As filed with the Securities and Exchange Commission on March 27, 2002
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2001 Commission File No. 0-19341
BOK FINANCIAL CORPORATION
Incorporated in the State I.R.S. Employer Identification
of Oklahoma No.73-1373454
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
Registrant's Telephone Number,
Including Area Code (918) 588-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT: (NONE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
COMMON STOCK ($.00006 Par Value)
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 X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-X is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant: $496,420,615 as of February 28, 2002.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 51,286,073 shares of common
stock ($.00006 par value) as of the start of business on March 1, 2002.
List hereunder the following documents if incorporated by reference and the part
of Form 10-K in which the document is incorporated:
Part I - Annual Report to Shareholders For Fiscal Year Ended December 31,
2001 (designated portions only)
Part II - Annual Report to Shareholders For Fiscal Year Ended December 31,
2001 (designated portions only)
Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for
April 30, 2002 (designated portions only)
Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31,
2001 (designated portions only)
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BOK FINANCIAL CORPORATION
FORM 10-K ANNUAL REPORT
INDEX
ITEM PAGE
PART I
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 5
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition and 6
Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk 6
8. Financial Statements and Supplementary Data 6
9. Changes in and Disagreements with Accountants on Accounting and 6
Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 6
11. Executive Compensation 6
12. Security Ownership of Certain Beneficial Owners and Management 7
13. Certain Relationships and Related Transactions 7
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 7 - 12
Signatures 13
PART I
ITEM 1 - Business
General Development of Business
Developments relating to individual aspects of the business of BOK Financial
Corporation ("BOK Financial") are described below. Additional discussion of BOK
Financial's activities during the current year is incorporated by reference to
"Management's Assessment of Operations and Financial Condition" (pages 10 - 28)
in BOK Financial's 2001 Annual Report to Shareholders. Information regarding BOK
Financial's acquisitions is incorporated by reference to Note 2 of "Notes to
Consolidated Financial Statements" (page 38) in BOK Financial's 2001 Annual
Report to Shareholders.
Narrative Description of Business
BOK Financial is a financial holding company whose activities are limited by the
Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services
Modernization Act or Gramm-Leach-Bliley Act. BOK Financial's banking and
bank-related activities are primarily performed through Bank of Oklahoma, N.A.
("BOk"), Bank of Texas, N.A., Bank of Albuquerque N.A., and Bank of Arkansas,
N.A. Other significant operating subsidiaries include BOSC, Inc., which is a
full-service securities firm with specialized expertise in public and municipal
finance and private placements. Other nonbank subsidiary operations are not
significant. As of December 31, 2001, BOK Financial and its subsidiaries had
3,392 full-time equivalent employees.
Industry Segments
BOK Financial operates four principal lines of business under its BOk franchise:
corporate banking, consumer banking, mortgage banking and trust services. It
also operates a fifth principal line of business, regional banks, which includes
banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas.
These five principal lines of business combined account for approximately 87% of
total revenue. Discussion of these principal lines of business is incorporated
by reference to Lines of Business in "Management's Assessment of Operations and
Financial Condition " (pages 13 - 15) and Note 18 of "Notes to Consolidated
Financial Statements" (pages 52 - 55) in BOK Financial's 2001 Annual Report to
Shareholders.
Competition
The banking industry in each of our markets is highly competitive. BOK
Financial, through four subsidiary banks, competes with other banks in obtaining
deposits, making loans and providing additional services related to banking. All
market share information below is based on share of deposits in specified area.
BOk is the largest banking subsidiary of BOK Financial. It has the largest
market share in Oklahoma and a leading position in eight of the eleven Oklahoma
counties in which it operates. BOk competes with two super-regional banks,
several regional and numerous locally owned banks in both the Tulsa and Oklahoma
City areas, as well as in every other community in which we do business
throughout the rest of the state.
BOK Financial competes in the Dallas-Ft. Worth combined metropolitan area, in
the Houston, Texas area, in the Albuquerque, New Mexico market, and in
Fayetteville, Arkansas through subsidiary banks. Bank of Texas competes against
numerous financial institutions, including some of the largest in the United
States. Bank of Texas's market share is approximately 2% in the Dallas-Ft. Worth
area and 1% in the Houston market. Bank of Albuquerque has a number four market
share position in the Albuquerque area behind two super-regional competitors,
some regional banks and several locally-owned smaller community banks. Bank of
Arkansas operates as a community bank serving Benton and Washington counties in
Arkansas.
Supervision and Regulation
Financial holding companies and banks are extensively regulated under both
federal and state law. The following information, to the extent it describes
statutory or regulatory provisions, is qualified in its entirety by reference to
the particular statutory and regulatory provisions. It is not possible to
predict the changes, if any, that may be made to existing banking laws and
regulations or whether such changes, if made, would have a materially adverse
effect on the business and prospects of BOK Financial, BOk, Bank of Texas, Bank
of Albuquerque, or Bank of Arkansas.
BOK Financial
As a financial holding company, BOK Financial is subject to regulation under the
BHCA (as amended by the Financial Services Modernization Act or
Gramm-Leach-Bliley Act) and to supervision by the Board of Governors of the
Federal Reserve System (the "Reserve Board"). Under the BHCA, BOK Financial
files with the Reserve Board quarterly reports and such other additional
information as the Reserve Board may require. The Reserve Board may also make
examinations of BOK Financial and its subsidiaries.
The BHCA requires notification to the Reserve Board in any case where a
financial holding company proposes to acquire control of more than five percent
of the voting shares of any bank, unless it already controls a majority of such
voting shares. Additionally, approval must also be obtained before a financial
holding company may acquire all or substantially all of the assets of another
bank or before it may merge or consolidate with another financial holding
company. The BHCA further provides that the Reserve Board shall not approve any
such acquisition, merger or consolidation that will substantially lessen
competition, tend to create a monopoly or be in restraint of trade, unless it
finds the anti-competitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the community to be served.
The BHCA also requires a financial holding company to notify the Reserve Board
within 30 days of engaging in new activities the Reserve Board has determined to
be financial in nature. These activities include dealing in and underwriting
debt and equity, operating a mortgage company, finance company, credit card
company or factoring company; performing certain data processing operations;
servicing loans and other extensions of credit; providing investment and
financial advice; acting as an insurance underwriter and/or agent; owning and
operating savings and loan associations; and leasing personal property on a full
pay-out, nonoperating basis. BOKF is already engaged in some of these activities
and has notified the Federal Reserve.
A financial holding company and its subsidiaries are further prohibited under
the BHCA from engaging in certain tie-in arrangements in connection with the
provision of any credit, property or services. Thus, a subsidiary of a financial
holding company may not extend credit, lease or sell property, furnish any
services or fix or vary the consideration for these activities on the condition
that (1) the customer obtain or provide some additional credit, property or
services from or to the financial holding company or any subsidiary thereof or
(2) the customer may not obtain some other credit, property or services from a
competitor, except to the extent reasonable conditions are imposed to insure the
soundness of credit extended.
The Federal Deposit Insurance Corporation Improvement Act of 1991 established
five capital rating tiers ranging from "well capitalized" to "critically
undercapitalized". A financial institution is considered to be well capitalized
if its Leverage, Tier 1 and Total Capital ratios are at 5%, 6% and 10%,
respectively. Any institution experiencing significant growth or acquiring other
institutions or branches is expected to maintain capital ratios above the well
capitalized level. At December 31, 2001, BOK Financial's Leverage, Tier 1 and
Total Capital ratios were 6.38%, 8.08% and 11.56%, respectively. Further
discussion of regulatory capital is incorporated by reference to Note 16 of
"Notes to Consolidated Financial Statements" (page 50 - 51) in BOK Financial's
2001 Annual Report to Shareholders.
Bank Subsidiaries
BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas are national
banking associations and are subject to the National Banking Act and other
federal statutes governing national banks. Under federal law, the Office of the
Comptroller of the Currency ("Comptroller") charters and serves as the primary
regulator of national banks. In addition, the Comptroller must approve certain
corporate or structural changes, including an increase or decrease in
capitalization, payment of dividends, change of place of business, establishment
of a branch and establishment of an operating subsidiary. The Comptroller
performs its functions through national bank examiners who provide the
Comptroller with information concerning the soundness of a national bank, the
quality of management and directors, and compliance with applicable laws, rules
and regulations. The National Banking Act authorizes the Comptroller to examine
every national bank as often as necessary. Although the Comptroller has primary
supervisory responsibility for national banks, such banks must also comply with
Reserve Board rules and regulations as members of the Federal Reserve System.
Bank of Arkansas is also subject to certain consumer-protection laws
incorporated in the Arkansas Constitution, which, among other restrictions,
limit the maximum interest rate on general loans to five percent above the
Federal Reserve Discount Rate. The rate on consumer loans is five percent above
the discount rate or seventeen percent, whichever is lower.
Applicable federal statutes and regulations require national banks to meet
certain leverage and risk-based capital requirements. At December 31, 2001, all
of BOK Financial Corporation's leverage and risk-based capital ratios were well
above the required minimum ratios. Additional discussion regarding regulatory
capital is incorporated by reference to Note 16 of "Notes to Consolidated
Financial Statements" (page 50 - 51) in BOK Financial's 2001 Annual Report to
Shareholders.
Governmental Policies and Economic Factors
The operations of BOK Financial and its subsidiaries are affected by legislative
changes and by the policies of various regulatory authorities and, in
particular, the credit policies of the Reserve Board. An important function of
the Reserve Board is to regulate the national supply of bank credit. Among the
instruments of monetary policy used by the Reserve Board to implement its
objectives are: open market operations in U.S. Government securities; changes in
the discount rate on bank borrowings; and changes in reserve requirements on
bank deposits. The effect of such policies in the future on the business and
earnings of BOK Financial and its subsidiaries cannot be predicted with
certainty.
Foreign Operations
BOK Financial does not engage in operations in foreign countries, nor does it
lend to foreign governments.
ITEM 2 - Properties
BOK Financial, through BOk, BOk's subsidiaries, Bank of Texas, Bank of
Albuquerque and Bank of Arkansas, owns improved real estate that was carried at
$93 million, net of depreciation and amortization, as of December 31, 2001. BOK
Financial conducts its operations through 64 locations in Oklahoma, 21 locations
in Texas, 18 locations in New Mexico, and 3 locations in Arkansas as of December
31, 2001. BOK Financial's facilities are suitable for their respective uses and
present needs.
The information set forth in Notes 6 and 14 of "Notes to Consolidated Financial
Statements" (pages 43 and 50, respectively) of BOK Financial's 2001 Annual
Report to Shareholders provides further discussion related to properties and is
incorporated herein by reference.
ITEM 3 - Legal Proceedings
The information set forth in Note 14 of "Notes to Consolidated Financial
Statements" (page 50) of BOK Financial's 2001 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended December 31,
2001.
PART II
ITEM 5 - Market for Registrant's Common Equity and Related Stockholder Matters
BOK Financial's $.00006 par value common stock is traded over-the-counter and is
reported on the facilities of the National Association of Securities Dealers
Automated Quotation system ("NASDAQ"), with the symbol BOKF. At December 31,
2001, common shareholders of record numbered 1,077 with 51,195,914 shares
outstanding.
BOK Financial's quarterly market information follows:
First Second Third Fourth
--------------- -------------- -------------- ---------------
2001:
Low 21.31 23.12 26.00 28.81
High 24.56 26.90 32.56 32.75
2000:
Low $15.31 $15.63 $16.75 $21.25
High 20.56 17.56 18.75 17.50
BOK Financial has not purchased any stock under its common stock repurchase
program during 2001. Under this program BOK Financial has authority to
repurchase up to 800,000 shares. These purchases have been made from
time-to-time in accordance with SEC Rule 10(b)18 transactions. Since the
original authorization announced in 1998, BOK Financial has repurchased 617,051
shares.
The information set forth under the captions "Table 1 - Consolidated Selected
Financial Data" (page 9), "Table 10 - Selected Quarterly Financial Data" (page
17) and Note 16 of "Notes to Consolidated Financial Statements" (page 50 - 51)
of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6 - Selected Financial Data
The information set forth under the caption "Table 1 - Consolidated Selected
Financial Data" (page 9) of BOK Financial's 2001 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information set forth under the captions "Management's Assessment of
Operations and Financial Condition" (pages 10 - 28), "Annual Financial Summary -
Unaudited" (pages 60 - 61) and "Quarterly Financial Summary Unaudited" (pages 62
- - 63) of BOK Financial's 2001 Annual Report to Shareholders is incorporated
herein by reference.
ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk
The information set forth under the caption "Market Risk" (pages 25 -27) of BOK
Financial's 2001 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 8 - Financial Statements and Supplementary Data
The supplementary data regarding quarterly results of operations set forth under
the caption "Table 10 - Selected Quarterly Financial Data" (page 17) of BOK
Financial's 2001 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10 - Directors and Executive Officers of the Registrant
The information set forth under the captions "Election of Directors" and
"Executive Compensation" in BOK Financial's 2002 Annual Proxy Statement for its
Annual Meeting of Shareholders scheduled for April 30, 2002 ("2002 Annual Proxy
Statement") is incorporated herein by reference.
ITEM 11 - Executive Compensation
The information set forth under the caption "Executive Compensation" in BOK
Financial's 2002 Annual Proxy Statement is incorporated herein by reference.
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in BOK Financial's
2002 Annual Proxy Statement is incorporated herein by reference.
ITEM 13 - Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions" in BOK
Financial's 2002 Annual Proxy Statement is incorporated herein by reference.
The information set forth under Note 5 and Note 10 of "Notes to Consolidated
Financial Statements" (pages 42 - 43 and page 46) of BOK Financial's 2001 Annual
Report to Shareholders is incorporated herein by reference.
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(A)(1) List of Financial Statements filed.
The following financial statements and reports included in BOK Financial's
Annual Report to Shareholders for the Fiscal Year Ended December 31, 2001 are
incorporated by reference in Parts I and II of this Annual Report on Form 10-K.
Description Page Number
Consolidated Selected Financial Data 9
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 28
Report of Independent Auditors 28
Consolidated Statements of Earnings 29
Consolidated Balance Sheets 30
Consolidated Statements of Cash Flows 31
Consolidated Statements of Changes in Shareholders' Equity 32 - 33
Notes to Consolidated Financial Statements 34 - 59
Annual Financial Summary - Unaudited 60 - 61
Quarterly Financial Summary - Unaudited 62 - 63
(A)(2) List of Financial Statement Schedules filed.
The schedules to the consolidated financial statements required by Regulation
S-X are not required under the related instructions or are inapplicable and are
therefore omitted.
(A)(3) List of Exhibits filed.
Exhibit Number Description of Exhibit
3.0 The Articles of Incorporation of BOK Financial, incorporated by
reference to (i) Amended and Restated Certificate of
Incorporation of BOK Financial filed with the Oklahoma Secretary
of State on May 28, 1991, filed as Exhibit 3.0 to S-1
Registration Statement No. 33-90450, and (ii) Amendment attached
as Exhibit A to Information Statement and Prospectus Supplement
filed November 20, 1991.
3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit 3.1
of S-1 Registration Statement No. 33-90450.
4.0 The rights of the holders of the Common Stock and Preferred Stock
of BOK Financial are set forth in its Certificate of
Incorporation.
10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK
Financial, Kaiser, and the FDIC, incorporated by reference to
Exhibit 2.0 of S-1 Registration Statement No. 33-90450.
10.1 Amendment to Purchase and Sale Agreement effective March 29,
1991, among BOK Financial, Kaiser, and the FDIC, incorporated by
reference to Exhibit 2.2 of S-1 Registration Statement No.
33-90450
10.2 Letter agreement dated April 12, 1991, among BOK Financial,
Kaiser, and the FDIC, incorporated by reference to Exhibit 2.3 of
S-1 Registration Statement No. 33-90450.
10.3 Second Amendment to Purchase and Sale Agreement effective April
15, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated
by reference to Exhibit 2.4 of S-1 Registration Statement No.
33-90450.
10.4 Employment agreements.
10.4(a) Employment Agreement between BOK Financial and Stanley A.
Lybarger, incorporated by reference to Exhibit 10.4(a) of Form
10-K for the fiscal year ended December 31, 1991.
10.4(b) Amendment to 1991 Employment Agreement between BOK Financial
and Stanley A. Lybarger, as filed herin for fiscal year ended
December 31, 2001.
10.5 Director indemnification agreement dated June 30, 1987, between
BOk and Kaiser, incorporated by reference to Exhibit 10.5 of S-1
Registration Statement No. 33-90450. Substantially similar
director indemnification agreements were executed between BOk and
the following:
Date of Agreement
James E. Barnes June 30, 1987
William H. Bell June 30, 1987
James S. Boese June 30, 1987
Dennis L. Brand June 30, 1987
Chester E. Cadieux June 30, 1987
William B. Cleary June 30, 1987
Glenn A. Cox June 30, 1987
William E. Durrett June 30, 1987
Leonard J. Eaton, Jr. June 30, 1987
William B. Fader December 5, 1990
Gregory J. Flanagan June 30, 1987
Jerry L. Goodman June 30, 1987
David A. Hentschel July 7, 1987
Philip N. Hughes July 8, 1987
Thomas J. Hughes, III June 30, 1987
William G. Kerr June 30, 1987
Philip C. Lauinger, Jr. June 30, 1987
Stanley A. Lybarger December 5, 1990
Patricia McGee Maino June 30, 1987
Robert L. Parker, Sr. June 30, 1987
James A. Robinson June 30, 1987
William P. Sweich June 30, 1987
10.6 Capitalization and Stock Purchase Agreement dated May 20, 1991,
between BOK Financial and Kaiser, incorporated by reference to
Exhibit 10.6 of S-1 Registration Statement No. 33-90450.
