BOKF 10-Q Quarterly Report Sept. 30, 2016

BOK FINANCIAL CORP ET AL

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10-Q 1 a20160930bokf10q.htm 10-Q Document

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, 2016



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

For the transition period from _____________ to ______________

Commission File No. 0-19341

BOK FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



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

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

(918) 588-6000

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 65,910,454 shares of common stock ($.00006 par value) as of September 30, 2016 .

BOK Financial Corporation

Form 10-Q

Quarter Ended September 30, 2016

Index



Part I. Financial Information
Management’s Discussion and Analysis (Item 2)	1
Market Risk (Item 3)	43
Controls and Procedures (Item 4)	45
Consolidated Financial Statements – Unaudited (Item 1)	47
Quarterly Financial Summary – Unaudited (Item 2)	132
Quarterly Earnings Trend – Unaudited	135

Part II. Other Information
Item 1. Legal Proceedings	135
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	135
Item 6. Exhibits	135
Signatures	136

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

Performance Summary

BOK Financial Corporation (“the Company”) reported net income of $74.3 million or $1.13 per diluted share for the third quarter of 2016 , compared to $74.9 million or $1.09 per diluted share for the third quarter of 2015 and $65.8 million or $1.00 per diluted share for the second quarter of 2016 .

Highlights of the third quarter of 2016 included:

•

Net interest revenue totaled $187.8 million for the third quarter of 2016 , compared to $178.6 million for the third quarter of 2015 and $182.6 million for the second quarter of 2016 . Net interest revenue increased over the prior year primarily due to growth in average earning assets. Average earning assets were $29.1 billion for the third quarter of 2016 and $27.9 billion for the third quarter of 2015 . Net interest margin was 2.64 percent for the third quarter of 2016 . Net interest margin was 2.61 percent for the third quarter of 2015 and 2.63 percent for the second quarter of 2016 .

•

Fees and commissions revenue totaled $185.3 million for the third quarter of 2016 , up $20.7 million over the third quarter of 2015 . All revenue categories grew over the prior year, led by mortgage banking and brokerage and trading revenue. Fees and commissions revenue increase d $1.8 million over the second quarter of 2016 . Growth in mortgage banking revenue and deposit service charges and fees was partially offset by decreases in brokerage and trading revenue, transaction card revenue and fiduciary and asset management revenue.


•	Changes in the fair value of mortgage servicing rights, net of economic hedges, increase d pre-tax net income by $1.2 million in the third quarter of 2016 , decrease d pre-tax net income by $4.4 million in the third quarter of 2015 and decrease d pre-tax net income by $1.2 million in the second quarter of 2016 .

•

Operating expenses totaled $262.1 million for the third quarter of 2016 , an increase of $37.5 million over the third quarter of 2015 . Personnel expense increase d $14.1 million primarily due to increased incentive compensation expense, regular compensation costs and higher employee healthcare costs. Non-personnel expense increase d $23.4 million largely due to increased mortgage banking expenses, litigation accruals, deposit insurance expense and professional fees and services expense. Operating expenses increase d $7.4 million over the previous quarter primarily due to increased litigation accruals and deposit insurance expense.

•

The Company recorded a $10.0 million provision for credit losses in the third quarter of 2016 . The Company recorded a $20.0 million provision in the second quarter of 2016 and a $7.5 million provision for credit losses in the third quarter of 2015 . Gross charge-offs were $8.1 million in the third quarter of 2016 , $5.3 million in the third quarter of 2015 and $8.8 million in the second quarter of 2016 . Recoveries were $2.0 million in the third quarter of 2016 , compared to $3.5 million in the third quarter of 2015 and $1.4 million in the second quarter of 2016 .

•

The combined allowance for credit losses totaled $256 million or 1.56 percent of outstanding loans at September 30, 2016 , compared to $252 million or 1.54 percent of outstanding loans at June 30, 2016 . The portion of the combined allowance attributed to the energy portfolio totaled 3.67 percent of outstanding energy loans at September 30, 2016 , an increase from 3.58 percent of outstanding energy loans at June 30, 2016 .

•

Nonperforming assets that are not guaranteed by U.S. government agencies totaled $253 million or 1.55 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at September 30, 2016 and $251 million or 1.55 percent of outstanding loans and repossessed assets (excluding those guaranteed by U.S. government agencies) at June 30, 2016 . Nonperforming energy loans decrease d $25 million during the third quarter.

•

Average loans increase d by $185 million over the previous quarter due primarily to a $239 million increase in commercial real estate loans, partially offset by a $156 million decrease in commercial loans, primarily due to a paydown of a single energy credit during the quarter. Period-end outstanding loan balances were $16.5 billion at September 30, 2016 , a $58 million increase over June 30, 2016 .


•	Average deposits grew by $297 million over the previous quarter primarily due to growth in demand deposit and interest-bearing transaction account balances, partially offset by a decrease in time deposits. Period-end deposits were $21.1 billion at September 30, 2016 , an increase of $336 million over June 30, 2016 .

- 1 -

•

The Company's common equity Tier 1 ratio was 11.99% at September 30, 2016 . In addition, the Company's Tier 1 capital ratio was 11.99% , total capital ratio was 13.65% and leverage ratio was 9.06% at September 30, 2016 . The Company's common equity Tier 1 ratio was 11.86% at June 30, 2016 . In addition, the Company's Tier 1 capital ratio was 11.86% , total capital ratio was 13.51% and leverage ratio was 9.06% at June 30, 2016 .


•	The Company paid a regular quarterly cash dividend of $28 million or $0.43 per common share during the third quarter of 2016 . On October 25, 2016 , the board of directors approved an increase in the regular quarterly cash dividend to $0.44 per common share payable on or about November 28, 2016 to shareholders of record as of November 14, 2016 .

Results of Operations

Net Interest Revenue and Net Interest Margin

Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings. The net interest margin is calculated by dividing tax-equivalent net interest revenue by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity.

Net interest revenue totaled $187.8 million for the third quarter of 2016 compared to $178.6 million for the third quarter of 2015 and $182.6 million for the second quarter of 2016 . Net interest margin was 2.64 percent for the third quarter of 2016 , 2.61 percent for the third quarter of 2015 and 2.63 percent for the second quarter of 2016 .

Tax-equivalent net interest revenue increase d $10.4 million over the third quarter of 2015 . Table 1 shows the effect on net interest revenue from changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities. Tax-equivalent net interest revenue increased $12.5 million primarily due to the growth in average loan balances. Net interest revenue decreased $2.1 million primarily due to the full quarter impact of the issuance of $150 million of 40 year 5.375% fixed rate subordinated debt in the second quarter that replaced $227 million of floating rating subordinated debt at 1.0105% at September 30, 2015. This floating rate debt was a year from maturity and was phased out from having any benefit to regulatory capital. The longer term fixed rate debt will better position us as interest rates rise. The benefit from a mix shift toward floating rate loans and higher short term interest rates was offset by increased borrowing costs.

The tax-equivalent yield on earning assets was 2.93 percent for the third quarter of 2016 , up 10 basis points over the third quarter of 2015 . Loan yields increased 9 basis points to 3.63% primarily due to the growth in variable rate loans and an increase in short-term interest rates. The yield on interest-bearing cash and cash equivalents increase d 23 basis points. The available for sale securities portfolio yield was unchanged compared to the prior year at 2.01 percent . Funding costs were up 12 basis points over the third quarter of 2015 . The cost of interest-bearing deposits decreased 2 basis points . The cost of other borrowed funds increased 26 basis points primarily due to an increase in the federal funds rate by the Federal Reserve in the fourth quarter of 2015. The cost of the subordinated debt was up 280 basis points as the existing lower variable rate debt was replaced by higher fixed rate debt. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities was 15 basis points for the third quarter of 2016 , up 5 basis points over the third quarter of 2015 .

Average earning assets for the third quarter of 2016 increased $1.2 billion or 4 percent over the third quarter of 2015 . Average loans, net of allowance for loan losses, increased $1.2 billion due primarily to growth in average commercial real estate and commercial loans. The average balance of trading securities increase d $187 million and the average balance of restricted equity securities increase d $80 million . The average balance of fair value option securities held as an economic hedge of our mortgage servicing rights decreased $163 million and the average balance of available for sale securities decreased $80 million . The average balance of investment securities decreased compared to the prior year, partially offset by an increase in the average balance of residential mortgage loans held for sale.

Average deposits increased $72 million over the third quarter of 2015 . Average demand deposit balances grew by $502 million , partially offset by a $110 million decrease in interest-bearing transaction account balances and a $361 million decrease average time deposits. Average savings account balances also grew over the prior year. Average borrowed funds increased $1.4 billion over the third quarter of 2015 , primarily due to increased borrowings from the Federal Home Loan Banks. The average balance of subordinated debentures increased $30 million .

- 2 -

Net interest margin increase d 1 basis point over the second quarter of 2016 . The yield on average earning assets increase d 2 basis points. The loan portfolio yield increase d by 5 basis points to 3.63 percent . The yield on the available for sale securities portfolio decrease d 3 basis point s to 2.01 percent . Funding costs were 0.44 percent , up 3 basis point over the prior quarter. The benefit to net interest margin from earning assets funded by non-interest bearing liabilities increase d 2 basis points over the prior quarter.

Average earning assets increase d $260 million over the second quarter of 2016 . Average loan balances increase d $185 million , primarily due to growth in commercial real estate balances. Average trading securities balances increase d $129 million and the average balance of residential mortgage loans held for sale was up $45 million , partially offset by a $101 million decrease in the balance of fair value option securities held as an economic hedge of our mortgage servicing rights.

Average deposits increase d $297 million compared to the previous quarter. Demand deposit balances increase d $335 million and interest-bearing transaction account balances increase d $60 million , partially offset by a $100 million decrease in time deposit balances. The average balance of borrowed funds increase d $175 million over the second quarter of 2016 . Increased borrowings from the Federal Home Loan Banks were partially offset by decreased federal funds sold and repurchase agreement balances.

Our overall objective is to manage the Company’s balance sheet to be relatively neutral to changes in interest rates as is further described in the Market Risk section of this report. Approximately 82% 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.

- 3 -

Table 1 -- Volume/Rate Analysis

(In thousands)



	Three Months Ended September 30, 2016 / 2015									Nine Months Ended September 30, 2016 / 2015
				Change Due To ¹									Change Due To ¹
	Change			Volume			Yield/Rate			Change			Volume			Yield/Rate
Tax-equivalent interest revenue:
Interest-bearing cash and cash equivalents	$	1,209		$	18		$	1,191		$	3,812		$	(9	)	$	3,821
Trading securities	2,212			2,213			(1		)	2,443			2,285			158
Investment securities:
Taxable securities	(211		)	(126		)	(85		)	(544		)	(421		)	(123		)
Tax-exempt securities	383			(255		)	638			1,156			(725		)	1,881
Total investment securities	172			(381		)	553			612			(1,146		)	1,758
Available for sale securities:
Taxable securities	(960		)	(924		)	(36		)	1,857			(2,181		)	4,038
Tax-exempt securities	71			(162		)	233			50			(443		)	493
Total available for sale securities	(889		)	(1,086		)	197			1,907			(2,624		)	4,531
Fair value option securities	(949		)	(355		)	(594		)	(621		)	(211		)	(410		)
Restricted equity securities	708			1,245			(537		)	3,057			4,429			(1,372		)
Residential mortgage loans held for sale	(178		)	362			(540		)	(811		)	(719		)	(92		)
Loans	14,579			11,157			3,422			36,913			36,580			333
Total tax-equivalent interest revenue	16,864			13,173			3,691			47,312			38,585			8,727
Interest expense:
Transaction deposits	1,356			(69		)	1,425			3,271			(376		)	3,647
Savings deposits	3			11			(8		)	1			14			(13		)
Time deposits	(2,278		)	(1,131		)	(1,147		)	(7,023		)	(3,184		)	(3,839		)
Funds purchased	18			(1		)	19			98			19			79
Repurchase agreements	4			(12		)	16			—			(63		)	63
Other borrowings	5,468			1,701			3,767			16,450			6,737			9,713
Subordinated debentures	1,872			178			1,694			(400		)	(883		)	483
Total interest expense	6,443			677			5,766			12,397			2,264			10,133
Tax-equivalent net interest revenue	10,421			12,496			(2,075		)	34,915			36,321			(1,406		)
Change in tax-equivalent adjustment	1,211									3,978
Net interest revenue	$	9,210								$	30,937


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

- 4 -

Other Operating Revenue

Other operating revenue was $191.3 million for the third quarter of 2016 , a $27.9 million increase over the third quarter of 2015 and a $2.5 million increase over the second quarter of 2016 . Fees and commissions revenue was up $20.7 million over the third quarter of 2015 and increase d $1.8 million over the prior quarter. The change in the fair value of mortgage servicing rights, net of economic hedges, increase d other operating revenue by $1.2 million in the third quarter of 2016 , decrease d other operating revenue by $4.4 million in the third quarter of 2015 and decrease d other operating revenue $1.2 million in the second quarter of 2016 .

Table 2 – Other Operating Revenue

(In thousands)



	Three Months Ended Sept. 30,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,			Increase (Decrease)			% Increase (Decrease)
	2016			2015			Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,			Increase (Decrease)			% Increase (Decrease)
Brokerage and trading revenue	$	38,006		$	31,582		$	6,424		20	%	$	39,530		$	(1,524	)	(4	)%
Transaction card revenue	33,933			32,514			1,419			4	%	34,950			(1,017		)	(3	)%
Fiduciary and asset management revenue	34,073			30,807			3,266			11	%	34,813			(740		)	(2	)%
Deposit service charges and fees	23,668			23,606			62			—	%	22,618			1,050			5	%
Mortgage banking revenue	42,548			33,170			9,378			28	%	38,224			4,324			11	%
Other revenue	13,080			12,978			102			1	%	13,352			(272		)	(2	)%
Total fees and commissions revenue	185,308			164,657			20,651			13	%	183,487			1,821			1	%
Other gains, net	2,442			1,161			1,281			N/A		1,307			1,135			N/A
Gain on derivatives, net	2,226			1,283			943			N/A		10,766			(8,540		)	N/A
Gain (loss) on fair value option securities, net	(3,355		)	5,926			(9,281		)	N/A		4,279			(7,634		)	N/A
Change in fair value of mortgage servicing rights	2,327			(11,757		)	14,084			N/A		(16,283		)	18,610			N/A
Gain on available for sale securities, net	2,394			2,166			228			N/A		5,326			(2,932		)	N/A
Total other operating revenue	$	191,342		$	163,436		$	27,906		17	%	$	188,882		$	2,460		1	%

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 50 percent of total revenue for the third quarter of 2016 , excluding provision for credit losses and gains and losses on other assets, securities and derivatives and the change in the fair value of mortgage servicing rights. We believe that a variety of fee revenue sources provides an offset to changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. As an example of this strength, many of the economic factors that cause net interest revenue compression such as falling interest rates may also drive growth in our mortgage banking revenue. We expect growth in other operating revenue to come through offering new products and services and by further development of our presence in other markets. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.

Brokerage and trading revenue includes revenues from trading, customer hedging, retail brokerage and investment banking. Brokerage and trading revenue increase d $6.4 million or 20 percent over the third quarter of 2015 .

- 5 -

Trading revenue includes net realized and unrealized gains primarily related to sales of U.S. government securities, residential mortgage-backed securities guaranteed by U.S. government agencies and municipal securities to institutional customers and related derivative instruments. Trading revenue was $12.0 million for the third quarter of 2016 , an increase of $337 thousand or 3 percent over the third quarter of 2015 . The Company added a new group trading in U.S. government agency residential mortgage-backed securities and related to-be-announced derivatives. The addition of this group added $2.0 million of net interest revenue and $1.9 million of trading revenue during the third quarter and added $426 million to the trading securities portfolio at September 30 . This increase was partially offset by lower volumes of U.S. agency residential mortgage-backed securities, brokered certificates of deposit and municipal securities sold to our institutional customers.

Customer hedging revenue is based primarily on realized and unrealized changes in the fair value of derivative contracts held for customer risk management programs. As more fully discussed under Customer Derivative Programs in Note 3 of the Consolidated Financial Statements, we offer commodity, interest rate, foreign exchange and equity derivatives to our customers. Customer hedging revenue totaled $13.8 million for the third quarter of 2016 , a $4.5 million or 48 percent increase over the third quarter of 2015 primarily due to increased hedging activity by our mortgage banking and energy customers.

Revenue earned from retail brokerage transactions increase d $932 thousand or 15 percent over the third quarter of 2015 to $7.0 million . Retail brokerage revenue is primarily based on fees and commissions earned on sales of fixed income securities, annuities, mutual funds and other financial instruments to retail customers. Revenue is primarily based on the volume of customer transactions and applicable commission rate for each product type. The increase in revenue due to transaction volume growth was partially offset by a change in product mix to products that pay a lower commission rate. In addition, volume has shifted from sales of products that pay a one-time transaction fee to accounts that pay us an on-going management fee.

Investment banking revenue, which includes fees earned upon completion of underwriting and financial advisory services and loan syndication fees, totaled $5.3 million for the third quarter of 2016 , an increase of $688 thousand or 15 percent over the third quarter of 2015 . Investment banking revenue is primarily related to the timing and volume of completed transactions.

Brokerage and trading revenue decrease d $1.5 million compared to the second quarter of 2016 . Investment banking revenue decrease d $1.7 million primarily due to the timing and volume of completed transactions. Trading revenue decrease d $307 thousand . Growth from the addition of our new mortgage trading group was offset by lower volumes of U.S. agency mortgage-backed securities and municipal securities to our institutional customers. Customer hedging revenue increase d $256 thousand primarily due to increased volumes of contracts with our mortgage banking, partially offset by lower contract volumes with our energy customers. Retail brokerage fees were up $228 thousand over the prior quarter.

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 2016 increase d $1.4 million or 4 percent over the third quarter of 2015 . Revenues from the processing of transactions on behalf of the members of our TransFund electronic funds transfer ("EFT") network totaled $17.8 million , a $1.6 million or 10 percent increase over the prior year. Merchant services fees totaled $11.3 million , a $274 thousand or 2 percent decrease based on decreased transaction activity. Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company totaled $4.9 million , an increase of $71 thousand or 1 percent over the third quarter of 2015 .

Excluding the impact of a $1.2 million customer early termination fee in the second quarter of 2016, transaction card revenue increased $165 thousand primarily due to an increase in transaction volumes on our TransFund EFT network, partially offset by a decrease in merchant services fees and revenue from interchange fees compared to the prior quarter.

Fiduciary and asset management revenue increase d $3.3 million or 11 percent over the third quarter of 2015 , largely due to decreased fee waivers. We earn fees as administrator to and investment adviser for the Cavanal Hill Funds, a diversified, open-ended investment company established as a business trust under the Investment Company Act of 1940. The Bank is custodian and BOK Financial Securities, Inc. is distributor for the Cavanal Hill Funds. Products of the Cavanal Hill Funds are offered to customers, employee benefit plans, trusts and the general public in the ordinary course of business. We have voluntarily waived administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the current low short-term interest rate environment. Waived fees totaled $1.6 million for the third quarter of 2016 compared to $3.4 million for the third quarter of 2015 and $1.8 million for the second quarter of 2016 . The decrease in fee waivers was related to increased interest rates as a result of the Federal Reserve's federal funds rate increase in the fourth quarter of 2015. The remaining increase is primarily due to growth in assets under management related to the Company's acquisition of Weaver and Tidwell Financial Advisors LTD d/b/a Weaver Wealth Management, a registered investment advisor, in the first quarter of 2016 and changes in market values.

- 6 -

Fiduciary and asset management revenue decrease d $740 thousand compared to the second quarter of 2016 primarily due to seasonality of annual assessment of tax preparation fees in the second quarter, partially offset by growth in assets under management.

The fair value of fiduciary assets administered by the Company totaled $41.2 billion at September 30, 2016 , $37.8 billion at September 30, 2015 and $39.9 billion at June 30, 2016 . Fiduciary assets are assets for which the Company possesses investment discretion on behalf of another or any other similar capacity.

Deposit service charges and fees were $23.7 million for the third quarter of 2016 , largely unchanged compared to the third quarter of 2015 . Commercial account service charge revenue totaled $11.4 million , up $595 thousand or 6 percent over the prior year. Overdraft fees were $10.6 million for the third quarter of 2016 , a decrease of $470 thousand or 4 percent compared to the third quarter of 2015 . Service charges on deposit accounts with a standard monthly fee were $1.7 million , a decrease of $68 thousand or 4 percent compared to the third quarter of 2015 . Deposit service charges and fees increase d $1.1 million over the prior quarter primarily due to a seasonal increase in overdraft fee volumes and increased commercial account service charge revenue.

Mortgage banking revenue increase d $9.4 million or 28% over the third quarter of 2015 . Mortgage production revenue increase d $7.3 million over the prior year. Better gains on sale margins and an increased volume of loans sold was partially offset by a lower volume of mortgage loan commitments. Mortgage servicing revenue was up $2.1 million or 15 percent over the third quarter of 2015 . The outstanding principal balance of mortgage loans serviced for others totaled $21.9 billion , an increase of $2.9 billion or 15 percent .

Outstanding mortgage loan commitments at September 30, 2016 decrease d $112 million or 15% compared to September 30, 2015 . The Company made a strategic decision to exit the correspondent lending channel during the third quarter of 2016 based on careful consideration of continued pressure on margin due to the competitive landscape and regulatory costs. This strategic decision decreased outstanding commitments by $289 million compared to the prior year. Mortgage loan commitments continued to grow in our retail and HomeDirect online channels. The correspondent lending channel represented $4.6 million of the total mortgage loan production revenue of $26.0 million for the third quarter of 2016 and $4.0 million of the total mortgage loan production revenue of $18.7 million for the third quarter of 2015 .

Mortgage banking revenue increase d $4.3 million over the second quarter of 2016 . Mortgage production revenue increase d $3.6 million due to growth in the volume of mortgage loans sold and increased gains on sale, partially offset by a decrease in mortgage loan commitments during the quarter. Average primary mortgage interest rates were 14 basis points lower than in the second quarter of 2016 . Total mortgage loans originated during the third quarter of 2016 increase d $46 million over the previous quarter. Outstanding mortgage loan commitments at September 30, 2016 decreased by $335 million from June 30, 2016 . The decrease in commitments related to correspondent lending was $414 million compared to June 30. Mortgage loan commitments from both the retail and HomeDirect channels grew over the prior quarter. The correspondent lending channel represented $3.0 million of total mortgage production revenue of $22.4 million for the second quarter of 2016 . Revenue from mortgage loan servicing grew by $760 thousand due to an increase in the volume of loans serviced. The outstanding balance of mortgage loans serviced for others increase d $673 million over June 30, 2016 .

- 7 -

Table 3 – Mortgage Banking Revenue

(In thousands)



	Three Months Ended Sept. 30,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,			Increase (Decrease)			% Increase (Decrease)
	2016			2015			Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,			Increase (Decrease)			% Increase (Decrease)
Net realized gains on mortgage loans sold	$	27,142		$	18,968		$	8,174		43	%	$	19,205		$	7,937		41	%
Change in net unrealized gains on mortgage loans held for sale	(1,152		)	(251		)	N/A			N/A		3,221			N/A			N/A
Total mortgage production revenue	25,990			18,717			7,273			39	%	22,426			3,564			16	%
Servicing revenue	16,558			14,453			2,105			15	%	15,798			760			5	%
Total mortgage revenue	$	42,548		$	33,170		$	9,378		28	%	$	38,224		$	4,324		11	%

Mortgage loans funded for sale	$	1,864,583		$	1,614,225		$	250,358		16	%	$	1,818,844		$	45,739		3	%
Mortgage loans sold	1,873,709			1,778,099			95,610			5	%	1,742,582			131,127			8	%

Period end outstanding mortgage commitments, net	630,804			742,742			(111,938		)	(15	)%	965,631			(334,827		)	(35	)%
Outstanding principal balance of mortgage loans serviced for others	21,851,536			18,928,726			2,922,810			15	%	21,178,387			673,149			3	%

Primary residential mortgage interest rate – period end	3.42		%	3.86		%	(44		) bps			3.48		%	(6		) bps
Primary residential mortgage interest rate – average	3.45		%	3.95		%	(50		) bps			3.59		%	(14		) bps
Secondary residential mortgage interest rate – period end	2.34		%	2.87		%	(53		) bps			2.31		%	3		bps
Secondary residential mortgage interest rate – average	2.36		%	2.97		%	(61		) bps			2.52		%	(16		) bps

Certain percentage increases (decreases) are not meaningful for comparison purposes based on the nature of the item.

Primary rates disclosed in Table 3 above represent rates generally available to borrowers on 30 year conforming mortgage loans. Secondary rates generally represent yields on 30 year residential mortgage-backed securities guaranteed by U.S. government agencies.

Net gains on securities, derivatives and other assets

In the third quarter of 2016 , we recognized a $2.4 million net gain from sales of $232 million of available for sale securities. Securities were sold either because they had reached their expected maximum potential or to move into securities that are expected to perform better in the current rate environment. In the third quarter of 2015 , we recognized a $2.2 million net gain from sales of $451 million of available for sale securities and in the second quarter of 2016 , we recognized a $5.3 million net gain on sales of $326 million of available for sale securities.

We also maintain a portfolio of residential mortgage-backed securities issued by U.S. government agencies, U.S. Treasury securities and interest rate derivative contracts held as an economic hedge of the changes in the fair value of our mortgage servicing rights. The fair value of our mortgage servicing rights fluctuates 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 increases. As benchmark mortgage rates fall, prepayment speeds increase and the value of our mortgage servicing rights decreases.

- 8 -

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 are highly dependent on changes in secondary mortgage rates, or rates required by investors, and interest rate derivative contracts are highly dependent on changes in other market interest rates. While primary and secondary mortgage rates generally move in the same direction, the spread between them may widen and narrow due to market conditions and government intervention. Changes in the forward-looking spread between the primary and secondary rates can cause significant earnings volatility. Additionally, the fair value of mortgage servicing rights is dependent on intermediate-term interest rates that affect the value of custodial funds. Changes in the spread between short-term and long-term interest rates can also cause significant 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 held as an economic hedge. The fair value of mortgage servicing rights increased during the third quarter of 2016 primarily due to changes in short term interest rates. The fair value of securities and interest rate derivative contracts held as an economic hedge decreased primarily due to an increase in interest rate swap rates, partially offset by a decrease in average secondary mortgage rates. The fair value of mortgage servicing rights, net of economic hedges, decreased in the second quarter of 2016 , primarily due to a decrease in secondary mortgage and interest rate swap rates. Hedge coverage was increased during the second quarter to improve its effectiveness.

Table 4 - Gain (Loss) on Mortgage Servicing Rights

(In thousands)



	Three Months Ended
	Sept. 30, 2016			June 30, 2016			Sept. 30, 2015
Gain on mortgage hedge derivative contracts, net	$	2,268		$	10,766		$	1,460
Gain (loss) on fair value option securities, net	(3,355		)	4,279			5,926
Gain (loss) on economic hedge of mortgage servicing rights, net	(1,087		)	15,045			7,386
Gain (loss) on change in fair value of mortgage servicing rights	2,327			(16,283		)	(11,757		)
Gain (loss) on changes in fair value of mortgage servicing rights, net of economic hedges	$	1,240		$	(1,238	)	$	(4,371	)

Net interest revenue on fair value option securities	$	861		$	1,348		$	2,140

- 9 -

Other Operating Expense

Other operating expense for the third quarter of 2016 totaled $262.1 million , a $37.5 million or 17 percent increase over the third quarter of 2015 . Personnel expenses increase d $14.1 million or 11 percent . Non-personnel expenses increase d $23.4 million or 24 percent over the prior year.

Operating expenses increase d $7.4 million over the previous quarter. Personnel expense increase d $695 thousand . Non-personnel expense increase d $6.7 million .

Table 5 -- Other Operating Expense

(In thousands)



	Three Months Ended Sept. 30,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,		Increase (Decrease)			% Increase (Decrease)
	2016			2015			Increase (Decrease)			% Increase (Decrease)		Three Months Ended June 30,		Increase (Decrease)			% Increase (Decrease)
Regular compensation	$	83,956		$	79,208		$	4,748		6	%	$	82,441	$	1,515		2	%
Incentive compensation:
Cash-based	36,133			30,462			5,671			19	%	34,894		1,239			4	%
Share-based	1,839			2,885			(1,046		)	(36	)%	3,701		(1,862		)	(50	)%
Deferred compensation	1,059			(539		)	1,598			N/A		211		848			N/A
Total incentive compensation	39,031			32,808			6,223			19	%	38,806		225			1	%
Employee benefits	20,198			17,046			3,152			18	%	21,243		(1,045		)	(5	)%
Total personnel expense	143,185			129,062			14,123			11	%	142,490		695			—	%
Business promotion	6,839			5,922			917			15	%	6,703		136			2	%
Charitable contributions to BOKF Foundation	—			796			(796		)	N/A		—		—			N/A
Professional fees and services	14,038			10,147			3,891			38	%	14,158		(120		)	(1	)%
Net occupancy and equipment	20,111			18,689			1,422			8	%	19,677		434			2	%
Insurance	9,390			4,864			4,526			93	%	7,129		2,261			32	%
Data processing and communications	33,331			30,708			2,623			9	%	32,802		529			2	%
Printing, postage and supplies	3,790			3,376			414			12	%	3,889		(99		)	(3	)%
Net losses (gains) and operating expenses of repossessed assets	(926		)	267			(1,193		)	(447	)%	1,588		(2,514		)	(158	)%
Amortization of intangible assets	1,521			1,089			432			40	%	2,624		(1,103		)	(42	)%
Mortgage banking costs	16,022			9,107			6,915			76	%	15,809		213			1	%
Other expense	14,819			10,601			4,218			40	%	7,856		6,963			89	%
Total other operating expense	$	262,120		$	224,628		$	37,492		17	%	$	254,725	$	7,395		3	%

Average number of employees (full-time equivalent)	4,928			4,846			82			2	%	4,893		35			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, increase d $4.7 million or 6 percent over the third quarter of 2015 . The average number of employees increase d 2 percent over the prior year. Recent additions have primarily been in mortgage, wealth management and technology. In addition, standard annual merit increases in regular compensation were effective for the majority of our staff on March 1.

Incentive compensation increase d $6.2 million or 19 percent over the third quarter of 2015 . 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 $5.7 million or 19 percent over the third quarter of 2015 .

- 10 -

Share-based compensation expense represents expense for equity awards based on grant-date fair value. Non-vested shares generally cliff vest in 3 years and are subject to a two year holding period after vesting. Compensation costs related to certain shares is variable based on changes in the the fair value of BOK Financial common shares. Share-based compensation expense decrease d $1.0 million or 36% compared to the prior year, primarily due to the decrease in the vesting probability of certain performance-based share awards.

Employee benefits expense increase d $3.2 million or 18 percent over the third quarter of 2015 primarily due to a $2.4 million increase in employee medical costs. Retirement plan costs and payroll taxes also increased over the prior year.

Personnel costs increase d by $695 thousand over the second quarter of 2016 . Regular compensation expense increase d $1.5 million . Cash-based incentive compensation was up $1.2 million primarily due to revenue growth. Deferred compensation expense was up $848 thousand over the prior quarter. This additional expense is largely offset by the increase in the fair value of deferred compensation plan assets included in Other revenue. Share-based compensation expense was $1.9 million lower primarily due to the decrease in the vesting probability of certain performance-based share awards. Employee benefits expense was lower compared to the prior quarter primarily due to a $1.5 million seasonal decrease in payroll tax expense, partially offset by a $365 thousand increase in employee medical costs.

Non-personnel operating expenses

Non-personnel operating expenses increase d $23.4 million or 24 percent over the third quarter of 2015 . Mortgage banking costs increase d $6.9 million . Expense related to the effect of actual loan prepayments on the fair value of mortgage servicing rights totaled $11.4 million , a $4.6 million increase over the third quarter of 2015 . Actual prepayments increased due to lower mortgage interest rates. Mortgage banking costs for the third quarter of 2015 included a $1.2 million benefit from the reversal of estimated claims based on a favorable resolution of an audit of servicing of certain residential mortgage loans guaranteed by U.S. government agencies.

