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 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. 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.

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.

The acquisition of Mobank on December 1, 2016 was not yet allocated to the operating segments at December 31, 2016. Accordingly, the operation, assets and liabilities of Mobank were included in Funds Management and Other for 2016.

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2016 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest and dividend revenue from external sources	$	492,967		$	85,998		$	33,006		$	135,257		$	747,228
Net interest revenue (expense) from internal sources	(58,781		)	37,777			29,043			(8,039		)	—
Net interest and dividend revenue	434,186			123,775			62,049			127,218			747,228
Provision for credit losses	32,959			4,927			(801		)	27,915			65,000
Net interest and dividend revenue after provision for credit losses	401,227			118,848			62,850			99,303			682,228
Other operating revenue	195,521			224,802			283,222			(29,525		)	674,020
Other operating expense	216,451			249,744			250,994			300,401			1,017,590
Net direct contribution	380,297			93,906			95,078			(230,623		)	338,658
Gain (loss) on financial instruments, net	10			(26,252		)	(42		)	26,284			—
Change in fair value of mortgage servicing rights	—			(2,193		)	—			2,193			—
Gain (loss) on repossessed assets, net	669			979			—			(1,648		)	—
Corporate expense allocations	35,760			66,411			42,378			(144,549		)	—
Net income before taxes	345,216			29			52,658			(59,245		)	338,658
Federal and state income taxes	134,289			11			20,484			(48,407		)	106,377
Net income	210,927			18			32,174			(10,838		)	232,281
Net income (loss) attributable to non-controlling interests	—			—			—			(387		)	(387		)
Net income attributable to BOK Financial Corp. shareholders	$	210,927		$	18		$	32,174		$	(10,451	)	$	232,668

Average assets	$	16,998,626		$	8,722,372		$	6,281,127		$	276,277		$	32,278,402

Reportable segments reconciliation to the Consolidated Financial Statements for the year ended December 31, 2015 is as follows (in thousands):



	Commercial			Consumer			Wealth Management			Funds Management and Other			BOK Financial Consolidated
Net interest and dividend revenue from external sources	$	439,751		$	84,848		$	24,744		$	154,011		$	703,354
Net interest revenue (expense) from internal sources	(52,313		)	28,503			24,043			(233		)	—
Net interest and dividend revenue	387,438			113,351			48,787			153,778			703,354
Provision for credit losses	(6,748		)	6,934			(1,083		)	34,897			34,000
Net interest and dividend revenue after provision for credit losses	394,186			106,417			49,870			118,881			669,354
Other operating revenue	177,729			218,095			267,523			(4,867		)	658,480
Other operating expense	202,804			203,070			228,664			261,653			896,191
Net direct contribution	369,111			121,442			88,729			(147,639		)	431,643
Gain (loss) on financial instruments, net	—			(4,712		)	(204		)	4,916			—
Change in fair value of mortgage servicing rights	—			(4,853		)	—			4,853			—
Gain (loss) on repossessed assets, net	708			916			—			(1,624		)	—
Corporate expense allocations	43,279			74,936			40,357			(158,572		)	—
Net income before taxes	326,540			37,857			48,168			19,078			431,643
Federal and state income taxes	127,024			14,726			18,737			(21,103		)	139,384
Net income	199,516			23,131			29,431			40,181			292,259
Net income attributable to non-controlling interests	—			—			—			3,694			3,694
Net income attributable to BOK Financial Corp. shareholders	$	199,516		$	23,131		$	29,431		$	36,487		$	288,565

Average assets	$	16,284,527		$	8,836,327		$	5,444,483		$	9,418		$	30,574,755

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 and dividend revenue from external sources	$	382,331		$	81,852		$	23,817		$	177,194		$	665,194
Net interest revenue (expense) from internal sources	(40,083		)	26,813			20,959			(7,689		)	—
Net interest and dividend revenue	342,248			108,665			44,776			169,505			665,194
Provision for credit losses	(7,447		)	5,477			213			1,757			—
Net interest and dividend revenue after provision for credit losses	349,695			103,188			44,563			167,748			665,194
Other operating revenue	171,390			214,657			242,268			(6,357		)	621,958
Other operating expense	195,706			207,131			218,000			226,685			847,522
Net direct contribution	325,379			110,714			68,831			(65,294		)	439,630
Gain (loss) on financial instruments, net	—			12,406			(235		)	(12,171		)	—
Change in fair value of mortgage servicing rights	—			(16,445		)	—			16,445			—
Gain (loss) on repossessed assets, net	(3,187		)	1,418			—			1,769			—
Corporate expense allocations	45,502			64,531			38,731			(148,764		)	—
Net income before taxes	276,690			43,562			29,865			89,513			439,630
Federal and state income taxes	107,632			16,946			11,617			7,956			144,151
Net income	169,058			26,616			18,248			81,557			295,479
Net income attributable to non-controlling interests	—			—			—			3,044			3,044
Net income attributable to BOK Financial Corp. shareholders	$	169,058		$	26,616		$	18,248		$	78,513		$	292,435

Average assets	$	15,394,957		$	8,373,317		$	5,002,515		$	(771,931	)	$	27,998,858