10.7 BOK Financial Corporation 1991 Special Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-44122.
10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-55312.
10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-70102.
10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-79834.
10.7.4 BOK Financial Corporation 1994 Stock Option Plan (Typographical
Error Corrected January 16, 1995), incorporated by reference to
Exhibit 10.7.4 of Form 10-K for the fiscal year ended December
31, 1994.
10.7.5 BOK Financial Corporation 1997 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
333-32649.
10.7.6 BOK Financial Corporation 2000 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
333-93957.
10.7.7 BOK Financial Corporation Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-79836.
10.7.8 Bank of Oklahoma Thrift Plan (Amended and Restated Effective as
of January 1, 1995), incorporated by reference to Exhibit 10.7.6
of Form 10-K for the year ended December 31, 1994.
10.7.9 Trust Agreement for the Bank of Oklahoma Thrift Plan (December
30, 1994), incorporated by reference to Exhibit 10.7.7 of Form
10-K for the year ended December 31, 1994.
10.8 Lease Agreement between One Williams Center Co. and National Bank
of Tulsa (predecessor to BOk) dated June 18, 1974, incorporated
by reference to Exhibit 10.9 of S-1 Registration Statement No.
33-90450.
10.9 Lease Agreement between Security Capital Real Estate Fund and BOk
dated January 1, 1988, incorporated by reference to Exhibit 10.10
of S-1 Registration Statement No. 33-90450.
10.10 Asset Purchase Agreement (OREO and other assets) between BOk and
Phi-Lea-Em Corporation dated April 30, 1991, incorporated by
reference to Exhibit 10.11 of S-1 Registration Statement No.
33-90450.
10.11 Asset Purchase Agreement (Tanker Assets) between BOk and Green
River Exploration Company dated April 30, 1991, incorporated by
reference to Exhibit 10.12 of S-1 Registration Statement No.
33-90450.
10.12 Asset Purchase Agreement (Recovery Rights) between BOk and
Kaiser dated April 30, 1991, incorporated by reference to Exhibit
10.13 of S-1 Registration Statement No. 33-90450.
10.13 Purchase and Assumption Agreement dated August 7, 1992 among
First Gibraltar Bank, FSB, Fourth Financial Corporation and BOk,
as amended, incorporated by reference to Exhibit 10.14 of Form
10-K for the fiscal year ended December 31, 1992.
10.13.1 Allocation Agreement dated August 7, 1992 between BOk and
Fourth Financial Corporation, incorporated by reference to
Exhibit 10.14.1 of Form 10-K for the fiscal year ended December
31, 1992.
10.14 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Two, Brookside Bancshares, Inc., The Shareholders of
Brookside Bancshares, Inc. and Brookside State Bank dated
December 22, 1992, as amended, incorporated by reference to
Exhibit 10.15 of Form 10-K for the fiscal year ended December 31,
1992.
10.14.1 Agreement to Merge between BOk and Brookside State Bank dated
January 27, 1993, incorporated by reference to Exhibit 10.15.1 of
Form 10-K for the fiscal year ended December 31, 1992.
10.15 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Three, Sand Springs Bancshares, Inc., The Shareholders of
Sand Springs Bancshares, Inc. and Sand Springs State Bank dated
December 22, 1992, as amended, incorporated by reference to
Exhibit 10.16 of Form 10-K for the fiscal year ended December 31,
1992.
10.15.1 Agreement to Merge between BOk and Sand Springs State Bank
dated January 27, 1993, incorporated by reference to Exhibit
10.16.1 of Form 10-K for the fiscal year ended December 31, 1992.
10.16 Partnership Agreement between Kaiser-Francis Oil Company and BOK
Financial dated December 1, 1992, incorporated by reference to
Exhibit 10.16 of Form 10-K for the fiscal year ended December 31,
1993.
10.16.1 Amendment to Partnership Agreement between Kaiser-Francis Oil
Company and BOK Financial dated May 17, 1993, incorporated by
reference to Exhibit 10.16.1 of Form 10-K for the fiscal year
ended December 31, 1993.
10.17 Purchase and Assumption Agreement between BOk and FDIC, Receiver
of Heartland Federal Savings and Loan Association dated October
9, 1993, incorporated by reference to Exhibit 10.17 of Form 10-K
for the fiscal year ended December 31, 1993.
10.18 Merger Agreement among BOk, Plaza National Bank and The
Shareholders of Plaza National Bank dated December 20, 1993,
incorporated by reference to Exhibit 10.18 of Form 10-K for the
fiscal year ended December 31, 1993.
10.18.1 Amendment to Merger Agreement among BOk, Plaza National Bank
and The Shareholders of Plaza National Bank dated January 14,
1994, incorporated by reference to Exhibit 10.18.1 of Form 10-K
for the fiscal year ended December 31, 1993.
10.19 Stock Purchase Agreement between Texas Commerce Bank, National
Association and BOk dated March 11, 1994, incorporated by
reference to Exhibit 10.19 of Form 10-K for the fiscal year ended
December 31, 1993.
10.20 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation Number Four, Citizens Holding Company and others
dated May 11, 1994, incorporated by reference to Exhibit 10.20 of
Form 10-K for the fiscal year ended December 31, 1994.
10.21 Stock Purchase and Merger Agreement among Northwest Bank of
Enid, BOk and The Shareholders of Northwest Bank of Enid
effective as of May 16, 1994, incorporated by reference to
Exhibit 10.21 of Form 10-K for the fiscal year ended December 31,
1994.
10.22 Agreement and Plan of Merger among BOK Financial Corporation,
BOKF Merger Corporation Number Five and Park Cities Bancshares,
Inc. dated October 3, 1996, incorporated by reference to Exhibit
C of S-4 Registration Statement No. 333-16337.
10.23 Agreement and Plan of Merger among BOK Financial Corporation and
First TexCorp., Inc. dated December 18, 1996, incorporated by
reference to Exhibit 10.24 of S-4 Registration Statement No.
333-16337.
10.24 Purchase and Assumption Agreement between Bank of America
National Trust and Savings Association and BOK Financial
Corporation dated July 27, 1998.
10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation No. Seven, First Bancshares of Muskogee, Inc., First
National Bank and Trust Company of Muskogee, and Certain
Shareholders of First Bancshares of Muskogee, Inc. dated December
30, 1998.
10.26 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation Number Nine, and Chaparral Bancshares, Inc. dated
February 19, 1999.
10.27 Merger Agreement among BOK Financial Corporation, Park Cities
Bancshares, Inc., Mid-Cities Bancshares, Inc. and Mid-Cities
National Bank dated February 24, 1999.
10.28 Merger Agreement among, BOK Financial Corporation, Park Cities
Bancshares, Inc., PC Interim State Bank, Swiss Avenue State Bank
and Certain Shareholders of Swiss Avenue State Bank dated March
4, 1999.
10.29 Merger Agreement among, BOK Financial Corporation, Park Cities
Bancshares, Inc. and CNBT Bancshares, Inc. dated August 18, 2000.
13.0 Annual Report to Shareholders for the fiscal year ended December
31, 2001. Such report, except for those portions thereof which
are expressly incorporated by reference in this filing, is
furnished for the information of the Commission and is not deemed
to be "filed" as part of this Annual Report on Form 10-K.
21.0 Subsidiaries of BOK Financial.
23.0 Consent of independent auditors - Ernst & Young LLP.
99.0 Additional Exhibits.
99.1 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44121 for Bank of Oklahoma Master Thrift Plan
and Trust, incorporated by reference to Exhibit 99.1 of Form 10-K
for the fiscal year ended December 31, 1993.
99.2 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44122 for BOK Financial Corporation 1991 Special
Stock Option Plan, incorporated by reference to Exhibit 99.2 of
Form 10-K for the fiscal year ended December 31, 1993.
99.3 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-55312 for BOK Financial Corporation 1992 Stock
Option Plan, incorporated by reference to Exhibit 99.3 of Form
10-K for the fiscal year ended December 31, 1993.
99.4 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-70102 for BOK Financial Corporation 1993 Stock
Option Plan, incorporated by reference to Exhibit 99.4 of Form
10-K for the fiscal year ended December 31, 1993.
99.5 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79834 for BOK Financial Corporation 1994 Stock
Option Plan, incorporated by reference to Exhibit 99.5 of Form
10-K for the fiscal year ended December 31, 1994.
99.6 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79836 for BOK Financial Corporation Directors'
Stock Compensation Plan, incorporated by reference to Exhibit
99.6 of Form 10-K for the fiscal year ended December 31, 1994.
99.7 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-32649 for BOK Financial Corporation 1997 Stock
Option Plan, Incorporated by reference to Exhibit 99.7 of Form
10-K for the fiscal year ended December 31, 1997.
99.8 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-93957for BOK Financial Corporation 2000 Stock
Option Plan, Incorporated by reference to Exhibit 99.8 of Form
10-K for the fiscal year ended December 31, 1999.
99.9 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-40280 for BOK Financial Corporation Thrift Plan
for Hourly Employees, Incorporated by reference to Exhibit 99.9
of Form 10-K for the fiscal year ended December 31, 2000.
(B) Reports on Form 8-K None.
(C) Exhibits Required by Item 601 of Regulation S-K The exhibits listed in
response to Item 14(A)(3) are filed as part of this report.
(D) Financial Statement Schedules None.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) 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
/s/ George B. Kaiser
DATE: March 26, 2002 BY:
-------------------------------------
George B. Kaiser,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 26, 2002, by the following persons on behalf of
the Registrant and in the capacities indicated.
OFFICERS
/s/ George B. Kaiser /s/ Stanley A. Lybarger
- --------------------------- -----------------------------
George B. Kaiser, Stanley A. Lybarger,
Chairman of the Board of Directors Director, President and Chief
Executive Officer
/s/ Steven E. Nell /s/ John C. Morrow
- --------------------------- -----------------------------
Steven E. Nell, John C. Morrow
Executive Vice President and Senior Vice President and Director of
Chief Financial Officer Financial Accounting and Reporting
DIRECTORS
/s/ Robert J. LaFortune
- ----------------------------------- ----------------------------------------
C. Fred Ball, Jr. Robert J. LaFortune
/s/ Sharon J. Bell
- ----------------------------------- ----------------------------------------
Sharon J. Bell Philip C. Lauinger, Jr.
/s/ Peter C. Boylan, III
- ----------------------------------- ----------------------------------------
Peter C. Boylan, III John C. Lopez
/s/ Joseph E. Cappy
- ----------------------------------- ----------------------------------------
Joseph E. Cappy Frank A. McPherson
- ----------------------------------- ----------------------------------------
Luke R. Corbett Steven E. Moore
- ----------------------------------- ----------------------------------------
William E. Durrett J. Larry Nichols
/s/ James O. Goodwin
- ----------------------------------- ----------------------------------------
James O. Goodwin Robert L. Parker, Sr.
/s/ V. Burns Hargis /s/ James A. Robinson
- ----------------------------------- ----------------------------------------
V. Burns Hargis James A. Robinson
/s/ Howard E. Janzen /s/ L. Francis Rooney, III
- ----------------------------------- ----------------------------------------
Howard E. Janzen L. Francis Rooney, III
/s/ E. Carey Joullian, IV /s/ Scott F. Zarrow
- ----------------------------------- ----------------------------------------
E. Carey Joullian, IV Scott F. Zarrow
- -----------------------------------
David L. Kyle
BOK Financial Corporation
Exhibit 10.4(b)
Employment Agreement
BOK FINANCIAL CORPORATION
Amendment to 1991 Employment Agreement
This amendment to 1991 Employment Agreement (the "First Amendment") is
made this 31st, day of July 2001 (the "Amendment Date") between the following
parties (the "Parties"):
i. Stanley A. Lybarger, an individual residing in Tulsa, Oklahoma
("Executive"); and,
ii. Bank of Oklahoma, National Association ("Bank").
The Bank and Executive, in exchange for the promises hereafter set
forth and other good and valuable consideration (the receipt and adequacy of
which the Parties hereby acknowledge), and intending to be legally bound hereby,
agree as follows:
1. Purpose of this Agreement. The Parties have heretofore entered in that
certain Employment Agreement effected June 7, 1991 and signed December
17, 1991 (the "Employment Agreement"). The purpose of this First
Amendment is to amend the Employment Agreement as herein provided. BOK
Financial Corporation ("BOKF") owns all of the issued and outstanding
capital stock of Bank.
2. Special Provisions Respecting Executive's Employee Stock Options.
Executive has heretofore been awarded options to acquire BOKF Common
Stock pursuant to the BOKF 1997 Stock Option Plan, the BOKF 1996 Stock
Option Plan, the BOKF 1995 Stock Option Plan, the BOKF 1994 Stock
Option Plan and the BOKF 1993 Stock Option Plan and may be awarded
options to acquire BOKF Common Stock pursuant to future BOKF stock
option plans (collectively, the "Stock Option Plans" and the "Stock
Options").
a. Notwithstanding any provisions of the Stock Option Plans to the
contrary, all Stock Options which have been awarded to Executive
as of Termination shall fully vest, subject to the following
conditions precedent:
i. Unless terminated by BOKF without cause or terminated by
Executive pursuant to Paragraph 6(a) of the Employment
Agreement ("Termination By the Executive Following
Occurrence of a Termination Event"), Executive shall have
satisfactorily (as determined by the agreement of the
Chairman of the Board and Executive) served as Chief
Executive Officer until Executive reaches 57 years of age;
ii. Executive shall have recruited a chief operating officer for
BOKF ( the "COO");
iii. At the time of recruitment, the COO possessed the experience
and qualifications on the basis of which the Chairman of the
Board and Executive mutually agree it is reasonable to
assume the COO should become qualified to be the Chief
Executive Officer of BOKF at Termination;
iv. The Board of Directors of BOKF approve the employment of the
COO;
v. The COO shall have completed a minimum of three years
employment with BOKF as of Termination;
vi. The Chairman of the Board and Executive, each in the
exercise of his good faith judgment, agree that the COO is
qualified to be the Chief Executive Officer of the
Corporation at Termination;
vii. The Board of directors of BOKF shall approve the election of
the COO and Chief Executive Officer of BOKF; and,
viii.The Chairman of the Board and Executive, each in the
exercise of his good faith judgment, agree that BOKF has
maintained satisfactory performance through the term of this
Agreement and is satisfactorily performing at Termination,
in each instance giving due consideration to the performance
of the United States economy in general and peer group
financial institutions in the United States in particular.
ix. In the event the Chairman of the Board and Executive do not,
each in the exercise of his good faith judgment, reach the
agreements described in sub-paragraphs a(i), a(iii) and
a(viii) above, the issue or issues shall be presented to the
full Board of Directors of Bank for determination and the
determination of the Bank Board of Directors shall be
binding upon Bank and Executive.
b. Notwithstanding any provisions of the Stock Option Plans to the
contrary, all Stock Options which have been awarded to Executive
and which have vested as of the Termination (whether pursuant to
the provisions of the preceding subparagraph or otherwise) shall
terminate, if not sooner exercised, six months following
Termination.
3. Executive's Continued Involved with BOKF Beyond Termination and Prior
to Age 65. In the event of Termination prior to reaching age 65,
Executive will be permitted to continue to be involved in the business
and affairs of BOKF as a part-time special employee, consultant,
director with special duties, or in some other capacity to the extent
reasonably required to permit Executive to continue to participate in
BOKF's employee health care benefits until age 65, but only for so long
as Executive continues to owe a duty of loyalty to BOKF. The costs of
such participation shall be allocated between Bank and Executive
equitably depending upon the level of Executive's continued involvement
with BOKF.
4. Agreement Not To Compete. In consideration for the foregoing, Executive
agrees not to Compete (as hereafter defined) for a period of two years
following Termination except in the case of Termination by the Bank
without cause. Executive agrees that (i) the restrictions imposed upon
Executive by this Non-Competition Agreement are essential and necessary
to ensure BOKF continues to enjoy the goodwill of the Bank, and (iii)
all the restrictions (including particularly the time and geographical
limitations) are fair and reasonable.
a. As used herein, Compete means to directly or indirectly (whether
individually or as an officer, director, employee, partner,
stockholder, creditor, agent, or representative of other persons
or entities) (i) engage in the banking business generally, or in
any business in which the Bank or any of the Bank's affiliates
has as of the date of such termination engaged, in any
metropolitan area or any County contiguous thereto in which the
Bank or any of the Bank's affiliates maintains an office as of
the date of such termination, (ii) solicit clients of Bank or
Bank's affiliates for banking business generally or for any
business in which the Bank or any of Bank's affiliates have
engaged as of the date of such termination, or accept business
therefrom, or (iii) solicit any employee of Bank or any of Bank's
affiliates to seek employment with any person or entity except
the Bank and its affiliates, whether, in either case, such
solicitation is made within or without the area described herein.
b. Executive agrees that any remedy at law for any breach of this
promise would be inadequate and, in the event of any such breach,
BOKF shall be entitled to both immediate and permanent injunctive
relief without the necessity of posting any bond therefor to
preclude any such breach (in addition to any remedies of law
which BOKF may be entitled).