Deposit insurance expense increase d $4.5 million , primarily due to an increase in criticized and classified assets, an input to the deposit insurance assessment, and implementation of a new surcharge for banks over $10 billion in assets. Criticized and classified assets increased compared to the prior year as a result of falling energy prices that began in the fourth quarter of 2015. During the third quarter of 2016, the deposit insurance fund reached a target of 1.15% of insured deposits which triggered a new surcharge for banks with more than $10 billion in assets to bring the deposit insurance fund to 1.35% of insured deposits. This impact was partially offset by a reduction in the base rate.

Other expense increase d $4.2 million over the prior year due primarily to a $5.0 million legal settlement accrual concerning the manner in which the Company posted charges to certain consumer and small business deposit accounts. Professional fees and services expense increase d $3.9 million primarily due to costs incurred in preparation for the mobank acquisition and increased legal fees. Data processing and communications expense increase d $2.6 million due to increased transaction activity. The Company had a net gain on sale of repossessed assets of $1.6 million in the third quarter of 2016 compared to a net loss of $517 thousand in the third quarter of 2015. Operating expenses related to repossessed assets also declined compared to the prior year.

Non-personnel expense increase d $6.7 million over the second quarter of 2016 primarily due to the $5.0 million accrual related to a legal settlement during the third quarter. Deposit insurance expense was up $2.3 million primarily due to the new surcharge for banks with more than $10 billion in assets. Expense related to prepayments of residential mortgage loans serviced for others increase d $1.6 million over the prior quarter, partially offset by a $1.4 million decrease in mortgage-related accruals. The Company had a net gain on sale of repossessed assets of $1.6 million in the third quarter compared to a net loss of $127 thousand in the second quarter. Operating expenses on repossessed assets also decreased compared to the prior quarter. The $1.1 million decrease in intangible asset amortization expense was due to an adjustment to a consolidated merchant-banking investment during the second quarter.

Income Taxes

The Company's income tax expense from continuing operations was $32.0 million or 29.8% of book taxable income for the third quarter of 2016 compared to $34.1 million or 31.0% of book taxable income for the third quarter of 2015 and $30.5 million or 31.5% of book taxable income for the second quarter of 2016 .

- 11 -

The statute of limitations expired on uncertain income tax positions and the Company adjusted its current income tax liability amounts on filed tax returns for 2015 during the third quarter of 2016. These adjustments reduced income tax expense by $2.6 million in the third quarter of 2016 and $2.0 million in the third quarter of 2015. Excluding these adjustments, income tax expense would have been 32.3% of book taxable income for the third quarter of 2016 and 32.8% of book taxable income for the third quarter of 2015.

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

BOK Financial operates in numerous jurisdictions, which requires judgment regarding the allocation of income, expense and earnings under various laws and regulations of each of these taxing jurisdictions. Each jurisdiction may audit our tax returns and may take different positions with respect to these allocations. The reserve for uncertain tax positions was $14 million at both September 30, 2016 and September 30, 2015 and $13 million at June 30, 2016 .

Lines of Business

We operate three principal lines of business: Commercial Banking, Consumer Banking and Wealth Management. Commercial Banking includes lending, treasury and cash management services and customer risk management products for small businesses, middle market and larger commercial customers. Commercial Banking also includes the TransFund EFT network. Consumer Banking includes retail lending and deposit services, lending and deposit services to small business customers served through our consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private banking services and investment advisory services in all markets. Wealth Management also underwrites state and municipal securities and engages in brokerage and trading activities.

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

We allocate resources and evaluate the performance of our lines of business using the net direct contribution which includes the allocation of funds, actual net credit losses and capital costs. In addition, we measure the performance of our business lines after allocation of certain indirect expenses and taxes based on statutory rates.

The cost of funds borrowed from the Funds Management unit by the operating lines of business is transfer priced at rates that approximate market rates for funds with similar 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 that 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 other market risk inherent in our business lines and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each business line, based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in the lines of business.

- 12 -

As shown in Table 6 , net income attributable to our lines of business increase d $12.4 million or 20 percent over the third quarter of 2015 . Net interest revenue grew by $19.3 million over the prior year. Other operating revenue was up $18.6 million . This revenue growth was partially offset by a $22.5 million increase in operating expense and a $4.4 million increase in net charge-offs primarily due to energy loans.

Table 6 -- Net Income by Line of Business

(In thousands)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016			2015
Commercial Banking	$	55,994	$	47,657	$	145,885		$	144,929
Consumer Banking	8,762		6,535		13,104			22,693
Wealth Management	9,108		7,250		26,866			24,672
Subtotal	73,864		61,442		185,855			192,294
Funds Management and other	413		13,449		(3,213		)	36,670
Total	$	74,277	$	74,891	$	182,642		$	228,964

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Commercial Banking

Commercial Banking contributed $56.0 million to consolidated net income in the third quarter of 2016 , an increase of $8.3 million or 18% over the third quarter of 2015 . Growth in net interest revenue and fees and commissions revenue was partially offset by increased loan charge-offs and higher operating expenses. Commercial Banking net loans charged off were $5.6 million in the third quarter of 2016 compared to a net recovery of $997 thousand in the third quarter of 2015 . The increase was primarily related to energy portfolio loans.

Table 7 -- Commercial Banking

(Dollars in thousands)



	Three Months Ended						Increase (Decrease)			Nine Months Ended						Increase (Decrease)
	September 30,									September 30,
	2016			2015						2016			2015
Net interest revenue from external sources	$	123,598		$	109,503		$	14,095		$	358,714		$	319,298		$	39,416
Net interest expense from internal sources	(15,052		)	(13,450		)	(1,602		)	(44,259		)	(38,728		)	(5,531		)
Total net interest revenue	108,546			96,053			12,493			314,455			280,570			33,885
Net loans charged off (recovered)	5,601			997			4,604			34,024			(7,952		)	41,976
Net interest revenue after net loans charged off (recovered)	102,945			95,056			7,889			280,431			288,522			(8,091		)

Fees and commissions revenue	47,710			45,133			2,577			144,215			132,609			11,606
Other gains, net	1,932			143			1,789			2,033			387			1,646
Other operating revenue	49,642			45,276			4,366			146,248			132,996			13,252

Personnel expense	28,365			27,354			1,011			82,513			80,736			1,777
Non-personnel expense	25,010			24,606			404			79,526			71,172			8,354
Other operating expense	53,375			51,960			1,415			162,039			151,908			10,131

Net direct contribution	99,212			88,372			10,840			264,640			269,610			(4,970		)
Gain on repossessed assets, net	1,486			350			1,136			806			336			470
Corporate expense allocations	9,054			10,723			(1,669		)	26,681			32,747			(6,066		)
Income before taxes	91,644			77,999			13,645			238,765			237,199			1,566
Federal and state income tax	35,650			30,342			5,308			92,880			92,270			610
Net income	$	55,994		$	47,657		$	8,337		$	145,885		$	144,929		$	956

Average assets	$	16,934,587		$	16,156,446		$	778,141		$	16,958,999		$	16,229,307		$	729,692
Average loans	13,737,081			12,531,113			1,205,968			13,542,719			12,230,278			1,312,441
Average deposits	8,317,341			8,627,281			(309,940		)	8,392,558			8,849,091			(456,533		)
Average invested capital	1,170,465			1,062,053			108,412			1,161,996			1,028,013			133,983

Net interest revenue increase d $12.5 million or 13% over the prior year. Growth in net interest revenue was primarily due to a $1.2 billion or 10% increase in average loan balances and increased yields on commercial loans due to rising short-term interest rates. The impact of decreased average deposit balances was offset by increased yields on deposits sold to the funds management unit related to the increase in short-term interest rates from the Federal Reserve increase in the federal funds rate in the fourth quarter of 2015.

Fees and commissions revenue grew by $2.6 million or 6% over the third quarter of 2015 . Brokerage and trading revenue increase d $1.5 million primarily due to growth in commercial loan syndication fees and increased hedging activity by our energy customers. Transaction card revenues from our TransFund electronic funds transfer network increase d $1.3 million primarily due to increased transaction volumes. Commercial deposit service charge revenue was also up over the prior year, offset by a decrease in other revenue.

- 14 -

Operating expenses increase d $1.4 million or 3% over the the third quarter of 2015 . Personnel expense increase d $1.0 million or 4% primarily due to standard annual merit increases and increased incentive compensation expense. Non-personnel expense increase d $404 thousand or 2% primarily due to a $403 thousand increase in intangible asset amortization. Increased business promotion expense related to timing of expenditures was offset by lower professional fees and services expense. Corporate expense allocations decrease d $1.7 million compared to the prior year.

The average outstanding balance of loans attributed to Commercial Banking grew by $1.2 billion or 10% over the third quarter of 2015 to $13.7 billion . See the Loans section of Management’s Discussion and Analysis of Financial Condition following for additional discussion of changes in commercial and commercial real estate loans which are primarily attributed to the Commercial Banking segment.

Average deposits attributed to Commercial Banking were $8.3 billion for the third quarter of 2016 , a decrease of $310 million or 4% compared to the third quarter of 2015 . See Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital for further discussion of change.

Consumer Banking

Consumer Banking provides retail banking services through four primary distribution channels: traditional branches, the 24-hour ExpressBank call center, Internet banking and mobile banking. Consumer Banking also conducts mortgage banking activities through offices located outside of our consumer banking markets and through Home Direct Mortgage, an online origination channel. During the third quarter of 2016. the Company made a strategic decision to exit the correspondent lending channel based on careful consideration of continued pressure on margin due to the competitive landscape and increasing regulatory costs.

Consumer Banking contributed $8.8 million to consolidated net income for the third quarter of 2016 , up $2.2 million over the third quarter of 2015 . Growth in mortgage banking revenue and net interest revenue was offset by the effect of increased actual prepayments of mortgage loans on mortgage servicing rights and increased personnel costs. Corporate expense allocations were $2.0 million lower than in the prior year.

Changes in the fair value of our mortgage servicing rights, net of economic hedge, resulted in a $758 thousand increase in Consumer Banking net income in the third quarter of 2016 compared to a $2.7 million decrease in Consumer Banking net income in the third quarter of 2015 .

- 15 -

Table 8 -- Consumer Banking

(Dollars in thousands)



	Three Months Ended						Increase (Decrease)			Nine Months Ended						Increase (Decrease)
	September 30,									September 30,
	2016			2015						2016			2015
Net interest revenue from external sources	$	22,098		$	21,551		$	547		$	65,897		$	63,993		$	1,904
Net interest revenue from internal sources	9,263			7,216			2,047			27,492			20,874			6,618
Total net interest revenue	31,361			28,767			2,594			93,389			84,867			8,522
Net loans charged off	1,157			1,431			(274		)	4,177			4,467			(290		)
Net interest revenue after net loans charged off	30,204			27,336			2,868			89,212			80,400			8,812

Fees and commissions revenue	64,805			57,504			7,301			181,816			178,899			2,917
Other gains (losses), net	(170		)	(155		)	(15		)	(42		)	(667		)	625
Other operating revenue	64,635			57,349			7,286			181,774			178,232			3,542

Personnel expense	30,576			26,128			4,448			87,206			78,251			8,955
Non-personnel expense	34,419			24,899			9,520			101,982			77,593			24,389
Total other operating expense	64,995			51,027			13,968			189,188			155,844			33,344

Net direct contribution	29,844			33,658			(3,814		)	81,798			102,788			(20,990		)
Gain (loss) on financial instruments, net	(1,087		)	7,386			(8,473		)	30,539			1,809			28,730
Change in fair value of mortgage servicing rights	2,327			(11,758		)	14,085			(41,944		)	(12,269		)	(29,675		)
Gain on repossessed assets, net	161			331			(170		)	566			888			(322		)
Corporate expense allocations	16,905			18,921			(2,016		)	49,513			56,075			(6,562		)
Income before taxes	14,340			10,696			3,644			21,446			37,141			(15,695		)
Federal and state income tax	5,578			4,161			1,417			8,342			14,448			(6,106		)
Net income	$	8,762		$	6,535		$	2,227		$	13,104		$	22,693		$	(9,589	)

Average assets	$	8,827,816		$	8,843,926		$	(16,110	)	$	8,763,564		$	8,871,423		$	(107,859	)
Average loans	1,893,431			1,884,635			8,796			1,888,693			1,908,632			(19,939		)
Average deposits	6,660,514			6,675,990			(15,476		)	6,623,724			6,674,052			(50,328		)
Average invested capital	275,358			264,540			10,818			267,123			268,427			(1,304		)

Net interest revenue from Consumer Banking activities grew by $2.6 million or 9% over the the third quarter of 2015 primarily due to increased rates on deposit balances sold to the Funds Management unit. Both average deposits and average loan balnaces were largely unchanged compared to the the prior year.

Fees and commissions revenue increase d $7.3 million or 13% over the third quarter of 2015 , primarily due to a $9.4 million increase in mortgage banking revenue. Mortgage loans funded for sale increase d $250 million or 16% over the third quarter of 2015 . Revenue from interchange fees paid by merchants for transactions processed from debit cards issued by the Company increase d $166 thousand or 3% . Deposit service charges and fees decrease d $502 thousand or 4% compared to the prior year. Other revenue decreased $1.7 million compared to the prior year due to change in earnings related to low income housing tax investments attributed to the Consumer Banking segment.

- 16 -

Operating expenses increase d $14.0 million or 27% over the third quarter of 2015 . Personnel expenses increase d $4.4 million or 17% . Regular compensation expense was up $2.0 million primarily due to annual merit increases and growth in mortgage banking headcount. Incentive compensation expense was up $2.0 million over the prior year. Non-personnel expense increase d $9.5 million or 38% over the prior year. Mortgage banking expense was up $7.5 million over the prior year. The effect of actual residential mortgage loan prepayments on the fair value of mortgage servicing rights increased expenses by $4.6 million. The third quarter of 2015 also included a $1.2 million benefit from the reversal of estimated claims based on a favorable resolution of an audit of servicing of certain residential mortgage loans guaranteed by U.S. government agencies. Business promotion, professional fees and services and printing, postage and supplies expense all increased over the prior year.

Corporate expense allocations decrease d $2.0 million compared to the third quarter of 2015 .

Average consumer deposits were largely unchanged compared to the third quarter of 2015 . Average time deposit balances decrease d $257 million or 19% , offset by a $163 million or 10% increase in demand deposit balances, a $48 million or 1% increase in interest-bearing transaction accounts and a $30 million or 8% increase in savings account balances.

- 17 -

Wealth Management

Wealth Management contributed $9.1 million to consolidated net income in the third quarter of 2016 , up $1.9 million or 26% over the third quarter of 2015 . Net interest revenue grew over the prior year. Growth in fiduciary and asset management revenue and brokerage and trading revenue was offset by increased operating expense.

Table 9 -- Wealth Management

(Dollars in thousands)



	Three Months Ended						Increase (Decrease)			Nine Months Ended						Increase (Decrease)
	September 30,									September 30,
	2016			2015						2016			2015
Net interest revenue from external sources	$	9,274		$	6,674		$	2,600		$	21,622		$	18,271		$	3,351
Net interest revenue from internal sources	7,401			5,834			1,567			22,258			17,400			4,858
Total net interest revenue	16,675			12,508			4,167			43,880			35,671			8,209
Net loans charged off (recovered)	(89		)	(190		)	101			(479		)	(937		)	458
Net interest revenue after net loans charged off (recovered)	16,764			12,698			4,066			44,359			36,608			7,751

Fees and commissions revenue	73,331			66,313			7,018			217,519			203,450			14,069
Other gains, net	192			228			(36		)	523			650			(127		)
Other operating revenue	73,523			66,541			6,982			218,042			204,100			13,942

Personnel expense	48,969			45,316			3,653			142,235			133,923			8,312
Non-personnel expense	15,457			12,040			3,417			44,289			36,190			8,099
Other operating expense	64,426			57,356			7,070			186,524			170,113			16,411

Net direct contribution	25,861			21,883			3,978			75,877			70,595			5,282
Loss on financial instruments, net	(42		)	(176		)	134			(42		)	(204		)	162
Corporate expense allocations	10,912			9,841			1,071			31,864			30,011			1,853
Income before taxes	14,907			11,866			3,041			43,971			40,380			3,591
Federal and state income tax	5,799			4,616			1,183			17,105			15,708			1,397
Net income	$	9,108		$	7,250		$	1,858		$	26,866		$	24,672		$	2,194

Average assets	$	6,413,735		$	5,433,238		$	980,497		$	5,916,545		$	5,401,433		$	515,112
Average loans	1,139,396			1,085,496			53,900			1,109,410			1,062,362			47,048
Average deposits	4,913,409			4,490,082			423,327			4,710,893			4,570,420			140,473
Average invested capital	244,291			226,477			17,814			238,917			225,222			13,695



	September 30,				Increase (Decrease)
	2016		2015		Increase (Decrease)
Fiduciary assets in custody for which BOKF has sole or joint discretionary authority	$	14,256,866	$	14,027,771	$	229,095
Fiduciary assets not in custody for which BOKF has sole or joint discretionary authority	3,800,445		3,325,785		474,660
Non-managed trust assets in custody	23,164,851		20,427,113		2,737,738
Total fiduciary assets	41,222,162		37,780,669		3,441,493
Assets held in safekeeping	28,101,063		23,574,320		4,526,743
Brokerage accounts under BOKF administration	5,950,506		5,646,493		304,013
Assets under management or in custody	$	75,273,731	$	67,001,482	$	8,272,249

- 18 -

Net interest revenue for the third quarter of 2016 increase d $4.2 million or 33% over the third quarter of 2015 , primarily due to an increase in the size of the U.S. agency mortgage-backed portfolio related to a new trading group that began operations during the third quarter of 2016 and increased rates on deposit balances sold to the Funds Management unit. Average deposit balances grew by $423 million or 9% over the third quarter of 2015 . Non-interest bearing demand deposits grew by $173 million or 17% and interest-bearing transaction account balances increase d $307 million or 11% , partially offset by a $60 million or 8% decrease in time deposit balances. Average loan balances increase d $54 million or 5% over the prior year.

Fees and commissions revenue was up $7.0 million or 11% over the third quarter of 2015 . Fiduciary and asset management revenue increase d $3.3 million or 11% over the prior year primarily due to decreased fee waivers, the Company's acquisition of Weaver and Tidwell Financial Advisors LTD d/b/a Weaver Wealth Management, a registered investment advisor, in the first quarter of 2016 and changes in market values. Brokerage and trading revenue grew by $3.2 million or 10% . The addition of a new group trading in U.S. government agency residential mortgage-backed securities and related derivatives added $1.9 million of trading revenue during the third quarter and $426 million to the trading securities portfolio at September 30 . Growth in retail brokerage revenue was offset by lower investment banking revenue compared to the third quarter of 2015 .

Other operating revenue includes fees earned from state and municipal bond and corporate debt underwriting and financial advisory services, primarily in the Oklahoma and Texas markets. In the third quarter of 2016 , the Wealth Management division participated in 107 state and municipal bond underwritings that totaled $5.2 billion. As a participant, the Wealth Management division was responsible for facilitating the sale of approximately $708 million of these underwritings. The Wealth Management division also participated in 11 corporate debt underwritings that totaled $4 billion. Our interest in these underwritings was $93 million. In the third quarter of 2015 , the Wealth Management division participated in 132 state and municipal bond underwritings that totaled approximately $3.2 billion. Our interest in these underwritings totaled approximately $997 million. The Wealth Management division also participated in three corporate debt underwritings that totaled $1.7 billion. Our interest in these underwritings was $27 million.

Operating expense increase d $7.1 million or 12% over the third quarter of 2015 . Personnel expenses increase d $3.7 million , primarily due to incentive compensation expense and standard merit increases to regular compensation. Non-personnel expense increase d $3.4 million , primarily due to a $1.8 million increase in professional fees and services expense .

Corporate expense allocations increase d $1.1 million or 11% over the prior year.

Financial Condition

Securities

We maintain a securities portfolio to enhance profitability, manage interest rate risk, provide liquidity and comply with regulatory requirements. Securities are classified as trading, held for investment, or available for sale. See Note 2 to the consolidated financial statements for the composition of the securities portfolio as of September 30, 2016 , December 31, 2015 and September 30, 2015 .

At September 30, 2016 , the carrying value of investment (held-to-maturity) securities was $546 million and the fair value was $580 million . Investment securities consist primarily of long-term, fixed rate Oklahoma and Texas municipal bonds, taxable Texas school construction bonds and residential mortgage-backed securities issued by U.S. government agencies. The investment security portfolio is diversified among issuers. The largest obligation of any single issuer is $30 million. Substantially all of these bonds are general obligations of the issuers. Approximately $104 million of the $200 million portfolio of 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 $8.7 billion at September 30, 2016 , an increase of $67 million over June 30, 2016 . Available for sale securities consist primarily of U.S. government agency residential mortgage-backed securities and U.S. government agency commercial mortgage-backed securities. Commercial mortgage-backed securities have prepayment penalties similar to commercial loans. At September 30, 2016 , residential mortgage-backed securities represented 65 percent of total available for sale securities.

- 19 -

A primary risk of holding residential mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Our best estimate of the duration of the combined residential mortgage-backed securities portfolio held in investment and available for sale securities at September 30, 2016 is 2.8 years. Management estimates the duration extends to 3.3 years assuming an immediate 200 basis point upward shock. The estimated duration contracts to 2.5 years assuming a 50 basis point decline in the current low rate environment.

Residential mortgage-backed securities also have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are fully guaranteed. At September 30, 2016 , approximately $5.6 billion of the amortized cost of the Company’s residential mortgage-backed securities were issued by U.S. government agencies. The fair value of these residential mortgage-backed securities totaled $5.7 billion at September 30, 2016 .

We also hold amortized cost of $108 million in residential mortgage-backed securities privately issued by publicly-owned financial institutions, a decrease of $6.9 million from June 30, 2016 . The decrease was due to cash payments received during the quarter. The fair value of our portfolio of privately issued residential mortgage-backed securities totaled $122 million at September 30, 2016 .

The amortized cost of our portfolio of privately issued residential mortgage-backed securities included $61 million of Jumbo-A residential mortgage loans and $47 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. Approximately 90 percent 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 29 percent 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.

The aggregate gross amount of unrealized losses on available for sale securities totaled $6.2 million at September 30, 2016 , compared to $3.0 million at June 30, 2016 . On a quarterly basis, we perform separate evaluations on debt and equity securities to determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements. No other-than-temporary impairment charges were recognized in earnings during the third quarter of 2016 .

Certain U.S. Treasury securities and residential mortgage-backed securities issued by U.S. government agencies included in fair value option securities on the Consolidated Balance Sheets are held as an economic hedge 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.

BOK Financial is required to hold stock as members of the Federal Reserve system and the Federal Home Loan Banks ("FHLB"). These restricted equity securities are carried at cost as these securities do not have a readily determined fair value because the ownership of these shares is restricted and they lack a market. Federal Reserve Bank stock totaled $36 million and holdings of FHLB stock totaled $297 million at September 30, 2016 . Holdings of FHLB stock increased $14 million over June 30, 2016 . We are required to hold stock in the FHLB in proportion to our borrowings with the FHLB.

- 20 -

Bank-Owned Life Insurance

We have approximately $310 million of bank-owned life insurance at September 30, 2016 . This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $283 million is held in separate accounts. Our separate account holdings are invested in diversified portfolios of investment-grade fixed income securities and cash equivalents, including U.S. Treasury and Agency securities, residential mortgage-backed securities, corporate debt, asset-backed and commercial mortgage-backed securities. The portfolios are managed by unaffiliated professional managers within parameters established in the portfolio’s investment guidelines. The cash surrender value of certain life insurance policies is further supported by a stable value wrap, which protects against changes in the fair value of the investments. At September 30, 2016 , the fair value of investments held in separate accounts was approximately $297 million. As the underlying fair value of the investments held in a separate account at September 30, 2016 exceeded the net book value of the investments, no cash surrender value was supported by the stable value wrap. The stable value wrap is provided by a domestic financial institution. The remaining cash surrender value of $28 million primarily represents the cash surrender value of policies held in general accounts and other amounts due from various insurance companies.

Loans

The aggregate loan portfolio before allowance for loan losses totaled $16 billion at September 30, 2016 , an increase of $58 million over June 30, 2016 . The outstanding balance of commercial loans decrease d by $236 million compared to June 30, 2016 . Commercial real estate loan balances were up $212 million . Residential mortgage loans decrease d $8.1 million compared to June 30, 2016 and personal loans increase d $91 million over June 30, 2016 .

Table 10 -- Loans

(In thousands)



	Sept. 30, 2016		June 30, 2016		March 31, 2016		Dec. 31, 2015		Sept. 30, 2015
Commercial:
Energy	$	2,520,804	$	2,818,656	$	3,029,420	$	3,097,328	$	2,838,167
Services	2,936,599		2,830,864		2,728,891		2,784,276		2,706,624
Healthcare	2,085,046		2,051,146		1,995,425		1,883,380		1,741,680
Wholesale/retail	1,602,030		1,532,957		1,451,846		1,422,064		1,461,936
Manufacturing	499,486		595,403		600,645		556,729		555,677
Other commercial and industrial	476,198		527,411		482,198		508,754		493,338
Total commercial	10,120,163		10,356,437		10,288,425		10,252,531		9,797,422

Commercial real estate:
Retail	801,377		795,419		810,522		796,499		769,449
Multifamily	873,773		787,200		733,689		751,085		758,658
Office	752,705		769,112		695,552		637,707		626,151
Industrial	838,021		645,586		564,467		563,169		563,871
Residential construction and land development	159,946		157,576		171,949		160,426		153,510
Other commercial real estate	367,776		427,073		394,328		350,147		363,428
Total commercial real estate	3,793,598		3,581,966		3,370,507		3,259,033		3,235,067

Residential mortgage:
Permanent mortgage	969,558		969,007		948,405		945,336		937,664
Permanent mortgages guaranteed by U.S. government agencies	190,309		192,732		197,350		196,937		192,712
Home equity	712,926		719,184		723,554		734,620		738,619
Total residential mortgage	1,872,793		1,880,923		1,869,309		1,876,893		1,868,995

Personal	678,232		587,423		494,325		552,697		465,957

Total	$	16,464,786	$	16,406,749	$	16,022,566	$	15,941,154	$	15,367,441

- 21 -

Commercial

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

Commercial loans totaled $10.1 billion or 61 percent of the loan portfolio at September 30, 2016 , a decrease of $236 million over June 30, 2016 . Energy loan balances decrease d $298 million , manufacturing sector loans decrease d $96 million and industrial loans decrease d $51 million . Service sector loans grew by $106 million , wholesale/retail sector loans increase d by $69 million and healthcare sector loans increase d by $34 million .

Table 11 presents the commercial sector of our loan portfolio distributed primarily by collateral location. Loans for which collateral location is less relevant, such as unsecured loans and reserve-based energy loans, are distributed by the borrower's primary operating location. The majority of the collateral securing our commercial loan portfolio is located within our geographical footprint with 33 percent concentrated in the Texas market and 23 percent concentrated in the Oklahoma market. At September 30, 2016 , the Other category is primarily composed of California - $295 million or 3 percent of the commercial loan portfolio, Louisiana - $175 million or 2 percent of the commercial loan portfolio, Florida - $117 million or 1% of the commercial loan portfolio, Tennessee - $106 million or 1% of the commercial loan portfolio and Ohio - $102 million or 1% of the commercial loan portfolio. All other states individually represent one percent or less of total commercial loans.

Table 11 -- Commercial Loans by Collateral Location

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Energy	$	535,942	$	1,203,558	$	16,511	$	5,273	$	279,101	$	10,150	$	91,841	$	378,428	$	2,520,804
Services	756,403		913,037		225,602		4,343		265,245		196,023		177,379		398,567		2,936,599
Healthcare	285,073		383,657		129,278		97,501		130,387		121,137		217,040		720,973		2,085,046
Wholesale/retail	487,050		566,871		40,167		47,045		65,280		66,227		40,639		288,751		1,602,030
Manufacturing	131,223		150,064		495		5,381		48,805		62,175		45,310		56,033		499,486
Other commercial and industrial	88,713		132,301		3,974		71,882		13,627		25,684		62,832		77,185		476,198
Total commercial loans	$	2,284,404	$	3,349,488	$	416,027	$	231,425	$	802,445	$	481,396	$	635,041	$	1,919,937	$	10,120,163

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.

- 22 -

Outstanding energy loans totaled $2.5 billion or 15 percent of total loans at September 30, 2016 . Unfunded energy loan commitments increase d by $326 million to $2.3 billion at September 30, 2016 . Approximately $2.0 billion of energy loans were to oil and gas producers, down $235 million compared to June 30, 2016 . The majority of this portfolio is first lien, senior secured, reserve-based lending, which we believe is the lowest risk form of energy lending. The Company has largely avoided higher-risk energy lending areas including second-lien financing, mezzanine debt and subordinated debt. In addition, the Company has no direct exposure to energy company equity or to borrowers with deep-water offshore exposure. Approximately 57 percent of the committed production loans are secured by properties primarily producing oil and 43 percent of the committed production loans are secured by properties primarily producing natural gas. Loans to midstream oil and gas companies totaled $253 million at September 30, 2016 , an increase of $6.8 million over June 30, 2016 . Loans to borrowers that provide services to the energy industry decrease d $64 million from the prior quarter to $198 million at September 30, 2016 . Loans to other energy borrowers, including those engaged in wholesale or retail energy sales, totaled $67 million , a $6.0 million decrease compared to the prior quarter.

The services sector of the loan portfolio totaled $2.9 billion or 18 percent of total loans and consists of a large number of loans to a variety of businesses, including governmental, finance and insurance, not-for-profit, educational services and loans to entities providing services for real estate and construction. Service sector loans increase d by $106 million compared to June 30, 2016 . Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business.

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

We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers. Shared national credits are defined by banking regulators as credits of more than $20 million and with three or more non-affiliated banks as participants. At September 30, 2016 , the outstanding principal balance of these loans totaled $3.8 billion . Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 17 percent of our shared national credits, based on dollars committed. We hold shared credits to the same standard of analysis and perform the same level of review as internally originated credits. Our lending policies generally avoid loans in which we do not have the opportunity to maintain or achieve other business relationships with the customer. In addition to management’s quarterly assessment of credit risk, banking regulators annually review a sample of shared national credits for proper risk grading.

Commercial Real Estate

Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes generally within our geographical footprint, with larger concentrations in Texas and Oklahoma which represent 30 percent and 12 percent of the total commercial real estate portfolio at September 30, 2016 , respectively. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

Commercial real estate loans totaled $3.8 billion or 23 percent of the loan portfolio at September 30, 2016 . The outstanding balance of commercial real estate loans increase d $212 million during the third quarter of 2016 . Loans secured by industrial facilities grew by $192 million and loans secured by multifamily residential properties increase d $87 million . This growth was partially offset by a $59 million decrease in other commercial real estate loan balances. The commercial real estate loan balance as a percentage of our total loan portfolio has ranged from 18 percent to 23 percent over the past five years.

The commercial real estate sector of our loan portfolio distributed by collateral location follows in Table 12 . The Other category is primarily composed of California and Utah which represent $189 million or 5% and $128 million or 3%, respectively. All other states individually represent less than 3% of the total commercial real estate portfolio.

- 23 -

Table 12 -- Commercial Real Estate Loans by Collateral Location

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Retail	$	89,739	$	303,207	$	115,024	$	6,617	$	44,206	$	34,007	$	16,825	$	191,752	$	801,377
Multifamily	85,547		315,561		12,190		26,040		62,895		74,790		92,571		204,179		873,773
Office	115,226		196,448		51,972		1,638		62,727		54,491		68,971		201,232		752,705
Industrial	83,956		226,431		25,298		70		23,994		26,909		67,949		383,414		838,021
Residential construction and land development	16,747		28,750		19,358		6,214		32,736		5,941		5,043		45,157		159,946
Other real estate	71,616		63,497		15,977		6,118		28,571		42,345		8,679		130,973		367,776
Total commercial real estate loans	$	462,831	$	1,133,894	$	239,819	$	46,697	$	255,129	$	238,483	$	260,038	$	1,156,707	$	3,793,598

Residential Mortgage and Personal

Residential mortgage loans totaled $1.9 billion , largely unchanged compared to June 30, 2016 . In general, we sell the majority of our conforming fixed rate loan originations in the secondary market and retain the majority of our non-conforming and adjustable-rate mortgage loans. We have no concentration in sub-prime residential mortgage loans. Our mortgage loan portfolio does not include payment option adjustable rate mortgage loans or adjustable rate mortgage loans with initial rates that are below market. Collateral for 97 percent of our residential mortgage loan portfolio is located within our geographical footprint.

