(17) Reportable Segments

BOK Financial operates 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 to 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 the consumer branch network and all mortgage banking activities. Wealth Management provides fiduciary services, private bank 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 its lines of business, BOK Financial has a Funds Management unit. The primary purpose of this unit is to manage the 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.

BOK Financial allocates resources and evaluates performance of its lines of business after 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 on statutory rates. Corporate expense allocations were updated in 2014. The allocation for the prior comparable periods have been revised on a comparable basis.

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 based on rates which approximate the 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 rates 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 intermediate swap rates. The expected duration ranges from 30 days for certain rate-sensitive deposits to five years.

Economic capital is assigned to the business units by a capital allocation model that reflects management's assessment of risk. This model assigns capital based upon credit, operating, interest rate and market risk inherent in our business lines and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each business line, based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in the lines of business.

Substantially all revenue is from domestic customers. No single external customer accounts for more than 10% of total revenue.

Net loans charged off and provision for credit losses represents net loans charged off as attributed to the lines of business and the provision for credit losses in excess of net charge-offs attributed to Funds Management and Other.

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2014 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	381,687		$	95,910		$	23,826		$	163,771		$	665,194
Net interest revenue (expense) from internal sources	(43,934		)	32,170			20,578			(8,814		)	—
Net interest revenue	337,753			128,080			44,404			154,957			665,194
Provision for credit losses	(7,447		)	5,405			213			1,829			—
Net interest revenue after provision for credit losses	345,200			122,675			44,191			153,128			665,194
Other operating revenue	169,704			200,815			239,045			3,095			612,659
Other operating expense	201,748			196,082			216,770			232,922			847,522
Net direct contribution	313,156			127,408			66,466			(76,699		)	430,331
Corporate expense allocations	41,338			67,040			31,375			(139,753		)	—
Income before taxes	271,818			60,368			35,091			63,054			430,331
Federal and state income taxes	105,737			23,483			13,650			(8,018		)	134,852
Net income	166,081			36,885			21,441			71,072			295,479
Net income attributable to non-controlling interests	—			—			—			3,044			3,044
Net income attributable to BOK Financial Corp. shareholders	$	166,081		$	36,885		$	21,441		$	68,028		$	292,435

Average assets	$	11,384,508		$	6,555,642		$	4,518,511		$	5,540,197		$	27,998,858
Average invested capital	946,383			277,404			193,784			1,793,190			3,210,761

Performance measurements:
Return on average assets	1.46		%	0.56		%	0.52		%				1.04		%
Return on average invested capital	17.58		%	13.30		%	12.07		%				9.11		%
Efficiency ratio	39.57		%	56.58		%	75.90		%				64.50		%

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2013 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	363,961		$	100,153		$	25,478		$	184,885		$	674,477
Net interest revenue (expense) from internal sources	(51,587		)	34,850			20,061			(3,324		)	—
Net interest revenue	312,374			135,003			45,539			181,561			674,477
Provision for credit losses	(4,372		)	5,532			1,275			(30,335		)	(27,900		)
Net interest revenue after provision for credit losses	316,746			129,471			44,264			211,896			702,377
Other operating revenue	163,206			225,336			211,655			14,275			614,472
Other operating expense	190,306			189,099			197,890			263,325			840,620
Net direct contribution	289,646			165,708			58,029			(37,154		)	476,229
Corporate expense allocations	44,865			60,005			29,993			(134,863		)	—
Net income before taxes	244,781			105,703			28,036			97,709			476,229
Federal and state income taxes	95,220			41,118			10,906			10,054			157,298
Net income	149,561			64,585			17,130			87,655			318,931
Net income attributable to non-controlling interests	—			—			—			2,322			2,322
Net income attributable to BOK Financial Corp. shareholders	$	149,561		$	64,585		$	17,130		$	85,333		$	316,609

Average assets	$	10,386,235		$	6,487,255		$	4,556,132		$	5,951,472		$	27,381,094
Average invested capital	906,717			293,736			203,914			1,606,715			3,011,082

Performance measurements:
Return on average assets	1.44		%	1.00		%	0.40		%				1.16		%
Return on average invested capital	16.49		%	21.99		%	9.00		%				10.51		%
Efficiency ratio	40.24		%	51.30		%	76.37		%				64.60		%

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2012 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest revenue from external sources	$	366,243		$	102,321		$	27,647		$	211,338		$	707,549
Net interest revenue (expense) from internal sources	(58,835		)	36,700			21,456			679			—
Net interest revenue	307,408			139,021			49,103			212,017			707,549
Provision for credit losses	9,463			10,588			2,284			(44,335		)	(22,000		)
Net interest revenue after provision for credit losses	297,945			128,433			46,819			256,352			729,549
Other operating revenue	162,085			271,723			197,306			22,564			653,678
Other operating expense	192,396			206,598			177,423			263,946			840,363
Net direct contribution	267,634			193,558			66,702			14,970			542,864
Corporate expense allocations	44,330			64,239			30,525			(139,094		)	—
Net income before taxes	223,304			129,319			36,177			154,064			542,864
Federal and state income taxes	86,865			50,305			14,073			37,497			188,740
Net income	136,439			79,014			22,104			116,567			354,124
Net income attributable to non-controlling interests	—			—			—			2,933			2,933
Net income attributable to BOK Financial Corp. shareholders	$	136,439		$	79,014		$	22,104		$	113,634		$	351,191

Average assets	$	9,844,145		$	6,498,193		$	4,357,641		$	5,589,171		$	26,289,150
Average invested capital	882,036			289,665			184,707			1,549,547			2,905,955

Performance measurements:
Return on average assets	1.39		%	1.22		%	0.52		%				1.34		%
Return on average invested capital	15.47		%	27.28		%	12.26		%				12.09		%
Efficiency ratio	42.26		%	49.60		%	71.19		%				62.03		%