5. Ratification of Employment Agreement. As amended by this First Amendment,
the Employment Agreement shall remain in full force and effect in
accordance with its terms.
6. Miscellaneous Provisions The Miscellaneous Provisions of Paragraph 8 of the
Employment Agreement shall apply to this First Amendment.
Dated as of the Agreement Date.
Bank of Oklahoma, National Association
By /s/ George B. Kaiser
--------------------------------------
Stanley A. Lybarger
/s/ Stanley A. Lybarger
---------------------------------------
BOK FINANCIAL CORPORATION
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Table of Contents
Consolidated Selected Financial Data 9
Management's Assessment of Operations and
Financial Condition 10
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 28
Report of Independent Auditors 28
Consolidated Financial Statements 29
Notes to Consolidated Financial Statements 34
Annual Financial Summary - Unaudited 60
Quarterly Financial Summary - Unaudited 62
Appendix A - Graph Data 69
2001 Annual Report
BOK FINANCIAL
CORPORATION
1 Management Letter
10 Management's Assessment of Operations and Financial Condition
28 Report of Management on Financial Statements
28 Report of Independent Auditors
29 Consolidated Financial Statements
64 Shareholder and Corporate Information
BOK Financial Corporation
Net Income and Acquisition Timeline Graph Data
Net Income*
03/31/91 2,609 1991 - BOK Financial Corporation, purchases Bank of Oklahoma; George B. Kaiser becomes chairman.
06/30/91 2,824 1991 - Company acquires eight Oklahoma City locations of Continental Federal Savings & Loan Association.
09/30/91 4,748
12/31/91 2,661
03/31/92 5,223 1992 - BOk purchases 19 offices of Sooner Federal Savings & Loan Association
06/30/92 6,257
09/30/92 6,830
12/31/92 7,333
03/31/93 9,613 1993 - Company acquires Brookside State Bank and Sand Springs State Bank.
06/30/93 8,404
09/30/93 8,807
12/31/93 8,950
03/31/94 10,658 1994 - BOK expands outside of its home state with the acquisition of Citizens Holding Co., operating in
06/30/94 11,279 Muskogee, OK and Feyetteville, AR.
09/30/94 11,390
12/31/94 11,738
03/31/95 11,967
06/30/95 12,082
09/30/95 12,493
12/31/95 12,663
03/31/96 12,995 1996 - Company announces agreements to purchase two Dallas banks, FNB Park Cities and First
06/30/96 13,591 Texas Bank, totaling $390 million in assets.
09/30/96 12,975
12/31/96 14,566
03/31/97 15,347 1997 - BOK Financial's assets top $5 billion and trust assets top $10 billion.
06/30/97 16,064
09/30/97 16,376
12/31/97 16,818
03/31/98 16,313 1998 - Company purchases Bank of America branches in New Mexico, leading to the
06/30/98 20,438 creation of Bank of Albuquerque.
09/30/98 18,750
12/31/98 19,215
03/31/99 21,237 1999 - Dallas presence is expanded with the acquisition of three metroplex banks, adding $417 million in
06/30/99 22,056 assets and $354 million of deposits.
09/30/99 22,736
12/31/99 23,197
03/31/00 24,813 2000 - BOK Financial's earnings exceed $100 million for the first time.
06/30/00 24,194
09/30/00 25,637
12/31/00 25,496
03/31/01 27,402 2001 - BOK Financial enters Houston market with the purchase of CNBT Bancshares, with $442
06/30/01 28,981 million in assets and seven branch locations.
09/30/01 29,787
12/31/01 30,132
* Net income as reported and not restated for any subsequent years
pooling-of-interests or changes in accounting.
TO BE THE BEST AT EVERYTHING WE DO
Financial Highlights
(Dollars In Thousands Except Per Share Data)
2001 2000 1999
------------------------------------
For the Years Ended December 31
Net income $ 116,302 $ 100,140 $ 89,226
Earnings per share:
Basic 2.25 1.95 1.73
Diluted 2.01 1.75 1.55
Book value per share $ 16.18 $ 13.88 $ 11.02
Return on average assets 1.14% 1.15% 1.17%
Return on average shareholders' equity 14.93 16.46 16.45
--------------------------------------------------------------------------------------------
Tangible operating results1:
Tangible net income $ 124,566 $ 105,487 $ 94,926
Tangible net income per diluted share 2.15 1.84 1.65
Tangible return on average assets 1.22% 1.21% 1.25%
Tangible return on average shareholders' equity 15.99 17.34 17.50
--------------------------------------------------------------------------------------------
As of December 31
Loans, net of reserves $ 6,193,473 $ 5,435,207 $ 4,567,255
Assets 11,130,388 9,748,334 8,373,997
Deposits 6,905,744 6,046,005 5,263,184
Shareholders' equity 828,483 703,576 557,164
Nonperforming assets2 50,708 43,599 22,943
--------------------------------------------------------------------------------------------
Tier 1 capital ratio 8.08% 8.06% 7.27%
Total capital ratio 11.56 11.23 10.72
Leverage ratio 6.38 6.51 5.92
Average shareholders' equity to average assets 7.62 7.00 7.12
Reserve for loan losses to nonperforming loans2 233.90 207.95 391.65
Reserve for loan losses to loans3 1.66 1.51 1.66
Net charge offs to average loans3 .35 .22 .04
--------------------------------------------------------------------------------------------
1 Operating results excluding the after-tax effect of certain
goodwill amortization that will be discontinued after 2001
(see Note 1 to Consolidated Financial Statements).
2 Includes nonaccrual loans, renegotiated loans and assets
acquired in satisfaction of loans. Excludes loans past due
90 days or more and still accruing.
3 Excludes residential mortgage loans held for sale.
To Our Shareholders, Customers, Employees, and Friends:
For BOK Financial Corporation, 2001 capped a decade of record earnings
growth. Work begun 10 years ago to build on Bank of Oklahoma's traditional local
strengths has since created a regional financial company doing business in six
states. BOK Financial offers an array of products and services for consumers and
businesses and has provided consistent asset and income growth for shareholders.
With this annual report, we celebrate past successes, present efforts and future
plans without forgetting our most valuable asset - employees who enabled the
company to emerge as a leader.
In 2001, growth was sustained by record net income of $116.3 million,
an increase of 16 percent over 2000. Earnings per diluted share* increased 15
percent, to $2.01. Income growth was driven by a 22 percent rise in net interest
revenue. Fees and commissions grew 18 percent in 2001, and accounted for 40
percent of total revenue, still near the top of our peer group, though down from
prior periods. Transaction card revenue was up 15 percent, driven primarily by
merchant fees and debit card transactions that continue to become more popular
with consumers. Mortgage banking revenue benefited in 2001 from declining
interest rates and rose 35 percent. We diversified our brokerage and trading
offerings and increased business 36 percent. Loans rose 14 percent to $6.3
billion at the end of the year, despite a slow-down in the second half. Deposits
grew 14 percent as well, keeping pace with the growth in loans.
In addition to strengthening our leadership position in Oklahoma during
2001, we saw even faster growth outside the state. Our operations elsewhere
accounted for 32 percent of the company's loans and 31 percent of deposits at
year end. The growth in lending was led by a 35 percent increase in the Texas
portfolio. Texas loans expanded by 17 percent, excluding the acquisition of CNBT
Bancshares of Houston. In New Mexico, loans rose 14 percent.
Our growth from serving the needs of longstanding customers, attracting
new business from rivals and making strategic acquisitions boosted total assets
above $11 billion last year. That was more than five times the assets at the end
of 1991 and more than double our size just five years ago.
In addition to an ongoing expansion in Texas and New Mexico, we opened
a commercial loan office in Denver in January 2002. Throughout the company,
newer technologies were implemented to enable us to better serve customers and
maintain operating efficiencies.
Despite the challenges of a slowing economy last year, we were pleased
with our performance and look forward to more success in the future. This annual
report commemorates the 10th year for BOK Financial and outlines the progress
we've made. As always, we will look to our strong local banking roots to
maintain our customer service strengths as we pursue new opportunities to expand
our products and presence and create new value for customers, employees and
shareholders.
Sincerely,
Stanley A. Lybarger George B. Kaiser
President and Chief Executive Officer Chairman
* All per share figures are restated to reflect the 3 percent stock dividend
paid in May 2001. Net income would have been $124.6 million, or $2.15 per
diluted share, if a new accounting standard had been effective that permits some
amortization of goodwill to be discontinued. The new standard becomes effective
as of January 1, 2002.
NATIONALLY COMPETITIVE PRODUCTS DELIVERED WITH COMMUNITY BANK SERVICE
A DECADE OF CHANGE AND CHALLENGE
Preserving our heritage. Maintaining our leadership. Expanding our
reach. That's the essence of our steadfast mission of the past decade and our
vision for the future. For 10 years, BOK Financial Corporation has consistently
built quality assets and achieved record earnings by delivering an array of
sophisticated big bank offerings with community bank service. We have kept our
edge by enhancing longstanding relationships, attracting new business from
rivals and targeting acquisitions in growing markets where we fill key niches
under-served during a wave of mega-bank mergers. Through growth and change, BOK
Financial's goal remains the same -- satisfy customers who have helped make us a
regional leader while we remain sensitive to the needs of shareholders and
employees.
Much has changed since BOK Financial was formed in 1991 and acquired
Bank of Oklahoma. Large banks acquired smaller ones in a wave of mergers. Bigger
banks themselves were then bought up, leaving behind a swell of dissatisfied
customers. Four of the five largest locally owned banks in Oklahoma disappeared.
The only stand-alone survivor, Bank of Oklahoma, emerged as the largest
full-service, home-owned bank in the state by maintaining local authority over
service issues important to our customers. We have since carried this approach
forward to banks in Arkansas, New Mexico and Texas, where local decision-making
and responsiveness set us apart from the competition.
SERVICE STRATEGY
From our strong local ties, we have grown into a thriving,
middle-market bank with more than 100 locations in six states. We balance our
regional size and specific focus by recruiting strong local management and staff
in each market we serve. Then, we centralize our support functions in order to
maximize efficiencies and streamline work processes. The result is a mix of
products and services giving the customer the best of both worlds.
Asset Graph - See Appendix A
Loan Graph - See Appendix A
We enjoyed tremendous success in 2001 across our network, from our
community banks in Oklahoma to our urban banks in large cities throughout the
Southwest. Each of our franchises has unique characteristics. Some are retail
oriented, and others specialize in commercial lending while various offices
focus exclusively on mortgage or private banking. Across the board, however, our
commitment to quality remains constant through the efforts of our exceptional
employees.
SUCCESS ACROSS THE REGION
In our home state of Oklahoma, we are the leader in practically every
market segment. Now at 12 percent, market share for Bank of Oklahoma continues
to grow while that of our largest competitors declines. Last year, loans and
deposits grew 9 percent and 7 percent, respectively, in the state. Oklahoma
operations were responsible for $84.7 million of BOK Financial's net income, up
8 percent.
Our three-year-old Bank of Albuquerque franchise is thriving. Acquired
as a branch network focused largely on retail banking, today the bank is No. 4
in the market with a full array of products and services. Last year we expanded
our branch network from 16 to 18, adding our first two Albertsons supermarket
branches and moving a branch to an upgraded location. We added key managers and
completed the staffing of our private banking and trust groups and now have
personal, corporate and employee benefit trust services.
Loans in New Mexico grew 14 percent in 2001 and have almost tripled
since we opened our doors in December 1998. Deposits last year grew 14 percent
and fee-based revenue 15 percent. BOK Financial's net income attributable to New
Mexico doubled to $8.2 million.
Deposits Graph - See Appendix A
The company's Bank of Texas franchise continues to expand in the
economically vibrant markets of Dallas and Houston, where native Texans with
local roots manage our banks. Internal growth and acquisitions have boosted
Texas assets to $2.1 billion, or 19 percent of BOK Financial's total. The
company's overall net income from Texas rose to $21 million, up 30 percent.
The acquisition of CNBT Bancshares of Houston highlighted our growth
last year in the Lone Star State. Like Dallas, we entered the Houston market by
acquiring a solid local mid-sized bank and arrived with a plan to compete on a
broader scale. We have a great platform in Houston and a pool of top-notch local
talent. We combined CNBT's expertise in consumer and small business banking with
the strength of Bank of Texas' middle-market and private banking services. The
Houston operation now has stronger fee-based services than most local
competitors and a greater expertise and capacity in commercial lending. In
Texas, loans and deposits grew 35 percent and 48 percent, respectively, over
2000 (or 17 percent and 11 percent excluding the impact of the CNBT
acquisition). Fee revenue grew 40 percent in Texas, or 16 percent when excluding
CNBT.
Our efforts in northwest Arkansas remain focused on commercial lending
and related fee services at Bank of Arkansas. Loans grew almost 17 percent in
2001. Deposits grew 8 percent. BOK Financial's Arkansas operations accounted for
$2.5 million of company net income, a 67 percent increase.
TRADITIONAL BANKING SERVICES - COMMERCIAL & CONSUMER
Although we value strong ties to our past, we aren't afraid to break
with tradition when a change enables us to better serve customers and expand our
market share. Among our most successful endeavors during 2001 was the
introduction of free checking. It led to significant growth in new accounts,
checking balances and related fees.
We have 107 branches in four states. For the last decade, much of our
focus has been on expanding our extended-hours services through supermarket
branches, Internet banking, and 24-hour telephone banking. Now, we are focusing
more on expanding our branch system.
In the Dallas-Fort Worth Metroplex, we opened a new location in
Grapevine and acquired land for a new location due to open this fall in Plano.
Plans are also underway for construction of a new branch in the Houston suburb
of Katy. A new branch has opened in Edmond, Okla., to better serve the needs of
one of Oklahoma's fastest growing communities.
Last year we introduced a long-term sales and service initiative called
"Perfect Banking." The vision is based on one overriding reality - that banking
is still about people, and that quality service is a critical reason that people
choose to do their banking with us. With a strong commitment to professional
training, consumer bankers now profile clients to determine current and future
financial needs with the goal of creating an exceptional experience with each
and every contact.
We believe favorable interaction with a service representative is
paramount, and we are dedicated to constantly improving each client's
experience.
Commercial banking has been a major part of our organization since its
inception. In fact, when the original bank first formed in 1910, its main
purpose was to provide funding to Oklahoma's then-new oil and gas business.
Today we still meet the needs of the region's growing companies. Overall, loan
growth in 2001 was realized in every segment, with loan volumes up 14 percent.
Fee Based Revenue Graph - See Appendix A
Our Treasury Services group is closely aligned with commercial banking
and continued to prosper in 2001, reflected in a 19 percent growth in revenue.
We assist our customers with currency exchange, letters of credit and a full
complement of sophisticated cash management products. Last year we completed the
implementation of our new image-based retail remittance service. BOK Financial
ranks 40th among all U.S. banks in ACH payments with a growth rate of 38
percent.
FEE BASED REVENUE
While our traditional consumer and commercial banking services continue
expanding, our fee-based lines of business remain one of our greatest success
stories of the past 10 years.
Fee-based revenue grew by 18 percent in 2001 and comprises 40 percent
of total revenue. This compares with an average of 31 percent in our peer group.
We emphasize fee-based revenue because the underlying businesses are less
capital-intensive and provide stability through economic cycles. Our fee revenue
is very diverse and continued growth remains a top priority.
Our trust assets grew last year to over $18 billion, continued evidence of
this historical strength of BOK Financial. Assets under management reached $9.7
billion. The trust division manages a family of proprietary mutual funds,
including one named the best in the nation. Lipper Inc. recognized the American
Performance Short-Term Income Fund as the No. 1 performing short-term bond fund
over the past five years. The fund returned 7.04 percent annually for the period
ending December 31, 2001, compared with an industry average of 5.93 percent.
We also manage employee benefit plans for 110,000 participants. We
offer a specialized self-directed 401(k) product that we have successfully
marketed coast to coast to law firms, medical clinics and closely-held
companies.
A few years ago, BOK Financial acquired the leading public finance firm
in Oklahoma, Leo Oppenheim. Last year we also entered the corporate finance
sector of the investment banking business, giving us the opportunity to leverage
the bank's current market presence in the corporate sector through the Oppenheim
division of BOSC Inc., our broker/dealer. This new diversification, in addition
to favorable reception to our product mix in newer markets, helped boost our
brokerage and trading revenue 36 percent, to $21.8 million.
Our mortgage banking operation is among the most successful in the
country. We offer mortgage services in all our banking markets plus the greater
Kansas City area. Benefiting from declining interest rates, mortgage banking
revenue grew 35 percent in 2001. Originations totaled $1.1 billion and generated
revenue of $17.8 million. This compares to $590 million and $4.8 million,
respectively, in 2000.
Among the most successful of our fee-based businesses during the last
decade was TransFund, our electronic funds transfer network. TransFund is the
13th largest network nationally and has experienced a compound annual growth
rate in transactions exceeding 16 percent, to 95.3 million last year. The system
had no non-Oklahoma clients in 1991. Today one third of the 324 financial
institutions served are located outside of Oklahoma, with recent growth
principally in Texas, Colorado and Kansas. The number of cardholders increased
from 378,000 a decade ago to 1.47 million at the end of 2001.