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

At September 30, 2016 , $190 million of permanent residential mortgage loans are guaranteed by U.S. government agencies. We have minimal credit exposure on loans guaranteed by the agencies. This amount includes residential mortgage loans previously sold into GNMA mortgage pools that the Company may repurchase when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have regained effective control over these loans and must include them on the Consolidated Balance Sheet. Permanent residential mortgage loans guaranteed by U.S. government agencies decrease d $2.4 million compared to June 30, 2016 .

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Home equity loans totaled $713 million at September 30, 2016 , a decrease of $6.3 million compared to June 30, 2016 . Our home equity loan portfolio is primarily composed of first-lien, fully amortizing home equity loans. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40 percent. The maximum loan amount available for our home equity loan products is generally $400 thousand. Revolving loans have a 5 year revolving period followed by a 15 year term of amortizing repayment. Interest-only home equity loans may not be extended for any additional revolving time. All other home equity loans may be extended at management's discretion for an additional 5 year revolving term subject to an update of certain credit information. A summary of our home equity loan portfolio at September 30, 2016 by lien position and amortizing status follows in Table 13 .

Table 13 -- Home Equity Loans

(In thousands)



	Revolving		Amortizing		Total
First lien	$	45,605	$	422,576	$	468,181
Junior lien	102,044		142,701		244,745
Total home equity	$	147,649	$	565,277	$	712,926

The distribution of residential mortgage and personal loans at September 30, 2016 is as follows in Table 14 . Residential mortgage loans are distributed by collateral location. Personal loans are generally distributed by borrower location.

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

(In thousands)



	Oklahoma		Texas		New Mexico		Arkansas		Colorado		Arizona		Kansas/Missouri		Other		Total
Residential mortgage:
Permanent mortgage	$	186,695	$	402,807	$	39,408	$	14,896	$	155,399	$	95,382	$	46,250	$	28,721	$	969,558
Permanent mortgages guaranteed by U.S. government agencies	57,007		23,236		60,328		5,975		7,220		1,749		12,598		22,196		190,309
Home equity	413,581		135,532		105,911		5,507		35,197		8,387		8,437		374		712,926
Total residential mortgage	$	657,283	$	561,575	$	205,647	$	26,378	$	197,816	$	105,518	$	67,285	$	51,291	$	1,872,793

Personal	$	260,840	$	274,693	$	11,237	$	6,758	$	44,070	$	29,607	$	39,771	$	11,256	$	678,232

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

Table 15 -- Loans Managed by Primary Geographical Market

(In thousands)



	Sept. 30, 2016		June 30, 2016		March 31, 2016		Dec. 31, 2015		Sept. 30, 2015
Bank of Oklahoma:
Commercial	$	3,545,924	$	3,698,215	$	3,656,034	$	3,782,687	$	3,514,391
Commercial real estate	795,806		781,458		747,689		739,829		677,372
Residential mortgage	1,401,166		1,415,766		1,411,409		1,409,114		1,405,235
Personal	271,420		246,229		204,158		255,387		185,463
Total Bank of Oklahoma	6,014,316		6,141,668		6,019,290		6,187,017		5,782,461

Bank of Texas:
Commercial	3,903,218		3,901,632		3,936,809		3,908,425		3,752,193
Commercial real estate	1,400,709		1,311,408		1,211,978		1,204,202		1,257,741
Residential mortgage	229,345		222,548		217,539		219,126		222,395
Personal	278,167		233,304		210,456		203,496		194,051
Total Bank of Texas	5,811,439		5,668,892		5,576,782		5,535,249		5,426,380

Bank of Albuquerque:
Commercial	398,147		398,427		402,082		375,839		368,027
Commercial real estate	299,785		322,956		323,059		313,422		312,953
Residential mortgage	110,478		114,226		117,655		120,507		121,232
Personal	11,333		10,569		10,823		11,557		10,477
Total Bank of Albuquerque	819,743		846,178		853,619		821,325		812,689

Bank of Arkansas:
Commercial	83,544		81,227		79,808		92,359		76,044
Commercial real estate	72,649		69,235		66,674		69,320		82,225
Residential mortgage	6,936		6,874		7,212		8,169		8,063
Personal	6,757		7,025		918		819		4,921
Total Bank of Arkansas	169,886		164,361		154,612		170,667		171,253

Colorado State Bank & Trust:
Commercial	1,013,314		1,076,620		1,030,348		987,076		1,029,694
Commercial real estate	254,078		237,569		219,078		223,946		229,835
Residential mortgage	59,838		59,425		52,961		53,782		50,138
Personal	42,901		35,064		24,497		23,384		30,683
Total Colorado State Bank & Trust	1,370,131		1,408,678		1,326,884		1,288,188		1,340,350

Bank of Arizona:
Commercial	680,447		670,814		656,527		606,733		608,235
Commercial real estate	726,542		639,112		605,383		507,523		482,918
Residential mortgage	39,206		38,998		40,338		44,047		41,722
Personal	31,205		24,248		18,372		31,060		17,609
Total Bank of Arizona	1,477,400		1,373,172		1,320,620		1,189,363		1,150,484

Bank of Kansas City:
Commercial	495,569		529,502		526,817		499,412		448,838
Commercial real estate	244,029		220,228		196,646		200,791		192,023
Residential mortgage	25,824		23,086		22,195		22,148		20,210
Personal	36,449		30,984		25,101		26,994		22,753
Total Bank of Kansas City	801,871		803,800		770,759		749,345		683,824

Total BOK Financial loans	$	16,464,786	$	16,406,749	$	16,022,566	$	15,941,154	$	15,367,441

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Loan Commitments

We enter into certain off-balance sheet arrangements in the normal course of business. These arrangements included unfunded loan commitments which totaled $8.7 billion and standby letters of credit which totaled $500 million at September 30, 2016 . 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 $1.2 million of the outstanding standby letters of credit were issued on behalf of customers whose loans are nonperforming at September 30, 2016 .

Table 16 – Off-Balance Sheet Credit Commitments

(In thousands)



	Sept. 30, 2016		June 30, 2016		March 31, 2016		Dec. 31, 2015		Sept. 30, 2015
Loan commitments	$	8,697,322	$	8,508,606	$	8,567,017	$	8,455,037	$	8,325,540
Standby letters of credit	499,990		491,002		509,902		507,988		479,638
Mortgage loans sold with recourse	139,306		145,403		152,843		155,489		161,897

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. We are obligated to repurchase these loans for the life of these loans in the event of foreclosure for the unpaid principal and interest at the time of foreclosure. Substantially all of these loans are to borrowers in our primary markets including $90 million to borrowers in Oklahoma, $15 million to borrowers in Arkansas and $12 million to borrowers in New Mexico.

We also have an off-balance sheet obligation to repurchase residential mortgage loans sold to government sponsored entities through our mortgage banking activities due to standard representations and warranties made under contractual agreements as described further in Note 6 to the Consolidated Financial Statements. For the period from 2010 through the third quarter of 2016 combined, approximately 21 percent of repurchase requests have currently resulted in actual repurchases or indemnification by the Company. The accrual for credit losses related to potential loan repurchases under representations and warranties totaled $3.2 million at September 30, 2016 and $3.3 million at June 30, 2016 .

Customer Derivative Programs

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

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

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

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

Derivative contracts are carried at fair value. At September 30, 2016 , the net fair values of derivative contracts, before consideration of cash margin, reported as assets under these programs totaled $658 million compared to $877 million at June 30, 2016 . At September 30, 2016 , the fair value of our derivative contracts included $536 million for foreign exchange contracts, $52 million related to to-be-announced residential mortgage-backed securities, $49 million for interest rate swaps and $13 million for energy contracts. The aggregate net fair value of derivative contracts, before consideration of cash margin, held under these programs reported as liabilities totaled $654 million at September 30, 2016 and $872 million at June 30, 2016 .

At September 30, 2016 , total derivative assets were reduced by $10 million of cash collateral received from counterparties and total derivative liabilities were reduced by $83 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, 2016 follows in Table 17 .

Table 17 -- Fair Value of Derivative Contracts

(In thousands)



Customers	$	355,348
Banks and other financial institutions	289,162
Exchanges and clearing organizations	3,233
Fair value of customer risk management program asset derivative contracts, net	$	647,743

At September 30, 2016 , our largest derivative exposure was to a customer for an interest rate derivative contract which totaled $6.5 million. At September 30, 2016 , our aggregate gross exposure to internationally active domestic financial institutions was approximately $54 million comprised of $49 million of cash and securities positions and $5.5 million of gross derivative positions. We have no direct exposure to European sovereign debt and our aggregate gross exposure to European financial institutions totaled $9.3 million at September 30, 2016 .

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 $26.57 per barrel of oil would decrease the fair value of derivative assets by $8.8 million. An increase in prices equivalent to $74.07 per barrel of oil would increase the fair value of derivative assets by $132 million as current prices move further away from the fixed prices embedded in our existing contracts. Liquidity requirements of this program are also affected by our credit rating. A decrease in our credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $18 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, 2016 , changes in interest rates would not materially impact regulatory capital or liquidity needed to support this portion of our customer derivative program.

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Summary of Loan Loss Experience

We maintain an allowance for loan losses and an accrual for off-balance sheet credit risk. At September 30, 2016 , the combined allowance for loan losses and off-balance sheet credit losses totaled $256 million or 1.56 percent of outstanding loans and 116 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $245 million and the accrual for off-balance sheet credit losses was $11 million . At June 30, 2016 , the combined allowance for credit losses was $252 million or 1.54 percent of outstanding loans and 111 percent of nonaccruing loans, excluding loans guaranteed by U.S. government agencies. The allowance for loan losses was $243 million and the accrual for off-balance sheet credit losses was $9.0 million . The portion of the combined allowance for credit losses attributed to the energy portfolio totaled 3.67 percent of outstanding energy loans at September 30, 2016 , an increase from 3.58 percent of outstanding energy loans at June 30, 2016 .

The provision for credit losses is the amount necessary to maintain the allowance for loan losses and an accrual for off-balance sheet credit risk at an amount determined by management to be appropriate based on its evaluation. The provision includes the combined charge to expense for both the allowance for loan losses and the accrual for off-balance sheet credit risk. All losses incurred from lending activities will ultimately be reflected in charge-offs against the allowance for loan losses following funds advanced against outstanding commitments. After evaluating all credit factors, we recorded a $10.0 million provision for credit losses during the third quarter of 2016 , compared to $20.0 million in the second quarter of 2016 and $7.5 million in the third quarter of 2015 . The lower provision for credit losses compared to previous quarter reflects continued improvement in credit metric trends over the previous quarter largely driven by energy price stability and decreased rates of newly identified nonaccruing and potential problem loans.

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Table 18 -- Summary of Loan Loss Experience

(In thousands)



	Three Months Ended
	Sept. 30, 2016			June 30, 2016			March 31, 2016			Dec. 31, 2015			Sept. 30, 2015
Allowance for loan losses:
Beginning balance	$	243,259		$	233,156		$	225,524		$	204,116		$	201,087
Loans charged off:
Commercial	(6,266		)	(7,355		)	(22,126		)	(2,182		)	(3,497		)
Commercial real estate	—			—			—			(900		)	—
Residential mortgage	(285		)	(345		)	(474		)	(421		)	(446		)
Personal	(1,550		)	(1,145		)	(1,391		)	(1,348		)	(1,331		)
Total	(8,101		)	(8,845		)	(23,991		)	(4,851		)	(5,274		)
Recoveries of loans previously charged off:
Commercial	177			223			488			928			759
Commercial real estate	521			282			85			120			1,865
Residential mortgage	650			200			163			137			205
Personal	690			681			783			685			692
Total	2,038			1,386			1,519			1,870			3,521
Net loans recovered (charged off)	(6,063		)	(7,459		)	(22,472		)	(2,981		)	(1,753		)
Provision for loan losses	7,907			17,562			30,104			24,389			4,782
Ending balance	$	245,103		$	243,259		$	233,156		$	225,524		$	204,116
Accrual for off-balance sheet credit losses:
Beginning balance	$	9,045		$	6,607		$	1,711		$	3,600		$	882
Provision for off-balance sheet credit losses	2,093			2,438			4,896			(1,889		)	2,718
Ending balance	$	11,138		$	9,045		$	6,607		$	1,711		$	3,600
Total combined provision for credit losses	$	10,000		$	20,000		$	35,000		$	22,500		$	7,500
Allowance for loan losses to loans outstanding at period-end	1.49		%	1.48		%	1.46		%	1.41		%	1.33		%
Net charge-offs (annualized) to average loans	0.15		%	0.18		%	0.56		%	0.08		%	0.05		%
Total provision for credit losses (annualized) to average loans	0.24		%	0.49		%	0.88		%	0.58		%	0.20		%
Recoveries to gross charge-offs	25.16		%	15.67		%	6.33		%	38.55		%	66.76		%
Accrual for off-balance sheet credit losses to off-balance sheet credit commitments	0.12		%	0.10		%	0.07		%	0.02		%	0.04		%
Combined allowance for credit losses to loans outstanding at period-end	1.56		%	1.54		%	1.50		%	1.43		%	1.35		%

Allowance for Loan Losses

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

Loans are considered to be impaired when it is probable that we will not collect all amounts due according to the contractual terms of the loan agreement. This includes all nonaccruing loans, all loans modified in troubled debt restructurings and all government guaranteed loans repurchased from GNMA pools. A specific allowance is required when the outstanding principal balance of the loan is not supported by either the discounted cash flows expected to be received from the borrower or the fair value of collateral for collateral dependent loans. At September 30, 2016 , impaired loans totaled $412 million , including $43 million with specific allowances of $6.6 million and $369 million with no specific allowances. At June 30, 2016 , impaired loans totaled $420 million , including $32 million of impaired loans with specific allowances of $4.3 million and $388 million with no specific allowances.

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Risk grading guidelines, recently in the Office of the Comptroller of the Currency ("OCC") Oil and Gas Lending Handbook, heavily weight ability to repay total borrower debt, regardless of collateral position. This change in grading methodology has increased loans especially mentioned, potential problem loans and nonaccrual loans. Because substantially all of our energy portfolio is supported by senior lien positions that, in general, have substantially lower loss exposure, the historical relationship between loan classification and loss exposure may be more difficult to correlate.

The most recently completed energy portfolio redetermination supported that $100 million of impaired energy loans required no allowance for credit losses based on the adequacy of collateral. In addition, $85 million of impaired energy loans are current on all payments due.

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

The aggregate amount of general allowances for all unimpaired loans totaled $210 million at September 30, 2016 , a decrease of $1.9 million compared to June 30, 2016 , primarily due to a $5.9 million decrease in the general allowance attributed to the commercial loan segment, partially offset by a $3.1 million increase in the general allowance attributed to the commercial real estate loan segment.

Nonspecific allowances are maintained for risks beyond factors specific to a particular portfolio segment or loan class. These factors include trends in the economy in our primary lending areas, concentrations in loans with large balances and other relevant factors. Nonspecific allowances totaled $28 million at September 30, 2016 , up from $27 million at June 30, 2016 . The nonspecific allowance includes consideration of the indirect impact that low energy prices might have on the broader economies within our geographical footprint that are highly dependent on the energy industry.

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

Our loan monitoring process also identified certain accruing substandard loans that possess more than the normal amount of risk due to deterioration in the financial condition of the borrower or the value of the collateral. Because the borrowers are still performing in accordance with the original terms of the loan agreements, and no loss of principal or interest is anticipated, these loans were not included in nonperforming assets. Known information does, however, cause management concern as to the borrowers’ ability to comply with current repayment terms. These potential problem loans totaled $478 million at September 30, 2016 , primarily composed of $361 million of energy loans, $31 million of service sector loans, $27 million of wholesale/retail sector loans, $20 million of manufacturing sector loans, $19 million of healthcare sector loans and $10 million of other commercial and industrial loans. Potential problem loans totaled $501 million at June 30, 2016 including $421 million of potential problem energy loans.

Based on regulatory guidelines, other loans especially mentioned are in compliance with the original terms of the agreement but may have a weakness that deserves management's close attention. Energy loans classified as other loans especially mentioned totaled $147 million or 6 percent of outstanding energy loans at September 30, 2016 and $198 million or 7 percent of outstanding energy loans at June 30, 2016 .

We updated our energy loan portfolio stress test at quarter end to estimate how the energy portfolio may respond in a prolonged low-price environment. Stress test assumptions include a starting price of $2.00 per million BTUs for natural gas and $37.50 per barrel of oil, gradually escalating over seven years to a maximum of $3.00 and $55.00, respectively. In this scenario, the energy portfolio exhibits greater stress than we have experienced to date and losses would be expected to exceed our 15 year historical loss rate on energy loans of 7 basis points. The results of the stress test are factored into our expectation that the loan loss provision could range from $70 million to $85 million for 2016. This expectation is based upon current observed conditions.

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Net Loans Charged Off

Loans are charged off against the allowance for loan losses when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value. Internally risk graded loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Non-risk graded loans are generally charged off when payments are between 60 days and 180 days past due, depending on loan class. In addition, non-risk graded loans are generally charged-down to collateral value within 60 days of being notified of a borrower's bankruptcy filing, regardless of payment status.

BOK Financial had net loans charged off of $6.1 million in the third quarter of 2016 , compared to $7.5 million in the second quarter of 2016 and $1.8 million in the third quarter of 2015 . The ratio of net loans charged off to average loans on an annualized basis was 0.15 percent for the third quarter of 2016 , compared with 0.18 percent for the second quarter of 2016 and 0.05 percent for the third quarter of 2015 .

Net commercial loans charged off totaled $6.1 million in the third quarter of 2016 , compared to net loans charged off of $7.1 million in the second quarter of 2016 . Charge-offs in both the third and second quarter of 2016 resulted primarily from energy loans. Net commercial real estate loan recoveries were $521 thousand in the third quarter, compared to net recoveries of $282 thousand in the second quarter. Residential mortgage net recoveries were $365 thousand and personal loan net charge-offs were $860 thousand for the third quarter. Personal loan net charge-offs include deposit account overdraft losses.

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Nonperforming Assets

Table 19 -- Nonperforming Assets

(In thousands)



	Sept. 30, 2016		June 30, 2016		March 31, 2016		Dec. 31, 2015		Sept. 30, 2015
Nonaccruing loans:
Commercial	$	176,464	$	181,989	$	174,652	$	76,424	$	33,798
Commercial real estate	7,350		7,780		9,270		9,001		10,956
Residential mortgage	52,452		57,061		57,577		61,240		44,099
Personal	686		354		331		463		494
Total nonaccruing loans	236,952		247,184		241,830		147,128		89,347
Accruing renegotiated loans guaranteed by U.S. government agencies	80,306		78,806		77,597		74,049		81,598
Real estate and other repossessed assets	31,941		24,054		29,896		30,731		33,116
Total nonperforming assets	$	349,199	$	350,044	$	349,323	$	251,908	$	204,061
Total nonperforming assets excluding those guaranteed by U.S. government agencies	$	253,461	$	251,497	$	252,176	$	155,959	$	118,578

Nonaccruing loans by loan portfolio segment and class:
Commercial:
Energy	$	142,966	$	168,145	$	159,553	$	61,189	$	17,880
Services	8,477		9,388		9,512		10,290		10,692
Wholesale / retail	2,453		2,772		3,685		2,919		3,058
Manufacturing	274		293		312		331		352
Healthcare	855		875		1,023		1,072		1,218
Other commercial and industrial	21,439		516		567		623		598
Total commercial	176,464		181,989		174,652		76,424		33,798

Commercial real estate:
Residential construction and land development	3,739		4,261		4,789		4,409		4,748
Retail	1,249		1,265		1,302		1,319		1,648
Office	882		606		629		651		684
Multifamily	51		65		250		274		185
Industrial	76		76		76		76		76
Other commercial real estate	1,353		1,507		2,224		2,272		3,615
Total commercial real estate	7,350		7,780		9,270		9,001		10,956

Residential mortgage:
Permanent mortgage	25,956		27,228		27,497		28,984		30,660
Permanent mortgage guaranteed by U.S. government agencies	15,432		19,741		19,550		21,900		3,885
Home equity	11,064		10,092		10,530		10,356		9,554
Total residential mortgage	52,452		57,061		57,577		61,240		44,099
Personal	686		354		331		463		494
Total nonaccruing loans	$	236,952	$	247,184	$	241,830	$	147,128	$	89,347

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	Sept. 30, 2016			June 30, 2016			March 31, 2016			Dec. 31, 2015			Sept. 30, 2015
Nonaccruing loans as % of outstanding balance for class:
Commercial:
Energy	5.67		%	5.97		%	5.27		%	1.98		%	0.63		%
Services	0.29		%	0.33		%	0.35		%	0.37		%	0.40		%
Wholesale / retail	0.15		%	0.18		%	0.25		%	0.21		%	0.21		%
Manufacturing	0.05		%	0.05		%	0.05		%	0.06		%	0.06		%
Healthcare	0.04		%	0.04		%	0.05		%	0.06		%	0.07		%
Other commercial and industrial	4.50		%	0.10		%	0.12		%	0.12		%	0.12		%
Total commercial	1.74		%	1.76		%	1.70		%	0.75		%	0.34		%

Commercial real estate:
Residential construction and land development	2.34		%	2.70		%	2.79		%	2.75		%	3.09		%
Retail	0.16		%	0.16		%	0.16		%	0.17		%	0.21		%
Office	0.12		%	0.08		%	0.09		%	0.10		%	0.11		%
Multifamily	0.01		%	0.01		%	0.03		%	0.04		%	0.02		%
Industrial	0.01		%	0.01		%	0.01		%	0.01		%	0.01		%
Other commercial real estate	0.37		%	0.35		%	0.56		%	0.65		%	0.99		%
Total commercial real estate	0.19		%	0.22		%	0.28		%	0.28		%	0.34		%

Residential mortgage:
Permanent mortgage	2.68		%	2.81		%	2.90		%	3.07		%	3.27		%
Permanent mortgage guaranteed by U.S. government agencies	8.11		%	10.24		%	9.91		%	11.12		%	2.02		%
Home equity	1.55		%	1.40		%	1.46		%	1.41		%	1.29		%
Total residential mortgage	2.80		%	3.03		%	3.08		%	3.26		%	2.36		%
Personal	0.10		%	0.06		%	0.07		%	0.08		%	0.11		%
Total nonaccruing loans	1.44		%	1.51		%	1.51		%	0.92		%	0.58		%

Ratios:
Allowance for loan losses to nonaccruing loans ¹	110.65		%	106.95		%	104.89		%	180.09		%	238.84		%
Accruing loans 90 days or more past due ¹	$	3,839		$	2,899		$	8,019		$	1,207		$	101


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

Nonperforming assets totaled $349 million or 2.12 percent of outstanding loans and repossessed assets at September 30, 2016 . Nonaccruing loans totaled $237 million , accruing renegotiated residential mortgage loans totaled $80 million and real estate and other repossessed assets totaled $32 million . All accruing renegotiated residential mortgage loans and $15 million of nonaccruing loans are guaranteed by U.S. government agencies. Excluding assets guaranteed by U.S. government agencies, nonperforming assets increase d $2.0 million during the third quarter. The Company generally retains nonperforming assets to maximize potential recovery which may cause future nonperforming assets to decrease more slowly.

- 34 -

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

At September 30, 2016 , renegotiated loans consist solely of accruing residential mortgage loans guaranteed by U.S. government agencies that have been modified in troubled debt restructurings. See Note 4 to the Consolidated Financial Statements for additional discussion of troubled debt restructurings. Generally, we modify residential mortgage loans primarily by reducing interest rates and extending the number of payments in accordance with U.S. government agency guidelines. Generally, no unpaid principal or interest is forgiven. Interest continues to accrue based on the modified terms of the loan. Modified loans guaranteed by U.S. government agencies under residential mortgage loan programs may be sold once they become eligible according to U.S. government agency guidelines.

A rollforward of nonperforming assets for the three and nine months ended September 30, 2016 follows in Table 20 .

Table 20 -- Rollforward of Nonperforming Assets

(In thousands)



	Three Months Ended
	September 30, 2016
	Nonaccruing Loans			Renegotiated Loans			Real Estate and Other Repossessed Assets			Total Nonperforming Assets
Balance, June 30, 2016	$	247,184		$	78,806		$	24,054		$	350,044
Additions	28,909			12,176			—			41,085
Payments	(10,841		)	(409		)	—			(11,250		)
Charge-offs	(8,101		)	—			—			(8,101		)
Net gains and write-downs	—			—			1,607			1,607
Foreclosure of nonperforming loans	(15,208		)	—			15,208			—
Foreclosure of loans guaranteed by U.S. government agencies	(5,551		)	(2,446		)	—			(7,997		)
Proceeds from sales	—			(7,392		)	(8,892		)	(16,284		)
Net transfers to nonaccruing loans	560			(560		)	—			—
Other, net	—			131			(36		)	95
Balance, Sept. 30, 2016	$	236,952		$	80,306		$	31,941		$	349,199

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	Nine Months Ended
	September 30, 2016
	Nonaccruing Loans			Renegotiated Loans			Real Estate and Other Repossessed Assets			Total Nonperforming Assets
Balance, Dec. 31, 2015	$	147,128		$	74,049		$	30,731		$	251,908
Additions	240,918			35,685			—			276,603
Payments	(77,561		)	(1,423		)	—			(78,984		)
Charge-offs	(40,937		)	—			—			(40,937		)
Net gains and write-downs	—			—			1,805			1,805
Foreclosure of nonperforming loans	(20,580		)	—			20,580			—
Foreclosure of loans guaranteed by U.S. government agencies	(13,912		)	(6,870		)	—			(20,782		)
Proceeds from sales	—			(19,498		)	(21,117		)	(40,615		)
Net transfers to nonaccruing loans	1,941			(1,941		)	—			—
Return to accrual status	(45		)	—			—			(45		)
Other, net	—			304			(58		)	246
Balance, Sept. 30, 2016	$	236,952		$	80,306		$	31,941		$	349,199

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

Commercial

Nonaccruing commercial loans totaled $176 million or 1.74 percent of total commercial loans at September 30, 2016 and $182 million or 1.76 percent of commercial loans at June 30, 2016 . There were $22 million in newly identified nonaccruing commercial loans during the quarter, offset by $7 million in payments and $6.3 million of charge-offs. Newly identified nonaccruing commercial loans were primarily other commercial and industrial loans and energy loans.

Nonaccruing commercial loans at September 30, 2016 were primarily composed of $143 million or 5.67 percent of total energy loans, and $21 million or 4.50 percent of total other commercial and industrial sector loans.

Commercial Real Estate

Nonaccruing commercial real estate loans totaled $7.4 million or 0.19 percent of outstanding commercial real estate loans at September 30, 2016 , compared to $7.8 million or 0.22 percent of outstanding commercial real estate loans at June 30, 2016 . Newly identified nonaccruing commercial real estate loans of $1.0 million were offset by $1.5 million of cash payments received. There were no charge-offs or foreclosures of nonaccruing commercial real estate loans during the third quarter.

Nonaccruing commercial real estate loans were primarily composed of $3.7 million or 2.34 percent of residential construction and land development loans.

Residential Mortgage and Personal

Nonaccruing residential mortgage loans totaled $52 million or 2.80 percent of outstanding residential mortgage loans at September 30, 2016 , compared to $57 million or 3.03 percent of outstanding residential mortgage loans at June 30, 2016 . Newly identified nonaccruing residential mortgage loans totaling $4.0 million were offset by $6.3 million of foreclosures, $2.6 million of payments and $285 thousand of loans charged off during the quarter.

Nonaccruing residential mortgage loans primarily consist of non-guaranteed permanent residential mortgage loans which totaled $26 million or 2.68 percent of outstanding non-guaranteed permanent residential mortgage loans at September 30, 2016 . Nonaccruing home equity loans totaled $11 million or 1.55 percent of total home equity loans.

- 36 -

Payments of accruing residential mortgage loans and personal loans may be delinquent. The composition of residential mortgage loans and personal loans past due but still accruing is included in the following Table 21 . Substantially all non-guaranteed residential loans past due 90 days or more are nonaccruing. Residential mortgage loans 30 to 59 days past due decrease d $2.6 million in the third quarter to $5.1 million at September 30, 2016 and residential mortgage loans 60 to 89 days past due increase d by $224 thousand . Personal loans past due 30 to 59 days also decrease d by $209 thousand compared to June 30, 2016 and personal loans 60 to 89 days increase d $90 thousand .

Table 21 -- Residential Mortgage and Personal Loans Past Due

(In thousands)



	September 30, 2016						June 30, 2016
	90 Days or More		60 to 89 Days		30 to 59 Days		90 Days or More		60 to 89 Days		30 to 59 Days
Residential mortgage:
Permanent mortgage ¹	$	—	$	202	$	3,547	$	—	$	124	$	5,798
Home equity	—		305		1,526		20		159		1,889
Total residential mortgage	$	—	$	507	$	5,073	20		$	283	$	7,687

Personal	$	13	$	148	$	191	$	—	$	58	$	400


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

Real Estate and Other Repossessed Assets

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

Real estate and other repossessed assets totaled $32 million at September 30, 2016 , an increase of $7.9 million compared to June 30, 2016 . The distribution of real estate and other repossessed assets attributed by geographical market is included in Table 22 following.

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

(In thousands)



	Oklahoma		Texas		Colorado		Arkansas		New Mexico		Arizona		Kansas/ Missouri		Other		Total
1-4 family residential properties	$	4,181	$	559	$	—	$	625	$	1,733	$	2,539	$	626	$	69	$	10,332
Developed commercial real estate properties	64		—		2,637		—		590		198		1,296		—		4,785
Undeveloped land	225		1,309		—		—		—		306		—		—		1,840
Residential land development properties	38		—		210		—		—		685		2		—		935
Oil and gas properties	—		14,042										—		—		14,042
Other	3		4		—		—		—		—		—		—		7
Total real estate and other repossessed assets	$	4,511	$	15,914	$	2,847	$	625	$	2,323	$	3,728	$	1,924	$	69	$	31,941

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

- 37 -

Liquidity and Capital

Subsidiary Bank

Deposits and borrowed funds are the primary sources of liquidity for BOKF, NA, the wholly owned subsidiary bank of BOK Financial. Based on the average balances for the third quarter of 2016 , approximately 64 percent of our funding was provided by deposit accounts, 21 percent from borrowed funds, and 10 percent from equity. Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks and other banks, provide adequate liquidity to meet our operating needs.

Deposit accounts represent our largest funding source. We compete for retail and commercial deposits by offering a broad range of products and services and focusing on customer convenience. Retail deposit growth is supported through 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.

Table 23 - Average Deposits by Line of Business

(In thousands)



	Three Months Ended
	Sept. 30, 2016		June 30, 2016		March 31, 2016		Dec. 31, 2015		Sept. 30, 2015
Commercial Banking	$	8,317,341	$	8,403,408	$	8,457,750	$	8,549,240	$	8,627,281
Consumer Banking	6,660,514		6,634,362		6,575,893		6,652,104		6,675,990
Wealth Management	4,913,409		4,521,031		4,696,013		4,583,474		4,490,082
Subtotal	19,891,264		19,558,801		19,729,656		19,784,818		19,793,353
Funds Management and other	873,750		908,931		896,965		920,632		899,795
Total	$	20,765,014	$	20,467,732	$	20,626,621	$	20,705,450	$	20,693,148

Average deposits for the third quarter of 2016 totaled $20.8 billion and represented approximately 64 percent of total liabilities and capital, up from $20.5 billion and 64 percent of total liabilities and capital for the second quarter of 2016 . Average deposits increase d $297 million from the second quarter of 2016 . Average demand deposits increase d by $335 million and average interest-bearing transaction accounts increase d by $60 million , partially offset by a $100 million decrease in average time deposit balances.

Average Commercial Banking deposit balances decrease d $86 million compared to the second quarter of 2016 , primarily due to a $102 million decrease in energy customer balances and a $62 million decrease in other commercial and industrial balances, partially offset by a $45 million increase in small business customer balances and a $21 million increase in commercial real estate customer balances. Commercial customers continue to retain large cash reserves primarily due to low yields available on other high quality investment alternatives and to minimize deposit service charges through the earnings credit. The earnings credit is a non-cash method that enables commercial customers to offset deposit service charges based on account balances. If economic activity were to improve significantly or if short-term interest rates were to increase, deposits may decline as customers deploy funds into projects or shift demand deposits into money market instruments.