IMPROVEMENTS IN TECHNOLOGY AND EFFICIENCY
With our ongoing commitment to efficiency and service, 2001 marked
another important milestone in the history of BOK Financial - the completed
occupancy of the new BOK Technology Center in Tulsa. With 184,000 square-feet in
one state-of-the-art facility, we have simplified our workflow process and have
given ourselves room to grow efficiently. In previous years, the processes were
handled in five separate buildings.
Net Income Graph - See Appendix A
Two new technologies have vastly improved our service quality. We
completed installing a new imaging technology for the retail remittance business
with 100 percent of existing customers opting for the service. We also converted
all signature cards to images, enabling instant company-wide access for
signature verification.
Last year we implemented a new fraud and kite detection system expected
to minimize fraud losses. Our customers now have quicker access to even more
up-to-date account information because of a new check-processing center we
opened in Dallas.
Through all the progress, we will remain focused on preserving our
community bank heritage and close-knit relationships with all our customers. We
will continually update and expand our offerings to maintain our leadership in
the financial services arena. We will expand our reach through greater market
share in existing lines of business and through new ventures that help us
achieve our consistent goal of being the best for customers-- for the next 10
years and beyond.
MAINTAIN OKLAHOMA LEADERSHIP WHILE PURSUING OPPORTUNITIES IN HIGH-GROWTH
METROPOLITAN MARKETS
Table 1 Consolidated Selected Financial Data
(Dollars In Thousands Except Per Share Data)
December 31,
---------------------------------------------------------------------
2001 2000 1999 19982 19972
---------------------------------------------------------------------
Selected Financial Data
For the year:
Interest revenue $ 654,633 $ 638,730 $ 500,274 $ 402,832 $ 357,074
Interest expense 327,859 369,843 264,150 212,406 194,842
Net interest revenue 326,774 268,887 236,124 190,426 162,232
Provision for loan losses 37,610 17,204 10,365 14,591 9,256
Net income 116,302 100,140 89,226 79,611 68,155
Period-end:
Loans, net of reserve 6,193,473 5,435,207 4,567,255 3,581,177 2,801,977
Assets 11,130,388 9,748,334 8,373,997 7,059,507 5,613,233
Deposits 6,905,744 6,046,005 5,263,184 4,607,727 3,924,405
Subordinated debentures 186,302 148,816 148,642 146,921 148,356
Shareholders' equity 828,483 703,576 557,164 524,793 451,880
Nonperforming assets3 50,708 43,599 22,943 18,762 25,249
Profitability Statistics
Earnings per share (based on average equivalent shares):
Basic $ 2.25 $ 1.95 $ 1.73 $ 1.55 $ 1.32
Diluted 2.01 1.75 1.55 1.38 1.19
Percentages (based on daily averages):
Return on average assets 1.14% 1.15% 1.17% 1.34% 1.29%
Return on average shareholders' equity 14.93 16.46 16.45 16.38 16.78
Average shareholders' equity to average assets 7.62 7.00 7.12 8.17 7.71
Common Stock Performance
Per Share:
Book Value $ 16.18 $ 13.88 $ 11.02 $ 10.57 $ 9.08
Market price: December 31 close 31.51 21.25 20.19 23.38 19.40
Market range - High trade 32.75 21.25 25.94 25.63 22.00
- Low trade 21.31 15.31 18.94 19.50 13.88
Selected Balance Sheet Statistics
Period-end:
Tier 1 capital ratio 8.08% 8.06% 7.27% 7.93% 9.87%
Total capital ratio 11.56 11.23 10.72 12.02 14.95
Leverage ratio 6.38 6.51 5.92 6.60 7.06
Reserve for loan losses to nonperforming loans3 233.90 207.95 391.65 467.70 270.65
Reserve for loan losses to loans1 1.66 1.51 1.66 1.86 1.95
Miscellaneous (at December 31)
Number of employees (FTE) 3,392 3,003 3,101 2,850 2,404
Number of banking locations 114 105 100 91 76
Number of TransFund locations 1,325 1,111 1,020 998 785
Mortgage loan servicing portfolio $ 6,645,868 $ 6,874,995 $ 7,028,247 $ 6,375,239 $ 6,981,744
- -------------------------------------------------------------------------------------------------------------------------------
1 Excludes residential mortgage loans held for sale.
2 Restated for pooling of interest in 1999.
3 Includes nonaccrual loans, renegotiated loans and assets acquired in
satisfaction of loans. Excludes loans past due 90 days or more and still
accruing.
Management's Assessment of Operations and Financial Condition
BOK Financial Corporation ("BOK Financial") is a financial holding company
that offers full service banking in Oklahoma, Northwest Arkansas, Dallas and
Houston, Texas metropolitan areas and New Mexico. BOK Financial's principal
subsidiaries are Bank of Oklahoma, N.A., ("BOk"), Bank of Texas, N.A., Bank of
Albuquerque, N.A., and Bank of Arkansas, N.A. Other subsidiaries include BOSC,
Inc., a broker/dealer that engages in retail and institutional securities sales
and municipal underwriting.
Assessment of Operations
Summary of Performance
BOK Financial recorded net income of $116.3 million or $2.01 per diluted
share for 2001 compared to $100.1 million or $1.75 per diluted share for 2000.
Prior years' earnings per share have been restated to reflect a 3% stock
dividend in 2001. Returns on average assets and average equity were 1.14% and
14.93%, respectively, for 2001 compared to 1.15% and 16.46%, respectively, for
2000. Net income in 2000 included a $3.0 million reduction in income tax expense
due to favorable resolution of an Internal Revenue Service examination. Diluted
earnings per share were $1.69, return on equity was 16.05%, and return on
average assets was 1.12% excluding this resolution.
Net interest revenue grew $57.9 million or 22% during 2001 due primarily to
an increase in average earning assets of $1.4 billion. Fees and commissions
revenue grew $35.7 million or 18%, which included increases in all major
categories of fee income compared to 2000. Gain on sales of securities included
gains on sales of securities used as an economic hedge of the mortgage-servicing
portfolio. The net impact of these sales and the provision for impairment of the
mortgage-servicing portfolio was a gain of $2.8 million. Excluding the
securities gains on this hedge, net gains on sales of securities were $17.9
million. Operating expenses increased $32.5 million or 11% excluding $20.7
million from Citizens National Bank of Texas ("CNBT"), which was acquired in
January 2001 and $15.6 million provision for impairment of mortgage servicing
rights. The provision for loan loss increased $20.4 million to $37.6 million.
Net income for the fourth quarter of 2001 was $30.1 million or $0.52 per
diluted common share, an increase of 18% over the same period of 2000. These
increases included an increase of $17.8 million or 26% in net interest revenue
and a $10.6 million or 20% increase in fees and commissions. These increases
were partially offset by a $17.2 million or 23% increase in other operating
expense, excluding provisions for impairment of mortgage servicing rights. This
increase was due primarily to amortization of mortgage servicing rights.
Net income for 1999 was $89.2 million or $1.55 per diluted common share.
Returns on average assets and equity were 1.17% and 16.45%, respectively.
Net Interest Revenue
Tax equivalent net interest revenue totaled $334.8 million for 2001 compared
to $276.7 million for 2000. The increase in net interest revenue was primarily
due to an increase in average earning assets. Average earning assets increased
by $1.4 billion during 2001, most notably average loan growth of $1.1 billion.
This growth in loans improved the mix of earning assets since loans generally
have higher yields than other types of earning assets. Average loans now
comprise 65% of average earning assets compared to 63% in 2000. The growth in
average earning assets was funded by a $1.2 billion increase in interest-bearing
liabilities, including an $845 million increase in interest-bearing deposits.
Table 2 reflects the effect on net interest revenue of changes in average
balances and interest rates for the various types of earning assets and
interest-bearing liabilities.
Net interest margin, the ratio of net interest revenue to average earning
assets, increased from 3.56% in 2000 to 3.64% in 2001. This increase reflects
the effect of changes in interest rates on BOK Financial's earning assets and
interest-bearing liabilities. BOK Financial's interest-bearing liabilities react
more quickly to changes in interest rates than its earning assets, causing the
net interest margin to increase during periods of declining interest rates.
Management expects the favorable effect of declining interest rates to moderate
as yields on earning assets decline and as overall market rates stabilize.
Table 2 Volume/Rate Analysis
(In Thousands)
2001/2000 2000/1999
------------------------------------- ------------------------------------
Change Due To(1) Change Due To(1)
------------------------ ------------------------
Change Volume Yield/Rate Change Volume Yield/Rate
------------ ----------- ------------ ----------- ------------ -----------
Tax-equivalent interest revenue:
Securities $17,329 $ 26,009 $ (8,680) $ 20,384 $11,444 $ 8,940
Trading securities (250) 226 (476) (841) (1,683) 842
Loans 1,149 88,815 (87,666) 117,643 77,933 39,710
Funds sold and resell agreements (2,133) (1,516) (617) 743 164 579
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Total 16,095 113,534 (97,439) 137,929 87,858 50,071
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Interest expense:
Transaction deposits (5,126) 9,642 (14,768) 8,509 4,847 3,662
Savings deposits (422) 50 (472) (268) (174) (94)
Time deposits 5,686 26,304 (20,618) 49,387 28,452 20,935
Borrowed funds (42,608) 15,392 (58,000) 46,962 22,154 24,808
Subordinated debenture 486 2,059 (1,573) 1,103 15 1,088
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Total (41,984) 53,447 (95,431) 105,693 55,294 50,399
- ---------------------------------------- ------------ -- -----------
----------- ------------ ------------ -----------
Tax-equivalent net interest revenue 58,079 $ 60,087 $ (2,008) 32,236 $32,564 $ (328)
----------- ------------ ------------ -----------
(Increase) decrease in tax-equivalent
adjustment (192) 527
- ---------------------------------------- ------------ -- -----------
Net interest revenue $57,887 $ 32,763
- ---------------------------------------- ------------ -- -----------
4th Qtr 2001/4th Qtr 2000
-----------------------------------
Change Due To(1)
-----------------------
Change Volume Yield/Rate
----------- ----------- -----------
Tax-equivalent interest revenue:
Securities $ 1,534 $ 7,337 $ (5,803)
Trading securities (160) 67 (227)
Loans (26,211) 18,863 (45,074)
Funds sold and resell agreements (703) (360) (343)
- ------------------------------------------ ----------- ----------- -----------
Total (25,540) 25,907 (51,447)
- ------------------------------------------ ----------- ----------- -----------
Interest expense:
Transaction deposits (5,713) 3,202 (8,915)
Savings deposits (184) 55 (239)
Time deposits (12,493) 2,315 (14,808)
Borrowed funds (24,807) 3,494 (28,301)
Subordinated debenture 97 619 (522)
- ------------------------------------------ ----------- ----------- -----------
Total (43,100) 9,685 (52,785)
- ------------------------------------------ -----------
----------- -----------
Tax-equivalent net interest revenue 17,560 $16,222 $ 1,338
----------- -----------
Decrease in tax-equivalent adjustment 267
- ------------------------------------------ -----------
Net interest revenue $17,827
- ------------------------------------------ -----------
(1) Changes attributable to both volume and yield/rate are allocated to both
volume and yield/rate on an equal basis.
Since inception in 1990, BOK Financial has followed a strategy of fully
utilizing its capital resources by borrowing funds in the capital markets to
supplement deposit growth and to invest in securities. The primary objective of
this strategy is to reduce total interest rate risk. The interest rate on these
borrowed funds, which generally reacts quickly to changes in market interest
rates, tends to match the effect of changes in interest rates on the loan
portfolio. Interest rates earned on the securities purchased with the proceeds
of these borrowed funds are affected less quickly by changes in market interest
rates. The timing of changes in interest rates earned on securities more closely
matches the timing of changes in interest rates paid on deposit accounts.
Although this strategy frequently results in a net interest margin that falls
below those normally seen in the commercial banking industry, it provides net
interest revenue as well as a reduction in interest rate risk. Management
estimates that this strategy resulted in a 31 basis point decrease in net
interest margin for 2001. However, this strategy contributed $38.8 million to
net interest revenue. Net interest margin, excluding this strategy, was 3.95%
for 2001. As more fully discussed in the subsequent Market Risk Section,
management employs various techniques to control, within established parameters,
the interest rate and liquidity risk inherent in this strategy. The
effectiveness of these strategies are reflected in the overall changes in net
interest revenue due to changes in interest rates as shown in Table 2.
Tax-equivalent net interest revenue for the fourth quarter of 2001 was
$88.8 million compared to $71.3 million for the fourth quarter of 2000. This
increase was due to the growth in average earning assets, which increased $1.4
billion or 17%. Net interest margin increased 22 basis points to 3.69% due to
the effect of declining rates over the past year as discussed above.
Tax-equivalent net interest revenue totaled $276.7 million for 2000
compared to $244.5 million in 1999. The increase in net interest revenue during
2000 was primarily due to an increase in average earning assets. Average earning
assets increased by $1.0 billion during 2000. Additionally, the mix of earning
assets improved during 2000. Average loans, which generally have higher yields
than other types of earning assets, increased to 63% of earning assets in 2000
compared to 60% in 1999. These volume factors contributed $87.9 million to the
increase in net interest revenue.
The financial service environment in BOK Financial's primary markets is
highly competitive due to a large number of commercial banks, thrifts, credit
unions and brokerage firms. Additionally, many customers have access to national
and regional financial institutions for many products and services. Management
expects that BOK Financial will continue to be able to successfully compete with
these financial institutions by delivering the loan and deposit products and
other financial services traditionally associated with a large bank with the
responsiveness of a smaller, community bank.
Other Operating Revenue
Other operating revenue increased $60.4 million or 30% compared to 2000,
including a $24.5 million increase from gains on financial instruments. Fees and
commissions continue to represent a significant portion of BOK Financial's total
revenue at 40% during 2001. Included in 2001 were fees and commissions of $2.8
million from the CNBT acquisition, including service charges on deposit accounts
of $2.3 million. All major categories of fees and commissions increased over the
same period in 2000. Most notably, mortgage banking revenue increased $13.0
million or 35% due to improved conditions for sales of loans into the secondary
market. Service charges and fees on deposit accounts grew $8.4 million or 19%
over 2000 due to growth in nonsufficient fund charges and growth of treasury
services revenue. When interest rates fall, more corporate customers pay for
banking services through treasury services fees instead of maintaining
compensating deposit balances. Brokerage and trading grew 36% to $21.8 million
during 2001. This growth was driven by diversification into corporate bonds,
favorable reception to the product mix in our newer markets and continued
expansion in revenue from traditional brokerage products. Growth in transaction
card revenue of $5.7 million or 15% was due to growth in merchant fees, which
are directly related to the level of consumer spending and growth in debit card
fees that continue to become more popular with consumers. Trust fees grew 3%
despite declining stock market values on which many fees are based.
Securities and derivatives net gains totaled $26.6 million for 2001. These
gains included $17.9 million from the general securities portfolio, gains of
$12.8 million on a securities portfolio that management has designated as an
economic hedge against the risk of loss on mortgage servicing rights, and losses
of $4.1 million from fair value adjustments of derivative instruments.
Additional discussion about the mortgage servicing rights and related hedge
portfolio and BOK Financial's use of derivative instruments is located in the
Market Risk section of this report.
Table 3 Other Operating Revenue
(In Thousands)
Years ended December 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
------------- ----------- ----------- ----------- -----------
Brokerage and trading revenue $ 21,822 $ 16,074 $ 16,233 $ 15,301 $ 9,556
Transaction card revenue 44,481 38,753 32,648 24,426 19,339
Trust fees and commissions 40,567 39,316 35,127 29,956 24,072
Service charges and fees on deposit accounts 51,284 42,932 41,067 33,920 30,181
Mortgage banking revenue 50,155 37,179 36,986 41,733 32,235
Leasing revenue 3,745 4,244 3,725 7,111 5,861
Other revenue 20,087 17,965 17,589 11,688 10,330
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Total fees and commissions 232,141 196,463 183,375 164,135 131,574
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Gain on sale of student loans 557 529 600 1,548 1,311
Gain on loan securitization - - 270 - -
Gain (loss) on sales of other assets - (148) 4,626 - -
Gain (loss) on sales of securities, net 30,640 2,059 (419) 9,337 (1,329)
Loss on derivatives, net (4,062) - - - -
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Total other operating revenue $259,276 $198,903 $188,452 $175,020 $131,556
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Other operating revenue for the fourth quarter of 2001 totaled $55.3
million compared to $54.9 million for the fourth quarter of 2000. Included in
the fourth quarter 2001 were $676 thousand of fees and commissions from the CNBT
acquisition, including service charges on deposit accounts of $594 thousand. The
fourth quarter of 2001 included securities losses of $3.8 million compared to
gains of $3.3 million in the fourth quarter of 2000. Net securities losses from
the portion of the available for sale portfolio, which serves as an economic
hedge of mortgage servicing rights, totaled $11.1 million. Net securities gains
on the remaining available for sale portfolio totaled $7.3 million. Changes in
the components of other revenue during the fourth quarter were consistent with
the year to date changes. Service charges and fees on deposit accounts increased
$2.8 million. Mortgage banking revenue increased $4.8 million.
Other operating revenue in 2000 increased $10.5 million or 6% compared to
1999. Fees and commissions, which are included in other operating revenue,
increased $13.1 million or 7% while gains on asset sales decreased $2.6 million.
Revenue generated by card-based transactions, such as the TransFund ATM network,
bankcards and related merchant discounts, increased by 19% to $38.8 million.
These increases are generally due to a higher volume of transactions processed
in 2000. Other revenue included $4.5 million of private placement and
underwriting fees.
Management expects continued growth in other operating revenue. However,
increased competition, market saturation and the level of economic activity
could affect the future rate of increase. Additionally, BOK Financial's ability
to generate fee revenue is affected by interest rates, values in the equity
market and consumer spending, all of which can be volatile.
Lines of Business
BOK Financial operates four principal lines of business under its Bank of
Oklahoma franchise: corporate banking, consumer banking, mortgage banking and
trust services. BOK Financial also operates a fifth principal line of business,
regional banks, which includes banking functions for Bank of Albuquerque, Bank
of Arkansas and Bank of Texas. These five principal lines of business combined
account for approximately 87% of total revenue. Other lines of business include:
TransFund ATM network which contributed $7.8 million in 2001, $7.1 million in
2000 and $5.3 million in 1999 to net income; and BOSC, Inc. which contributed
$1.4 million in 2001, $406 thousand in 2000 and $534 thousand in 1999 to net
income.
Corporate Banking
The Corporate Banking Division provides loan and lease financing and
treasury and cash management services to businesses throughout Oklahoma and
seven surrounding states. In addition to serving the banking needs of small
businesses, middle market and larger customers, the Corporate Banking Division
has specialized groups that serve customers in the energy, agriculture,
healthcare and banking/finance industries. The Corporate Banking Division
contributed 39% of consolidated net income for 2001 compared to 43% of
consolidated net income for 2000. The reduction in the percent of consolidated
earnings contributed by the Corporate Banking Division reflects the growth in
the Regional Banks Division, most notably Bank of Texas. Total revenue for this
division increased 11% primarily due to a 13% increase in outstanding loans.
This increase in revenue was partially offset by increases in internal funding
rates charged to the Corporate Banking Division. Operating expense for this
division increased 7%. The provision for loan loss represents net loans charged
off or recovered for the Corporate Banking Division.
Table 4 Corporate Banking
(In Thousands)
Years ended December 31,
----------------------------------------
2001 2000 1999
----------------------------------------
Revenue (interest
expense) from
external sources $ 229,277 $ 264,623 $ 207,926
Revenue (interest
expense)from
internal sources (86,615) (136,367) (92,844)
Operating expense 57,322 53,451 47,025
Provision for
loan loss 10,493 3,658 (1,111)
Net income 45,580 43,471 42,262
Average assets $3,854,310 $3,370,044 $2,933,619
Average equity 442,870 392,711 330,091
Return on assets 1.18% 1.29% 1.44%
Return on equity 10.29 11.07 12.80
Efficiency ratio 40.18 41.68 40.86
Consumer Banking
The Consumer Banking Division provides its customers throughout Oklahoma
with a full line of deposit, loan and fee-based services through four major
distribution channels: traditional branches, supermarket branches, the 24-hour
ExpressBank call center and the Internet. Additionally, the division is a
significant referral source for the Bank of Oklahoma Mortgage Division ("BOk
Mortgage") and BOSC's retail brokerage division. The Consumer Banking Division
contributed 14% of consolidated net income for 2001 and 17% of consolidated net
income for 2000. Net expense from external sources decreased $16.1 million due
primarily to lower rates paid on deposits. This decrease was partially offset by
lower revenue from internal sources due to rates charged to other operating
units. Operating expenses increased $4.2 million or 8% during 2001, including a
$2.0 million increase in personnel costs.
Table 5 Consumer Banking
(In Thousands)
Years ended December 31,
-------------------------------------------
2001 2000 1999
------------- ------------ --------------
Revenue (interest
expense)from
external sources $ (4,054) $ (20,154) $ (1,065)
Revenue (interest
expense)from
internal sources 94,393 107,172 80,973
Operating expense 59,099 54,906 53,545
Net income 16,539 17,379 14,602
Average assets $2,192,698 $2,140,383 $2,100,368
Average equity 69,102 60,813 58,824
Return on assets .75% .81% .70%
Return on equity 23.93 28.58 24.82
Efficiency ratio 65.42 63.10 67.01
Mortgage Banking
BOK Financial engages in mortgage banking activities through the BOk
Mortgage Division of Bank of Oklahoma. These activities include the origination,
marketing and servicing of conventional and government-sponsored mortgage loans.
BOk Mortgage contributed 7% of net income in 2001 compared to 3% in 2000.
Mortgage banking revenue, which is included in other operating revenue,
totaled $50.2 million in 2001, an increase of $13.0 million compared to 2000.
Declining interest rates throughout 2001 were favorable for mortgage lending.
Mortgage loans originated totaled $1.1 billion during 2001, including $562
million for home purchases and $566 million of loans refinanced. Mortgage loans
originated during 2000 totaled $590 million. The increase in volume of new loans
combined with improved pricing resulted in an increase in revenue from loan
production to $17.8 million in 2001 compared to $4.8 million in 2000. Revenue
from loan production included $22.7 million in 2001 and $11.3 million in 2000
from capitalized originated mortgage loan servicing rights. Income before taxes
from loan origination and marketing activities was $12.1 million in 2001
compared to a loss of $3.1 million in 2000. Approximately 71% of the mortgage
loans originated during 2001 were in Oklahoma.
The declining interest rate environment had an unfavorable effect on BOk
Mortgage's loan servicing portfolio, as both actual and anticipated prepayments
increased significantly. Total servicing revenue was $32.3 million for 2001
compared to $32.9 million for 2000. Amortization of servicing rights, which is
included in operating expense, increased by $8.3 million to $23.5 million due to
the higher level of prepayments. Additionally, an impairment provision of $15.6
million was recognized in 2001 for actual run-off and anticipated prepayments.
Net gains from the sales of securities that have been designated as an economic
hedge of the loan servicing portfolio totaled $12.8 million in 2001 and $5.3
million in 2000. These factors combined to reduce pretax income on loan
servicing activities to $378 thousand during 2001 compared to pretax income of
$7.8 million for 2000. See the Market Risk section of this report for additional
discussion of the prepayment risk of the mortgage servicing portfolio and
related hedging strategies.
BOk Mortgage services approximately $6.6 billion of mortgage loans.
Approximately 60% of these loans are in BOK Financial's primary market area and
21% are in the southeastern United Sates. Information regarding stratification
of the servicing portfolio by primary risk characteristics is presented in Note
8 to the Consolidated Financial Statements.
Table 6 Mortgage Banking
(In Thousands)
Years ended December 31,
-------------------------------------
2001 2000 1999
-------------------------------------
Revenue (interest
expense)from
external sources $ 62,664 $ 44,907 $ 39,675
Capitalized mortgage
servicing rights 22,695 11,267 11,483
Revenue (interest
expense)from
internal sources (20,867) (15,006) (8,296)
Operating expense 47,750 37,762 39,422
Provision for
impairment of
mortgage servicing
rights 15,551 2,900 -
Gain on sales of
securities, net 12,757 5,257 -
Net income 8,493 3,486 2,051
Average assets $ 651,103 $ 412,219 $ 355,887
Average equity 50,891 32,053 32,006
Return on assets 1.30% .85% .58%
Return on equity 16.69 10.88 6.41
Efficiency ratio 74.04 91.73 91.97
Trust Services
BOK Financial provides a wide range of trust services, including
institutional, investment and retirement products and services to affluent
individuals and businesses, not-for-profit organizations and governmental
agencies. Trust services are primarily provided to clients in Oklahoma, Texas,
Arkansas and New Mexico. Additionally, trust services include a nationally
competitive, self-directed 401-k program with clients in Dallas, Chicago, New
York and Los Angeles. At December 31, 2001 and 2000, trust assets with an
aggregate market value of $18 billion were subject to various fiduciary
arrangements. BOK Financial has sole or joint discretionary authority over $10
billion of trust assets at December 31, 2001 compared to $9 billion at the end
of 2000. Trust services contributed 8% to consolidated net income for 2001
compared to 10% for 2000. Growth in trust fees was limited by the declining
stock market values during 2001 on which many fees are based. Total revenue from
trust services increased $2.2 million or 4% during 2001, while operating
expenses increased $2.6 million or 7% due primarily to $921 thousand in
personnel costs.
Table 7 Trust Services
(In Thousands)
Years ended December 31,
--------------------------------------
2001 2000 1999
------------- ----------- ------------
Revenue (interest
expense)from
external sources $ 41,064 $ 43,433 $ 39,809
Revenue (interest
expense)from
internal sources 13,589 8,995 7,243
Operating expense 38,534 35,916 33,481
Net income 9,771 10,087 8,249
Average assets $ 475,715 $ 355,150 $ 332,297
Average equity 41,290 37,895 33,473
Return on assets 2.05% 2.84% 2.48%
Return on equity 23.66 26.62 24.64
Efficiency ratio 70.51 68.51 71.16
Regional Banks
Regional banks include Bank of Texas, Bank of Arkansas and Bank of
Albuquerque. Each of these banks provides a full range of corporate and consumer
banking, treasury services and retail investments in its respective market.
Small businesses and middle-market corporations are the regional banks' primary
customer focus.
Regional banks contributed $31.7 million or 27% to consolidated net income
in 2001 compared to $21.7 million or 22% in 2000. Total revenue for 2001
increased $40.5 million compared to 2000, while operating expenses increased
$23.0 million. The increase in operating expenses included a $5.0 million
increase in intangible amortization expense.
BOK Financial's operations in Texas, New Mexico and Arkansas contributed
$21.0 million, $8.2 million, and $2.5 million, respectively, to consolidated net
income for 2001. This compared to net income of $16.1 million, $4.1 million, and
$1.5 million for 2000.
Table 8 Regional Banks
(In Thousands)
Years ended December 31,
-----------------------------------------
2001 2000 1999
-------------------------------------------
Revenue (interest
expense)from
external sources $ 158,510 $ 119,036 $ 83,512
Revenue (interest
expense)from
internal sources (11,690) (12,709) (10,458)
Operating expense 91,253 68,224 60,662
Gains (losses) on
sales of securities 484 (356) (53)
Net income 31,651 21,705 7,856
Tangible net income 46,848 31,916 14,807
Average assets $3,352,155 $2,467,530 $1,860,667
Average equity 409,622 282,223 214,226
Tangible return on
assets 1.40% 1.29% .80%
Tangible return on
equity 11.44 11.31 6.91
Efficiency ratio 62.15 64.16 83.04
Average equity assigned to the regional banks included both an amount based
on management's assessment of risk and an additional amount based upon BOK
Financial's investment in these entities. Management excludes the amortization
of all intangible assets when evaluating the performance of the regional banks
on a tangible return basis.
Other Operating Expense
Other operating expense totaled $368.8 million for 2001 compared to $302.8
million in 2000. Excluding a $15.6 million provision for impairment of mortgage
servicing rights in 2001 compared to $2.9 million in 2000 and $20.7 million of
operating expenses from the CNBT acquisition in 2001, other operating expense
increased $32.5 million or 11%. The following discussion excludes CNBT operating
expenses (most notably personnel of $6.3 million, net occupancy and equipment of
$1.7 million and amortization of intangible assets of $7.4 million) to improve
comparability.
Personnel costs increased $11.4 million or 8%. Regular compensation
(including overtime and temporary assistance) and benefits increased $9.3
million or 7%. Average staffing on a full time equivalent ("FTE") basis
increased by 141 employees or 5% while average compensation expense per FTE
increased by 3%. Incentive compensation increased by $2.0 million or 10%
compared to 2000 due to growth in revenue over pre-determined targets.
Professional fees for 2001 increased $3.4 million or 36%, which included
$1.5 million in consulting fees for public finance business at BOSC, Inc. and
$320 thousand for the Perfect Banking sales and service program. Net occupancy
and equipment expense for 2001 increased $5.6 million or 16% due primarily to a
$3.2 million increase in depreciation expense. This increase reflects additional
investments in facilities and technology improvements over the past two years.
Data processing and communications increased $4.4 million or 13% primarily in
transaction card servicing and external processing due to increased volumes.
Mortgage banking costs increased $8.0 million or 36% due primarily to
amortization of mortgage servicing rights, which is caused by an increase in
loan prepayments. A provision for impairment of mortgage servicing rights of
$15.6 million was taken during 2001 due primarily to the interest rate and
prepayment environment.
Table 9 Other Operating Expense
(In Thousands)
Years ended December 31,
------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Personnel expense $163,835 $146,215 $136,010 $109,437 $ 90,625
Business promotion 10,658 8,395 9,077 8,220 8,886
Contribution of stock to BOk Charitable Foundation - - - 2,257 3,638
Professional fees and services 13,391 9,618 9,584 9,781 6,906
Net occupancy and equipment 42,764 35,447 30,789 21,811 18,720
Data processing and communications 40,013 34,962 32,038 23,764 19,444
FDIC and other insurance 1,717 1,569 1,356 1,368 1,380
Printing, postage and supplies 12,329 11,260 11,599 9,524 8,067
Net gains and operating expenses on repossessed assets 1,401 (1,283) (3,473) (474) (3,831)
Amortization of intangible assets 20,113 15,478 15,823 9,515 8,968
Mortgage banking costs 30,261 22,274 23,932 25,949 19,968
Provision for impairment of mortgage servicing rights 15,551 2,900 - (2,290) 4,100
Other expense 16,729 15,980 13,781 15,133 12,983
- --------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total $368,762 $302,815 $280,516 $233,995 $199,854
- --------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Other operating expenses for the fourth quarter of 2001 totaled $84.8
million compared to $79.3 million for the fourth quarter of 2000. The fourth
quarter of 2001 included an $8.9 million reversal of previous provisions
compared to a $2.9 million provision for impairment of mortgage servicing rights
during 2000. Excluding the effects of this impairment charge, operating expenses
for the fourth quarter of 2001 increased by 23% from 2000 due to reasons
consistent with those discussed above.
Other operating expense totaled $302.8 million for 2000 compared to $280.5
million in 1999, an increase of 8%. Personnel, net occupancy and equipment and
data processing and communications comprised most of the increase.
In 2000, personnel costs increased $10.2 million or 8% compared to 1999.
Regular compensation (including overtime and temporary assistance) and benefits
increased $6.1 million or 6%. Average staffing on a full time equivalent ("FTE")
basis increased by 77 employees or 3% while average compensation expense per FTE
increased by 5%. Incentive compensation increased by $3.4 million or 20%
compared to 1999 due to growth in revenue over pre-determined targets and growth
in the number of business units covered by incentive plans.
Net occupancy and equipment expense for 2000 increased $4.7 million or 15%
compared to 1999. Equipment expense increased by $3.1 million due primarily to
depreciation of computer equipment purchased in 1998 and 1999. Data processing
and communications increased $2.9 million or 9% due primarily to a $1.6 million
increase in processing charges.
Income Taxes
Income tax expense was $63.6 million, $47.6 million and $44.5 million for
2001, 2000 and 1999, respectively, representing 35%, 32% and 33%, respectively,
of book taxable income. Tax expense currently payable totaled $74.2 million in
2001 compared to $38.4 million in 2000 and $43.8 million in 1999.
The Internal Revenue Service is currently examining the carryback of $30.8
million of capital loss generated in 1999. Such loss was applied against capital
gains generated in 1997 and 1998 resulting in a $9.8 million refund. Management
expects no material adverse impact on the financial statements as a result of
this examination.
The Internal Revenue Service closed its examination of 1996 during 2000. As
a result of the outcome of this examination, BOK Financial reduced its tax
accrual by $3.0 million. Income tax expense for 2000 was 34% of pre-tax book
income excluding the reversal of this accrual. During 1999 the Internal Revenue
Service examination for 1995 was closed with no significant adjustments.