Average Consumer Banking deposit balances increase d $26 million . Demand deposit balances increase d by $66 million and interest-bearing transaction deposits increase d by $1.4 million , partially offset by a $38 million decrease in time deposit balances. Growth in Consumer Banking deposits includes escrow funds associated with mortgage loan servicing. These deposits tend to grow throughout the year and are largely disbursed near year end.

Average Wealth Management deposits increase d $392 million compared to the second quarter of 2016 primarily due to a $346 million increase in interest-bearing transaction account balances and an $84 million increase in demand deposits, partially offset by a $39 million decrease in time deposit balances. Growth in Wealth Management deposits include funds being held temporarily in anticipation of money market reforms.

- 38 -

Average time deposits for the third quarter of 2016 included $519 million of brokered deposits, an increase of $94 million over the second quarter of 2016 . Average interest-bearing transaction accounts for the third quarter included $678 million of brokered deposits, an increase of $115 million over the second quarter of 2016 . Changes in average brokered deposits largely affect Funds Management and Other.

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

Table 24 -- Period End Deposits by Principal Market Area

(In thousands)



	Sept. 30, 2016		June 30, 2016		Mar. 31,2016		Dec. 31, 2015		Sept. 30, 2015
Bank of Oklahoma:
Demand	$	4,158,273	$	4,020,181	$	3,813,128	$	4,133,520	$	3,834,145
Interest-bearing:
Transaction	5,701,983		5,741,302		5,706,067		5,971,819		5,783,258
Savings	242,959		247,984		246,122		226,733		225,580
Time	1,091,464		1,167,271		1,198,022		1,202,274		1,253,137
Total interest-bearing	7,036,406		7,156,557		7,150,211		7,400,826		7,261,975
Total Bank of Oklahoma	11,194,679		11,176,738		10,963,339		11,534,346		11,096,120

Bank of Texas:
Demand	2,734,981		2,677,253		2,571,883		2,627,764		2,689,493
Interest-bearing:
Transaction	2,240,040		2,035,634		2,106,905		2,132,099		1,996,223
Savings	84,642		83,862		83,263		77,902		74,674
Time	528,380		516,231		530,657		549,740		554,106
Total interest-bearing	2,853,062		2,635,727		2,720,825		2,759,741		2,625,003
Total Bank of Texas	5,588,043		5,312,980		5,292,708		5,387,505		5,314,496

Bank of Albuquerque:
Demand	584,681		530,853		557,200		487,286		520,785
Interest-bearing:
Transaction	555,326		573,690		560,684		563,723		529,862
Savings	54,480		49,200		47,187		43,672		41,380
Time	244,706		250,068		259,630		267,821		281,426
Total interest-bearing	854,512		872,958		867,501		875,216		852,668
Total Bank of Albuquerque	1,439,193		1,403,811		1,424,701		1,362,502		1,373,453

Bank of Arkansas:
Demand	32,203		30,607		31,318		27,252		25,397
Interest-bearing:
Transaction	313,480		278,335		265,803		202,857		290,728
Savings	2,051		1,853		1,929		1,747		1,573
Time	17,534		18,911		21,035		24,983		26,203
Total interest-bearing	333,065		299,099		288,767		229,587		318,504
Total Bank of Arkansas	365,268		329,706		320,085		256,839		343,901

- 39 -



	Sept. 30, 2016		June 30, 2016		Mar. 31,2016		Dec. 31, 2015		Sept. 30, 2015

Colorado State Bank & Trust:
Demand	517,063		528,124		413,506		497,318		430,675
Interest-bearing:
Transaction	623,055		625,240		610,077		616,697		655,206
Savings	31,613		31,509		33,108		31,927		31,398
Time	247,667		254,164		271,475		296,224		320,279
Total interest-bearing	902,335		910,913		914,660		944,848		1,006,883
Total Colorado State Bank & Trust	1,419,398		1,439,037		1,328,166		1,442,166		1,437,558

Bank of Arizona:
Demand	418,718		396,837		341,828		326,324		306,425
Interest-bearing:
Transaction	303,750		302,297		313,825		358,556		293,319
Savings	2,959		3,198		3,277		2,893		4,121
Time	27,935		28,681		29,053		29,498		26,750
Total interest-bearing	334,644		334,176		346,155		390,947		324,190
Total Bank of Arizona	753,362		731,013		687,983		717,271		630,615

Bank of Kansas City:
Demand	235,445		240,754		221,812		197,424		234,847
Interest-bearing:
Transaction	86,526		112,371		146,405		153,203		150,253
Savings	1,645		1,656		1,619		1,378		1,570
Time	11,945		11,735		31,502		35,524		36,630
Total interest-bearing	100,116		125,762		179,526		190,105		188,453
Total Bank of Kansas City	335,561		366,516		401,338		387,529		423,300
Total BOK Financial deposits	$	21,095,504	$	20,759,801	$	20,418,320	$	21,088,158	$	20,619,443

In addition to deposits, liquidity is provided primarily by federal funds purchased, securities repurchase agreements and Federal Home Loan Bank borrowings. Federal funds purchased consist primarily of unsecured, overnight funds acquired from other financial institutions. Funds are primarily purchased from bankers’ banks and Federal Home Loan banks from across the country. The largest single source of wholesale federal funds purchased totaled $44 million at September 30, 2016 . Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale securities. Federal Home Loan Bank borrowings are generally short term and are secured by a blanket pledge of eligible collateral (generally unencumbered U.S. Treasury and agency mortgage-backed securities, 1-4 family residential mortgage loans, multifamily and other qualifying commercial real estate loans). Amounts borrowed from the Federal Home Loan Bank of Topeka averaged $6.3 billion during the quarter, compared to $6.0 billion in the second quarter of 2016 .

At September 30, 2016 , the estimated unused credit available to BOKF, NA from collateralized sources was approximately $4.3 billion.

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

- 40 -

Table 25 -- Borrowed Funds

(In thousands)



			Three Months Ended September 30, 2016								Three Months Ended June 30, 2016
	Sept. 30, 2016		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter		June 30, 2016		Average Balance During the Quarter		Rate		Maximum Outstanding At Any Month End During the Quarter

Funds purchased	$	109,031	$	68,280	0.19	%	$	109,031	$	56,780	$	70,682	0.19	%	$	70,264
Repurchase agreements	504,573		522,822		0.04	%	547,335		472,683		611,264		0.05	%	663,538
Other borrowings:
Federal Home Loan Bank advances	6,500,000		6,309,783		0.55	%	6,500,000		5,800,000		6,046,154		0.55	%	6,400,000
GNMA repurchase liability	16,624		14,560		4.67	%	16,624		12,769		12,210		4.81	%	12,769
Other	16,819		18,026		2.40	%	18,067		17,967		17,664		2.44	%	17,967
Total other borrowings	6,533,443		6,342,369		0.57	%			5,830,736		6,076,028		0.57	%
Subordinated debentures	144,631		255,890		3.84	%	371,827		371,812		232,795		1.52	%	371,812
Total Borrowed Funds	$	7,291,678	$	7,189,361	0.64	%			$	6,732,011	$	6,990,769	0.55	%

In 2007, BOKF, NA 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 percent through May 14, 2012 which then converted to a floating rate of three-month LIBOR plus 0.69 percent. The $227 million of this subordinated debt that remained outstanding was called during the third quarter of 2016.

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

Parent Company

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

At September 30, 2016 , cash and interest-bearing cash and cash equivalents held by the parent company totaled $336 million. The primary sources of liquidity for BOK Financial are cash on hand and dividends from BOKF, NA. Dividends from the bank are limited by various banking regulations to net profits, as defined, for the year plus retained profits for the two preceding years. Dividends are further restricted by minimum capital requirements. At September 30, 2016 , based upon the most restrictive limitations as well as management's internal capital policy, the bank could declare up to $172 million of dividends without regulatory approval. Dividend constraints may be alleviated through increases in retained earnings, capital issuances or changes in risk weighted assets. Future losses or increases in required regulatory capital at the bank could affect its ability to pay dividends to the parent company.

Our equity capital at September 30, 2016 was $3.4 billion , an increase of $30 million over June 30, 2016 . Net income less cash dividends paid increase d equity $46 million during the third quarter of 2016 . Accumulated other comprehensive income decreased $22 million primarily related to the change in unrealized gains on available for sale securities due to changes in interest rates. Capital is managed to maximize long-term value to the shareholders. Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.

On October 27, 2015, the board of directors authorized the Company to purchase up to five million common shares, subject to market conditions, securities law and other regulatory compliance limitations. As of September 30, 2016 , a cumulative total of 2,179,243 shares have been repurchased under this authorization. No shares were repurchased in the third quarter of 2016 .

- 41 -

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

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

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

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

Table 26 -- Capital Ratios



	Minimum Capital Requirement ¹		Capital Conservation Buffer ²		Minimum Capital Requirement Including Capital Conservation Buffer		Sept. 30, 2016		June 30, 2016		Sept. 30, 2015
Risk-based capital:
Common equity Tier 1	4.50	%	2.50	%	7.00	%	11.99	%	11.86	%	12.78	%
Tier 1 capital	6.00	%	2.50	%	8.50	%	11.99	%	11.86	%	12.78	%
Total capital	8.00	%	2.50	%	10.50	%	13.65	%	13.51	%	13.89	%
Tier 1 Leverage	4.00	%	N/A		4.00	%	9.06	%	9.06	%	9.55	%

Average total equity to average assets							10.39	%	10.46	%	11.05	%
Tangible common equity ratio							9.19	%	9.33	%	9.78	%


¹	Effective January 1, 2015


²	Effective January 1, 2016

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

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

Table 27 -- Non-GAAP Measure

(Dollars in thousands)



	Sept. 30, 2016			June 30, 2016			March 31, 2016			Dec. 31, 2015			Sept. 30, 2015
Tangible common equity ratio:
Total shareholders' equity	$	3,398,311		$	3,368,833		$	3,321,555		$	3,230,556		$	3,377,226
Less: Goodwill and intangible assets, net	424,716			426,111			428,733			429,370			430,460
Tangible common equity	2,973,595			2,942,722			2,892,822			2,801,186			2,946,766
Total assets	32,779,231			31,970,450			31,413,945			31,476,128			30,566,905
Less: Goodwill and intangible assets, net	424,716			426,111			428,733			429,370			430,460
Tangible assets	$	32,354,515		$	31,544,339		$	30,985,212		$	31,046,758		$	30,136,445
Tangible common equity ratio	9.19		%	9.33		%	9.34		%	9.02		%	9.78		%

- 42 -

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

Off-Balance Sheet Arrangements

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

Market Risk

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. Market risk excludes changes in fair value due to the 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 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 percent 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. The Asset/Liabilty Committee is also responsible for monitoring market risk limits for mortgage banking production and mortgage servicing assets inclusive of economic hedge benefits. Each of these desks must limit projected exposure from a 50 basis point change in interest rates.

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 on the Company's performance across multiple interest rate scenarios. While the current internal policy limit for net interest revenue variation is a maximum decline of 5 percent due to a 200 basis point change over twelve months, the results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful. We report the effect of a 50 basis point decrease in the interim.

- 43 -

The Company’s primary interest rate exposures include the Federal Funds rate, which affects short-term borrowings, and the prime lending rate and LIBOR, which are the basis for much of the variable rate loan pricing. Additionally, residential mortgage rates directly affect the prepayment speeds for residential mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. In addition, the impact on the level and composition of DDA and other core deposit balances resulting from a significant increase in short-term market interest rates and the overall interest rate environment is likely to be material. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model. The effects of changes in interest rates on the value of mortgage servicing rights are excluded from Table 28 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 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 28 -- Interest Rate Sensitivity

(Dollars in thousands)



	200 bp Increase						50 bp Decrease
	September 30,						September 30,
	2016			2015			2016			2015
Anticipated impact over the next twelve months on net interest revenue	$	551		$	(5,325	)	$	(25,147	)	$	(20,047	)
	0.07		%	(0.70		)%	(3.22		)%	(2.62		)%

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 and municipal bonds to enhance returns on its securities portfolios. Both of these activities involve interest rate risk. BOK Financial has an insignificant exposure to foreign exchange risk and does not take positions in commodity derivatives.

A variety of methods are used to 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. Economic hedges in either the futures, over the counter derivatives 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 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 percent 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 nine months ended September 30, 2016 and 2015 . At September 30, 2016 , 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, 2016 and September 30, 2015 are as follows in Table 29 .

- 44 -

Table 29 -- Trading Value at Risk (VaR)

(In thousands)



	Three Months Ended Sept. 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Average	$	2,551	$	1,799	$	2,280	$	1,635
High	4,321		2,680		4,321		2,680
Low	1,152		1,048		775		782

The Company expanded its trading activities during the third quarter through the initial operation of a team that deals in specified pools of mortgage loans that have been placed into U.S. government agency issued securities and related derivative instruments. These instruments are generally customized to meet requirements of specific customers. This team also serves as a market maker that provides liquidity as both a buyer and seller of to-be-announced derivative instruments. Each of these expanded activities must fall within the VaR guidelines mentioned above.

The Company also bears interest rate risk by originating residential mortgages held for sale (RMHFS). A variety of methods are used to manage the interest rate risk of mortgage origination activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and revenue sensitivity limits. Interest rate risk from RMHFS is mitigated through forward sale contracts.

Management uses a pre-tax income sensitivity methodology to measure market risk from RMHFS. Pre-tax income sensitivity is calculated using a + / - 50 basis point change in interest rates, a 30 day average fall out rate, and a projected fall out-rate that is statistically modeled and recalibrated using such factors as loan product type, seasonality, region, originator, channel, rate lock terms, rate change scenario and various borrower characteristics. The Company monitors the effectiveness of this model through back-testing, updating the data and regular validations. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the pre-tax income sensitivity to $7 million. There were no instances of pre-tax income sensitivity exceeding the $7 million limit during the three and nine months ended September 30, 2016 and 2015 .

The average, high and low pre-tax income sensitivity amounts for the three and nine months ended September 30, 2016 and September 30, 2015 are as follows.

Table 30 -- RMHFS Interest Rate Sensitivity

(In thousands)



	Three Months Ended Sept. 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Average	$	827	$	2,814	$	2,179	$	2,615
High	2,563		5,422		6,858		6,590
Low	17		86		12		68

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.

- 45 -

Forward-Looking Statements

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

- 46 -



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	2016			2015			2016			2015
Loans	$	146,840		$	132,985		$	427,512		$	392,878
Residential mortgage loans held for sale	3,615			3,793			9,823			10,634
Trading securities	2,996			669			4,136			1,618
Taxable securities	3,000			3,211			9,244			9,788
Tax-exempt securities	1,132			1,274			3,492			3,933
Total investment securities	4,132			4,485			12,736			13,721
Taxable securities	42,513			43,473			130,790			128,933
Tax-exempt securities	529			535			1,591			1,718
Total available for sale securities	43,042			44,008			132,381			130,651
Fair value option securities	1,531			2,480			6,182			6,803
Restricted equity securities	4,510			3,802			12,684			9,627
Interest-bearing cash and cash equivalents	2,651			1,442			7,926			4,114
Total interest revenue	209,317			193,664			613,380			570,046
Interest expense
Deposits	9,812			10,731			30,351			34,102
Borrowed funds	9,191			3,701			25,943			9,395
Subordinated debentures	2,468			596			4,056			4,456
Total interest expense	21,471			15,028			60,350			47,953
Net interest revenue	187,846			178,636			553,030			522,093
Provision for credit losses	10,000			7,500			65,000			11,500
Net interest revenue after provision for credit losses	177,846			171,136			488,030			510,593
Other operating revenue
Brokerage and trading revenue	38,006			31,582			109,877			99,301
Transaction card revenue	33,933			32,514			101,237			96,302
Fiduciary and asset management revenue	34,073			30,807			100,942			94,988
Deposit service charges and fees	23,668			23,606			68,828			67,618
Mortgage banking revenue	42,548			33,170			115,202			109,336
Other revenue	13,080			12,978			38,336			35,650
Total fees and commissions	185,308			164,657			534,422			503,195
Other gains, net	2,442			1,161			5,309			3,373
Gain on derivatives, net	2,226			1,283			20,130			1,162
Gain (loss) on fair value option securities, net	(3,355		)	5,926			10,367			443
Change in fair value of mortgage servicing rights	2,327			(11,757		)	(41,944		)	(12,269		)
Gain on available for sale securities, net	2,394			2,166			11,684			9,926
Total other-than-temporary impairment losses	—			—			—			(781		)
Portion of loss recognized in other comprehensive income	—			—			—			689
Net impairment losses recognized in earnings	—			—			—			(92		)
Total other operating revenue	191,342			163,436			539,968			505,738
Other operating expense
Personnel	143,185			129,062			421,518			390,305
Business promotion	6,839			5,922			19,238			19,435
Charitable contributions to BOKF Foundation	—			796			—			796
Professional fees and services	14,038			10,147			39,955			29,766
Net occupancy and equipment	20,111			18,689			58,554			56,660
Insurance	9,390			4,864			23,784			14,960
Data processing and communications	33,331			30,708			98,150			91,135
Printing, postage and supplies	3,790			3,376			11,586			10,390
Net losses (gains) and operating expenses of repossessed assets	(926		)	267			1,732			1,103
Amortization of intangible assets	1,521			1,089			5,304			3,269
Mortgage banking costs	16,022			9,107			44,210			27,501
Other expense	14,819			10,601			37,714			26,686
Total other operating expense	262,120			224,628			761,745			672,006
Net income before taxes	107,068			109,944			266,253			344,325
Federal and state income taxes	31,956			34,128			83,881			113,142
Net income	75,112			75,816			182,372			231,183
Net income (loss) attributable to non-controlling interests	835			925			(270		)	2,219
Net income attributable to BOK Financial Corporation shareholders	$	74,277		$	74,891		$	182,642		$	228,964
Earnings per share:
Basic	$	1.13		$	1.09		$	2.77		$	3.33
Diluted	$	1.13		$	1.09		$	2.76		$	3.32
Average shares used in computation:
Basic	65,085,392			67,668,076			65,208,774			68,004,508
Diluted	65,157,841			67,762,483			65,263,566			68,104,017
Dividends declared per share	$	0.43		$	0.42		$	1.29		$	1.26

See accompanying notes to consolidated financial statements.

- 47 -



Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except share and per share data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Net income	$	75,112		$	75,816		$	182,372		$	231,183
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)	(33,458		)	57,892			133,108			57,763
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—			(105		)	(112		)	(418		)
Interest expense, Subordinated debentures	—			—			—			121
Net impairment losses recognized in earnings	—			—			—			92
Gain on available for sale securities, net	(2,394		)	(2,166		)	(11,684		)	(9,926		)
Other comprehensive income (loss) before income taxes	(35,852		)	55,621			121,312			47,632
Federal and state income taxes	(13,947		)	21,637			47,172			18,529
Other comprehensive income (loss), net of income taxes	(21,905		)	33,984			74,140			29,103
Comprehensive income	53,207			109,800			256,512			260,286
Comprehensive income (loss) attributable to non-controlling interests	835			925			(270		)	2,219
Comprehensive income attributable to BOK Financial Corp. shareholders	$	52,372		$	108,875		$	256,782		$	258,067

See accompanying notes to consolidated financial statements.

- 48 -

Consolidated Balance Sheets (In thousands, except share data)

	Sept. 30, 2016			Dec. 31, 2015			Sept. 30, 2015
	(Unaudited)			(Footnote 1)			(Unaudited)
Assets
Cash and due from banks	$	535,916		$	573,699		$	489,268
Interest-bearing cash and cash equivalents	2,080,978			2,069,900			1,830,105
Trading securities	546,615			122,404			181,131
Investment securities (fair value : September 30, 2016 – $580,310; December 31, 2015 – $629,159 ; September 30, 2015 – $643,091)	546,457			597,836			612,384
Available for sale securities	8,862,283			9,042,733			8,801,089
Fair value option securities	222,409			444,217			427,760
Restricted equity securities	333,391			273,684			263,587
Residential mortgage loans held for sale	447,592			308,439			357,414
Loans	16,464,786			15,941,154			15,367,441
Allowance for loan losses	(245,103		)	(225,524		)	(204,116		)
Loans, net of allowance	16,219,683			15,715,630			15,163,325
Premises and equipment, net	318,196			306,490			294,669
Receivables	650,368			163,480			151,451
Goodwill	382,739			385,461			385,461
Intangible assets, net	41,977			43,909			44,999
Mortgage servicing rights	203,621			218,605			200,049
Real estate and other repossessed assets, net of allowance ( September 30, 2016 – $9,524 ; December 31, 2015 – $12,622; September 30, 2015 – $12,874)	31,941			30,731			33,116
Derivative contracts, net	655,078			586,270			726,159
Cash surrender value of bank-owned life insurance	310,211			303,335			300,981
Receivable on unsettled securities sales	19,642			40,193			30,009
Other assets	370,134			249,112			273,948
Total assets	$	32,779,231		$	31,476,128		$	30,566,905

Liabilities and Equity
Liabilities:
Noninterest-bearing demand deposits	$	8,681,364		$	8,296,888		$	8,041,767
Interest-bearing deposits:
Transaction	9,824,160			9,998,954			9,698,849
Savings	420,349			386,252			380,296
Time	2,169,631			2,406,064			2,498,531
Total deposits	21,095,504			21,088,158			20,619,443
Funds purchased	109,031			491,192			62,297
Repurchase agreements	504,573			722,444			555,677
Other borrowings	6,533,443			4,837,879			4,635,150
Subordinated debentures	144,631			226,350			226,314
Accrued interest, taxes and expense	191,276			119,584			158,048
Derivative contracts, net	573,987			581,701			636,115
Due on unsettled securities purchases	677			16,897			98,351
Other liabilities	193,698			124,284			159,348
Total liabilities	29,346,820			28,208,489			27,150,743
Shareholders' equity:
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: September 30, 2016 – 74,866,429; December 31, 2015 – 74,530,364; September 30, 2015 – 74,461,234)	4			4			4
Capital surplus	995,680			982,009			973,824
Retained earnings	2,801,931			2,704,121			2,673,292
Treasury stock (shares at cost: September 30, 2016 – 8,955,975; December 31, 2015 – 8,636,332; September 30, 2015 – 6,748,203)	(495,031		)	(477,165		)	(355,670		)
Accumulated other comprehensive income	95,727			21,587			85,776
Total shareholders’ equity	3,398,311			3,230,556			3,377,226
Non-controlling interests	34,100			37,083			38,936
Total equity	3,432,411			3,267,639			3,416,162
Total liabilities and equity	$	32,779,231		$	31,476,128		$	30,566,905

See accompanying notes to consolidated financial statements.

- 49 -

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

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

Balance, Dec. 31, 2014	74,004	$	4	$	954,644	$	2,530,837		4,890	$	(239,979	)	$	56,673	$	3,302,179		$	34,027		$	3,336,206
Net income (loss)	—	—		—		228,964			—	—			—		228,964			2,219			231,183
Other comprehensive income	—	—		—		—			—	—			29,103		29,103			—			29,103
Repurchase of common stock	—	—		—		—			1,760	(109,760		)	—		(109,760		)	—			(109,760		)
Issuance of shares for equity compensation	457	—		10,728		—			98	(5,931		)	—		4,797			—			4,797
Tax effect from equity compensation, net	—	—		645		—			—	—			—		645			—			645
Share-based compensation	—	—		7,807		—			—	—			—		7,807			—			7,807
Cash dividends on common stock	—	—		—		(86,509		)	—	—			—		(86,509		)	—			(86,509		)
Sale of non-controlling interest	—	—		—		—			—	—			—		—			5,500			5,500
Capital calls and distributions, net	—	—		—		—			—	—			—		—			(2,810		)	(2,810		)

Balance, Sept. 30, 2015	74,461	$	4	$	973,824	$	2,673,292		6,748	$	(355,670	)	$	85,776	$	3,377,226		$	38,936		$	3,416,162

Balance, Dec. 31, 2015	74,530	$	4	$	982,009	$	2,704,121		8,636	$	(477,165	)	$	21,587	$	3,230,556		$	37,083		$	3,267,639
Net income (loss)	—	—		—		182,642			—	—			—		182,642			(270		)	182,372
Other comprehensive income	—	—		—		—			—	—			74,140		74,140			—			74,140
Repurchase of common stock	—	—		—		—			305	(17,771		)	—		(17,771		)	—			(17,771		)
Issuance of shares for equity compensation	336	—		5,513		—			15	(95		)	—		5,418			—			5,418
Tax effect from equity compensation, net	—	—		589		—			—	—			—		589			—			589
Share-based compensation	—	—		7,569		—			—	—			—		7,569			—			7,569
Cash dividends on common stock	—	—		—		(84,832		)	—	—			—		(84,832		)	—			(84,832		)
Capital calls and distributions, net	—	—		—		—			—	—			—		—			(2,713		)	(2,713		)

Balance, Sept. 30, 2016	74,866	$	4	$	995,680	$	2,801,931		8,956	$	(495,031	)	$	95,727	$	3,398,311		$	34,100		$	3,432,411

See accompanying notes to consolidated financial statements.

- 50 -

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

	Nine Months Ended
	September 30,
	2016			2015
Cash Flows From Operating Activities:
Net income	$	182,372		$	231,183
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	65,000			11,500
Change in fair value of mortgage servicing rights	41,944			12,269
Net unrealized gains from derivative contracts	(9,755		)	(974		)
Tax effect from equity compensation, net	(589		)	(645		)
Share-based compensation	7,569			7,807
Depreciation and amortization	64,543			50,088
Net amortization of securities discounts and premiums	31,373			42,757
Net realized gains on financial instruments and other net gains	(13,663		)	(12,601		)
Net gain on mortgage loans held for sale	(61,775		)	(60,075		)
Mortgage loans originated for sale	(4,927,442		)	(5,007,471		)
Proceeds from sale of mortgage loans held for sale	4,855,682			5,022,109
Capitalized mortgage servicing rights	(56,345		)	(62,375		)
Charitable contributions to BOKF Foundation	—			796
Change in trading and fair value option securities	(204,030		)	(110,857		)
Change in receivables	(483,836		)	8,455
Change in other assets	(17,931		)	(15,368		)
Change in accrued interest, taxes and expense	27,780			14,447
Change in other liabilities	7,262			40,670
Net cash provided by (used in) operating activities	(491,841		)	171,715
Cash Flows From Investing Activities:
Proceeds from maturities or redemptions of investment securities	65,104			53,795
Proceeds from maturities or redemptions of available for sale securities	1,120,917			1,307,177
Purchases of investment securities	(18,599		)	(19,037		)
Purchases of available for sale securities	(1,860,287		)	(2,271,374		)
Proceeds from sales of available for sale securities	1,027,379			1,164,425
Change in amount receivable on unsettled securities transactions	20,551			44,250
Loans originated, net of principal collected	(551,351		)	(1,121,100		)
Net payments on derivative asset contracts	(79,512		)	(291,949		)
Acquisitions, net of cash acquired	(7,700		)	(18,098		)
Proceeds from disposition of assets	131,761			131,824
Purchases of assets	(159,263		)	(203,546		)
Net cash used in investing activities	(311,000		)	(1,223,633		)
Cash Flows From Financing Activities:
Net change in demand deposits, transaction deposits and savings accounts	243,779			(411,231		)
Net change in time deposits	(236,433		)	(110,185		)
Net change in other borrowed funds	1,015,822			1,786,438
Repayment of subordinated debentures	(226,550		)	(121,810		)
Issuance of subordinated debentures	145,331			—
Net proceeds on derivative liability contracts	76,144			277,872
Net change in derivative margin accounts	(129,141		)	(148,119		)
Change in amount due on unsettled security transactions	(16,220		)	(192,189		)
Issuance of common and treasury stock, net	5,418			4,797
Tax effect from equity compensation, net	589			645
Sale of non-controlling interests	—			5,500
Repurchase of common stock	(17,771		)	(109,760		)
Dividends paid	(84,832		)	(86,509		)
Net cash provided by financing activities	776,136			895,449
Net decrease in cash and cash equivalents	(26,705		)	(156,469		)
Cash and cash equivalents at beginning of period	2,643,599			2,475,842
Cash and cash equivalents at end of period	$	2,616,894		$	2,319,373

- 51 -

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

	Nine Months Ended
	September 30,
	2016		2015

Supplemental Cash Flow Information:
Cash paid for interest	$	61,522	$	50,066
Cash paid for taxes	$	43,096	$	78,115
Net loans and bank premises transferred to repossessed real estate and other assets	$	20,580	$	9,558
Residential mortgage loans guaranteed by U.S. government agencies that became eligible for repurchase during the period	$	79,710	$	86,242
Conveyance of other real estate owned guaranteed by U.S. government agencies	$	50,855	$	93,157

See accompanying notes to consolidated financial statements.

- 52 -

Notes to Consolidated Financial Statements (Unaudited)

( 1 ) Significant Accounting Policies

Basis of Presentation

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

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

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

The financial information should be read in conjunction with BOK Financial’s 2015 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2015 have been derived from the audited financial statements included in BOK Financial’s 2015 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 nine -month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 .

Newly Adopted and Pending Accounting Policies

Financial Accounting Standards Board (“FASB”)

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

On May 28, 2014, the FASB issued ASU 2014-09 to clarify the principles for recognizing revenue by providing a more robust framework that will give greater consistency and comparability in revenue recognition practices. In the new framework, an entity recognizes revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services. The new model requires the identification of performance obligations included in contracts with customers, a determination of the transaction price and an allocation of the price to those performance obligations. The entity recognizes revenue when performance obligations are satisfied. ASU 2014-09 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is evaluating the impact the adoption of ASU 2014-09 will have on the Company's financial statements.

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

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

- 53 -

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

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

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

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

FASB Accounting Standards Update No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity ("ASU 2014-16")

On November 3, 2014, the FASB issued ASU 2014-16 to eliminate the use of different methods and reduce diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. For hybrid financial instruments issued in the form of a share, an entity should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument. The entity should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. For public business entities, the ASU was effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods. Adoption of ASU 2014-16 did not have a material impact on the Company's consolidated financial statements.

FASB Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02")

On February 18, 2015, the FASB issued ASU 2015-02 to address concerns that current U.S. GAAP may require a reporting entity to consolidate another legal entity where the reporting entity's contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity's voting rights, or the reporting entity is not exposed to a majority of the legal entity's economic benefits or obligations. The amendments affect limited partnerships and similar legal entities, the evaluation of fees paid to a decision maker or a service provider as a variable interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and certain investment funds. The ASU was effective for periods beginning after December 15, 2015 for public companies. Adoption of ASU 2015-02 did not have a material impact on the Company's consolidated financial statements.

FASB Accounting Standards Update No. 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) ("ASU 2015-07")

On May 1, 2015, the FASB issued ASU 2015-07 to gain consistency within the categorization of the fair value hierarchy. The update removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. It also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. The ASU was effective for the Company for interim and annual periods beginning after December 15, 2015 and should be applied retrospectively to all periods presented. Adoption of ASU 2015-07 did not have a material impact on the Company's consolidated financial statements.

- 54 -

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

On January 5, 2016, the FASB issued ASU 2016-01 over the recognition and measurement of financial assets and liabilities. The update requires equity investments, in general, to be measured at fair value with changes in fair value recognized in earnings. It also eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost, requires entities to use the exit price notion when measuring fair value, requires an entity to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from a change in the instrument-specific credit risk when the fair value option has been elected, requires separate presentation of financial assets and liabilities by measurement category and form on the balance sheet or accompanying notes, clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets, and simplifies the impairment assessment of equity investments without readily determinable fair values. The ASU is effective for the Company for interim and annual periods beginning after December 15, 2017. Upon adoption, unrealized gains and losses from equity securities will be reclassified from other comprehensive income to retained earnings. At September 30, 2016 , the Company had $3.3 million of unrealized gains included in accumulated other comprehensive income.

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

On February 25, 2016, the FASB issued ASU 2016-02 to increase transparency and comparability by recognizing lease assets and liabilities on the balance and disclosing key information about leasing arrangements. The final guidance requires lessees to put most leases on their balance sheets and may affect the presentation and timing of expense recognition, eliminates the current real estate-specific provisions, modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors. The ASU is effective for the Company for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application of the amendments is permitted. The Company is evaluating the impact the adoption of ASU 2016-02 will have on the Company's financial statements.