Table 10 Selected Quarterly Financial Data
(In Thousands Except Per Share Data)
Fourth Third Second First
------------ ------------ ------------ ------------
2001
---------------------------------------------------
Interest revenue $148,222 $161,863 $168,270 $176,278
Interest expense 61,203 77,337 88,653 100,666
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Net interest revenue 87,019 84,526 79,617 75,612
Provision for loan losses 10,517 11,023 8,497 7,573
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Net interest revenue after provision for loan losses 76,502 73,503 71,120 68,039
Other operating revenue 62,330 57,450 58,496 54,422
Gain (loss) on sales of securities, net (3,770) 19,746 2,030 12,634
Gain (loss) on derivatives, net (3,300) (1,105) (303) 646
Other operating expense 84,801 103,591 86,584 93,786
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Income before taxes 46,961 46,003 44,759 41,955
Income tax expense 16,829 16,216 15,778 14,789
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Net income before cumulative effect of a change in
accounting principle, net of tax 30,132 29,787 28,981 27,166
Transition adjustment of adoption of FAS 133 - - - 236
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Net income $ 30,132 $ 29,787 $ 28,981 $ 27,402
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Earnings per share:
Basic $ .58 $ .58 $ .56 $ .53
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Diluted $ .52 $ .51 $ .50 $ .48
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Average shares:
Basic 51,138 51,015 50,906 50,828
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
Diluted 58,201 58,095 57,837 57,626
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
2000
----------------------------------------------------
Interest revenue $173,495 $163,577 $156,314 $145,344
Interest expense 104,303 95,430 88,444 81,666
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Net interest revenue 69,192 68,147 67,870 63,678
Provision for loan losses 6,000 5,031 3,534 2,639
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Net interest revenue after provision for loan losses 63,192 63,116 64,336 61,039
Other operating revenue 51,628 50,378 48,030 46,808
Gain (loss) on sales of securities, net 3,296 (538) (682) (17)
Other operating expense 79,318 73,964 74,917 74,616
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Income before taxes 38,798 38,992 36,767 33,214
Income tax expense 13,302 13,355 12,573 8,401
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Net income $ 25,496 $ 25,637 $ 24,194 $ 24,813
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Earnings per share:
Basic $ .50 $ .50 $ .47 $ .48
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Diluted $ .44 $ .45 $ .42 $ .43
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Average shares:
Basic 50,705 50,625 50,718 50,712
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Diluted 57,371 57,292 57,370 57,380
- ------------------------------------------------------------ ------------ ------------ ------------ -------------
Assessment of Financial Condition
Securities Portfolio
Securities are identified as either investment or available for sale based
upon asset/liability management strategies, liquidity and profitability
objectives and regulatory requirements. Investment securities, which consist
primarily of Oklahoma municipal bonds and other short-term instruments, are
carried at cost, adjusted for amortization of premiums or accretion of
discounts. Available for sale securities, which may be sold prior to maturity
based upon asset/liability management decisions, are carried at fair value.
Unrealized gains or losses on available for sale securities, less deferred
taxes, are recorded as accumulated other comprehensive income in stockholders'
equity.
During 2001, the amortized cost of available for sale securities increased
by $682 million. Mortgage-backed securities increased by $779 million to $3.3
billion. Approximately $619 million of the increase in mortgage-backed
securities reflected BOK Financial's strategy of fully utilizing available
capital resources by borrowing funds in the capital markets as previously
discussed in the Net Interest Revenue section of this report. Additionally,
mortgage-backed securities designated as an economic hedge of the mortgage
servicing rights increased $159 million to $362 million. At December 31, 2001,
available for sale securities with an amortized cost of $1.3 billion were
pledged as collateral for repurchase agreement borrowings.
BOK Financial realized net gains from securities sales of $30.6 million in
2001 and $2.1 million in 2000. These amounts included net gains from securities
designated as hedges of the mortgage servicing portfolio of $12.8 million in
2001 and $5.3 million in 2000. The increase in net realized gains reflected the
active management of the securities portfolio as interest rates declined in
2001. Net unrealized gains in the securities portfolio increased from $5.4
million at December 31, 2000 to $9.6 million at December 31, 2001. The expected
duration of the mortgage-backed securities portfolio extended to approximately
3.0 years during 2001. Management currently intends to reduce the expected
duration of the mortgage-backed securities portfolio to approximately 2.8 years.
Additional information about the securities portfolio is presented in Note 3 to
the Consolidated Financial Statements.
Table 11 Securities
(In Thousands)
December 31,
-----------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- -------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------ ------------ ------------ ------------ ------------ ------------
Investment:
U.S. Treasury $ 7,982 $ 7,981 $ - $ - $ 196 $ 198
Municipal and other tax-exempt 222,195 223,487 207,177 207,641 186,177 184,748
Mortgage-backed U.S. agency securities 7,381 7,620 11,541 11,567 18,051 17,926
Other debt securities 3,555 3,540 14,653 14,659 8,756 8,752
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total $ 241,113 $ 242,628 $ 233,371 $ 233,867 $ 213,180 $ 211,624
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Available for sale:
U.S. Treasury $ 34,538 $ 35,197 $ 85,656 $ 85,564 $ 112,902 $ 111,860
Municipal and other tax-exempt 4,262 4,299 14,492 14,552 13,086 13,094
Mortgage-backed securities:
U.S. agencies 2,637,636 2,638,425 2,050,100 2,046,318 2,174,916 2,106,094
Other 669,057 673,737 478,065 486,170 202,229 200,558
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total mortgage-backed securities 3,306,693 3,312,162 2,528,165 2,532,488 2,377,145 2,306,652
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Other debt securities 536 538 242 245 353 353
Equity securities and mutual funds 93,918 97,353 129,823 130,971 156,476 156,745
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total $3,439,947 $3,449,549 $2,758,378 $2,763,820 $2,659,962 $2,588,704
- ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Loans
The aggregate loan portfolio at December 31, 2001 totaled $6.3 billion, an
increase of $778 million since December 31, 2000. Growth in the loan portfolio
included $184 million from the CNBT acquisition and $117 million of residential
mortgage loans held for sale. Excluding these items, total loans increased 9%
during 2001. Commercial loans increased $427 million during the year. This
increase was primarily in the energy, services and wholesale/retail sectors of
the loan portfolio. Additionally, the consumer loan portfolio increased $97
million since December 31, 2000.
Table 12 Loans
(In Thousands)
December 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Commercial:
Energy $ 987,556 $ 837,223 $ 606,561 $ 468,700 $ 333,988
Manufacturing 467,260 421,046 344,175 245,268 205,836
Wholesale/retail 600,470 499,017 407,785 279,265 264,029
Agriculture 170,861 185,407 173,653 160,241 155,868
Services 1,084,480 963,171 807,184 635,585 482,476
Other commercial and industrial 364,123 342,169 325,343 200,214 107,260
Commercial real estate:
Construction and land development 327,455 311,700 249,160 174,059 104,322
Multifamily 291,687 271,459 257,187 181,525 103,218
Other real estate loans 722,633 687,335 588,195 404,985 284,220
Residential mortgage:
Secured by 1-4 family residential properties 703,080 638,044 531,058 500,690 435,753
Residential mortgages held for sale 166,093 48,901 57,057 100,269 79,779
Consumer 409,680 312,390 296,131 296,298 299,272
- ---------------------------------------------------- ------------ ------------ ------------ ------------ ------------
Total $6,295,378 $5,517,862 $4,643,489 $3,647,099 $2,856,021
- ---------------------------------------------------- ------------ ------------ ------------ ------------ ------------
Outstanding loans to energy customers totaled $988 million or 16% of total
loans at December 31, 2001. This represents an increase of 18% over last year.
Small- and medium-size customers in the Houston, Texas; Denver, Colorado and
West Texas markets were the primary source of this loan growth. Approximately
$768 million of the energy loan portfolio was to oil and gas producers. The
amount of credit available to these customers generally depends on the value of
their proven energy reserves based on current prices. The energy category also
included loans to borrowers involved in the transportation and sale of oil and
gas and loans to borrowers that manufacture equipment and provide other services
to the energy industry. Outstanding loans to the services industry totaled $1.1
billion, an increase of 13%. Services included loans that totaled $162 million
to nursing homes, $115 million to the healthcare industry and $69 million to the
hotel industry. Loans to the wholesale/retail industry increased 20% to $600
million. Approximately $40 million of this increase resulted from increased
efforts in New Mexico. Agriculture included $150 million of loans to the cattle
industry. Other notable loan concentrations by the primary industry of the
borrowers are presented in Table 12.
BOK Financial participates in shared national credits when appropriate to
obtain or maintain business relationships with local customers. At December 31,
2001, the outstanding principal balance of these loans totaled $659 million,
including $637 million to borrowers with local market relationships. BOK
Financial is the agent lender in approximately 25% of these loans.
Commercial real estate loans totaled $1.3 billion or 21% of the loan
portfolio at December 31, 2001. This represented a 6% increase from the previous
year-end. Construction and land development loans included $265 million for
single-family residential lots and premises. The major components of other
commercial real estate loans were office buildings - $256 million and retail
facilities - $220 million.
Residential mortgage loans included $296 million of home equity loans, $253
million of mortgage loans held for business relationship purposes, and $154
million of adjustable rate mortgage loans. Consumer loans included $177 million
of indirect automobile loans at December 31, 2001, an increase of $62 million
since the previous year-end. Substantially all of these loans were purchased
from dealers in Oklahoma. Approximately 26% of the indirect automobile loan
portfolio were considered sub-prime.
Table 13 Loan Maturity and Interest Rate Sensitivity at December 31, 2001
(In Thousands)
Remaining Maturities of Selected Loans
--------------------------------------
Total Within 1 Year 1-5 Years After 5 Years
-------------- ------------ ------------ ------------
Loan maturity:
Commercial $3,674,750 $1,371,647 $1,775,114 $527,989
Commercial real estate 1,341,775 553,363 622,007 166,405
- --------------------------------------------- -------------- ------------ ------------ ------------
Total $5,016,525 $1,925,010 $2,397,121 $694,394
- --------------------------------------------- -------------- ------------ ------------ ------------
Interest rate sensitivity for selected
loans with:
Predetermined interest rates $1,174,615 $ 190,371 $ 687,061 $297,183
Floating or adjustable interest rates 3,841,910 1,734,639 1,710,060 397,211
- --------------------------------------------- -------------- ------------ ------------ ------------
Total $5,016,525 $1,925,010 $2,397,121 $694,394
- --------------------------------------------- -------------- ------------ ------------ ------------
While BOK Financial continued to increase geographic diversification through
expansion into Texas and New Mexico, geographic concentration subjects the loan
portfolio to the general economic conditions in Oklahoma. Table 14 reflects the
distribution of the major loan categories among BOK Financial's principal market
areas.
Table 14 Loans by Principal Market Area
(In Thousands)
December 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Oklahoma:
Commercial $2,606,977 $2,480,825 $2,172,268 $1,785,961 $1,399,900
Commercial real estate 739,419 768,232 704,999 538,529 363,329
Residential mortgage 642,116 458,395 376,806 427,004 459,646
Consumer 314,060 250,298 236,565 266,453 272,197
------------ ------------ ------------ ------------ ------------
Total Oklahoma $4,302,572 $3,957,750 $3,490,638 $3,017,947 $2,495,072
------------ ------------ ------------ ------------ ------------
Texas:
Commercial $ 775,788 $ 549,505 $ 383,460 $ 154,593 $ 120,672
Commercial real estate 380,602 299,357 227,748 105,208 69,950
Residential mortgage 136,181 122,082 102,888 58,185 50,639
Consumer 85,347 53,397 50,923 23,431 23,666
------------ ------------ ------------ ------------ ------------
Total Texas $1,377,918` $1,024,341 $ 765,019 $ 341,417 $ 264,927
------------ ------------ ------------ ------------ ------------
Albuquerque:
Commercial $ 219,257 $ 167,023 $ 63,370 $ 13,480 $ 450
Commercial real estate 136,425 118,492 87,759 45,331 10,138
Residential mortgage 85,309 101,920 103,684 109,741 -
Consumer 8,200 6,107 5,410 3,038 -
------------ ------------ ------------ ------------ ------------
Total Albuquerque $ 449,191 $ 393,542 $ 260,223 $ 171,590 $ 10,588
------------ ------------ ------------ ------------ ------------
Northwest Arkansas:
Commercial $ 72,728 $ 50,680 $ 45,603 $ 35,239 $ 28,435
Commercial real estate 85,329 84,413 74,036 71,501 48,343
Residential mortgage 5,567 4,548 4,737 6,029 5,247
Consumer 2,073 2,588 3,233 3,376 3,409
------------ ------------ ------------ ------------ ------------
Total Northwest Arkansas $ 165,697 $ 142,229 $ 127,609 $ 116,145 $ 85,434
------------ ------------ ------------ ------------ ------------
Other Derivatives with Credit Risk
During 2001 BOK Financial developed a program that permits its
energy-producing customers to hedge against price fluctuations through energy
option and swap contracts. These contracts are executed between BOk and its
customers. Offsetting contracts are executed between BOk and selected energy
dealers to minimize the risk of changes in energy prices. The dealer contracts
are identical to the customer contracts, except for a fixed pricing spread paid
to BOk as compensation for administrative costs, credit risk and profit.
This program creates credit risk for potential amounts due to BOk from the
customers and dealers. Customer credit risk is monitored through existing
lending policies and procedures. The value of energy production is evaluated
across a range of prices to determine a maximum exposure BOk is willing to have
individually to any customer or collectively to all energy producers. Dealer
credit risk is monitored through existing policies and procedures used to
evaluate counterparty risk. This evaluation considers all relationships between
BOK Financial and each counterparty. Individual limits are established by
management and approved by the Risk Oversight Committee of the Board of
Directors. Margin collateral is required if the exposure to a counterparty
exceeds established limits. BOK Financial had no energy contracts with Enron
Corp.
BOK Financial carries the energy contracts at fair value in other assets
and other liabilities. Changes in fair value are recorded in income. Closing
prices on the New York Mercantile Exchange are used to determine fair value. At
December 31, 2001, other assets included $28 million and other liabilities
included $29 million of energy contracts. The primary counterparties on asset
contracts were Bank of Montreal, $10.6 million; Goldman Sachs, $5.7 million;
Morgan Stanley, $5.6 million and J. P. Morgan Chase, $5.4 million. A
deterioration in the credit standing of one or more of the counterparties 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.
Summary of Loan Loss Experience
The reserve for loan losses, which is available to absorb losses
inherent in the loan portfolio, totaled $102 million at December 31, 2001
compared to $83 million at December 31, 2000. This represented 1.66% and 1.51%
of total loans, excluding loans held for sale, at December 31, 2001 and 2000,
respectively. Losses on loans held for sale, principally mortgage loans
accumulated for placement in security pools, are charged to earnings through
adjustments in the carrying value. The increase in loan charge-offs reflected
the general trend toward a slower economy in 2001. Commercial loan charge-offs
included $5.9 million from two shared national credits to manufacturers with
ties to the local economy. Table 15 presents statistical information regarding
the reserve for loan losses for the past five years.
Table 15 Summary of Loan Loss Experience
(Dollars In Thousands)
Years ended December 31,
-------------------------------------------------------------------
2001 2000 1999 1998 1997
-------------------------------------------------------------------
Beginning balance $ 82,655 $76,234 $65,922 $54,044 $45,907
Loans charged off:
Commercial 18,042 7,747 2,136 3,219 3,350
Commercial real estate 71 1,176 35 175 698
Residential mortgage 308 285 617 202 440
Consumer 6,827 5,593 4,560 4,000 4,791
- ------------------------------------------------------------------------------------------------------------------------
Total 25,248 14,801 7,348 7,596 9,279
- ------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial 1,151 1,126 3,110 1,487 2,543
Commercial real estate 653 428 487 1,398 957
Residential mortgage 57 157 17 162 557
Consumer 2,727 2,307 2,156 1,836 1,578
- ------------------------------------------------------------------------------------------------------------------------
Total 4,588 4,018 5,770 4,883 5,635
- ------------------------------------------------------------------------------------------------------------------------
Net loans charged off 20,660 10,783 1,578 2,713 3,644
Provision for loan losses 37,610 17,204 10,365 14,591 9,256
Additions due to acquisitions 2,300 - 1,525 - 2,525
- ------------------------------------------------------------------------------------------------------------------------
Ending balance $101,905 $82,655 $76,234 $65,922 $54,044
- ------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses to loans outstanding at 1.66% 1.51% 1.66% 1.86% 1.95%
year-end1
Net charge-offs to average loans1 .35 .22 .04 .09 .14
Provision for loan losses to average loans1 .63 .35 .26 .48 .35
Recoveries to gross charge-offs 18.17 27.15 78.52 64.28 60.73
Reserve as a multiple of net charge-offs 4.93x 7.67x 48.31x 24.30x 14.83x
- ------------------------------------------------------------------------------------------------------------------------
Problem Loans
- ------------------------------------------------------------------------------------------------------------------------
Loans past due (90 days) $ 8,108 $15,467 $11,336 $ 9,553 $10,710
Nonaccrual2 43,540 39,661 19,465 14,095 19,761
Renegotiated 27 87 - - 207
- ------------------------------------------------------------------------------------------------------------------------
Total $ 51,675 $55,215 $30,801 $23,648 $30,678
- ------------------------------------------------------------------------------------------------------------------------
Foregone interest on nonaccrual loans2 $ 5,163 $ 3,803 $ 2,321 $ 2,271 $ 2,981
- ------------------------------------------------------------------------------------------------------------------------
1 Excludes residential mortgage loans held for sale.
2 Interest collected and recognized on nonaccrual loans was $3.3 million in 1998 and was not significant in 2001 and previous years
disclosed.
The reserve for loan losses is assessed by management based upon an ongoing
evaluation of the probable estimated losses inherent in the portfolio, including
probable losses on both outstanding loans and unused commitments to provide
financing. A consistent well-documented methodology has been developed that
includes reserves assigned to specific criticized loans, general reserves that
are based on a statistical migration analysis and nonspecific reserves that are
based on analysis of current economic conditions, loan concentrations, portfolio
growth and other relevant factors. An independent Credit Administration
department is responsible for performing this evaluation for all of BOK
Financial's subsidiaries to ensure that the methodology is applied consistently.