FASB Accounting Standards Update No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships ("ASU 2016-05")

On March 10, 2016, the FASB issued ASU 2016-05 which clarifies that "a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument" or "a change in a critical term of the hedging relationship." If all other hedge accounting criteria in ASC 815 are met, a hedging relationship where the hedging derivative instrument is novated would not be discontinued or need to be redesignated. The ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. An entity would apply the guidance prospectively unless modified retrospective transition is elected. Early adoption is permitted. Adoption of ASU 2016-05 is not expected to have a material impact on the Company's financial statements.

FASB Accounting Standards Update No. 2016-07, Investments - Equity Method and Joint Ventures ("ASU 2016-07")

On March 15, 2016, the FASB issued ASU 2016-07 to simplify the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as result of an increase in the level of ownership interest or degree of influence. The ASU also requires that unrealized holding gains or losses in accumulated other comprehensive income related to an available for sale security that becomes eligible for the equity method be recognized in earnings as of the date the investment qualifies for the equity method. The ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Adoption of ASU 2016-07 is not expected to have a material impact on the Company's financial statements.

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

On March 30, 2016, the FASB issued ASU 2016-09 to simplify multiple aspects of accounting for employee share-based payment transactions including accounting income taxes, forfeitures, and statutory tax withholding requirements. The ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Implementation of ASU 2016-09 will add volatility to tax expense as stock prices change; however, we expect the impact to be insignificant.

- 55 -

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

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

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

On August 26, 2016, the FASB issued ASU 2016-15, which amends guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows, in order to reduce inconsistent application. The amendments address eight cash flow issues including debt repayment and extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments following a business combination, proceeds from the settlement of insurance claims and corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows. ASU 2016-15 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. Adoption of ASU 2016-15 is not expected to have a material impact on the Company's financial statements.

- 56 -

( 2 ) Securities

Trading Securities

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



	September 30, 2016					December 31, 2015					September 30, 2015
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)
U.S. government agency debentures	$	15,705	$	(7	)	$	61,295	$	(71	)	$	42,431	$	(38	)
U.S. government agency residential mortgage-backed securities	464,749		876			10,989		17			30,973		195
Municipal and other tax-exempt securities	54,856		(100		)	31,901		210			84,261		421
Other trading securities	11,305		14			18,219		(16		)	23,466		28
Total trading securities	$	546,615	$	783		$	122,404	$	140		$	181,131	$	606

Investment Securities

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



	September 30, 2016
	Amortized		Carrying		Fair		Gross Unrealized ¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	323,225	$	323,225	$	327,788	$	4,745	$	(182	)
U.S. government agency residential mortgage-backed securities – Other	22,166		22,166		23,452		1,286		—
Other debt securities	201,066		201,066		229,070		28,014		(10		)
Total investment securities	$	546,457	$	546,457	$	580,310	$	34,045	$	(192	)


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



	December 31, 2015
	Amortized		Carrying		Fair		Gross Unrealized ¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	365,258	$	365,258	$	368,910	$	3,935	$	(283	)
U.S. government agency residential mortgage-backed securities – Other	26,721		26,833		27,874		1,063		(22		)
Other debt securities	205,745		205,745		232,375		26,689		(59		)
Total investment securities	$	597,724	$	597,836	$	629,159	$	31,687	$	(364	)


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



	September 30, 2015
	Amortized		Carrying		Fair		Gross Unrealized ¹
	Cost		Value		Value		Gain		Loss
Municipal and other tax-exempt	$	379,980	$	379,980	$	384,310	$	4,461	$	(131	)
U.S. government agency residential mortgage-backed securities – Other	28,456		28,653		30,080		1,427		—
Other debt securities	203,751		203,751		228,701		25,063		(113		)
Total investment securities	$	612,187	$	612,384	$	643,091	$	30,951	$	(244	)


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

- 57 -

The amortized cost and fair values of investment securities at September 30, 2016 , 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	$	87,330		$	195,763		$	8,778		$	31,354		$	323,225		2.76
Fair value	87,331			196,864			9,023			34,570			327,788
Nominal yield¹	1.42		%	2.01		%	3.20		%	6.08		%	2.28		%
Other debt securities:
Carrying value	15,047			42,314			125,955			17,750			201,066			6.84
Fair value	15,191			45,802			148,422			19,655			229,070
Nominal yield	3.49		%	5.03		%	5.88		%	4.86		%	5.43		%
Total fixed maturity securities:
Carrying value	$	102,377		$	238,077		$	134,733		$	49,104		$	524,291		4.32
Fair value	102,522			242,666			157,445			54,225			556,858
Nominal yield	1.72		%	2.54		%	5.70		%	5.64		%	3.48		%
Residential mortgage-backed securities:
Carrying value													$	22,166		³
Fair value													23,452
Nominal yield ⁴													2.75		%
Total investment securities:
Carrying value													$	546,457
Fair value													580,310
Nominal yield													3.46		%


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


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


³	The average expected lives of residential mortgage-backed securities were 4.3 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.

- 58 -

Available for Sale Securities

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



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

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

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

- 59 -



	December 31, 2015
	Amortized		Fair		Gross Unrealized¹
	Cost		Value		Gain		Loss			OTTI ²
U.S. Treasury	$	1,000	$	995	$	—	$	(5	)	$	—
Municipal and other tax-exempt	56,681		56,817		873		(737		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	3,156,214		3,187,215		41,502		(10,501		)	—
FHLMC	1,940,915		1,949,335		14,727		(6,307		)	—
GNMA	763,967		761,801		2,385		(4,551		)	—
Other	—		—		—		—			—
Total U.S. government agencies	5,861,096		5,898,351		58,614		(21,359		)	—
Private issue:
Alt-A loans	56,387		62,574		6,574		—			(387		)
Jumbo-A loans	71,724		76,544		5,260		—			(440		)
Total private issue	128,111		139,118		11,834		—			(827		)
Total residential mortgage-backed securities	5,989,207		6,037,469		70,448		(21,359		)	(827		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,919,044		2,905,796		5,396		(18,644		)	—
Other debt securities	4,400		4,151		—		(249		)	—
Perpetual preferred stock	17,171		19,672		2,501		—			—
Equity securities and mutual funds	17,121		17,833		752		(40		)	—
Total available for sale securities	$	9,004,624	$	9,042,733	$	79,970	$	(41,034	)	$	(827	)

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, 2015
	Amortized		Fair		Gross Unrealized ¹
	Cost		Value		Gain		Loss			OTTI ²
U.S. Treasury	$	1,000	$	1,003	$	3	$	—		$	—
Municipal and other tax-exempt	57,610		57,960		1,065		(715		)	—
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	3,115,810		3,185,097		69,757		(470		)	—
FHLMC	1,853,379		1,885,201		32,646		(824		)	—
GNMA	741,212		744,647		4,557		(1,122		)	—
Other	3,922		4,182		260		—			—
Total U.S. government agencies	5,714,323		5,819,127		107,220		(2,416		)	—
Private issue:
Alt-A loans	58,801		64,700		6,519		—			(620		)
Jumbo-A loans	75,258		80,982		6,121		—			(397		)
Total private issue	134,059		145,682		12,640		—			(1,017		)
Total residential mortgage-backed securities	5,848,382		5,964,809		119,860		(2,416		)	(1,017		)
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,708,931		2,735,787		28,889		(2,033		)	—
Other debt securities	4,400		4,150		—		(250		)	—
Perpetual preferred stock	17,171		19,163		2,030		(38		)	—
Equity securities and mutual funds	18,711		18,217		950		(1,444		)	—
Total available for sale securities	$	8,656,205	$	8,801,089	$	152,797	$	(6,896	)	$	(1,017	)


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.

- 60 -

The amortized cost and fair values of available for sale securities at September 30, 2016 , 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 Maturity ⁵
U.S. Treasuries:
Amortized cost	$	—		$	1,000		$	—		$	—			$	1,000		1.29
Fair value	—			1,002			—			—				1,002
Nominal yield	—		%	0.87		%	—		%	—		%		0.87		%
Municipal and other tax-exempt:
Amortized cost	$	9,089		$	13,593		$	2,092		$	17,169			$	41,943		8.14
Fair value	9,190			13,858			2,109			16,935				42,092
Nominal yield¹	4.97		%	3.85		%	3.46		%	2.36		%	⁶	3.46		%
Commercial mortgage-backed securities:
Amortized cost	$	—		$	931,761		$	1,817,166		$	194,061			$	2,942,988		6.82
Fair value	—			942,994			1,848,462			195,039				2,986,495
Nominal yield	—		%	1.74		%	1.84		%	1.54		%		1.79		%
Other debt securities:
Amortized cost	$	—		$	—		$	—		$	4,400			$	4,400		30.91
Fair value	—			—			—			4,151				4,151
Nominal yield	—		%	—		%	—		%	1.71		%	⁶	1.71		%
Total fixed maturity securities:
Amortized cost	$	9,089		$	946,354		$	1,819,258		$	215,630			$	2,990,331		6.87
Fair value	9,190			957,854			1,850,571			216,125				3,033,740
Nominal yield	4.97		%	1.77		%	1.85		%	1.61		%		1.81		%
Residential mortgage-backed securities:
Amortized cost														$	5,679,520		²
Fair value														5,790,275
Nominal yield ⁴														1.87		%
Equity securities and mutual funds:
Amortized cost														$	32,899		³
Fair value														38,268
Nominal yield														—		%
Total available-for-sale securities:
Amortized cost														$	8,702,750
Fair value														8,862,283
Nominal yield														1.84		%


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


²	The average expected lives of mortgage-backed securities were 3.4 years years based upon current prepayment assumptions.


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


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


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


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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Proceeds	$	232,239		$	450,765		$	1,027,379		$	1,164,425
Gross realized gains	2,415			3,803			11,705			13,543
Gross realized losses	(21		)	(1,637		)	(21		)	(3,617		)
Related federal and state income tax expense	931			843			4,545			3,861

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



	Sept. 30,2016		Dec. 31, 2016		Sept. 30,2015
Investment:
Carrying value	$	301,754	$	231,033	$	50,380
Fair value	307,264		234,382		52,249

Available for sale:
Amortized cost	7,098,721		6,831,743		6,225,689
Fair value	7,213,520		6,849,524		6,318,330

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

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Temporarily Impaired Securities as of September 30, 2016

(in thousands):



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investment:
Municipal and other tax-exempt	75	$	100,624	$	106	$	4,359	$	76	$	104,983	$	182
U.S. government agency residential mortgage-backed securities – Other	—	—		—		—		—		—		—
Other debt securities	3	444		6		856		4		1,300		10
Total investment securities	78	$	101,068	$	112	$	5,215	$	80	$	106,283	$	192



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
Municipal and other tax-exempt	20	$	2,210	$	3	$	6,396	$	450	$	8,606	$	453
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	14	365,201		1,712		14,229		52		379,430		1,764
FHLMC	6	122,713		91		20,306		258		143,019		349
GNMA	16	230,043		1,157		212,705		191		442,748		1,348
Total U.S. government agencies	36	717,957		2,960		247,240		501		965,197		3,461
Private issue ¹ :
Alt-A loans	5	8,231		141		7,773		63		16,004		204
Jumbo-A loans	1	6,583		26		—		—		6,583		26
Total private issue	6	14,814		167		7,773		63		22,587		230
Total residential mortgage-backed securities	42	732,771		3,127		255,013		564		987,784		3,691
Commercial mortgage-backed securities guaranteed by U.S. government agencies	33	372,805		1,656		60,851		166		433,656		1,822
Other debt securities	2	—		—		4,151		249		4,151		249
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	33	86		—		886		17		972		17
Total available for sale securities	130	$	1,107,872	$	4,786	$	327,297	$	1,446	$	1,435,169	$	6,232


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

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Temporarily Impaired Securities as of December 31, 2015

(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	73	$	127,319	$	207	$	13,380	$	77	$	140,699	$	284
U.S. government agency residential mortgage-backed securities – Other	1	5,533		22		—		—		5,533		22
Other debt securities	11	1,082		41		1,715		18		2,797		59
Total investment securities	85	$	133,934	$	270	$	15,095	$	95	$	149,029	$	365



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
U.S. Treasury	1	$	995	$	5	$	—	$	—	$	995	$	5
Municipal and other tax-exempt	20	$	9,909	$	27	$	11,664	$	710	$	21,573	$	737
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	55	1,188,022		10,262		18,236		239		1,206,258		10,501
FHLMC	40	726,713		4,827		77,545		1,480		804,258		6,307
GNMA	15	364,919		1,951		102,109		2,600		467,028		4,551
Total U.S. government agencies	110	2,279,654		17,040		197,890		4,319		2,477,544		21,359
Private issue ¹ :
Alt-A loans	4	—		—		9,264		387		9,264		387
Jumbo-A loans	8	—		—		8,482		440		8,482		440
Total private issue	12	—		—		17,746		827		17,746		827
Total residential mortgage-backed securities	122	2,279,654		17,040		215,636		5,146		2,495,290		22,186
Commercial mortgage-backed securities guaranteed by U.S. government agencies	213	1,582,469		11,419		484,258		7,225		2,066,727		18,644
Other debt securities	2	—		—		4,151		249		4,151		249
Perpetual preferred stocks	—	—		—		—		—		—		—
Equity securities and mutual funds	61	782		5		991		35		1,773		40
Total available for sale securities	419	$	3,873,809	$	28,496	$	716,700	$	13,365	$	4,590,509	$	41,861


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

- 64 -

Temporarily Impaired Securities as of September 30, 2015

(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	15	$	6,250	$	81	$	13,438	$	50	$	19,688	$	131
U.S. government agency residential mortgage-backed securities – Other	—	—		—		—		—		—		—
Other debt securities	17	1,283		64		4,577		49		5,860		113
Total investment securities	32	$	7,533	$	145	$	18,015	$	99	$	25,548	$	244



	Number of Securities	Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale:
Municipal and other tax-exempt ¹	18	$	7,868	$	485	$	3,800	$	230	$	11,668	$	715
Residential mortgage-backed securities:
U. S. government agencies:
FNMA	6	155,747		470		—		—		155,747		470
FHLMC	4	71,930		503		26,848		321		98,778		824
GNMA	4	54,701		562		54,701		560		109,402		1,122
Total U.S. government agencies	14	282,378		1,535		81,549		881		363,927		2,416
Private issue ¹ :
Alt-A loans	4	2,857		186		6,667		434		9,524		620
Jumbo-A loans	8	5,380		236		3,681		161		9,061		397
Total private issue	12	8,237		422		10,348		595		18,585		1,017
Total residential mortgage-backed securities	26	290,615		1,957		91,897		1,476		382,512		3,433
Commercial mortgage-backed securities guaranteed by U.S. government agencies	31	327,790		1,488		223,007		545		550,797		2,033
Other debt securities	2	—		—		4,149		250		4,149		250
Perpetual preferred stocks	1	1,912		38		—		—		1,912		38
Equity securities and mutual funds	37	4,031		1,432		526		12		4,557		1,444
Total available for sale securities	115	$	632,216	$	5,400	$	323,379	$	2,513	$	955,595	$	7,913


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

On a quarterly basis, the Company performs separate evaluations of impaired debt and equity investments 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, 2016 , the Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity.

- 65 -

Impairment of debt securities rated investment grade by all nationally-recognized rating agencies is 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, 2016 .

At September 30, 2016 , 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):



	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
Investment:
Municipal and other tax-exempt	$	207,881	$	209,210	$	5,094	$	5,160	$	—	$	—	$	110,250	$	113,418	$	323,225	$	327,788
U.S. government agency residential mortgage-backed securities ₁	—		—		—		—		—		—		22,166		23,452		22,166		23,452
Other debt securities	140,184		164,118		—		—		—		—		60,882		64,952		201,066		229,070
Total investment securities	$	348,065	$	373,328	$	5,094	$	5,160	$	—	$	—	$	193,298	$	201,822	$	546,457	$	580,310



	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
Available for Sale:
U.S. Treasury	$	—	$	—	$	—	$	—	$	—	$	—	$	1,000	$	1,002	$	1,000	$	1,002
Municipal and other tax-exempt	23,837		24,290		5,675		5,316		—		—		12,431		12,486		41,943		42,092
U.S. government agency residential mortgage-backed securities ₁	—		—		—		—		—		—		5,571,104		5,668,672		5,571,104		5,668,672
Privately issued residential mortgage-backed securities	—		—		—		—		108,416		121,603		—		—		108,416		121,603
Commercial mortgage-backed securities guaranteed by U.S. government agencies	—		—		—		—		—		—		2,942,988		2,986,495		2,942,988		2,986,495
Other debt securities	4,400		4,151		—		—		—		—		—		—		4,400		4,151
Perpetual preferred stock	—		—		4,796		5,505		10,766		14,073		—		—		15,562		19,578
Equity securities and mutual funds	4		591		—		—		—		—		17,333		18,099		17,337		18,690
Total available for sale securities	$	28,241	$	29,032	$	10,471	$	10,821	$	119,182	$	135,676	$	8,544,856	$	8,686,754	$	8,702,750	$	8,862,283


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.

At September 30, 2016 , the entire portfolio of privately issued residential mortgage-backed securities was rated below investment grade by the nationally-recognized rating agencies. The gross unrealized loss on these securities totaled $230 thousand . Impairment of securities rated below investment grade was evaluated based on projections of estimated cash flows from individual loans underlying each security using current and anticipated unemployment and default rates, changes in housing prices and estimated liquidation costs at foreclosure. Each factor is considered in the evaluation.

- 66 -

The primary assumptions used in this evaluation were:



	September 30, 2016	Dec. 31, 2015	September 30, 2015

Unemployment rate	Moving down to 4.7 percent over the next 12 months and remain at 4.7 percent thereafter.	Decreasing to 4.8 percent over the next 12 months and remain at 4.8 percent thereafter.	Moving down to 5.1 percent over the next 12 months and remain at 5.1 percent thereafter.
Housing price appreciation/depreciation	Starting with current depreciated housing prices based on information derived from the FHFA ¹ , appreciating 3.5 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.	Starting with current depreciated housing prices based on information derived from the FHFA ¹ , appreciating 3.5 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.	Starting with current depreciated housing prices based on information derived from the FHFA ¹ , appreciating 3.2 percent over the next 12 months, then flat for the following 12 months and then appreciating at 2 percent per year thereafter.
Estimated liquidation costs	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.	Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.
Discount rates	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.	Estimated cash flows were discounted at rates that range from 2.00 percent to 6.25 percent based on our current expected yields.


¹	Federal Housing Finance Agency

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 is charged against other comprehensive income, net of deferred taxes. No credit loss impairments were recognized in earnings on privately issued residential mortgage-backed securities during the three months ended September 30, 2016 .

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, 2016			Life-to-date
	Number of Securities	Amortized Cost		Fair Value		Number of Securities	Amount		Number of Securities	Amount
Alt-A	14	$	47,039	$	54,065	—	$	—	14	$	36,284
Jumbo-A	30	61,377		67,538		—	—		29	18,220
Total	44	$	108,416	$	121,603	—	$	—	43	$	54,504

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, 2016 .

- 67 -

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,
	2016		2015		2016		2015
Balance of credit-related OTTI recognized on available for sale debt securities, beginning of period	$	54,504	$	54,439	$	54,504	$	54,347
Additions for credit-related OTTI not previously recognized	—		—		—		—
Additions for increases in credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost	—		—		—		92
Reductions for change in intent to hold before recovery	—		—		—		—
Sales	—		—		—		—
Balance of credit-related OTTI recognized on available for sale debt securities, end of period	$	54,504	$	54,439	$	54,504	$	54,439

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

Fair Value Option Securities

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

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



	Sept. 30,2016					Dec. 31, 2015					Sept. 30, 2015
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain (Loss)
U.S. Treasury	$	222,409	$	(2,397	)	$	—	$	—		$	—	$	—
U.S. government agency residential mortgage-backed securities	$	—	$	—		$	444,217	$	(2,060	)	$	427,760	$	2,067
Total	$	222,409	$	(2,397	)	$	444,217	$	(2,060	)	$	427,760	$	2,067

Restricted Equity Securities

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



	Sept. 30,2016		Dec. 31, 2015		Sept. 30,2015
Federal Reserve stock	$	36,283	$	36,148	$	35,148
Federal Home Loan Bank stock	296,907		237,365		228,268
Other	201		171		171
Total	$	333,391	$	273,684	$	263,587

- 68 -

( 3 ) Derivatives

Derivative instruments may be used by the Company as part of its internal risk management programs or may be offered to customers. All derivative instruments are carried at fair value and changes in fair value are reported in earnings as they occur. Credit risk is also considered in determining fair value.

When bilateral netting agreements or similar arrangements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by derivative contract type by counterparty basis.

Derivative contracts may require the Company to provide or receive cash margin as collateral for derivative assets and liabilities. Derivative assets and liabilities are reported net of cash margin when certain conditions are met. In addition, derivative contracts executed with customers under Customer Risk Management Programs may be secured by non-cash collateral in conjunction with a credit agreement with that customer. Access to collateral, in the event of default is reasonably assured. As of September 30, 2016 , a decrease in BOK Financial's credit rating to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $18 million .

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

Customer Risk Management Programs

BOK Financial offers programs to permit its customers to manage various risks, including fluctuations in energy, cattle and other agricultural products, and foreign exchange rates, or to take positions in derivative contracts. Customers may also manage interest rate risk through interest rate swaps used by borrowers to modify interest rate terms of their loans or to-be-announced securities used by mortgage banking customers to hedge their loan production. Derivative contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial and other selected counterparties to minimize the risk of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts and included in other operating revenue – brokerage and trading revenue in the Consolidated Statements of Earnings.

Internal Risk Management Programs

BOK Financial may use derivative contracts in managing its interest rate sensitivity, as part of its economic hedge of the change in the fair value of mortgage servicing rights and as an economic hedge of trading securities. As of September 30, 2016 , derivative contracts under the internal risk management programs were primarily used as part of the economic hedges of the change in the fair value of the mortgage servicing rights and trading securities.

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

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at September 30, 2016 (in thousands):



	Assets
	Notional ¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	20,078,974	$	90,999	$	(38,678	)	$	52,321	$	—		$	52,321
Interest rate swaps	1,323,045		49,279		—			49,279		(794		)	48,485
Energy contracts	729,202		41,775		(28,464		)	13,311		(288		)	13,023
Agricultural contracts	53,002		3,950		(1,571		)	2,379		(1,076		)	1,303
Foreign exchange contracts	550,828		536,264		—			536,264		(7,577		)	528,687
Equity option contracts	103,464		4,654		—			4,654		(730		)	3,924
Total customer risk management programs	22,838,515		726,921		(68,713		)	658,208		(10,465		)	647,743
Internal risk management programs	2,298,038		7,335		—			7,335		—			7,335
Total derivative contracts	$	25,136,553	$	734,256	$	(68,713	)	$	665,543	$	(10,465	)	$	655,078

	Liabilities
	Notional¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	19,776,883	$	86,812	$	(38,678	)	$	48,134	$	(39,042	)	$	9,092
Interest rate swaps	1,323,045		49,518		—			49,518		(34,457		)	15,061
Energy contracts	695,835		40,888		(28,464		)	12,424		(3,857		)	8,567
Agricultural contracts	52,997		3,943		(1,571		)	2,372		—			2,372
Foreign exchange contracts	550,943		536,660		—			536,660		(5,396		)	531,264
Equity option contracts	103,464		4,654		—			4,654		—			4,654
Total customer risk management programs	22,503,167		722,475		(68,713		)	653,762		(82,752		)	571,010
Interest risk management programs	1,485,691		2,977		—			2,977		—			2,977
Total derivative contracts	$	23,988,858	$	725,452	$	(68,713	)	$	656,739	$	(82,752	)	$	573,987


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

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2015 (in thousands):



	Assets
	Notional ¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	14,583,052	$	43,270	$	(28,305	)	$	14,965	$	—		$	14,965
Interest rate swaps	1,332,044		31,744		—			31,744		(1,424		)	30,320
Energy contracts	470,613		83,045		(22,970		)	60,075		(18,606		)	41,469
Agricultural contracts	61,662		2,591		(1,158		)	1,433		—			1,433
Foreign exchange contracts	546,572		498,830		—			498,830		(4,140		)	494,690
Equity option contracts	137,278		3,780		—			3,780		(470		)	3,310
Total customer risk management programs	17,131,221		663,260		(52,433		)	610,827		(24,640		)	586,187
Interest risk management programs	22,000		83		—			83		—			83
Total derivative contracts	$	17,153,221	$	663,343	$	(52,433	)	$	610,910	$	(24,640	)	$	586,270

	Liabilities
	Notional ¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	14,168,927	$	40,141	$	(28,305	)	$	11,836	$	(1,308	)	$	10,528
Interest rate swaps	1,332,044		31,928		—			31,928		(20,530		)	11,398
Energy contracts	463,703		81,869		(22,970		)	58,899		—			58,899
Agricultural contracts	61,657		2,579		(1,158		)	1,421		(1,248		)	173
Foreign exchange contracts	546,405		498,574		—			498,574		(1,951		)	496,623
Equity option contracts	137,278		3,780		—			3,780		—			3,780
Total customer risk management programs	16,710,014		658,871		(52,433		)	606,438		(25,037		)	581,401
Interest risk management programs	75,000		300		—			300		—			300
Total derivative contracts	$	16,785,014	$	659,171	$	(52,433	)	$	606,738	$	(25,037	)	$	581,701


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

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The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at September 30, 2015 (in thousands):



	Assets
	Notional ¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	16,093,704	$	136,435	$	(50,845	)	$	85,590	$	—		$	85,590
Interest rate swaps	1,345,779		42,636		—			42,636		—			42,636
Energy contracts	560,997		89,948		(28,535		)	61,413		(23,089		)	38,324
Agricultural contracts	101,321		8,064		(4,053		)	4,011		(1,558		)	2,453
Foreign exchange contracts	618,991		557,313		—			557,313		(3,985		)	553,328
Equity option contracts	143,452		3,784		—			3,784		(470		)	3,314
Total customer risk management programs	18,864,244		838,180		(83,433		)	754,747		(29,102		)	725,645
Interest risk management programs	47,000		514		—			514		—			514
Total derivative contracts	$	18,911,244	$	838,694	$	(83,433	)	$	755,261	$	(29,102	)	$	726,159

	Liabilities
	Notional ¹		Gross Fair Value		Netting Adjustments			Net Fair Value Before Cash Collateral		Cash Collateral			Fair Value Net of Cash Collateral
Customer risk management programs:
Interest rate contracts
To-be-announced residential mortgage-backed securities	$	16,050,271	$	133,543	$	(50,845	)	$	82,698	$	(82,225	)	$	473
Interest rate swaps	1,345,779		42,901		—			42,901		(26,723		)	16,178
Energy contracts	551,989		85,856		(28,535		)	57,321		—			57,321
Agricultural contracts	101,325		8,045		(4,053		)	3,992		—			3,992
Foreign exchange contracts	618,770		556,890		—			556,890		(2,619		)	554,271
Equity option contracts	143,452		3,784		—			3,784		—			3,784
Total customer risk management programs	18,811,586		831,019		(83,433		)	747,586		(111,567		)	636,019
Interest risk management programs	7,500		96		—			96		—			96
Total derivative contracts	$	18,819,086	$	831,115	$	(83,433	)	$	747,682	$	(111,567	)	$	636,115


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

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



	Three Months Ended
	September 30, 2016					September 30, 2015
	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	$	11,584		$	—	$	7,914		$	—
Interest rate swaps	710			—		411			—
Energy contracts	1,222			—		771			—
Agricultural contracts	25			—		44			—
Foreign exchange contracts	218			—		152			—
Equity option contracts	—			—		—			—
Total customer risk management programs	13,759			—		9,292			—
Interest risk management programs	(1,608		)	2,226		(199		)	1,283
Total derivative contracts	$	12,151		$	2,226	$	9,093		$	1,283



	Nine Months Ended
	September 30, 2016					September 30, 2015
	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	$	28,886		$	—	$	25,942		$	—
Interest rate swaps	1,758			—		1,495			—
Energy contracts	4,667			—		3,138			—
Agricultural contracts	86			—		86			—
Foreign exchange contracts	730			—		618			—
Equity option contracts	—			—		—			—
Total customer risk management programs	36,127			—		31,279			—
Interest risk management programs	(1,617		)	20,130		(199		)	1,162
Total derivative contracts	$	34,510		$	20,130	$	31,080		$	1,162

Net interest revenue was not significantly impacted by the settlement of amounts receivable or payable on interest rate swaps for the nine months ended September 30, 2016 and 2015 , respectively.

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( 4 ) Loans and Allowances for Credit Losses

Loans

Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower’s difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures. Accounting policies for all loans, excluding residential mortgage loans guaranteed by U.S. government agencies, are as follows.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccruing status when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are individually evaluated for nonaccruing status quarterly. Non-risk graded loans are generally placed on nonaccruing status when more than 90 days past due or within 60 days of being notified of the borrower's bankruptcy filing. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccruing status. Payments on nonaccruing loans are applied to principal or recognized as interest income, according to management’s judgment as to the collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower’s financial condition or a sustained period of performance.

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

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

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

Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable.

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

Loans are disaggregated into portfolio segments and further disaggregated into classes. The portfolio segment is the level at which the Company develops and documents a systematic method for determining its allowance for credit losses. Classes are a further disaggregation of portfolio segments based on the risk characteristics of the loans and the Company’s method for monitoring and assessing credit risk.

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



	September 30, 2016								December 31, 2015
	Fixed Rate		Variable Rate		Non-accrual		Total		Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	1,991,423	$	7,952,276	$	176,464	$	10,120,163	$	1,850,548	$	8,325,559	$	76,424	$	10,252,531
Commercial real estate	565,429		3,220,819		7,350		3,793,598		627,678		2,622,354		9,001		3,259,033
Residential mortgage	1,572,288		248,053		52,452		1,872,793		1,598,992		216,661		61,240		1,876,893
Personal	104,408		573,138		686		678,232		91,816		460,418		463		552,697
Total	$	4,233,548	$	11,994,286	$	236,952	$	16,464,786	$	4,169,034	$	11,624,992	$	147,128	$	15,941,154
Accruing loans past due (90 days) ¹							$	3,839							$	1,207



	September 30, 2015
	Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	1,854,163	$	7,909,461	$	33,798	$	9,797,422
Commercial real estate	588,604		2,635,507		10,956		3,235,067
Residential mortgage	1,624,759		200,136		44,100		1,868,995
Personal	100,615		364,848		494		465,957
Total	$	4,168,141	$	11,109,952	$	89,348	$	15,367,441
Accruing loans past due (90 days) ¹							$	101


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

At September 30, 2016 , $5.3 billion or 32 percent of our total loan portfolio is to businesses and individuals attributed to the Texas market and $3.7 billion or 22 percent of the total loan portfolio is to businesses and individuals attributed to the Oklahoma market. These geographic concentrations subject the loan portfolio to the general economic conditions within these areas.

Commercial

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

At September 30, 2016 , commercial loans attributed to the Texas market totaled $3.3 billion or 33 percent of the commercial loan portfolio segment and commercial loans attributed to the Oklahoma market totaled $2.3 billion or 23 percent of the commercial loan portfolio segment.

The commercial loan portfolio segment is further divided into loan classes. The energy loan class totaled $2.5 billion or 15 percent of total loans at September 30, 2016 , including $2.0 billion of outstanding loans to energy producers. Approximately 57 percent of committed production loans are secured by properties primarily producing oil and 43 percent are secured by properties producing natural gas. The services loan class totaled $2.9 billion or 18 percent of total loans at September 30, 2016 . Approximately $1.3 billion of loans in the services category consist of loans with individual balances of less than $10 million . Businesses included in the services class include governmental, finance and insurance, not-for-profit, educational services and loans to entities providing services for real estate and construction. The healthcare loan class totaled $2.1 billion or 13 percent of total loans at September 30, 2016 . The healthcare loan class consists primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted living and skill nursing. Healthcare also includes loans to hospitals and other medical service providers.

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Commercial Real Estate

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

At September 30, 2016 , 30 percent of commercial real estate loans are secured by properties primarily located in the Dallas and Houston areas of Texas. An additional 12 percent of commercial real estate loans are secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma.

Residential Mortgage and Personal

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

At September 30, 2016 , residential mortgage loans included $190 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 $713 million at September 30, 2016 . Approximately, 66 percent of the home equity loan portfolio is comprised of first lien loans and 34 percent of the home equity portfolio is comprised of junior lien loans. Junior lien loans are distributed 58 percent to amortizing term loans and 42 percent to revolving lines of credit. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40 percent. The maximum loan amount available for our home equity loan products is generally $400 thousand . Revolving loans have a 5 year revolving period followed by a 15 year term of amortizing repayments. Interest-only home equity loans may not be extended for any additional revolving time. All other home equity loans may be extended at management's discretion for an additional 5 year revolving term, subject to an update of certain credit information.

Credit Commitments

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At September 30, 2016 , outstanding commitments totaled $8.7 billion . Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

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

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Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At September 30, 2016 , outstanding standby letters of credit totaled $500 million . Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At September 30, 2016 , outstanding commercial letters of credit totaled $5.2 million .

Allowances for Credit Losses

BOK Financial maintains an allowance for loan losses and an accrual for off-balance sheet credit risk. The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees. As discussed in greater detail in Note 6 , the Company also has separate accruals for off-balance sheet credit risk related to residential mortgage loans previously sold with full or partial recourse and for residential mortgage loans sold to government sponsored agencies under standard representations and warranties.

The appropriateness of the allowance for loan losses and accrual for off-balance sheet credit losses (collectively "allowance for credit losses") is assessed by management based on an on-going quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments.

The allowance for loan losses consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances for unimpaired loans based on estimated loss rates by loan class and nonspecific allowances based on general economic conditions, risk concentration and related factors. There have been no material changes in the approach or techniques utilized in developing the allowance for loan losses and the accrual for off-balance sheet credit losses for the three and nine months ended September 30, 2016 .

Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreements. Internally risk graded loans are evaluated individually for impairment. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on evaluation of the borrowers' ability to repay. Certain commercial loans and most residential mortgage and consumer loans are small balance, homogeneous pools of loans that are not risk graded. Non-risk graded loans are identified as impaired based on performance status. Generally, non-risk graded loans 90 days or more past due or modified in a TDR or in bankruptcy are considered to be impaired.

Specific allowances for impaired loans are measured by an evaluation of estimated future cash flows discounted at the loans’ initial effective interest rate or the fair value of collateral for certain collateral dependent loans. Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are on an "as-is" basis and are generally not adjusted by the Company. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Historical statistics may be used as a practical way to estimate impairment in limited situations, such as when a collateral dependent loan is identified as impaired at the end of a reporting period, until an updated appraisal of collateral value is received or a full assessment of future cash flows is completed. Estimates of future cash flows and collateral values require significant judgments and may be volatile.

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

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

An accrual for off-balance sheet credit losses is included in Other liabilities in the Consolidated Balance Sheets. The appropriateness of this accrual is determined in the same manner as the allowance for loan losses.

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

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended September 30, 2016 is summarized as follows (in thousands):



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance		Total
Allowance for loan losses:
Beginning balance	$	145,139		$	46,745		$	18,690		$	6,001		$	26,684	$	243,259
Provision for loan losses	2,420			2,551			(466		)	1,900			1,502		7,907
Loans charged off	(6,266		)	—			(285		)	(1,550		)	—		(8,101		)
Recoveries	177			521			650			690			—		2,038
Ending balance	$	141,470		$	49,817		$	18,589		$	7,041		$	28,186	$	245,103
Allowance for off-balance sheet credit losses:
Beginning balance	$	8,752		$	203		$	62		$	28		$	—	$	9,045
Provision for off-balance sheet credit losses	2,170			(53		)	(7		)	(17		)	—		2,093
Ending balance	$	10,922		$	150		$	55		$	11		$	—	$	11,138

Total provision for credit losses	$	4,590		$	2,498		$	(473	)	$	1,883		$	1,502	$	10,000

- 78 -

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, 2016 is summarized as follows (in thousands):



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	130,334		$	41,391		$	19,509		$	4,164		$	30,126		$	225,524
Provision for loan losses	45,995			7,538			(829		)	4,809			(1,940		)	55,573
Loans charged off	(35,747		)	—			(1,104		)	(4,086		)	—			(40,937		)
Recoveries	888			888			1,013			2,154			—			4,943
Ending balance	$	141,470		$	49,817		$	18,589		$	7,041		$	28,186		$	245,103
Allowance for off-balance sheet credit losses:
Beginning balance	$	1,506		$	153		$	30		$	22		$	—		$	1,711
Provision for off-balance sheet credit losses	9,416			(3		)	25			(11		)	—			9,427
Ending balance	$	10,922		$	150		$	55		$	11		$	—		$	11,138

Total provision for credit losses	$	55,411		$	7,535		$	(804	)	$	4,798		$	(1,940	)	$	65,000



	Commercial			Commercial Real Estate		Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	107,037		$	39,744	$	21,449		$	3,955		$	28,902		$	201,087
Provision for loan losses	4,694			180		(349		)	1,413			(1,156		)	4,782
Loans charged off	(3,497		)	—		(446		)	(1,331		)	—			(5,274		)
Recoveries	759			1,865		205			692			—			3,521
Ending balance	$	108,993		$	41,789	$	20,859		$	4,729		$	27,746		$	204,116
Allowance for off-balance sheet credit losses:
Beginning balance	$	595		$	242	$	26		$	19		$	—		$	882
Provision for off-balance sheet credit losses	1,873			847		(2		)	—			—			2,718
Ending balance	$	2,468		$	1,089	$	24		$	19		$	—		$	3,600

Total provision for credit losses	$	6,567		$	1,027	$	(351	)	$	1,413		$	(1,156	)	$	7,500

- 79 -



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	90,875		$	42,445		$	23,458		$	4,233		$	28,045		$	189,056
Provision for loan losses	20,869			(11,571		)	(1,938		)	2,069			(299		)	9,130
Loans charged off	(4,552		)	(44		)	(1,784		)	(3,940		)	—			(10,320		)
Recoveries	1,801			10,959			1,123			2,367			—			16,250
Ending balance	$	108,993		$	41,789		$	20,859		$	4,729		$	27,746		$	204,116
Allowance for off-balance sheet credit losses:
Beginning balance	$	475		$	707		$	28		$	20		$	—		$	1,230
Provision for off-balance sheet credit losses	1,993			382			(4		)	(1		)	—			2,370
Ending balance	$	2,468		$	1,089		$	24		$	19		$	—		$	3,600

Total provision for credit losses	$	22,862		$	(11,189	)	$	(1,942	)	$	2,068		$	(299	)	$	11,500

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at September 30, 2016 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	9,943,699	$	134,968	$	176,464	$	6,502	$	10,120,163	$	141,470
Commercial real estate	3,786,248		49,817		7,350		—		3,793,598		49,817
Residential mortgage	1,820,341		18,527		52,452		62		1,872,793		18,589
Personal	677,546		7,041		686		—		678,232		7,041
Total	16,227,834		210,353		236,952		6,564		16,464,786		216,917

Nonspecific allowance	—		—		—		—		—		28,186

Total	$	16,227,834	$	210,353	$	236,952	$	6,564	$	16,464,786	$	245,103

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2015 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,176,107	$	114,027	$	76,424	$	16,307	$	10,252,531	$	130,334
Commercial real estate	3,250,032		41,373		9,001		18		3,259,033		41,391
Residential mortgage	1,815,653		19,441		61,240		68		1,876,893		19,509
Personal	552,234		4,164		463		—		552,697		4,164
Total	15,794,026		179,005		147,128		16,393		15,941,154		195,398

Nonspecific allowance	—		—		—		—		—		30,126

Total	$	15,794,026	$	179,005	$	147,128	$	16,393	$	15,941,154	$	225,524

- 80 -

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at September 30, 2015 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	$	9,763,624	$	104,157	$	33,798	$	4,836	$	9,797,422	$	108,993
Commercial real estate	3,224,111		41,771		10,956		18		3,235,067		41,789
Residential mortgage	1,824,896		20,762		44,099		97		1,868,995		20,859
Personal	465,463		4,729		494		—		465,957		4,729
Total	15,278,094		171,419		89,347		4,951		15,367,441		176,370

Nonspecific allowance	—		—		—		—		—		27,746

Total	$	15,278,094	$	171,419	$	89,347	$	4,951	$	15,367,441	$	204,116

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, 2016 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,093,884	$	140,552	$	26,279	$	918	$	10,120,163	$	141,470
Commercial real estate	3,793,598		49,817		—		—		3,793,598		49,817
Residential mortgage	206,430		3,028		1,666,363		15,561		1,872,793		18,589
Personal	586,869		4,182		91,363		2,859		678,232		7,041
Total	14,680,781		197,579		1,784,005		19,338		16,464,786		216,917

Nonspecific allowance	—		—		—		—		—		28,186

Total	$	14,680,781	$	197,579	$	1,784,005	$	19,338	$	16,464,786	$	245,103

- 81 -

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, 2015 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,227,303	$	129,426	$	25,228	$	908	$	10,252,531	$	130,334
Commercial real estate	3,259,033		41,391		—		—		3,259,033		41,391
Residential mortgage	196,701		2,883		1,680,192		16,626		1,876,893		19,509
Personal	467,955		1,390		84,742		2,774		552,697		4,164
Total	14,150,992		175,090		1,790,162		20,308		15,941,154		195,398

Nonspecific allowance	—		—		—		—		—		30,126

Total	$	14,150,992	$	175,090	$	1,790,162	$	20,308	$	15,941,154	$	225,524

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, 2015 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	9,771,003	$	108,101	$	26,419	$	892	$	9,797,422	$	108,993
Commercial real estate	3,235,067		41,789		—		—		3,235,067		41,789
Residential mortgage	190,361		2,938		1,678,634		17,921		1,868,995		20,859
Personal	380,376		1,790		85,581		2,939		465,957		4,729
Total	13,576,807		154,618		1,790,634		21,752		15,367,441		176,370

Nonspecific allowance	—		—		—		—		—		27,746

Total	$	13,576,807	$	154,618	$	1,790,634	$	21,752	$	15,367,441	$	204,116

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

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

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

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The following table summarizes the Company’s loan portfolio at September 30, 2016 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	1,869,598	$	147,153	$	361,087	$	142,966	$	—	$	—	$	2,520,804
Services	2,882,065		14,861		31,196		8,477		—		—		2,936,599
Wholesale/retail	1,557,067		15,337		27,173		2,453		—		—		1,602,030
Manufacturing	470,702		8,774		19,736		274		—		—		499,486
Healthcare	2,022,757		42,224		19,210		855		—		—		2,085,046
Other commercial and industrial	415,769		2,478		10,302		21,370		26,210		69		476,198
Total commercial	9,217,958		230,827		468,704		176,395		26,210		69		10,120,163

Commercial real estate:
Residential construction and land development	155,737		—		470		3,739		—		—		159,946
Retail	794,920		4,802		406		1,249		—		—		801,377
Office	750,924		899		—		882		—		—		752,705
Multifamily	868,501		—		5,221		51		—		—		873,773
Industrial	837,945		—		—		76		—		—		838,021
Other commercial real estate	366,416		—		7		1,353		—		—		367,776
Total commercial real estate	3,774,443		5,701		6,104		7,350		—		—		3,793,598

Residential mortgage:
Permanent mortgage	200,590		1,192		2,134		2,514		739,686		23,442		969,558
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		174,877		15,432		190,309
Home equity	—		—		—		—		701,862		11,064		712,926
Total residential mortgage	200,590		1,192		2,134		2,514		1,616,425		49,938		1,872,793

Personal	585,287		228		923		431		91,108		255		678,232

Total	$	13,778,278	$	237,948	$	477,865	$	186,690	$	1,733,743	$	50,262	$	16,464,786

- 83 -

The following table summarizes the Company’s loan portfolio at December 31, 2015 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,580,694	$	325,663	$	129,782	$	61,189	$	—	$	—	$	3,097,328
Services	2,763,929		3,296		6,761		10,290		—		—		2,784,276
Wholesale/retail	1,394,596		18,184		6,365		2,919		—		—		1,422,064
Manufacturing	534,966		19,560		1,872		331		—		—		556,729
Healthcare	1,876,745		5,563		—		1,072		—		—		1,883,380
Other commercial and industrial	477,551		5,479		—		496		25,101		127		508,754
Total commercial	9,628,481		377,745		144,780		76,297		25,101		127		10,252,531

Commercial real estate:
Residential construction and land development	154,369		1,355		293		4,409		—		—		160,426
Retail	788,708		6,046		426		1,319		—		—		796,499
Office	636,210		291		555		651		—		—		637,707
Multifamily	744,299		—		6,512		274		—		—		751,085
Industrial	563,093		—		—		76		—		—		563,169
Other commercial real estate	347,864		—		11		2,272		—		—		350,147
Total commercial real estate	3,234,543		7,692		7,797		9,001		—		—		3,259,033

Residential mortgage:
Permanent mortgage	192,367		89		1,932		2,313		721,964		26,671		945,336
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		175,037		21,900		196,937
Home equity	—		—		—		—		724,264		10,356		734,620
Total residential mortgage	192,367		89		1,932		2,313		1,621,265		58,927		1,876,893

Personal	467,808		3		14		130		84,409		333		552,697

Total	$	13,523,199	$	385,529	$	154,523	$	87,741	$	1,730,775	$	59,387	$	15,941,154

- 84 -

The following table summarizes the Company’s loan portfolio at September 30, 2015 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,527,543	$	196,298	$	96,446	$	17,880	$	—	$	—	$	2,838,167
Services	2,683,655		4,207		8,070		10,692		—		—		2,706,624
Wholesale/retail	1,432,460		23,176		3,242		3,058		—		—		1,461,936
Manufacturing	532,443		20,975		1,907		352		—		—		555,677
Healthcare	1,734,741		5,721		—		1,218		—		—		1,741,680
Other commercial and industrial	463,385		3,012		—		522		26,343		76		493,338
Total commercial	9,374,227		253,389		109,665		33,722		26,343		76		9,797,422

Commercial real estate:
Residential construction and land development	146,764		1,628		370		4,748		—		—		153,510
Retail	761,279		6,089		433		1,648		—		—		769,449
Office	624,611		296		560		684		—		—		626,151
Multifamily	750,791		—		7,682		185		—		—		758,658
Industrial	563,795		—		—		76		—		—		563,871
Other commercial real estate	359,672		—		141		3,615		—		—		363,428
Total commercial real estate	3,206,912		8,013		9,186		10,956		—		—		3,235,067

Residential mortgage:
Permanent mortgage	186,832		91		918		2,520		719,163		28,140		937,664
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		188,827		3,885		192,712
Home equity	—		—		—		—		729,065		9,554		738,619
Total residential mortgage	186,832		91		918		2,520		1,637,055		41,579		1,868,995

Personal	380,216		5		15		140		85,227		354		465,957

Total	$	13,148,187	$	261,498	$	119,784	$	47,338	$	1,748,625	$	42,009	$	15,367,441

- 85 -

Impaired Loans

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

A summary of impaired loans follows (in thousands):



	As of										For the				For the
	September 30, 2016										Three Months Ended				Nine Months Ended
			Recorded Investment								September 30, 2016				September 30, 2016
	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	$	179,578	$	142,966	$	100,300	$	42,666	$	6,502	$	155,555	$	—	$	85,333	$	—
Services	11,858		8,477		8,477		—		—		8,932		—		9,384		—
Wholesale/retail	8,528		2,453		2,453		—		—		2,613		—		2,686		—
Manufacturing	642		274		274		—		—		284		—		303		—
Healthcare	1,168		855		855		—		—		865		—		964		—
Other commercial and industrial	29,176		21,439		21,439		—		—		10,978		—		11,031		—
Total commercial	230,950		176,464		133,798		42,666		6,502		179,227		—		109,701		—

Commercial real estate:
Residential construction and land development	6,090		3,739		3,739		—		—		4,000		—		4,074		—
Retail	1,914		1,249		1,249		—		—		1,257		—		1,284		—
Office	1,187		882		882		—		—		744		—		766		—
Multifamily	1,000		51		51		—		—		58		—		163		—
Industrial	76		76		76		—		—		76		—		76		—
Other real estate loans	7,375		1,353		1,353		—		—		1,430		—		1,813		—
Total commercial real estate	17,642		7,350		7,350		—		—		7,565		—		8,176		—

Residential mortgage:
Permanent mortgage	32,372		25,956		25,847		109		62		26,592		292		27,470		923
Permanent mortgage guaranteed by U.S. government agencies ¹	196,162		190,309		190,309		—		—		190,547		2,098		193,879		5,893
Home equity	12,099		11,064		11,064		—		—		10,578		—		10,710		—
Total residential mortgage	240,633		227,329		227,220		109		62		227,717		2,390		232,059		6,816

Personal	724		686		686		—		—		520		—		575		—

Total	$	489,949	$	411,829	$	369,054	$	42,775	$	6,564	$	415,029	$	2,390	$	350,511	$	6,816


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At September 30, 2016 , $15 million of these loans were nonaccruing and $175 million were accruing based on the guarantee by U.S. government agencies.

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

- 86 -

A summary of impaired loans at December 31, 2015 follows (in thousands):



			Recorded Investment
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance
Commercial:
Energy	$	63,910	$	61,189	$	18,330	$	42,859	$	16,115
Services	13,449		10,290		9,657		633		148
Wholesale/retail	8,582		2,919		2,907		12		9
Manufacturing	665		331		331		—		—
Healthcare	1,352		1,072		931		141		35
Other commercial and industrial	8,304		623		623		—		—
Total commercial	96,262		76,424		32,779		43,645		16,307

Commercial real estate:
Residential construction and land development	8,963		4,409		4,409		—		—
Retail	1,923		1,319		1,319		—		—
Office	937		651		651		—		—
Multifamily	1,192		274		274		—		—
Industrial	76		76		76		—		—
Other real estate loans	8,363		2,272		2,113		159		18
Total commercial real estate	21,454		9,001		8,842		159		18

Residential mortgage:
Permanent mortgage	37,273		28,984		28,868		116		68
Permanent mortgage guaranteed by U.S. government agencies ¹	202,984		196,937		196,937		—		—
Home equity	10,988		10,356		10,356		—		—
Total residential mortgage	251,245		236,277		236,161		116		68

Personal	489		463		463		—		—

Total	$	369,450	$	322,165	$	278,245	$	43,920	$	16,393


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At December 31, 2015 , $22 million of these loans were nonaccruing and $175 million were accruing based on the guarantee by U.S. government agencies.

- 87 -

A summary of impaired loans at September 30, 2015 follows (in thousands):



											For the				For the
	As of September 30, 2015										Three Months Ended				Nine Months Ended
			Recorded Investment								September 30, 2015				September 30, 2015
	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	$	18,904	$	17,880	$	5,017	$	12,863	$	4,644	$	12,361	$	—	$	9,648	$	—
Services	13,677		10,692		10,041		651		148		10,818		—		7,946		—
Wholesale/retail	8,588		3,058		3,046		12		9		3,612		—		3,603		—
Manufacturing	675		352		352		—		—		365		—		401		—
Healthcare	1,612		1,218		1,064		154		35		1,248		—		1,299		—
Other commercial and industrial	8,277		598		598		—		—		611		—		765		—
Total commercial	51,733		33,798		20,118		13,680		4,836		29,015		—		23,662		—

Commercial real estate:
Residential construction and land development	9,349		4,748		4,748		—		—		7,058		—		5,023		—
Retail	2,252		1,648		1,648		—		—		2,737		—		2,787		—
Office	2,046		684		684		—		—		1,522		—		2,052		—
Multifamily	192		185		185		—		—		190		—		93		—
Industrial	76		76		76		—		—		76		—		38		—
Other real estate loans	9,650		3,615		3,452		163		18		3,965		—		4,763		—
Total commercial real estate	23,565		10,956		10,793		163		18		15,548		—		14,756		—

Residential mortgage:
Permanent mortgage	38,829		30,660		30,506		154		97		31,424		297		32,753		942
Permanent mortgage guaranteed by U.S. government agencies ¹	198,905		192,712		192,712		—		—		193,165		1,902		198,312		6,205
Home equity	10,085		9,554		9,554		—		—		9,810		—		9,559		—
Total residential mortgage	247,819		232,926		232,772		154		97		234,399		2,199		240,624		7,147

Personal	516		494		494		—		—		522		—		530		—

Total	$	323,633	$	278,174	$	264,177	$	13,997	$	4,951	$	279,484	$	2,199	$	279,572	$	7,147


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At September 30, 2015 , $3.9 million of these loans were nonaccruing and $189 million were accruing based on the guarantee by U.S. government agencies.

- 88 -

Troubled Debt Restructurings

A summary of troubled debt restructurings ("TDRs") by accruing status as of September 30, 2016 is as follows (in thousands):



	As of September 30, 2016								Amounts Charged Off During:
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended September 30, 2016		Nine Months Ended Sept. 30, 2016
Nonaccruing TDRs:

Commercial:
Energy	$	1,746	$	—	$	1,746	$	—	$	500	$	1,000
Services	7,761		7,034		727		—		—		—
Wholesale/retail	2,327		2,287		40		—		—		—
Manufacturing	238		238		—		—		—		—
Healthcare	623		—		623		—		—		—
Other commercial and industrial	497		61		436		—		—		57
Total commercial	13,192		9,620		3,572		—		500		1,057

Commercial real estate:
Residential construction and land development	794		359		435		—		—		—
Retail	1,249		892		357		—		—		—
Office	149		149		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	666		666		—		—		—		—
Total commercial real estate	2,858		2,066		792		—		—		—

Residential mortgage:
Permanent mortgage	16,109		11,944		4,165		62		—		2
Permanent mortgage guaranteed by U.S. government agencies	8,220		2,331		5,889		—		—		—
Home equity	5,168		4,667		501		—		34		153
Total residential mortgage	29,497		18,942		10,555		62		34		155

Personal	273		271		2		—		9		18

Total nonaccruing TDRs	$	45,820	$	30,899	$	14,921	$	62	$	543	$	1,230

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	80,306		29,020		51,286		—		—		—

Total TDRs	$	126,126	$	59,919	$	66,207	$	62	$	543	$	1,230

- 89 -

A summary of troubled debt restructurings by accruing status as of December 31, 2015 is as follows (in thousands):



	As of
	December 31, 2015
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance
Nonaccruing TDRs:

Commercial:
Energy	$	2,304	$	2,304	$	—	$	—
Services	9,027		8,210		817		148
Wholesale/retail	2,758		2,706		52		9
Manufacturing	282		282		—		—
Healthcare	673		673		—		—
Other commercial and industrial	621		89		532		—
Total commercial	15,665		14,264		1,401		157

Commercial real estate:
Residential construction and land development	2,328		1,556		772		—
Retail	1,319		942		377		—
Office	165		165		—		—
Multifamily	—		—		—		—
Industrial	—		—		—		—
Other real estate loans	920		478		442		—
Total commercial real estate	4,732		3,141		1,591		—

Residential mortgage:
Permanent mortgage	16,618		9,043		7,575		68
Permanent mortgage guaranteed by U.S. government agencies	11,136		139		10,997		—
Home equity	5,159		4,218		941		—
Total residential mortgage	32,913		13,400		19,513		68

Personal	324		297		27		—

Total nonaccuring TDRs	$	53,634	$	31,102	$	22,532	$	225

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	74,050		23,029		51,021		—

Total TDRs	$	127,684	$	54,131	$	73,553	$	225

- 90 -

A summary of troubled debt restructurings by accruing status as of September 30, 2015 is as follows (in thousands):



	As of September 30, 2015								Amounts Charged Off During
	Recorded Investment		Performing in Accordance With Modified Terms		Not Performing in Accordance With Modified Terms		Specific Allowance		Three Months Ended September 30, 2015		Nine Months Ended Sept. 30, 2015
Nonaccruing TDRs:

Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	9,362		8,502		860		148		—		—
Wholesale/retail	2,897		2,844		53		9		—		—
Manufacturing	296		296		—		—		—		—
Healthcare	689		689		—		—		—		—
Other commercial and industrial	590		76		514		—		100		100
Total commercial	13,834		12,407		1,427		157		100		100

Commercial real estate:
Residential construction and land development	2,539		1,624		915		—		—		—
Retail	1,356		960		396		—		—		—
Office	169		169		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	1,037		584		453		—		—		—
Total commercial real estate	5,101		3,337		1,764		—		—		—

Residential mortgage:
Permanent mortgage	16,359		9,361		6,998		97		140		142
Permanent mortgage guaranteed by U.S. government agencies	1,944		140		1,804		—		—		—
Home equity	4,975		4,336		639		—		10		68
Total residential mortgage	23,278		13,837		9,441		97		150		210

Personal	365		209		156		—		—		2

Total nonaccruing TDRs	$	42,578	$	29,790	$	12,788	$	254	$	250	$	312

Accruing TDRs:
Permanent mortgages guaranteed by U.S. government agencies	81,598		22,352		59,246		—		—		—

Total TDRs	$	124,176	$	52,142	$	72,034	$	254	$	250	$	312

- 91 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans at September 30, 2016 by class that were restructured during the three months ended September 30, 2016 by primary type of concession (in thousands):



	Three Months Ended Sept. 30, 2016
	Accruing							Nonaccrual						Total
		Payment Stream		Combination & Other		Total		Payment Stream		Combination & Other		Total
Commercial:
Energy		$	—	$	—	$	—	$	—	$	—	$	—	$	—
Services		—		—		—		—		—		—		—
Wholesale/retail		—		—		—		—		—		—		—
Manufacturing		—		—		—		—		—		—		—
Healthcare		—		—		—		—		—		—		—
Other commercial and industrial		—		—		—		—		—		—		—
Total commercial		—		—		—		—		—		—		—

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

Residential mortgage:
Permanent mortgage		—		—		—		—		151		151		151
Permanent mortgage guaranteed by U.S. government agencies		3,527		4,211		7,738		—		287		287		8,025
Home equity		—		—		—		—		920		920		920
Total residential mortgage		3,527		4,211		7,738		—		1,358		1,358		9,096

Personal		—		—		—		—		19		19		19

Total		$	3,527	$	4,211	$	7,738	$	—	$	1,377	$	1,377	$	9,115

- 92 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans at September 30, 2016 by class that were restructured during the nine months ended September 30, 2016 by primary type of concession (in thousands):



	Nine Months Ended Sept. 30, 2016
	Accruing							Nonaccrual						Total
		Payment Stream		Combination & Other		Total		Payment Stream		Combination & Other		Total
Commercial:
Energy		$	—	$	—	$	—	$	501	$	—	$	501	$	501
Services		—		—		—		—		—		—		—
Wholesale/retail		—		—		—		—		—		—		—
Manufacturing		—		—		—		—		—		—		—
Healthcare		—		—		—		—		—		—		—
Other commercial and industrial		—		—		—		—		—		—		—
Total commercial		—		—		—		501		—		501		501

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

Residential mortgage:
Permanent mortgage		—		—		—		1,037		1,051		2,088		2,088
Permanent mortgage guaranteed by U.S. government agencies		9,687		9,350		19,037		—		982		982		20,019
Home equity		—		—		—		48		1,630		1,678		1,678
Total residential mortgage		9,687		9,350		19,037		1,085		3,663		4,748		23,785

Personal		—		—		—		—		82		82		82

Total		$	9,687	$	9,350	$	19,037	$	1,586	$	3,745	$	5,331	$	24,368

- 93 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans by class that were restructured during three months ended September 30, 2015 by primary type of concession (in thousands):



	Three Months Ended Sept. 30, 2015
	Accruing						Nonaccrual								Total
	Payment Stream		Combination & Other		Total		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—		—		—
Healthcare	—		—		—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—		—		—
Total commercial	—		—		—		—		—		—		—		—

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

Residential mortgage:
Permanent mortgage	—		—		—		—		1,448		150		1,598		1,598
Permanent mortgage guaranteed by U.S. government agencies	5,809		3,846		9,655		—		—		—		—		9,655
Home equity	—		—		—		—		—		447		447		447
Total residential mortgage	5,809		3,846		9,655		—		1,448		597		2,045		11,700

Personal	—		—		—		—		—		18		18		18

Total	$	5,809	$	3,846	$	9,655	$	—	$	1,448	$	615	$	2,063	$	11,718

- 94 -

Troubled debt restructurings generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. The following tables detail the recorded balance of loans by class that were restructured during nine months ended September 30, 2015 by primary type of concession (in thousands):



	Nine Months Ended Sept. 30, 2015
	Accruing						Nonaccrual								Total
	Payment Stream		Combination & Other		Total		Interest Rate		Payment Stream		Combination & Other		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		—		—		7,851		7,851		7,851
Wholesale/retail	—		—		—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—		—		—
Healthcare	—		—		—		689		—		—		689		689
Other commercial and industrial	—		—		—		—		—		—		—		—
Total commercial	—		—		—		689		—		7,851		8,540		8,540

Commercial real estate:
Residential construction and land development	—		—		—		—		329		—		329		329
Retail	—		—		—		—		—		—		—		—
Office	—		—		—		—		—		—		—		—
Multifamily	—		—		—		—		—		—		—		—
Industrial	—		—		—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—		—		—
Total commercial real estate	—		—		—		—		329		—		329		329

Residential mortgage:
Permanent mortgage	—		—		—		—		2,150		1,125		3,275		3,275
Permanent mortgage guaranteed by U.S. government agencies	15,858		10,397		26,255		—		—		843		843		27,098
Home equity	—		—		—		59		145		1,523		1,727		1,727
Total residential mortgage	15,858		10,397		26,255		59		2,295		3,491		5,845		32,100

Personal	—		—		—		—		—		104		104		104

Total	$	15,858	$	10,397	$	26,255	$	748	$	2,624	$	11,446	$	14,818	$	41,073

- 95 -

The following table summarizes, by loan class, the recorded investment at September 30, 2016 and 2015 , respectively, of loans modified as TDRs within the previous 12 months and for which there was a payment default during the three months ended September 30, 2016 and 2015 , respectively (in thousands):



	Three Months Ended Sept. 30, 2016						Nine Months Ended Sept. 30, 2016
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Commercial:
Energy	$	—	$	1,746	$	1,746	$	—	$	1,746	$	1,746
Services	—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		1,746		1,746		—		1,746		1,746

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

Residential mortgage:
Permanent mortgage	—		298		298		—		542		542
Permanent mortgage guaranteed by U.S. government agencies	17,491		1,095		18,586		19,352		1,121		20,473
Home equity	—		258		258		—		258		258
Total residential mortgage	17,491		1,651		19,142		19,352		1,921		21,273

Personal	—		11		11		—		11		11

Total	$	17,491	$	3,408	$	20,899	$	19,352	$	3,678	$	23,030

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

- 96 -



	Three Months Ended Sept. 30, 2015						Nine Months Ended Sept. 30, 2015
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Commercial:
Energy	$	—	$	—	$	—	$	—	$	—	$	—
Services	—		—		—		—		—		—
Wholesale/retail	—		—		—		—		—		—
Manufacturing	—		—		—		—		—		—
Healthcare	—		—		—		—		—		—
Other commercial and industrial	—		—		—		—		—		—
Total commercial	—		—		—		—		—		—

Commercial real estate:
Residential construction and land development	—		329		329		—		329		329
Retail	—		—		—		—		—		—
Office	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
Industrial	—		—		—		—		—		—
Other real estate loans	—		—		—		—		—		—
Total commercial real estate	—		329		329		—		329		329

Residential mortgage:
Permanent mortgage	—		2,364		2,364		—		2,543		2,543
Permanent mortgage guaranteed by U.S. government agencies	29,942		779		30,721		31,673		919		32,592
Home equity	—		398		398		—		435		435
Total residential mortgage	29,942		3,541		33,483		31,673		3,897		35,570

Personal	—		38		38		—		38		38

Total	$	29,942	$	3,908	$	33,850	$	31,673	$	4,264	$	35,937

- 97 -

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, 2016 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,365,850	$	11,988	$	—	$	—	$	142,966	$	2,520,804
Services	2,923,874		502		39		3,707		8,477		2,936,599
Wholesale/retail	1,599,356		221		—		—		2,453		1,602,030
Manufacturing	499,212		—		—		—		274		499,486
Healthcare	2,083,556		635		—		—		855		2,085,046
Other commercial and industrial	454,538		34		68		119		21,439		476,198
Total commercial	9,926,386		13,380		107		3,826		176,464		10,120,163

Commercial real estate:
Residential construction and land development	156,207		—		—		—		3,739		159,946
Retail	796,362		3,766		—		—		1,249		801,377
Office	751,823		—		—		—		882		752,705
Multifamily	868,591		—		5,131		—		51		873,773
Industrial	837,945		—		—		—		76		838,021
Other real estate loans	366,416		7		—		—		1,353		367,776
Total commercial real estate	3,777,344		3,773		5,131		—		7,350		3,793,598

Residential mortgage:
Permanent mortgage	939,853		3,547		202		—		25,956		969,558
Permanent mortgages guaranteed by U.S. government agencies	41,150		17,364		12,963		103,400		15,432		190,309
Home equity	700,031		1,526		305		—		11,064		712,926
Total residential mortgage	1,681,034		22,437		13,470		103,400		52,452		1,872,793

Personal	677,194		191		148		13		686		678,232

Total	$	16,061,958	$	39,781	$	18,856	$	107,239	$	236,952	$	16,464,786

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A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 2015 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	3,033,504	$	2,635	—	$	—	$	61,189	$	3,097,328
Services	2,769,895		66		4,025	—		10,290		2,784,276
Wholesale/retail	1,418,396		49		—	700		2,919		1,422,064
Manufacturing	556,398		—		—	—		331		556,729
Healthcare	1,879,873		2,435		—	—		1,072		1,883,380
Other commercial and industrial	507,929		84		16	102		623		508,754
Total commercial	10,165,995		5,269		4,041	802		76,424		10,252,531

Commercial real estate:
Residential construction and land development	156,017		—		—	—		4,409		160,426
Retail	795,180		—		—	—		1,319		796,499
Office	637,056		—		—	—		651		637,707
Multifamily	742,697		8,114		—	—		274		751,085
Industrial	563,093		—		—	—		76		563,169
Other real estate loans	347,498		—		—	377		2,272		350,147
Total commercial real estate	3,241,541		8,114		—	377		9,001		3,259,033

Residential mortgage:
Permanent mortgage	913,062		3,290		—	—		28,984		945,336
Permanent mortgages guaranteed by U.S. government agencies	33,653		16,986		13,397	111,001		21,900		196,937
Home equity	721,149		2,379		716	20		10,356		734,620
Total residential mortgage	1,667,864		22,655		14,113	111,021		61,240		1,876,893

Personal	551,533		665		28	8		463		552,697

Total	$	15,626,933	$	36,703	18,182	$	112,208	$	147,128	$	15,941,154

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A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of September 30, 2015 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,813,145	$	7,142	—	$	—	$	17,880	$	2,838,167
Services	2,690,554		1,575		3,803	—		10,692		2,706,624
Wholesale/retail	1,458,681		197		—	—		3,058		1,461,936
Manufacturing	555,325		—		—	—		352		555,677
Healthcare	1,740,462		—		—	—		1,218		1,741,680
Other commercial and industrial	492,554		65		21	100		598		493,338
Total commercial	9,750,721		8,979		3,824	100		33,798		9,797,422

Commercial real estate:
Residential construction and land development	148,762		—		—	—		4,748		153,510
Retail	767,801		—		—	—		1,648		769,449
Office	625,250		217		—	—		684		626,151
Multifamily	752,055		—		6,418	—		185		758,658
Industrial	563,795		—		—	—		76		563,871
Other real estate loans	359,813		—		—	—		3,615		363,428
Total commercial real estate	3,217,476		217		6,418	—		10,956		3,235,067

Residential mortgage:
Permanent mortgage	903,685		3,183		135	—		30,661		937,664
Permanent mortgages guaranteed by U.S. government agencies	33,046		15,299		10,477	130,005		3,885		192,712
Home equity	725,572		2,873		619	1		9,554		738,619
Total residential mortgage	1,662,303		21,355		11,231	130,006		44,100		1,868,995

Personal	465,218		199		46	—		494		465,957

Total	$	15,095,718	$	30,750	21,519	$	130,106	$	89,348	$	15,367,441

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( 5 ) Acquisitions

On December 8, 2015, the Company announced the signing of a definitive purchase agreement with MBT Bancshares (“MBT”). MBT is headquartered in Kansas City, Mo. and is the parent company of Missouri Bank and Trust of Kansas City (“mobank”). mobank operates four banking branches in the Kansas City, Mo. area. Under terms of the definitive agreement, BOK Financial will pay $102.5 million in an all-cash deal for all outstanding shares of MBT stock, subject to certain conditions and potential adjustments. The transaction has been approved by the boards of directors of both companies and is expected to close by the end of 2016, subject to customary closing conditions, including regulatory approval.