Table 16 Loan Loss Reserve Allocation
(Dollars in Thousands)
December 31,
-------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
------------------ ------------------- ------------------- ------------------- ------------------
% of % of % of % of % of
Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1
--------- -------- --------- --------- --------- --------- --------- --------- --------- --------
Loan category:
Commercial2 $ 61,164 59.95% $55,187 59.39% $47,261 58.10% $37,570 56.09% $35,009 55.81%
Commercial real
estate 15,923 21.89 12,393 23.23 11,216 23.86 7,949 21.44 3,236 17.71
Residential mortgage 3,774 11.47 2,019 11.67 2,137 11.58 1,807 14.12 1,783 15.70
Consumer 6,890 6.69 6,407 5.71 6,721 6.46 6,689 8.35 5,763 10.78
Nonspecific allowance 14,154 - 6,649 - 8,899 - 11,907 - 8,253 -
- -------------------------- --------- -------- --------- --------- --------- --------- --------- --------- --------- --------
Total $101,905 100.00% $82,655 100.00% $76,234 100.00% $65,922 100.00% $54,044 100.00%
- -------------------------- --------- -------- --------- --------- --------- --------- --------- --------- --------- --------
1 Excludes residential mortgage loans held for sale.
2 Specific allocation for Year 2000 risks were $2.0 million in 1999, $3.6
million in 1998 and $4.8 million in 1997. 3 Specific allocation for the loan
concentration risks are included in the appropriate category: Energy,
Agriculture and Hotel/Motel.
All significant criticized loans are reviewed quarterly. Specific reserves
for impairment are determined through evaluation of estimated future cash flow
and collateral value in accordance with generally accepted accounting principles
and regulatory standards. At December 31, 2001 specific impairment reserves
totaled $2.5 million on total impaired loans of $40 million.
The general reserve for loan losses is determined primarily through an
internally developed migration analysis model. The purpose of this model is to
determine the probability that each loan in the portfolio has an inherent loss
based on historic trends. Management uses an eight-quarter aggregate
accumulation of net loan losses as the basis for this model. Greater emphasis is
placed on loan losses in the more recent periods. This model is used to assign a
general allowance for loan losses to all commercial loans and leases, excluding
loans that have a specific impairment allowance, residential mortgage loans and
consumer loans.
A nonspecific allowance for loan losses is maintained for risks beyond
those factors specific to a particular loan or those identified by the migration
analysis. These factors include trends in the general economic conditions in BOK
Financial's primary lending areas, duration of the business cycle, specific
conditions in industries where BOK Financial has a concentration of loans and
overall growth in the loan portfolio. Additional factors considered are bank
regulatory examination results, error potential in the migration analysis model
or the underlying data, and other relevant factors. A range of potential losses
is determined for each factor identified. At December 31, 2001 the range of
potential losses for the more significant factors were: General economic
conditions - $3.2 million to $4.0 million Concentration of large loans - $1.0
million to $1.9 million Loan portfolio growth - $700 thousand to $1.4 million.
Allocation of the loan loss reserve to the major loan categories is
presented in Table 16. The increase in the nonspecific allowance was due
primarily to the effect of general economic conditions and overall growth in the
loan portfolio.
A provision for loan losses is charged against earnings in amounts necessary
to maintain an adequate loan loss reserve. These provisions totaled $37.6
million for 2001, $17.2 million for 2000 and $10.4 million for 1999. The
increase reflected the growth in net loans charged-off for each of those years,
growth in nonperforming and potential problem loans.
Evaluation of the loan loss reserve requires a significant level of
assumptions by management including estimation of future cash flows, collateral
values, relevance of historic loss trends to the loan portfolio and assessment
of the effect of current economic conditions on borrowers' ability to repay. The
required loan loss reserve could be materially affected by changes in these
assumptions. The loan loss reserve is adequate to absorb losses inherent in the
loan portfolio based upon current conditions and information available to
management. However, actual losses may differ significantly due to changing
conditions or information that is currently not available.
Nonperforming Assets
Information regarding nonperforming assets, which totaled $51 million at
December 31, 2001 and $44 million at December 31, 2000 is presented in Table 17.
Nonperforming assets included nonaccrual and renegotiated loans and excluded
loans 90 days or more past due but still accruing interest. Nonaccrual loans
increased by $3.9 million during 2001. Newly identified nonaccruing loans
totaled $31.3 million during 2001. This amount included $11.4 million for one
borrower whose acquisition strategy was adversely affected by market conditions.
Total nonaccrual loans decreased by $12.4 million of cash payments received,
$9.7 million of losses charged against the reserve for loan losses and $3.8
million of transfers to real estate and other repossessed assets.
Table 17 Nonperforming Assets
(Dollars in Thousands)
December 31,
-----------------------------------------------------------------
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ -------------
Nonperforming loans
Nonaccrual loans:
Commercial $35,075 $37,146 $12,686 $ 8,394 $12,745
Commercial real estate 3,856 161 2,046 1,950 3,276
Residential mortgage 4,140 1,855 3,383 2,583 2,985
Consumer 469 499 1,350 1,168 755
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
Total nonaccrual loans 43,540 39,661 19,465 14,095 19,761
Renegotiated loans 27 87 - - 207
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
Total nonperforming loans 43,567 39,748 19,465 14,095 19,968
Other nonperforming assets 7,141 3,851 3,478 4,667 5,281
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
Total nonperforming assets $50,708 $43,599 $22,943 $18,762 $25,249
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
Ratios:
Reserve for loan losses to nonperforming loans 233.90% 207.95% 391.65% 467.70% 270.65%
Nonperforming loans to period-end loans2 .71 .73 .42 .40 .72
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
Loans past due (90 days)1 $ 8,108 $15,467 $11,336 $ 9,553 $10,710
- ----------------------------------------------------- ------------ ------------ ------------ ------------ -------------
1 Includes residential mortgages guaranteed by agencies of
the U.S. Government. $ 6,222 $ 7,616 $ 8,538 $ 8,122 $ 7,072
Excludes residential mortgages guaranteed by agencies of
the U.S. Government in foreclosure. 4,396 5,630 8,310 6,953 7,396
2 Excludes residential mortgage loans held for sale.
The loan review process also identifies 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 are not included in
Nonperforming Assets. However, known information causes management to have
concerns as to the borrower's ability to comply with current repayment terms.
Potential problem loans totaled $50 million at December 31, 2001 and $24 million
at December 31, 2000. At December 31, 2001, the composition of potential problem
loans by primary industry categories included manufacturing, $24 million;
healthcare, $12 million; and telecommunications, $10 million.
Deposits
Average deposits for 2001 increased $968 million or 18% compared to 2000.
Most notably, average transaction deposit accounts increased $377 million or
20%; time deposits of $100,000 or more increased $254 million or 19% and other
time deposits increased $211 million or 18%. Average time deposits of $100,000
or more were $1.6 billion in 2001 compared to $1.3 billion in 2000. At December
31, 2001, the outstanding balance of time deposits of $100,000 or more decreased
to $1.3 billion while the balance of other time deposits increased to $1.5
billion. This reflected a determination to reduce the level of large time
deposits as a funding source.
Table 18 Average Deposits
(In Thousands)
2001 2000
----------------------------
Core deposits $3,331,210 $3,293,456
Public funds 447,846 400,467
Uninsured deposits 2,706,038 1,823,192
- ------------------------------------------------------------
Total $6,485,094 $5,517,115
- ------------------------------------------------------------
Average core deposits as a percent of total deposits decreased to 51% in
2001 compared to 60% in 2000 and 65% in 1999. Concurrently, average uninsured
deposits represented 42% of total deposits in 2001, 33% in 2000 and 27% in 1999.
Uninsured deposits as used in this presentation are based on a simple analysis
of account balances and do not reflect combined ownership and other account
styling that would determine insurance based on FDIC regulations.
Table 19 Maturity of Domestic CDs and Public Funds
in Amounts of $100,000 or More
(In Thousands) December 31,
---------------------------
2001 2000
---------------------------
Months to maturity:
3 or less $ 625,686 $ 534,960
Over 3 through 6 311,743 395,537
Over 6 through 12 221,264 303,260
Over 12 449,263 210,107
- ------------------------------------------------------------
Total $1,607,956 $1,443,864
- ------------------------------------------------------------
The distribution of deposit accounts among BOK Financial's principal
markets is shown in Table 20. Deposit growth in Texas included $366 million from
the acquisition of CNBT. Excluding this acquisition, deposits in Texas grew by
$108 million or 11%.
BOK Financial competes for deposits by offering a broad range of products
and services to its customers. This includes offering competitive rates and
fees, convenience and service to its customers. BOK Financial offered free
checking accounts during 2001. This product helped to increase the number of new
checking accounts opened during 2001 to over 46 thousand compared to
approximately 17 thousand in 2000. Management believes that the growth in
deposit balances and the value of additional customer contact opportunities more
than offset any lost fee income.
Bank of Oklahoma offers banking convenience through 114 locations,
including 33 supermarket locations. Bank of Texas has 14 locations in the Dallas
metropolitan area and 7 in Houston. Bank of Albuquerque has 18 banking locations
in Albuquerque, New Mexico and Bank of Arkansas has 3 locations in northwest
Arkansas. A 24-hour ExpressBank call center is available to serve customers from
all of BOK Financial's subsidiary banks.
Table 20 Deposits by Principal Market Area
(In Thousands)
December 31,
----------------------------
2001 2000
----------------------------
Oklahoma:
Demand $ 992,663 $ 937,163
Interest-bearing:
Transaction 1,650,269 1,407,083
Savings 101,433 93,598
Time 2,041,025 2,036,274
----------------------------
Total interest-bearing 3,792,727 3,536,955
----------------------------
Total Oklahoma $ 4,785,390 $ 4,474,118
----------------------------
Texas:
Demand $ 305,745 $ 250,347
Interest-bearing:
Transaction 670,728 406,446
Savings 28,918 22,910
Time 451,031 303,203
----------------------------
Total interest-bearing 1,150,677 732,559
----------------------------
Total Texas $1,456,422 $ 982,906
----------------------------
December 31,
----------------------------
2001 2000
----------------------------
Albuquerque:
Demand $ 57,648 $ 45,803
Interest-bearing:
Transaction 224,265 161,027
Savings 26,848 25,843
Time 241,549 250,876
----------------------------
Total interest-bearing 492,662 437,746
----------------------------
Total Albuquerque $ 550,310 $ 483,549
----------------------------
Northwest Arkansas:
Demand $ 10,634 $ 10,453
Interest-bearing:
Transaction 14,452 11,114
Savings 1,035 1,030
Time 87,501 82,835
----------------------------
Total interest-bearing 102,988 94,979
----------------------------
Total Northwest Arkansas $ 113,622 $ 105,432
----------------------------
Borrowings and Capital
Parent Company
BOK Financial (parent company) negotiated a $122.5 million unsecured
revolving credit agreement with certain banks during 2001. This credit
agreement, which matures in October 2004, replaced a $125 million credit
agreement that was scheduled to mature in November 2002. The outstanding
principal balance of this credit agreement at December 31, 2001 was $95 million.
Interest is based on either the London Interbank Offering Rate ("LIBOR") plus a
defined margin that is determined by the principal balance outstanding and BOK
Financial's credit rating or a base rate. The base rate is defined as the
greater of the daily federal funds rate plus 0.5% or the prime rate. This credit
agreement includes certain restrictive covenants that limit BOK Financial's
ability to borrow additional funds and to pay cash dividends on common stock.
These covenants also require BOK Financial and its subsidiaries to maintain
minimum capital levels and to exceed minimum net worth ratios. BOK Financial met
all of the restrictive covenants at December 31, 2001.
BOK Financial filed a shelf registration statement with the Securities and
Exchange Commission for the issuance of up to $250 million of senior debt
securities during the fourth quarter of 1998. These securities are direct,
unsecured obligations and are not insured by the Federal Deposit Insurance
Corporation or guaranteed by any governmental agency. None of this debt had been
issued at December 31, 2001.
BOK Financial borrowed $30 million during 2001 from its principal
shareholder, George B. Kaiser, by issuing a subordinated debenture. This
debenture matures in March 2008. Interest is based on LIBOR plus 1.75%, payable
quarterly. The proceeds of this borrowing were used to support asset growth,
including the CNBT acquisition.
The primary sources of liquidity available to BOK Financial are earnings on
deposits and investments and dividends from subsidiaries. Dividends from
subsidiary banks are generally limited by various banking regulations to net
profits, as defined, for the year plus retained net profits for the preceding
two years. Dividends are further restricted by minimum capital regulations.
Based on the most restrictive limitations, BOK Financial's subsidiary banks
could declare up to $102 million of dividends without regulatory approval.
Management has developed and the Board of Directors has approved an internal
capital policy that is more restrictive than the regulatory capital standards.
The subsidiary banks could declare up to $68 million under this policy.
Subsidiary Banks
BOK Financial's subsidiary banks use borrowings to supplement deposits as a
source of funds for loan and securities growth. These sources include federal
funds purchased, securities repurchase agreements, and advances from the Federal
Home Loan Bank. Interest rates and maturity dates for the various sources of
funds are matched with specific types of assets in the asset / liability
management process. See Note 10 to the Consolidated Financial Statements for
additional information about the interest rates and maturity dates of these
borrowings.
In 1997, BOk issued $150 million of 7.125% fixed rate subordinated
debentures that mature in 2007. Interest rate swaps were used as a fair value
hedge to convert the fixed interest on these debentures to a LIBOR-based
floating rate. This permitted BOk to adjust the carrying value of the
subordinated debentures to fair value. In 2001, the interest rate swaps were
terminated. The related market value adjustment of the subordinated debenture of
$8 million will be recognized over the remaining life of the debt.
Equity capital for BOK Financial increased by $125 million to $828 million
during 2001. Earnings provided $116 million of this increase. The remainder was
primarily due to the effects of stock options exercised during the year. The
present policy of BOK Financial is to retain earnings for capital and future
growth. Management has no current plans to recommend payments of cash dividends
on common stock. Management presently plans to recommend continued payment of an
annual dividend in shares of common stock.
BOK Financial and its subsidiary banks are subject to various capital
requirements administered by federal agencies. Failure to meet minimum capital
requirements can result in certain mandatory and additional discretionary
actions by regulators that could have a material effect 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. The capital ratios for BOK Financial and each of
its subsidiary banks generally increased by a small amount during 2001 as
retained capital was used to support asset growth. See Note 16 to the
Consolidated Financial Statements for additional information regarding
regulatory capital.
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. Additionally, the financial instruments
subject to market risk can be classified either as held for trading or held for
purposes other than trading.
BOK Financial is subject to market risk primarily through the effect of
changes in interest rates on both its portfolio of assets held for purposes
other than trading and trading assets. The effect of other changes, such as
foreign exchange rates, commodity prices or equity prices do not pose
significant market risk to BOK Financial. The responsibility for managing market
risk rests with the Asset/Liability Committee that operates under policy
guidelines established by the Board of Directors. The negative acceptable
variation in net interest revenue and economic value of equity due to a 200
basis point increase or decrease in interest rates is generally limited by these
guidelines to +/- 10%. These guidelines also establish maximum levels for
short-term borrowings, short-term assets and public and brokered deposits and
establish minimum levels for unpledged assets, among other things. Compliance
with these guidelines is reviewed monthly.
Interest Rate Risk Management (Other than Trading)
BOK Financial performs a sensitivity analysis to identify more dynamic
interest rate risk exposures, including embedded option positions on net
interest revenue, net income and economic value of equity. A simulation model is
used to estimate the effect of changes in interest rates over the next twelve
months based on three interest rate scenarios. These are a "most likely" rate
scenario and two "shock test" scenarios, the first assuming a sustained parallel
200 basis point increase and the second a sustained parallel 100 basis point
decrease in interest rates. Management historically evaluated interest rate
sensitivity for a sustained 200 basis point decrease in interest rates. However,
the results of a 200 basis point decrease in interest rates in the current
low-rate environment are not meaningful. An independent source is used to
determine the most likely interest rates for the next year. The Federal Reserve
Bank's discount rate affects short-term borrowings, the prime lending rate and
the LIBOR. These rates in turn are the basis for much of the variable-rate loan
pricing. Additionally, the 30-year mortgage rate directly affects the prepayment
speeds for 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. Sensitivity of fee income to
market interest rate levels, such as those related to cash management services
and mortgage servicing are also included. The model incorporates assumptions
regarding the level of interest rate or balance changes on indeterminable
maturity deposits (demand deposits, interest-bearing transaction accounts and
savings accounts) for a given level of market rate changes. The assumptions have
been developed through a combination of historical analysis and future expected
pricing behavior. Interest rate swaps on all products are included to the extent
that they are effective in the 12-month simulation period. Changes in prepayment
behavior of mortgage-backed securities and residential mortgage loans and
mortgage servicing in each rate environment are captured using industry
estimates of prepayment speeds for various coupon segments of the portfolio. The
effect of changes in interest rates on the value of mortgage servicing rights is
excluded from Table 21 due to the extreme volatility over such a large rate
range. The effect of changes in interest rates on the value of mortgage
servicing rights and hedge securities is shown in Table 22. The impact of
planned growth and new business activities is factored into the simulation
model. At December 31, 2001 and 2000, this modeling indicated interest rate
sensitivity as follows:
Table 21 Interest Rate Sensitivity
(Dollars in Thousands) Decrease
----------------------------
200 bp Increase 100 bp 200 bp Most Likely
--------------------------------------------------------------------------------
2001 2000 2001 2000 2001 2000
--------------------------------------------------------------------------------
Anticipated impact over the next twelve months:
Net interest revenue $ 7,380 $ (199) $ (10,403) $ 2,269 $ 3,896 $ 3,837
2.0% (0.1)% (2.8)% 0.7% 1.1% 1.3%
- ------------------------------------------------------------------------------------------------------------------
Net income $ 4,612 $ (124) $ (6,502) $ 1,418 $ 2,435 $ 2,398
3.3% (0.1)% (4.6)% 1.3% 1.7% 2.1%
- ------------------------------------------------------------------------------------------------------------------
Economic value of equity $ 705 $ (32,142) $(109,487) $(10,113) $ (398) $33,255
0.1% (2.8)% (8.5)% (0.9)% - 2.9%
- ------------------------------------------------------------------------------------------------------------------
The estimated changes in interest rates on net interest revenue, net income,
and economic value of equity is within guidelines established by the Board of
Directors for all interest rate scenarios.