In the first quarter of 2016, the Company acquired Weaver and Tidwell Financial Advisors LTD d/b/a Weaver Wealth Management, a registered investment advisor and E-Spectrum Advisors, an energy investment banking firm in Texas. The cash purchase price for these acquisitions was $7.7 million . The purchase price allocation included $5.3 million of identifiable intangible assets and $3.3 million of goodwill.

On May 4, 2015, the Company acquired a majority voting interest in Heartland Food Products, LLC, a Kansas-based food product and restaurant equipment company. The cash purchase price for this acquisition was $18 million . The final purchase price allocation included $11 million of identifiable intangible assets and $2.7 million of goodwill.

The pro-forma impact of these transactions was not material to the Company's consolidated financial statements.

( 6 ) Mortgage Banking Activities

Residential Mortgage Loan Production

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

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

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



	September 30, 2016					Dec. 31, 2015				September 30, 2015
	Unpaid Principal Balance/ Notional		Fair Value			Unpaid Principal Balance/ Notional		Fair Value		Unpaid Principal Balance/ Notional		Fair Value
Residential mortgage loans held for sale	$	422,523	$	433,040		$	293,637	$	299,505	$	336,974	$	348,400
Residential mortgage loan commitments	630,804		18,598			601,147		8,134		742,742		18,161
Forward sales contracts	929,907		(4,046		)	884,710		800		1,073,343		(9,147		)
			$	447,592				$	308,439			$	357,414

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of September 30, 2016 , December 31, 2015 or September 30, 2015 . No credit losses were recognized on residential mortgage loans held for sale for the nine month periods ended September 30, 2016 and 2015 .

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Mortgage banking revenue was as follows (in thousands):



	Three Months Ended Sept. 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Production revenue:
Net realized gains on sale of mortgage loans	$	27,142		$	18,968		$	57,126		$	60,075
Net change in unrealized gain on mortgage loans held for sale	(2,518		)	6,666			4,649			4,751
Net change in the fair value of mortgage loan commitments	(6,901		)	9,838			10,464			8,190
Net change in the fair value of forward sales contracts	8,267			(16,755		)	(4,846		)	(5,146		)
Total production revenue	25,990			18,717			67,393			67,870
Servicing revenue	16,558			14,453			47,809			41,466
Total mortgage banking revenue	$	42,548		$	33,170		$	115,202		$	109,336

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

Residential Mortgage Servicing

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

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



	September 30, 2016			Dec. 31, 2015			September 30, 2015
Number of residential mortgage loans serviced for others	139,587			131,859			128,828
Outstanding principal balance of residential mortgage loans serviced for others	$	21,851,536		$	19,678,226		$	18,928,726
Weighted average interest rate	4.01		%	4.12		%	4.15		%
Remaining term (in months)	302			300			300

Activity in capitalized mortgage servicing rights during the three months ended September 30, 2016 was as follows (in thousands):



	Purchased			Originated			Total
Balance, June 30, 2016	$	4,067		$	186,680		$	190,747
Additions, net	—			21,990			21,990
Change in fair value due to scheduled payments and full-balance payoffs	(753		)	(10,690		)	(11,443		)
Change in fair value due to market assumption changes	251			2,076			2,327
Balance, Sept. 30, 2016	$	3,565		$	200,056		$	203,621

Activity in capitalized mortgage servicing rights during the nine months ended September 30, 2016 was as follows (in thousands):



	Purchased			Originated			Total
Balance, Dec. 31, 2015	$	9,911		$	208,694		$	218,605
Additions, net	—			56,345			56,345
Change in fair value due to scheduled payments and full-balance payoffs	(2,109		)	(27,276		)	(29,385		)
Change in fair value due to market assumption changes	(4,237		)	(37,707		)	(41,944		)
Balance, Sept. 30, 2016	$	3,565		$	200,056		$	203,621

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Activity in capitalized mortgage servicing rights during the three months ended September 30, 2015 was as follows (in thousands):



	Purchased			Originated			Total
Balance, June 30, 2015	$	10,730		$	187,964		$	198,694
Additions, net	—			19,993			19,993
Change in fair value due to scheduled payments and full-balance payoffs	(661		)	(6,220		)	(6,881		)
Change in fair value due to market assumption changes	(656		)	(11,101		)	(11,757		)
Balance, Sept. 30, 2015	$	9,413		$	190,636		$	200,049

Activity in capitalized mortgage servicing rights during the nine months ended September 30, 2015 was as follows (in thousands):



	Purchased			Originated			Total
Balance, Dec. 31, 2014	$	11,114		$	160,862		$	171,976
Additions, net	—			62,375			62,375
Change in fair value due to scheduled payments and full-balance payoffs	(2,171		)	(19,862		)	(22,033		)
Change in fair value due to market assumption changes	470			(12,739		)	(12,269		)
Balance, Sept. 30, 2015	$	9,413		$	190,636		$	200,049

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

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



	September 30, 2016	Dec. 31, 2015	September 30, 2015
Discount rate – risk-free rate plus a market premium	10.08%	10.11%	10.12%
Loan servicing costs – annually per loan based upon loan type:
Performing loans	$63-$120	$63 - $105	$63 - $105
Delinquent loans	$150 - $500	$150 - $500	$150 - $500
Loans in foreclosure	$650 - $4,250	$650 - $4,250	$650 - $4,250
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life	1.18%	1.73%	1.40%
Primary/secondary mortgage rate spread	115 bps	130 bps	135 bps

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, 2016 follows (in thousands):



	< 4.00%			4.00% - 4.99%			5.00% - 5.99%			> 5.99%			Total
Fair value	$	121,802		$	74,830		$	4,968		$	2,021		$	203,621
Outstanding principal of loans serviced for others	$	12,145,996		$	7,720,311		$	1,215,692		$	769,537		$	21,851,536
Weighted average prepayment rate ¹	9.16		%	12.48		%	36.75		%	47.15		%	13.20		%


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.

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The interest rate sensitivity of our mortgage servicing rights is modeled over a range of +/- 50 basis points. At September 30, 2016 , a 50 basis point decrease in mortgage interest rates is expected to decrease the fair value of our mortgage servicing rights by $52.6 million . A 50 basis point increase in mortgage interest rates is expected to increase the fair value of our mortgage servicing rights by $30.6 million . In the model, changes in the value of servicing rights due to changes in interest rates assume stable relationships between residential mortgage rates and prepayment speeds. Changes in market conditions can cause variations from these assumptions. These factors and others may cause changes in the value of our mortgage servicing rights to differ from our expectations.

The aging status of our mortgage loans serviced for others by investor at September 30, 2016 follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Total
FHLMC	$	7,760,547	$	34,145	$	10,399	$	23,938	$	7,829,029
FNMA	6,944,158		43,046		8,704		17,097		7,013,005
GNMA	6,338,155		150,386		48,790		16,624		6,553,955
Other	452,083		1,219		596		1,649		455,547
Total	$	21,494,943	$	228,796	$	68,489	$	59,308	$	21,851,536

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 $139 million at September 30, 2016 , $155 million at December 31, 2015 and $162 million at September 30, 2015 . A separate accrual for these off-balance sheet commitments is included in Other liabilities in the Consolidated Balance Sheets. At September 30, 2016 , approximately 2 percent of the loans sold with recourse with an outstanding principal balance of $3.3 million were either delinquent more than 90 days, in bankruptcy or in foreclosure and 5 percent with an outstanding balance of $7.1 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 accrual 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 September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Beginning balance	$	4,339		$	6,691		$	4,649		$	7,299
Provision for recourse losses	113			81			504			211
Loans charged off, net	(235		)	(506		)	(936		)	(1,244		)
Ending balance	$	4,217		$	6,266		$	4,217		$	6,266

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

The Company repurchased 2 loans from the agencies for $ 309 thousand during the third quarter of 2016 . There were no indemnifications on loans paid during the third quarter of 2016 . Losses recognized on repurchases were insignificant.

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



	September 30,
	2016		2015
Number of unresolved deficiency requests	221		194
Aggregate outstanding principal balance subject to unresolved deficiency requests	$	15,750	$	14,237
Unpaid principal balance subject to indemnification by the Company	5,399		4,604

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Beginning balance	$	8,043		$	8,908		$	7,732		$	11,868
Provision for losses	1,357			(52		)	5,260			(3,056		)
Charge-offs, net	(1,758		)	(1,262		)	(5,350		)	(1,218		)
Ending balance	$	7,642		$	7,594		$	7,642		$	7,594

( 7 ) Commitments and Contingent Liabilities

Litigation Contingencies

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

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

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

On June 24, 2015, the Bank received a complaint alleging that an employee had colluded with a bond issuer and an individual in misusing revenues pledged to municipal bonds for which the Bank served as trustee under the bond indenture. The Company conducted an investigation and concluded that employees in one of its Corporate Trust offices had, with respect to a single group of affiliated bond issuances, violated Company policies and procedures by waiving financial covenants, granting forbearances and accepting without disclosure to the bondholders, debt service payments from sources other than pledged revenues. The relationship manager was terminated. The Company reported the circumstances to, and cooperated with an investigation by, the Securities and Exchange Commission ("SEC"). On December 28, 2015, in an action brought by the SEC, the United States District Court for the District of New Jersey entered a judgment against the principals involved in the issuing the bonds, precluding the principals from denying the alleged violations of the federal securities laws and requiring the principals to pay all outstanding principal, accrued interest, and other amounts required under the bond documents (estimated to be approximately $73 million , less the value of the facilities securing repayment of the bonds), subject to oversight by a court appointed monitor. On September 7, 2016, the Bank agreed, and the SEC entered, a consent order finding that the Bank had violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act and requiring the Bank to disgorge $1,067,721 of fees and pay a civil penalty of $600,000 . The Bank has disgorged the fees and paid the penalty. On January 7, 2016, the terminated employee filed an action against the Bank alleging the Bank defamed the employee and made a

- 105 -

demand for indemnification respecting the SEC investigation which demand the respective boards of directors of the Company and the Bank denied. On September 9, 2016, the SEC filed a complaint against the terminated employee alleging the employee violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act and requiring the employee to disgorge ill-gotten gains. On September 26, 2016, the employee dismissed the action without prejudice. On August 26, 2016, the Bank was sued in the United States District Court for New Jersey by two bondholders in a putative class action on behalf of all holders of the bonds alleging the Bank participated in the fraudulent sale of securities by the principals. On September 14, 2016, the Bank was sued in the District Court of Tulsa County, Oklahoma by 19 bondholders alleging the Bank participated in the fraudulent sale of securities by the principals. Management has been advised by counsel that the Bank has valid defenses to the claims. The Bank expects the Court ordered payment plan will result in the payment of the bonds by the principals. Accordingly, no loss is probable at this time and no provision for loss has been made. If the payment plan does not result in payment of the bonds, a loss could become probable. A reasonable estimate cannot be made at this time though the amount could be material to the Company.

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

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

Alternative Investment Commitments

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

BOKF Equity, LLC, an indirect wholly-owned subsidiary, is the general partner of two consolidated private equity funds (“the Funds”). The Funds provide alternative investment opportunities to certain customers, some of which are related parties, through unaffiliated limited partnerships. These unaffiliated limited partnerships generally invest in distressed assets, asset buy-outs or venture capital companies. As general partner, BOKF Equity, LLC has the power to direct activities that most significantly affect the Funds' performance and contingent obligations to make additional investments totaling $4.6 million at September 30, 2016 . Substantially all of the obligations are offset by limited partner commitments. The Company does not accrue its contingent liability to fund investments. The Volcker Rule in Title VI of the Dodd-Frank Act will limit both the amount and structure of these types of investments.

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

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

- 106 -

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

A summary of consolidated and unconsolidated alternative investments as of September 30, 2016 , December 31, 2015 and September 30, 2015 is as follows (in thousands):



	September 30, 2016
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	18,420	$	—	$	—	$	15,946
Tax credit entities	10,000		11,740		—		10,964		10,000
Other	—		30,978		2,346		1,063		8,154
Total consolidated	$	10,000	$	61,138	$	2,346	$	12,027	$	34,100

Unconsolidated:
Tax credit entities	$	39,849	$	129,715	$	57,026	$	—	$	—
Other	—		30,272		13,653		—		—
Total unconsolidated	$	39,849	$	159,987	$	70,679	$	—	$	—



	Dec. 31, 2015
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	22,472	$	—	$	—	$	17,823
Tax credit entities	10,000		12,206		—		10,964		10,000
Other	—		40,453		2,198		2,831		9,260
Total consolidated	$	10,000	$	75,131	$	2,198	$	13,795	$	37,083

Unconsolidated:
Tax credit entities	$	16,916	$	85,274	$	14,572	$	—	$	—
Other	—		15,506		6,319		—		—
Total unconsolidated	$	16,916	$	100,780	$	20,891	$	—	$	—

- 107 -



	September 30, 2015
	Loans		Other assets		Other liabilities		Other borrowings		Non-controlling interests
Consolidated:
Private equity funds	$	—	$	24,133	$	—	$	—	$	19,947
Tax credit entities	10,000		12,361		—		10,964		10,000
Other	—		41,197		2,774		2,788		8,989
Total consolidated	$	10,000	$	77,691	$	2,774	$	13,752	$	38,936

Unconsolidated:
Tax credit entities	$	18,114	$	94,600	$	21,973	$	—	$	—
Other	—		15,822		6,899		—		—
Total unconsolidated	$	18,114	$	110,422	$	28,872	$	—	$	—

Other Commitments and Contingencies

At September 30, 2016 , Cavanal Hill Funds’ assets included U.S. Treasury, cash management and tax-free money market funds. Assets of these funds consist of highly-rated, short-term obligations of the U.S. Treasury, corporate issuers and U.S. states and municipalities. The net asset value of units in these funds was $1.00 at September 30, 2016 . 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 2016 or 2015 .

The Company has agreed to purchase approximately $7.5 million of Oklahoma Historic State Income Tax Credits from the George Kaiser Family Foundation, a principal shareholder of BOKF. These credits will be used to reduce the Company's state income tax liability in 2016 and 2017.

( 8 ) Shareholders' Equity

On October 25, 2016 , the Company declared a quarterly cash dividend of $0.44 per common share on or about November 28, 2016 to shareholders of record as of November 14, 2016 .

Dividends declared were $0.43 per share and $1.29 per share during the three and nine months ended September 30, 2016 and $0.42 per share and $1.26 during the three and nine months ended September 30, 2015 .

Accumulated Other Comprehensive Income (Loss)

AOCI includes unrealized gains and losses on available for sale ("AFS") securities and non-credit related unrealized losses on AFS securities for which an other-than-temporary impairment has been recorded in earnings. AOCI also includes unrealized gains on AFS securities that were transferred from AFS to investment securities in the third quarter of 2011. Such amounts are being amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of premium on the transferred securities. Unrealized losses on employee benefit plans will be reclassified into income as pension plan costs are recognized over the remaining service period of plan participants. Accumulated losses on the interest rate lock hedge of the 2005 subordinated debt issuance were reclassified into income over the ten-year life of the debt. Gains and losses in AOCI are net of deferred income taxes.

- 108 -

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, Dec. 31, 2014	$	59,239		$	376		$	(2,868	)	$	(74	)	$	56,673
Net change in unrealized gain (loss)	57,763			—			—			—			57,763
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—			(418		)	—			—			(418		)
Interest expense, Subordinated debentures	—			—			—			121			121
Net impairment losses recognized in earnings	92			—			—			—			92
Gain on available for sale securities, net	(9,926		)	—			—			—			(9,926		)
Other comprehensive income (loss), before income taxes	47,929			(418		)	—			121			47,632
Federal and state income taxes ¹	18,644			(162		)	—			47			18,529
Other comprehensive income (loss), net of income taxes	29,285			(256		)	—			74			29,103
Balance, Sept. 30, 2015	$	88,524		$	120		$	(2,868	)	$	—		$	85,776

Balance, Dec. 31, 2015	$	23,284		$	68		$	(1,765	)	$	—		$	21,587
Net change in unrealized gain (loss)	133,108			—			—			—			133,108
Reclassification adjustments included in earnings:
Interest revenue, Investment securities, Taxable securities	—			(112		)	—			—			(112		)
Interest expense, Subordinated debentures	—			—			—			—			—
Net impairment losses recognized in earnings	—			—			—			—			—
Gain on available for sale securities, net	(11,684		)	—			—			—			(11,684		)
Other comprehensive income (loss), before income taxes	121,424			(112		)	—			—			121,312
Federal and state income taxes ¹	47,216			(44		)	—			—			47,172
Other comprehensive income (loss), net of income taxes	74,208			(68		)	—			—			74,140
Balance, Sept. 30, 2016	$	97,492		$	—		$	(1,765	)	$	—		$	95,727


¹	Calculated using a 39 percent effective tax rate.

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( 9 ) Earnings Per Share



(In thousands, except share and per share amounts)	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Numerator:
Net income attributable to BOK Financial Corp. shareholders	$	74,277	$	74,891	$	182,642	$	228,964
Less: Earnings allocated to participating securities	916		894		2,275		2,652
Numerator for basic earnings per share – income available to common shareholders	73,361		73,997		180,367		226,312
Effect of reallocating undistributed earnings of participating securities	1		1		1		2
Numerator for diluted earnings per share – income available to common shareholders	$	73,362	$	73,998	$	180,368	$	226,314

Denominator:
Weighted average shares outstanding	65,895,430		68,486,376		66,031,497		68,800,419
Less: Participating securities included in weighted average shares outstanding	810,038		818,300		822,723		795,911
Denominator for basic earnings per common share	65,085,392		67,668,076		65,208,774		68,004,508
Dilutive effect of employee stock compensation plans ¹	72,449		94,407		54,792		99,509
Denominator for diluted earnings per common share	65,157,841		67,762,483		65,263,566		68,104,017

Basic earnings per share	$	1.13	$	1.09	$	2.77	$	3.33
Diluted earnings per share	$	1.13	$	1.09	$	2.76	$	3.32
¹ Excludes employee stock options with exercise prices greater than current market price.	—		—		—		—

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( 10 ) Reportable Segments

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended September 30, 2016 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	123,598		$	22,098		$	9,274		$	32,876		$	187,846
Net interest revenue (expense) from internal sources	(15,052		)	9,263			7,401			(1,612		)	—
Net interest revenue	108,546			31,361			16,675			31,264			187,846
Provision for credit losses	5,601			1,157			(89		)	3,331			10,000
Net interest revenue after provision for credit losses	102,945			30,204			16,764			27,933			177,846
Other operating revenue	49,642			64,635			73,523			3,542			191,342
Other operating expense	53,375			64,995			64,426			79,324			262,120
Net direct contribution	99,212			29,844			25,861			(47,849		)	107,068
Loss on financial instruments, net	—			(1,087		)	(42		)	1,129			—
Change in fair value of mortgage servicing rights	—			2,327			—			(2,327		)	—
Gain on repossessed assets, net	1,486			161			—			(1,647		)	—
Corporate expense allocations	9,054			16,905			10,912			(36,871		)	—
Net income before taxes	91,644			14,340			14,907			(13,823		)	107,068
Federal and state income taxes	35,650			5,578			5,799			(15,071		)	31,956
Net income	55,994			8,762			9,108			1,248			75,112
Net income attributable to non-controlling interests	—			—			—			835			835
Net income attributable to BOK Financial Corp. shareholders	$	55,994		$	8,762		$	9,108		$	413		$	74,277

Average assets	$	16,934,587		$	8,827,816		$	6,413,735		$	470,335		$	32,646,473
Average invested capital	1,170,465			275,358			244,291			1,667,437			3,357,551

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Reportable segments reconciliation to the Consolidated Financial Statements for the nine months ended September 30, 2016 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	358,714		$	65,897		$	21,622		$	106,797		$	553,030
Net interest revenue (expense) from internal sources	(44,259		)	27,492			22,258			(5,491		)	—
Net interest revenue	314,455			93,389			43,880			101,306			553,030
Provision for credit losses	34,024			4,177			(479		)	27,278			65,000
Net interest revenue after provision for credit losses	280,431			89,212			44,359			74,028			488,030
Other operating revenue	146,248			181,774			218,042			(6,096		)	539,968
Other operating expense	162,039			189,188			186,524			223,994			761,745
Net direct contribution	264,640			81,798			75,877			(156,062		)	266,253
Gain (loss) on financial instruments, net	—			30,539			(42		)	(30,497		)	—
Change in fair value of mortgage servicing rights	—			(41,944		)	—			41,944			—
Gain on repossessed assets, net	806			566			—			(1,372		)	—
Corporate expense allocations	26,681			49,513			31,864			(108,058		)	—
Net income before taxes	238,765			21,446			43,971			(37,929		)	266,253
Federal and state income taxes	92,880			8,342			17,105			(34,446		)	83,881
Net income	145,885			13,104			26,866			(3,483		)	182,372
Net loss attributable to non-controlling interests	—			—			—			(270		)	(270		)
Net income attributable to BOK Financial Corp. shareholders	$	145,885		$	13,104		$	26,866		$	(3,213	)	$	182,642

Average assets	$	16,958,999		$	8,763,564		$	5,916,545		$	410,075		$	32,049,183
Average invested capital	1,161,996			267,123			238,917			1,650,563			3,318,599

- 112 -

Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended September 30, 2015 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	109,503		$	21,551		$	6,674		$	40,908		$	178,636
Net interest revenue (expense) from internal sources	(13,450		)	7,216			$	5,834		400			—
Net interest revenue	96,053			28,767			12,508			41,308			178,636
Provision for credit losses	997			1,431			(190		)	5,262			7,500
Net interest revenue after provision for credit losses	95,056			27,336			12,698			36,046			171,136
Other operating revenue	45,276			57,349			66,541			(5,730		)	163,436
Other operating expense	51,960			51,027			57,356			64,285			224,628
Net direct contribution	88,372			33,658			21,883			(33,969		)	109,944
Gain (loss) on financial instruments, net	—			7,386			(176		)	(7,210		)	—
Change in fair value of mortgage servicing rights	—			(11,758		)	—			11,758			—
Gain on repossessed assets, net	350			331			—			(681		)	—
Corporate expense allocations	10,723			18,921			9,841			(39,485		)	—
Net income before taxes	77,999			10,696			11,866			9,383			109,944
Federal and state income taxes	30,342			4,161			4,616			(4,991		)	34,128
Net income	47,657			6,535			7,250			14,374			75,816
Net income attributable to non-controlling interests	—			—			—			925			925
Net income attributable to BOK Financial Corp. shareholders	$	47,657		$	6,535		$	7,250		$	13,449		$	74,891

Average assets	$	16,156,446		$	8,843,926		$	5,433,238		$	336,123		$	30,769,733
Average invested capital	1,062,053			264,540			226,477			1,808,477			3,361,547

- 113 -

Reportable segments reconciliation to the Consolidated Financial Statements for the nine months ended September 30, 2015 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	319,298		$	63,993		$	18,271		$	120,531		$	522,093
Net interest revenue (expense) from internal sources	(38,728		)	20,874			$	17,400		454			—
Net interest revenue	280,570			84,867			35,671			120,985			522,093
Provision for credit losses	(7,952		)	4,467			(937		)	15,922			11,500
Net interest revenue after provision for credit losses	288,522			80,400			36,608			105,063			510,593
Other operating revenue	132,996			178,232			204,100			(9,590		)	505,738
Other operating expense	151,908			155,844			170,113			194,141			672,006
Net direct contribution	269,610			102,788			70,595			(98,668		)	344,325
Gain (loss) on financial instruments, net	—			1,809			(204		)	(1,605		)	—
Change in fair value of mortgage servicing rights	—			(12,269		)	—			12,269			—
Gain on repossessed assets, net	336			888			—			(1,224		)	—
Corporate expense allocations	32,747			56,075			30,011			(118,833		)	—
Net income before taxes	237,199			37,141			40,380			29,605			344,325
Federal and state income taxes	92,270			14,448			15,708			(9,284		)	113,142
Net income	144,929			22,693			24,672			38,889			231,183
Net income attributable to non-controlling interests	—			—			—			2,219			2,219
Net income attributable to BOK Financial Corp. shareholders	$	144,929		$	22,693		$	24,672		$	36,670		$	228,964

Average assets	$	16,229,307		$	8,871,423		$	5,401,433		$	(97,733	)	$	30,404,430
Average invested capital	1,028,013			268,427			225,222			1,819,969			3,341,631

- 114 -

( 11 ) Fair Value Measurements

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

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

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

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


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


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


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


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

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

Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices in active markets for identical instruments to significant other observable inputs or significant unobservable inputs during the three and nine months ended September 30, 2016 and 2015 , respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three and nine months ended September 30, 2016 and 2015 are included in the summary of changes in recurring fair values measured using unobservable inputs.

The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately reflect the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market. No significant adjustments were made to prices provided by third-party pricing services at September 30, 2016 , December 31, 2015 or September 30, 2015 .

- 115 -

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of September 30, 2016 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	15,705	$	—	$	15,705	$	—
U.S. government agency residential mortgage-backed securities	464,749		—		464,749		—
Municipal and other tax-exempt securities	54,856		—		54,856		—
Other trading securities	11,305		—		11,305		—
Total trading securities	546,615		—		546,615		—
Available for sale securities:
U.S. Treasury	1,002		1,002		—		—
Municipal and other tax-exempt	42,092		—		36,379		5,713
U.S. government agency residential mortgage-backed securities	5,668,672		—		5,668,672		—
Privately issued residential mortgage-backed securities	121,603		—		121,603		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,986,495		—		2,986,495		—
Other debt securities	4,151		—		—		4,151
Perpetual preferred stock	19,578		—		19,578		—
Equity securities and mutual funds	18,690		3,544		15,146		—
Total available for sale securities	8,862,283		4,546		8,847,873		9,864
Fair value option securities:
U.S. government agency residential mortgage-backed securities	—		—		—		—
U.S. Treasury	222,409		222,409		—		—
Total fair value option securities	222,409		222,409		—		—
Residential mortgage loans held for sale	447,592		—		438,291		9,301
Mortgage servicing rights ¹	203,621		—		—		203,621
Derivative contracts, net of cash collateral ²	655,078		5,575		649,503		—
Liabilities:
Derivative contracts, net of cash collateral ²	573,987		1,308		572,679		—


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

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

- 116 -

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of December 31, 2015 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	61,295	$	—	$	61,295	$	—
U.S. government agency residential mortgage-backed securities	10,989		—		10,989		—
Municipal and other tax-exempt securities	31,901		—		31,901		—
Other trading securities	18,219		—		18,219		—
Total trading securities	122,404		—		122,404		—
Available for sale securities:
U.S. Treasury	995		995		—		—
Municipal and other tax-exempt	56,817		—		47,207		9,610
U.S. government agency residential mortgage-backed securities	5,898,351		—		5,898,351		—
Privately issued residential mortgage-backed securities	139,118		—		139,118		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,905,796		—		2,905,796		—
Other debt securities	4,151		—		—		4,151
Perpetual preferred stock	19,672		—		19,672		—
Equity securities and mutual funds	17,833		3,265		14,568		—
Total available for sale securities	9,042,733		4,260		9,024,712		13,761
Fair value option securities:
U.S. government agency residential mortgage-backed securities	444,217		—		444,217		—
U.S. Treasury	—		—		—		—
Total fair value option securities	444,217		—		444,217		—
Residential mortgage loans held for sale	308,439		—		300,565		7,874
Mortgage servicing rights ¹	218,605		—		—		218,605
Derivative contracts, net of cash collateral ²	586,270		38,530		547,740		—
Liabilities:
Derivative contracts, net of cash collateral ²	581,701		—		581,701		—


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

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

- 117 -

The fair value of financial assets and liabilities measured on a recurring basis was as follows as of September 30, 2015 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Trading securities:
U.S. government agency debentures	$	42,431	$	—	$	42,431	$	—
U.S. government agency residential mortgage-backed securities	30,973		—		30,973		—
Municipal and other tax-exempt securities	84,261		—		84,261		—
Other trading securities	23,466		—		23,466		—
Total trading securities	181,131		—		181,131		—
Available for sale securities:
U.S. Treasury	1,003		1,003		—		—
Municipal and other tax-exempt	57,960		—		48,360		9,600
U.S. government agency residential mortgage-backed securities	5,819,127		—		5,819,127		—
Privately issued residential mortgage-backed securities	145,682		—		145,682		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,735,787		—		2,735,787		—
Other debt securities	4,150		—		—		4,150
Perpetual preferred stock	19,163		—		19,163		—
Equity securities and mutual funds	18,217		3,505		14,712		—
Total available for sale securities	8,801,089		4,508		8,782,831		13,750
Fair value option securities:
U.S. government agency residential mortgage-backed securities	427,760		—		427,760		—
U.S. Treasury	—		—		—		—
Total fair value option securities	427,760		—		427,760		—
Residential mortgage loans held for sale	357,414		—		349,381		8,033
Mortgage servicing rights ¹	200,049		—		—		200,049
Derivative contracts, net of cash collateral ²	726,159		4,922		721,237		—
Liabilities:
Derivative contracts, net of cash collateral ²	636,115		—		636,115		—


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

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

- 118 -

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

Securities

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

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

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

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

Residential Mortgage Loans Held for Sale

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

Other Assets - Private Equity Funds

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

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

- 119 -

The following represents the changes for the three months ended September 30, 2016 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities		Residential mortgage loans held for sale
Balance, June 30, 2016	$	9,600		$	4,151	$	9,749
Transfer to Level 3 from Level 2	—			—		442
Purchases	—			—		—
Proceeds from sales	—			—		(1,003		)
Redemptions and distributions	(3,975		)	—		—
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—		113
Other comprehensive income (loss):
Net change in unrealized gain (loss)	88			—		—
Balance, Sept. 30, 2016	$	5,713		$	4,151	$	9,301

The following represents the changes for the nine months ended September 30, 2016 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities		Residential mortgage loans held for sale
Balance, Dec. 31, 2015	$	9,610		$	4,151	$	7,874
Transfer to Level 3 from Level 2	—			—		3,982
Purchases	—			—		—
Proceeds from sales	—			—		(2,365		)
Redemptions and distributions	(3,975		)	—		—
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—		(190		)
Other comprehensive income (loss):
Net change in unrealized gain (loss)	78			—		—
Balance, Sept. 30, 2016	$	5,713		$	4,151	$	9,301

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The following represents the changes for the three months ended September 30, 2015 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		Residential mortgage loans held for sale
Balance, June 30, 2015	$	9,617		$	4,150	$	7,973
Transfer to Level 3 from Level 2	—			—		966
Purchases	—			—		—
Proceeds from sales	—			—		(811		)
Redemptions and distributions	—			—		—
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—		(95		)
Other comprehensive income (loss):
Net change in unrealized gain (loss)	(17		)	—		—
Balance, Sept. 30, 2015	$	9,600		$	4,150	$	8,033

The following represents the changes for the nine months ended September 30, 2015 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		Residential mortgage loans held for sale
Balance, Dec. 31, 2014	$	10,093		$	4,150	$	11,856
Transfer to Level 3 from Level 2	—			—		2,153
Purchases	—			—		—
Proceeds from sales	—			—		(6,099		)
Redemptions and distributions	(500		)	—		—
Gain (loss) recognized in earnings						—
Mortgage banking revenue	—			—		123
Other comprehensive income (loss):
Net change in unrealized gain (loss)	7			—		—
Balance, Sept. 30, 2015	$	9,600		$	4,150	$	8,033

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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, 2016 follows (in thousands):



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

Available for sale securities
Municipal and other tax-exempt securities	$	6,195	$	6,162	$	5,713	Discounted cash flows	¹	Interest rate spread	5.60%-5.90% (5.85%)	²
										90.00%-93.79% (92.22%)	³
Other debt securities	4,400		4,400		4,151		Discounted cash flows	¹	Interest rate spread	5.98%-6.03% (6.02%)	⁴
										94.34% - 94.34 (94.34%)	³

Residential mortgage loans held for sale	N/A		9,957		9,301		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	93.41%


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


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 437 to 484 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


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

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of December 31, 2015 follows (in thousands):



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

Available for sale securities
Municipal and other tax-exempt securities	$	10,370	$	10,311	$	9,610	Discounted cash flows	¹	Interest rate spread	5.47%-5.77% (5.73%)	²
										92.34%-92.93% (92.67%)	³
Other debt securities	4,400		4,400		4,151		Discounted cash flows	¹	Interest rate spread	5.80%-5.92% (5.90%)	⁴
										94.33% - 94.34 (94.34%)	³
Residential mortgage loans held for sale	N/A		8,395		7,874		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	93.79%


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 499 to 541 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


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

- 122 -

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2015 follows (in thousands):



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

Available for sale securities
Municipal and other tax-exempt securities	$	10,370	$	10,310	$	9,600	Discounted cash flows	¹	Interest rate spread	5.23%-5.53% (5.49%)	²
										92.35%-92.73% (92.57%)	³
Other debt securities	4,400		4,400		4,150		Discounted cash flows	¹	Interest rate spread	5.65%-5.70% (5.69%)	⁴
										94.32% - 94.33 (94.33%)	³

Residential mortgage loans held for sale	N/A		8,538		8,033		Quoted prices of loans sold in securitization transactions, with a liquidity discount applied		Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.	94.09%


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 510 to 538 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


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

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

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

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at September 30, 2016 for which the fair value was adjusted during the three and nine months ended September 30, 2016 :



							Fair Value Adjustments for the
	Carrying Value at September 30, 2016						Three Months Ended September 30, 2016 Recognized in:				Nine Months Ended September 30, 2016 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	436	$	23,089	$	6,334	$	—	$	30,200	$	—
Real estate and other repossessed assets	—		6,048		1,927		—		480		—		1,260

- 123 -

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, 2015 for which the fair value was adjusted during the three and nine months ended September 30, 2015 :



							Fair Value Adjustments for the
	Carrying Value at September 30, 2015						Three Months Ended September 30, 2015 Recognized in:				Nine Months Ended September 30, 2015 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	3,239	$	12,386	$	890	$	—	$	1,439	$	—
Real estate and other repossessed assets	—		12,689		702		—		670		—		1,771

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

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2016 follows (in thousands):



	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	23,089	Discounted cash flows	Recoverable oil and gas reserves, forward-looking commodity prices, estimated operating costs	23% - 59% (43%) ¹
Real estate and other repossessed assets	1,927		Appraised value, as adjusted	Marketability adjustment off appraised value ²	68% - 80% (71%)


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


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

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2015 follows (in thousands):



	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	12,386	Appraised value, as adjusted	Broker quotes and management's knowledge of industry and collateral	N/A
Real estate and other repossessed assets	702		Appraised value, as adjusted	Marketability adjustments off appraised value1	66%-86% (78%)


¹	Marketability adjustments include consideration of estimated costs to sell which is approximately 10% of the fair value.

- 124 -

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, 2016 (dollars in thousands):



	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	535,916		$	535,916	$	535,916	$	—	$	—
Interest-bearing cash and cash equivalents	2,080,978			2,080,978		2,080,978		—		—
Trading securities:								—
U.S. government agency debentures	15,705			15,705		—		15,705		—
U.S. government agency residential mortgage-backed securities	464,749			464,749		—		464,749		—
Municipal and other tax-exempt securities	54,856			54,856		—		54,856		—
Other trading securities	11,305			11,305		—		11,305		—
Total trading securities	546,615			546,615		—		546,615		—
Investment securities:
Municipal and other tax-exempt	323,225			327,788		—		327,788		—
U.S. government agency residential mortgage-backed securities	22,166			23,452		—		23,452		—
Other debt securities	201,066			229,070		—		229,070		—
Total investment securities	546,457			580,310		—		580,310		—
Available for sale securities:
U.S. Treasury	1,002			1,002		1,002		—		—
Municipal and other tax-exempt	42,092			42,092		—		36,379		5,713
U.S. government agency residential mortgage-backed securities	5,668,672			5,668,672		—		5,668,672		—
Privately issued residential mortgage-backed securities	121,603			121,603		—		121,603		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,986,495			2,986,495		—		2,986,495		—
Other debt securities	4,151			4,151		—		—		4,151
Perpetual preferred stock	19,578			19,578		—		19,578		—
Equity securities and mutual funds	18,690			18,690		3,544		15,146		—
Total available for sale securities	8,862,283			8,862,283		4,546		8,847,873		9,864
Fair value option securities:
U.S. government agency residential mortgage-backed securities	—			—		—		—		—
U.S. Treasury	222,409			222,409		222,409		—		—
Total fair value option securities	222,409			222,409		222,409		—		—
Residential mortgage loans held for sale	447,592			447,592		—		438,291		9,301
Loans:
Commercial	10,120,163			9,926,548		—		—		9,926,548
Commercial real estate	3,793,598			3,769,427		—		—		3,769,427
Residential mortgage	1,872,793			1,905,786		—		—		1,905,786
Personal	678,232			671,421		—		—		671,421
Total loans	16,464,786			16,273,182		—		—		16,273,182
Allowance for loan losses	(245,103		)	—		—		—		—
Loans, net of allowance	16,219,683			16,273,182		—		—		16,273,182
Mortgage servicing rights	203,621			203,621		—		—		203,621
Derivative instruments with positive fair value, net of cash margin	655,078			655,078		5,575		649,503		—
Deposits with no stated maturity	18,925,873			18,925,873		—		—		18,925,873
Time deposits	2,169,631			2,163,947		—		—		2,163,947
Other borrowed funds	7,147,047			7,079,737		—		—		7,079,737
Subordinated debentures	144,631			148,360		—		148,360		—
Derivative instruments with negative fair value, net of cash margin	573,987			573,987		1,308		572,679		—

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	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	573,699		$	573,699	$	573,699	$	—	$	—
Interest-bearing cash and cash equivalents	2,069,900			2,069,900		2,069,900		—		—
Trading securities:								—
U.S. government agency debentures	61,295			61,295		—		61,295		—
U.S. government agency residential mortgage-backed securities	10,989			10,989		—		10,989		—
Municipal and other tax-exempt securities	31,901			31,901		—		31,901		—
Other trading securities	18,219			18,219		—		18,219		—
Total trading securities	122,404			122,404		—		122,404		—
Investment securities:
Municipal and other tax-exempt	365,258			368,910		—		368,910		—
U.S. government agency residential mortgage-backed securities	26,833			27,874		—		27,874		—
Other debt securities	205,745			232,375		—		232,375		—
Total investment securities	597,836			629,159		—		629,159		—
Available for sale securities:
U.S. Treasury	995			995		995		—		—
Municipal and other tax-exempt	56,817			56,817		—		47,207		9,610
U.S. government agency residential mortgage-backed securities	5,898,351			5,898,351		—		5,898,351		—
Privately issued residential mortgage-backed securities	139,118			139,118		—		139,118		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,905,796			2,905,796		—		2,905,796		—
Other debt securities	4,151			4,151		—		—		4,151
Perpetual preferred stock	19,672			19,672		—		19,672		—
Equity securities and mutual funds	17,833			17,833		3,265		14,568		—
Total available for sale securities	9,042,733			9,042,733		4,260		9,024,712		13,761
Fair value option securities:
U.S. government agency residential mortgage-backed securities	444,217			444,217		—		444,217		—
U.S. Treasury	—			—		—		—		—
Total fair value option securities	444,217			444,217		—		444,217		—
Residential mortgage loans held for sale	308,439			308,439		—		300,565		7,874
Loans:
Commercial	10,252,531			10,053,952		—		—		10,053,952
Commercial real estate	3,259,033			3,233,476		—		—		3,233,476
Residential mortgage	1,876,893			1,902,976		—		—		1,902,976
Personal	552,697			549,068		—		—		549,068
Total loans	15,941,154			15,739,472		—		—		15,739,472
Allowance for loan losses	(225,524		)	—		—		—		—
Loans, net of allowance	15,715,630			15,739,472		—		—		15,739,472
Mortgage servicing rights	218,605			218,605		—		—		218,605
Derivative instruments with positive fair value, net of cash margin	586,270			586,270		38,530		547,740		—
Deposits with no stated maturity	18,682,094			18,682,094		—		—		18,682,094
Time deposits	2,406,064			2,394,562		—		—		2,394,562
Other borrowed funds	6,051,515			5,600,932		—		—		5,600,932
Subordinated debentures	226,350			223,758		—		—		223,758
Derivative instruments with negative fair value, net of cash margin	581,701			581,701		—		581,701		—

- 126 -



	Carrying Value			Estimated Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and due from banks	$	489,268		$	489,268	$	489,268	$	—	$	—
Interest-bearing cash and cash equivalents	1,830,105			1,830,105		1,830,105		—		—
Trading securities:								—
U.S. government agency debentures	42,431			42,431		—		42,431		—
U.S. government agency residential mortgage-backed securities	30,973			30,973		—		30,973		—
Municipal and other tax-exempt securities	84,261			84,261		—		84,261		—
Other trading securities	23,466			23,466		—		23,466		—
Total trading securities	181,131			181,131		—		181,131		—
Investment securities:
Municipal and other tax-exempt	379,980			384,310		—		384,310		—
U.S. government agency residential mortgage-backed securities	28,653			30,080		—		30,080		—
Other debt securities	203,751			228,701		—		228,701		—
Total investment securities	612,384			643,091		—		643,091		—
Available for sale securities:
U.S. Treasury	1,003			1,003		1,003		—		—
Municipal and other tax-exempt	57,960			57,960		—		48,360		9,600
U.S. government agency residential mortgage-backed securities	5,819,127			5,819,127		—		5,819,127		—
Privately issued residential mortgage-backed securities	145,682			145,682		—		145,682		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,735,787			2,735,787		—		2,735,787		—
Other debt securities	4,150			4,150		—		—		4,150
Perpetual preferred stock	19,163			19,163		—		19,163		—
Equity securities and mutual funds	18,217			18,217		3,505		14,712		—
Total available for sale securities	8,801,089			8,801,089		4,508		8,782,831		13,750
Fair value option securities:
U.S. government agency residential mortgage-backed securities	427,760			427,760		—		427,760		—
U.S. Treasury	—			—		—		—		—
Total fair value option securities	427,760			427,760		—		427,760		—
Residential mortgage loans held for sale	357,414			357,414		—		349,381		8,033
Loans:
Commercial	9,797,422			9,530,437		—		—		9,530,437
Commercial real estate	3,235,067			3,330,298		—		—		3,330,298
Residential mortgage	1,868,995			1,906,585		—		—		1,906,585
Personal	465,957			462,266		—		—		462,266
Total loans	15,367,441			15,229,586		—		—		15,229,586
Allowance for loan losses	(204,116		)	—		—		—		—
Loans, net of allowance	15,163,325			15,229,586		—		—		15,229,586
Mortgage servicing rights	200,049			200,049		—		—		200,049
Derivative instruments with positive fair value, net of cash margin	726,159			726,159		4,922		721,237		—
Deposits with no stated maturity	18,120,912			18,120,912		—		—		18,120,912
Time deposits	2,498,531			2,500,469		—		—		2,500,469
Other borrowed funds	5,253,124			5,239,400		—		—		5,239,400
Subordinated debentures	226,314			223,334		—		—		223,334
Derivative instruments with negative fair value, net of cash margin	636,115			636,115		—		636,115		—

- 127 -

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

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

Cash and Cash Equivalents

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

Securities

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

Loans

The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates and credit and liquidity spreads currently being offered for loans with similar remaining terms to maturity and risk, adjusted for the impact of interest rate floors and ceilings which are classified as Significant Unobservable Inputs. The fair values of loans were estimated to approximate their discounted cash flows less loan loss allowances allocated to these loans of $217 million at September 30, 2016 , $195 million at December 31, 2015 and $176 million at September 30, 2015 . A summary of assumptions used in determining the fair value of loans follows:



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
September 30, 2016:
Commercial	0.38% - 30.00%	0.69	0.54% - 3.93%
Commercial real estate	0.38% - 18.00%	0.72	0.80% - 3.90%
Residential mortgage	1.74% - 18.00%	1.95	1.57% - 3.55%
Personal	0.25% - 21.00%	0.35	0.75% - 4.15%

December 31, 2015:
Commercial	0.25% - 30.00%	0.62	0.52% - 4.34%
Commercial real estate	0.38% - 18.00%	0.73	0.95% - 3.93%
Residential mortgage	1.67% - 18.00%	2.42	0.86% - 4.25%
Personal	0.38% - 21.00%	0.37	1.19% - 4.11%

September 30, 2015:
Commercial	0.19% - 30.00%	0.63	0.47%-4.06%
Commercial real estate	0.38% - 18.00%	0.77	0.92%-3.60%
Residential mortgage	1.25% - 18.00%	2.34	0.86%-3.94%
Personal	0.38% - 21.00%	0.40	0.89%-3.86%

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.

- 128 -

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



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
September 30, 2016	0.03% - 9.65%	2.10	1.37% - 1.66%
December 31, 2015	0.02% - 5.50%	1.78	1.11% - 1.57%
September 30, 2015	0.02% - 9.64%	1.75	0.85%-1.25%

Other Borrowings and Subordinated Debentures

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



	Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate
September 30, 2016:
Other borrowed funds	0.25% - 3.81%	0.02	0.29% - 2.99%
Subordinated debentures	5.38%	18.37	5.38%

December 31, 2015:
Other borrowed funds	0.25% - 3.40%	0.00	0.20% - 2.89%
Subordinated debentures	1.05%	1.37	2.12%

September 30, 2015:
Other borrowed funds	0.25% - 3.34%	0.02	0.07%-2.66%
Subordinated debentures	1.01%	1.63	1.83%

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, 2016 , December 31, 2015 or September 30, 2015 .

Fair Value Election

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

- 129 -

( 12 ) Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on September 30, 2016 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.

- 130 -

Nine-Month Financial Summary – Unaudited Consolidated Daily Average Balances, Average Yields and Rates

(In Thousands, Except Per Share Data)	Nine Months Ended
	September 30, 2016								September 30, 2015
	Average Balance			Revenue/ Expense			Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate
Assets
Interest-bearing cash and cash equivalents	$	2,040,978		$	7,926		0.52	%	$	2,043,351		$	4,114	0.27	%
Trading securities	264,525			4,659			2.48	%	149,292			2,216		2.37	%
Investment securities
Taxable	227,136			9,244			5.43	%	237,416			9,788		5.50	%
Tax-exempt	340,292			5,713			2.24	%	391,621			4,557		1.55	%
Total investment securities	567,428			14,957			3.52	%	629,037			14,345		3.04	%
Available for sale securities
Taxable	8,831,032			130,790			2.02	%	8,952,043			128,933		1.96	%
Tax-exempt	70,205			2,605			5.15	%	82,951			2,555		4.26	%
Total available for sale securities	8,901,237			133,395			2.04	%	9,034,994			131,488		1.98	%
Fair value option securities	361,623			6,182			2.11	%	423,432			6,803		2.25	%
Restricted equity securities	316,563			12,684			5.34	%	219,248			9,627		5.85	%
Residential mortgage loans held for sale	379,174			9,823			3.49	%	404,756			10,634		3.52	%
Loans	16,235,071			436,966			3.59	%	14,886,418			400,053		3.59	%
Allowance for loan losses	(242,508		)						(198,755		)
Loans, net of allowance	15,992,563			436,966			3.65	%	14,687,663			400,053		3.64	%
Total earning assets	28,824,091			626,592			2.92	%	27,591,773			579,280		2.82	%
Receivable on unsettled securities sales	141,957								86,095
Cash and other assets	3,083,135								2,726,562
Total assets	$	32,049,183							$	30,404,430
Liabilities and equity
Interest-bearing deposits:
Transaction	$	9,666,048		$	9,994		0.14	%	$	10,052,159		$	6,723	0.09	%
Savings	411,568			295			0.10	%	375,883			294		0.10	%
Time	2,286,844			20,062			1.17	%	2,622,634			27,085		1.38	%
Total interest-bearing deposits	12,364,460			30,351			0.33	%	13,050,676			34,102		0.35	%
Funds purchased	83,668			142			0.23	%	67,777			44		0.09	%
Repurchase agreements	598,631			214			0.05	%	814,429			214		0.04	%
Other borrowings	6,002,018			25,587			0.57	%	3,961,436			9,137		0.31	%
Subordinated debentures	238,415			4,056			2.27	%	293,623			4,456		2.03	%
Total interest-bearing liabilities	19,287,192			60,350			0.42	%	18,187,941			47,953		0.35	%
Non-interest bearing demand deposits	8,255,859								7,959,336
Due on unsettled securities purchases	150,994								148,445
Other liabilities	1,001,283								731,126
Total equity	3,353,855								3,377,582
Total liabilities and equity	$	32,049,183							$	30,404,430
Tax-equivalent Net Interest Revenue				$	566,242		2.50	%				$	531,327	2.47	%
Tax-equivalent Net Interest Revenue to Earning Assets							2.64	%						2.59	%
Less tax-equivalent adjustment				13,212								9,234
Net Interest Revenue				553,030								522,093
Provision for credit losses				65,000								11,500
Other operating revenue				539,968								505,738
Other operating expense				761,745								672,006
Income before taxes				266,253								344,325
Federal and state income taxes				83,881								113,142
Net income				182,372								231,183
Net income (loss) attributable to non-controlling interests				(270		)						2,219
Net income attributable to BOK Financial Corp. shareholders				$	182,642							$	228,964
Earnings Per Average Common Share Equivalent:
Net income:
Basic				$	2.77							$	3.33
Diluted				$	2.76							$	3.32

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

- 131 -

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

(In Thousands, Except Per Share Data)	Three Months Ended
	September 30, 2016							June 30, 2016
	Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate
Assets
Interest-bearing cash and cash equivalents	$	2,047,991		$	2,651	0.51	%	$	2,022,028		$	2,569	0.51	%
Trading securities	366,545			3,157		2.71	%	237,808			775		1.89	%
Investment securities
Taxable	224,518			3,000		5.34	%	227,103			3,069		5.41	%
Tax-exempt	328,074			1,851		2.26	%	335,288			1,878		2.25	%
Total investment securities	552,592			4,851		3.51	%	562,391			4,947		3.52	%
Available for sale securities
Taxable	8,795,869			42,513		1.99	%	8,819,135			43,345		2.01	%
Tax-exempt	66,721			867		5.47	%	70,977			862		5.06	%
Total available for sale securities	8,862,590			43,380		2.01	%	8,890,112			44,207		2.04	%
Fair value option securities	266,998			1,531		1.70	%	368,434			2,062		2.19	%
Restricted equity securities	335,812			4,510		5.37	%	319,136			3,863		4.84	%
Residential mortgage loans held for sale	445,930			3,615		3.28	%	401,114			3,508		3.53	%
Loans	16,447,750			150,077		3.63	%	16,263,132			144,708		3.58	%
Allowance for loan losses	(247,901		)					(245,448		)
Loans, net of allowance	16,199,849			150,077		3.69	%	16,017,684			144,708		3.63	%
Total earning assets	29,078,307			213,772		2.93	%	28,818,707			206,639		2.91	%
Receivable on unsettled securities sales	259,906							49,568
Cash and other assets	3,308,260							3,117,767
Total assets	$	32,646,473						$	31,986,042
Liabilities and equity
Interest-bearing deposits:
Transaction	$	9,650,618		$	3,417	0.14	%	$	9,590,855		$	3,260	0.14	%
Savings	420,009			100		0.09	%	417,122			102		0.10	%
Time	2,197,350			6,295		1.14	%	2,297,621			6,635		1.16	%
Total interest-bearing deposits	12,267,977			9,812		0.32	%	12,305,598			9,997		0.33	%
Funds purchased	68,280			33		0.19	%	70,682			33		0.19	%
Repurchase agreements	522,822			53		0.04	%	611,264			72		0.05	%
Other borrowings	6,342,369			9,105		0.57	%	6,076,028			8,675		0.57	%
Subordinated debentures	255,890			2,468		3.84	%	232,795			878		1.52	%
Total interest-bearing liabilities	19,457,338			21,471		0.44	%	19,296,367			19,655		0.41	%
Non-interest bearing demand deposits	8,497,037							8,162,134
Due on unsettled securities purchases	200,574							93,812
Other liabilities	1,099,858							1,089,483
Total equity	3,391,666							3,344,246
Total liabilities and equity	$	32,646,473						$	31,986,042
Tax-equivalent Net Interest Revenue				$	192,301	2.49	%				$	186,984	2.50	%
Tax-equivalent Net Interest Revenue to Earning Assets						2.64	%						2.63	%
Less tax-equivalent adjustment				4,455							4,372
Net Interest Revenue				187,846							182,612
Provision for credit losses				10,000							20,000
Other operating revenue				191,342							188,882
Other operating expense				262,120							254,725
Income before taxes				107,068							96,769
Federal and state income taxes				31,956							30,497
Net income				75,112							66,272
Net income (loss) attributable to non-controlling interests				835							471
Net income attributable to BOK Financial Corp. shareholders				$	74,277						$	65,801
Earnings Per Average Common Share Equivalent:
Basic				$	1.13						$	1.00
Diluted				$	1.13						$	1.00

- 132 -



Three Months Ended
March 31, 2016								December 31, 2015							September 30, 2015
Average Balance			Revenue /Expense			Yield / Rate		Average Balance			Revenue / Expense		Yield / Rate		Average Balance			Revenue / Expense		Yield / Rate

$	2,052,840		$	2,706		0.53	%	$	1,995,945		$	1,466	0.29	%	$	2,038,611		$	1,442	0.28	%
188,100			727			2.47	%	150,402			840		2.86	%	179,098			945		2.70	%

229,817			3,175			5.53	%	232,566			3,144		5.41	%	233,914			3,211		5.49	%
357,648			1,984			2.22	%	369,803			1,413		1.53	%	382,177			1,468		1.54	%
587,465			5,159			3.51	%	602,369			4,557		3.03	%	616,091			4,679		3.04	%

8,878,478			44,932			2.06	%	8,894,019			43,649		2.02	%	8,862,917			43,473		1.99	%
72,958			876			4.95	%	77,071			786		4.22	%	79,344			796		4.15	%
8,951,435			45,808			2.08	%	8,971,090			44,435		2.04	%	8,942,261			44,269		2.01	%
450,478			2,589			2.38	%	435,449			2,461		2.32	%	429,951			2,480		2.30	%
294,529			4,311			5.85	%	262,461			3,905		5.95	%	255,610			3,802		5.95	%
289,743			2,700			3.75	%	310,425			2,968		3.85	%	401,359			3,793		3.79	%
15,991,993			142,181			3.57	%	15,586,998			139,372		3.55	%	15,192,311			135,498		3.54	%
(234,116		)						(207,156		)					(202,829		)
15,757,877			142,181			3.63	%	15,379,842			139,372		3.60	%	14,989,482			135,498		3.59	%
28,572,467			206,181			2.92	%	28,107,983			200,004		2.86	%	27,852,463			196,908		2.83	%
115,101								62,228							64,591
2,820,903								2,909,965							2,852,679
$	31,508,471							$	31,080,176						$	30,769,733


$	9,756,843		$	3,317		0.14	%	$	9,527,491		$	2,098	0.09	%	$	9,760,839		$	2,061	0.08	%
397,479			93			0.09	%	382,284			89		0.09	%	379,828			97		0.10	%
2,366,543			7,132			1.21	%	2,482,714			7,881		1.26	%	2,557,874			8,573		1.33	%
12,520,865			10,542			0.34	%	12,392,489			10,068		0.32	%	12,698,541			10,731		0.34	%
112,211			76			0.27	%	73,220			21		0.11	%	70,281			15		0.08	%
662,640			89			0.05	%	623,921			68		0.04	%	672,085			49		0.03	%
5,583,917			7,807			0.56	%	4,957,175			4,720		0.38	%	4,779,981			3,637		0.30	%
226,368			710			1.26	%	226,332			644		1.13	%	226,296			596		1.04	%
19,106,001			19,224			0.40	%	18,273,137			15,521		0.34	%	18,447,184			15,028		0.32	%
8,105,756								8,312,961							7,994,607
158,050								248,811							90,135
813,427								884,652							838,612
3,325,237								3,360,615							3,399,195
$	31,508,471							$	31,080,176						$	30,769,733
			$	186,957		2.52	%				$	184,483	2.52	%				$	181,880	2.51	%
						2.65	%						2.64	%						2.61	%
			4,385								3,222							3,244
			182,572								181,261							178,636
			35,000								22,500							7,500
			159,744								161,115							163,436
			244,900								232,558							224,628
			62,416								87,318							109,944
			21,428								26,242							34,128
			40,988								61,076							75,816
			(1,576		)						1,475							925
			$	42,564							$	59,601						$	74,891

			$	0.64							$	0.89						$	1.09
			$	0.64							$	0.89						$	1.09

- 133 -

Quarterly Earnings Trends – Unaudited

(In thousands, except share and per share data)



	Three Months Ended
	Sept. 30,2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Sept. 30,2015

Interest revenue	$	209,317		$	202,267		$	201,796		$	196,782		$	193,664
Interest expense	21,471			19,655			19,224			15,521			15,028
Net interest revenue	187,846			182,612			182,572			181,261			178,636
Provision for credit losses	10,000			20,000			35,000			22,500			7,500
Net interest revenue after provision for credit losses	177,846			162,612			147,572			158,761			171,136
Other operating revenue
Brokerage and trading revenue	38,006			39,530			32,341			30,255			31,582
Transaction card revenue	33,933			34,950			32,354			32,319			32,514
Fiduciary and asset management revenue	34,073			34,813			32,056			31,165			30,807
Deposit service charges and fees	23,668			22,618			22,542			22,813			23,606
Mortgage banking revenue	42,548			38,224			34,430			25,039			33,170
Other revenue	13,080			13,352			11,904			14,233			12,978
Total fees and commissions	185,308			183,487			165,627			155,824			164,657
Other gains, net	2,442			1,307			1,560			2,329			1,161
Gain (loss) on derivatives, net	2,226			10,766			7,138			(732		)	1,283
Gain (loss) on fair value option securities, net	(3,355		)	4,279			9,443			(4,127		)	5,926
Change in fair value of mortgage servicing rights	2,327			(16,283		)	(27,988		)	7,416			(11,757		)
Gain on available for sale securities, net	2,394			5,326			3,964			2,132			2,166
Total other-than-temporary impairment losses	—			—			—			(2,114		)	—
Portion of loss recognized in other comprehensive income	—			—			—			387			—
Net impairment losses recognized in earnings	—			—			—			(1,727		)	—
Total other operating revenue	191,342			188,882			159,744			161,115			163,436
Other operating expense
Personnel	143,185			142,490			135,843			133,182			129,062
Business promotion	6,839			6,703			5,696			8,416			5,922
Charitable contributions to BOKF Foundation	—			—			—			—			796
Professional fees and services	14,038			14,158			11,759			10,357			10,147
Net occupancy and equipment	20,111			19,677			18,766			19,356			18,689
Insurance	9,390			7,129			7,265			5,415			4,864
Data processing and communications	33,331			32,802			32,017			31,248			30,708
Printing, postage and supplies	3,790			3,889			3,907			3,108			3,376
Net losses (gains) and operating expenses of repossessed assets	(926		)	1,588			1,070			343			267
Amortization of intangible assets	1,521			2,624			1,159			1,090			1,089
Mortgage banking costs	16,022			15,809			12,379			11,496			9,107
Other expense	14,819			7,856			15,039			8,547			10,601
Total other operating expense	262,120			254,725			244,900			232,558			224,628
Net income before taxes	107,068			96,769			62,416			87,318			109,944
Federal and state income taxes	31,956			30,497			21,428			26,242			34,128
Net income	75,112			66,272			40,988			61,076			75,816
Net income (loss) attributable to non-controlling interests	835			471			(1,576		)	1,475			925
Net income attributable to BOK Financial Corporation shareholders	$	74,277		$	65,801		$	42,564		$	59,601		$	74,891

Earnings per share:
Basic	$1.13			$1.00			$0.64			$0.89			$1.09
Diluted	$1.13			$1.00			$0.64			$0.89			$1.09
Average shares used in computation:
Basic	65,085,392			65,245,887			65,296,541			66,378,380			67,668,076
Diluted	65,157,841			65,302,926			65,331,428			66,467,729			67,762,483

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PART II. Other Information

Item 1. Legal Proceedings

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

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

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended September 30, 2016 .



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, 2016	—	$	—	—	2,820,757
August 1 to August 31, 2016	5,137	$	69.24	—	2,820,757
September 1 to September 30, 2016	—	$	—	—	2,820,757
Total	5,137			—


¹	On October 1, 2015, the Company's board of directors authorized the Company to repurchase up to five million shares of the Company's common stock. As of September 30, 2016 , the Company had repurchased 2,179,243 shares under this plan. Future repurchases of the Company's common stock will vary based on market conditions, regulatory limitations and other factors.


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

Item 6. Exhibits


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


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


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


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

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

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Signatures

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

BOK FINANCIAL CORPORATION

(Registrant)

Date: October 31, 2016

/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, 2016