BOK Financial also has risk associated with its portfolio of mortgage
servicing rights. The primary risk is due to loan prepayments. Generally, the
value of mortgage servicing rights declines when interest rates fall due to an
increase in loan prepayments. The decrease in value of the servicing rights is
recorded as an impairment allowance. Both the amortized cost and the fair value
of the servicing rights are stratified by interest rate and loan type. An
impairment provision is charged against earnings whenever the amortized cost
exceeds the fair value of each stratum. Generally, the value of mortgage
servicing rights increases when interest rates rise due to a decrease in loan
prepayments. However, this increase in value can only be recognized up to the
amortized cost. Any increase in fair value beyond amortized cost is not
recognized.
There is no active market for trading servicing rights. Therefore, fair
value is determined by using industry consensus prepayment speeds to project
future cash flows. Additional assumptions are made regarding servicing costs,
earnings on escrow deposits and ancillary income and discount rates. Management
consistently uses independent sources to provide many of these assumptions.
However, actual fair values may differ significantly from computed fair values
due to assumption changes or modeling errors.
BOK Financial designates a portion of its securities portfolio as an
economic hedge against the risk of loss on its mortgage servicing rights.
Mortgage-backed and principal only securities are acquired and held as available
for sale when the prepayment risk exceeds certain levels. The fair value of
these securities is expected to vary inversely to the fair value of the mortgage
servicing rights. Management may sell these securities and realize gains or
losses when necessary to offset losses or gains on the mortgage servicing
rights. However, this strategy presents certain risks. A well- developed market
determines fair values for securities. As previously noted, there is no
comparable market for mortgage servicing rights. Therefore, the computed change
in value of the servicing rights for a specified change in interest rates may
not correlate to the change in value of the securities.
The relationship between the fair value of mortgage servicing rights and
mortgage-backed securities has become more volatile. Since September 30, 2001,
industry projections of prepayment speeds have changed significantly due to
factors other than interest rates, including duration of the low interest rate
environment and borrower prepayment behavior. As a result, the hedge program was
less effective during the fourth quarter of 2001. At December 31, 2001,
securities with a fair value of $340 million and an aggregate unrealized loss of
$22 million were held for the hedge program. This unrealized loss, net of income
taxes, is included in shareholders' equity as part of other accumulated
comprehensive income. The interest rate sensitivity of the mortgage servicing
portfolio and securities held as a hedge is modeled over a range of + / - 50
basis points. At December 31, 2001, the pre-tax results on this modeling on
reported earnings were:
Table 22 Interest Rate Sensitivity - Mortgage Servicing
(Dollars in Thousands)
2001
-----------------------------
50 bp 50 bp Decrease
Increase
-----------------------------
Anticipated change in:
Mortgage servicing rights $10,670(1) $(18,001)
Hedging instruments (12,135) (2)
- ---------------------------------------------------------
Net $ (1,465) $(18,001)
- ---------------------------------------------------------
(1) Total anticipated increase in value is $12.3 million. However, only $10.7
million can be recognized due to risk strata limits.
(2) Anticipated increase in value of hedging instrument totals $12.6 million,
which would reduce the existing unrealized loss. However, gains would not be
available to be realized.
The simulations used to manage market risk are based on numerous
assumptions regarding the effect of changes in interest rates on the timing and
extent of repricing 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 and changes in market conditions and management strategies, among
other factors.
BOK Financial uses interest rate swaps, a form of off-balance sheet
derivative product, in managing its interest rate sensitivity. These products
are generally used to more closely match interest paid on certain fixed rate
loans with funding sources and long-term certificates of deposit with earning
assets. During 2001 and 2000, net interest income increased $6.1 million and
$2.2 million. Credit risk from these swaps is closely monitored and
counterparties to these contracts are selected on the basis of their credit
worthiness, among other factors. Derivative products are not used for
speculative purposes. See Note 4 to the Consolidated Financial Statements for
additional information.
Trading Activities
BOK Financial enters into trading account activities both as an
intermediary for customers and for its own account. As an intermediary, BOK
Financial will take positions in securities, generally 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. BOK Financial will also take trading
positions in U.S. Treasury securities mortgage-backed securities, municipal
securities and financial futures for its own account through either BOk or BOSC,
Inc. These positions are taken with the objective of generating trading profits.
Both of these activities involve interest rate risk.
A variety of methods are used to manage the interest rate risk of
trading activities. These methods include daily marking of all positions to
market value, independent verification of inventory pricing, and position limits
for each trading activity. Hedges in either the futures or cash markets may be
used to reduce the risk associated with some trading programs. The Risk
Management Department monitors trading activity daily and reports to senior
management and the Risk Oversight and Audit Committee of the BOK Financial Board
of Directors any exceptions to trading position limits and risk management
policy exceptions.
BOK Financial uses a Value at Risk ("VAR") methodology to measure the market
risk inherent in its trading activities. VAR is calculated based upon historical
simulations over the past five years using a variance/co-variance matrix of
interest rate changes. It represents an amount of market loss that is likely to
be exceeded 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 nominal aggregate trading positions to $100 million and the VAR to
$6.5 million. At December 31, 2001, the nominal aggregate trading positions were
$42 million and the VAR was $946 thousand. The greatest value at risk during
2001 was $1.7 million.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141") and
No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 eliminated
the pooling of interests method of accounting for business combinations and
provided new definitions for intangible assets that must be recognized apart
from goodwill. FAS 141 was adopted on July 1, 2001. FAS 142 established new
rules of accounting for intangible assets. Under these new rules, intangible
assets with indefinite lives such as goodwill will no longer be amortized but
will be subject to impairment testing. Other intangible assets will continue to
be amortized over their useful lives. Subsequent to the issuance of FAS 142, the
Financial Accounting Standards Board issued an interpretation that the
unidentifiable intangible asset that results from certain business combinations,
such as branch acquisitions, must continue to be amortized over periods
determined by the expected lives of the acquired assets and deposits. The Board
is currently reconsidering this interpretation.
BOK Financial will adopt FAS 142 as of January 1, 2002. Net income and
earnings per fully diluted share for 2001 and 2000 would have been $124.6
million or $2.15 and $105.5 million or $1.84 if FAS 142 had been effective for
those years. During 2002, BOKF will perform the first of the required impairment
tests of goodwill. The effect of these tests on earnings and financial position
has not yet been determined.
Forward-Looking Statements
This Annual Report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about BOK Financial, the financial services industry and the economy
in general. Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "plans," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements. Management
judgments relating to and discussion of the provision and reserve for loan
losses involve judgments as to expected events and are inherently
forward-looking statements. Assessments that BOK Financial's acquisitions and
other growth endeavors will be profitable are necessary statements of belief as
to the outcome of future events, based in part on information provided by others
that BOK Financial has not independently verified. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict
with regard to timing, extent, likelihood and degree of occurrence. Therefore,
actual results and outcomes may materially differ from what is expressed,
implied or forecasted in such forward-looking statements. Internal and external
factors that might cause such a difference include, but are not limited to: (1)
the ability to fully realize expected cost savings from mergers within the
expected time frames, (2) the ability of other companies on which BOK Financial
relies to provide goods and services in a timely and accurate manner, (3)
changes in interest rates and interest rate relationships, (4) demand for
products and services, (5) the degree of competition by traditional and
nontraditional competitors, (6) changes in banking regulations, tax laws,
prices, levies and assessments, (7) the impact of technological advances and (8)
trends in customer behavior as well as their ability to repay loans. BOK
Financial and its affiliates undertake no obligation to update, amend, or
clarify forward-looking statements, whether as a result of new information,
future events or otherwise.
Report of Management on Financial Statements
Management is responsible for the consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted
in the United States. In management's opinion, the consolidated financial
statements present fairly the financial conditions, results of operations and
cash flows of BOK Financial and its subsidiaries at the dates and for the
periods indicated.
BOK Financial and its subsidiaries maintain a system of internal accounting
controls designed to provide reasonable assurance that transactions are executed
in accordance with management's general or specific authorization, and are
recorded as necessary to maintain accountability for assets and to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States. This system includes written policies
and procedures, a corporate code of conduct, an internal audit program and
standards for the hiring and training of qualified personnel.
The Board of Directors of BOK Financial maintains a Risk Oversight and
Audit Committee consisting of outside directors that meet periodically with
management and BOK Financial's internal and independent auditors. The Committee
considers the audit and nonaudit services to be performed by the independent
auditors, makes arrangements for the internal and independent audits and
recommends BOK Financial's selection of independent auditors. The Committee also
reviews the results of the internal and independent audits, considers and
approves certain of BOK Financial's accounting principles and practices, and
reviews various shareholder reports and other reports and filings.
Ernst & Young LLP, certified public accountants, have been engaged to audit
the consolidated financial statements of BOK Financial and its subsidiaries.
Their audit is conducted in accordance with auditing standards generally
accepted in the United States and their report on BOK Financial's consolidated
financial statements is set forth below.
Report of Independent Auditors
We have audited the accompanying consolidated balance sheets of BOK
Financial Corporation as of December 31, 2001 and 2000, and the related
consolidated statements of earnings, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BOK Financial Corporation at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Tulsa, Oklahoma
January 23, 2002
BOK FINANCIAL CORPORATION
Consolidated Statements of Earnings
(Dollars In Thousands Except Per Share Data)
2001 2000 1999
----------------- ----------------- -----------------
Interest Revenue
Loans $455,332 $454,077 $336,630
Taxable securities 184,464 167,493 144,901
Tax-exempt securities 12,979 12,782 14,233
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total securities 197,443 180,275 159,134
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Trading securities 1,029 1,416 2,291
Funds sold and resell agreements 829 2,962 2,219
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total interest revenue 654,633 638,730 500,274
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Interest Expense
Deposits 208,387 208,249 150,621
Borrowed funds 108,549 151,157 104,195
Subordinated debentures 10,923 10,437 9,334
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total interest expense 327,859 369,843 264,150
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Net Interest Revenue 326,774 268,887 236,124
Provision for Loan Losses 37,610 17,204 10,365
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Net Interest Revenue After Provision for Loan Losses 289,164 251,683 225,759
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Other Operating Revenue
Brokerage and trading revenue 21,822 16,074 16,233
Transaction card revenue 44,481 38,753 32,648
Trust fees and commissions 40,567 39,316 35,127
Service charges and fees on deposit accounts 51,284 42,932 41,067
Mortgage banking revenue 50,155 37,179 36,986
Leasing revenue 3,745 4,244 3,725
Other revenue 20,087 17,965 17,589
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total fees and commissions 232,141 196,463 183,375
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Gain on sale of student loans 557 529 600
Gain on loan securitization - - 270
Gain (loss) on sales of other assets - (148) 4,626
Gain (loss) on sales of securities, net 30,640 2,059 (419)
Loss on derivatives, net (4,062) - -
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total other operating revenue 259,276 198,903 188,452
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Other Operating Expense
Personnel expense 163,835 146,215 136,010
Business promotion 10,658 8,395 9,077
Professional fees and services 13,391 9,618 9,584
Net occupancy and equipment 42,764 35,447 30,789
Data processing and communications 40,013 34,962 32,038
FDIC and other insurance 1,717 1,569 1,356
Printing, postage and supplies 12,329 11,260 11,599
Net gains and operating expenses on repossessed assets 1,401 (1,283) (3,473)
Amortization of intangible assets 20,113 15,478 15,823
Mortgage banking costs 30,261 22,274 23,932
Provision for impairment of mortgage servicing rights 15,551 2,900 -
Other expense 16,729 15,980 13,781
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Total other operating expense 368,762 302,815 280,516
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Income Before Taxes 179,678 147,771 133,695
Federal and state income tax 63,612 47,631 44,469
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Income Before Cumulative Effect of a Change in Accounting
Principle, Net of Tax 116,066 100,140 89,226
Transition adjustment of adoption of FAS 133 236 - -
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Net Income $116,302 $100,140 $ 89,226
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Earnings Per Share:
Basic:
Before cumulative effect of change in accounting principle $ 2.25 $ 1.95 $ 1.73
Transition adjustment of adoption of FAS 133 - - -
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Net Income $ 2.25 $ 1.95 $ 1.73
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Diluted:
Before cumulative effect of change in accounting principle $ 2.01 $ 1.75 $ 1.55
Transition adjustment of adoption of FAS 133 - - -
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Net Income $ 2.01 $ 1.75 $ 1.55
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
Average Shares Used in Computation:
Basic 50,972,642 50,665,525 50,598,351
Diluted 57,937,534 57,328,915 57,599,259
- ------------------------------------------------------------------------- ----------------- ----------------- -----------------
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
(In Thousands Except Share Data)
December 31,
-------------------------------
2001 2000
--------------- ---------------
Assets
Cash and due from banks $ 643,938 $ 701,424
Funds sold and resell agreements 3,400 49,305
Trading securities 10,327 39,865
Securities:
Available for sale 2,815,070 2,105,619
Available for sale securities pledged to creditors 634,479 658,201
Investment (fair value: 2001 - $242,628; 2000 - $233,867) 241,113 233,371
- ------------------------------------------------------------------------------ --------------- ---------------
Total securities 3,690,662 2,997,191
- ------------------------------------------------------------------------------ --------------- ---------------
Loans 6,295,378 5,517,862
Less reserve for loan losses (101,905) (82,655)
- ------------------------------------------------------------------------------ --------------- ---------------
Net loans 6,193,473 5,435,207
- ------------------------------------------------------------------------------ --------------- ---------------
Premises and equipment, net 141,425 132,066
Accrued revenue receivable 68,728 74,981
Intangible assets, net 152,076 109,045
Mortgage servicing rights, net 98,796 110,791
Real estate and other repossessed assets 7,141 3,851
Bankers' acceptances 4,179 6,925
Other assets 116,243 87,683
- ------------------------------------------------------------------------------ --------------- ---------------
Total assets $11,130,388 $9,748,334
- ------------------------------------------------------------------------------ --------------- ---------------
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits $ 1,366,690 $1,243,766
Interest-bearing deposits:
Transaction 2,559,714 1,985,670
Savings 158,234 143,381
Time 2,821,106 2,673,188
- ------------------------------------------------------------------------------ --------------- ---------------
Total deposits 6,905,744 6,046,005
- ------------------------------------------------------------------------------ --------------- ---------------
Funds purchased and repurchase agreements 1,601,989 1,853,073
Other borrowings 1,220,948 882,204
Subordinated debentures 186,302 148,816
Accrued interest, taxes and expense 67,014 77,860
Bankers' acceptances 4,179 6,925
Amount due on unsettled security transactions 231,660 -
Other liabilities 84,069 29,875
- ------------------------------------------------------------------------------ --------------- ---------------
Total liabilities 10,301,905 9,044,758
- ------------------------------------------------------------------------------ --------------- ---------------
Shareholders' equity:
Preferred stock 25 25
Common stock ($.00006 par value; 2,500,000,000 shares authorized; issued:
2001 - 51,737,154; 2000 - 49,706,055) 3 3
Capital surplus 323,860 278,882
Retained earnings 511,301 431,390
Treasury stock (shares at cost: 2001 - 541,240; 2000 - 487,553) (12,498) (10,044)
Accumulated other comprehensive income 5,792 3,320
- ------------------------------------------------------------------------------ --------------- ---------------
Total shareholders' equity 828,483 703,576
- ------------------------------------------------------------------------------ --------------- ---------------
Total liabilities and shareholders' equity $11,130,388 $9,748,334
- ------------------------------------------------------------------------------ --------------- ---------------
See accompanying notes to consolidated financial statements.
BOK FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
2001 2000 1999
------------ ------------ -------------
Cash Flows From Operating Activities:
Net income $ 116,302 $ 100,140 $ 89,226
Adjustments to reconcile net income to net cash
provided by operating activities:
Provisions for loan losses 37,610 17,204 10,365
Provisions for mortgage servicing rights 15,551 2,900 -
Transition adjustment of adoption of FAS 133 (236) - -
Unrealized losses from derivatives 12,082 - -
Depreciation and amortization 69,165 54,444 41,088
Tax benefit on exercise of stock options 3,408 1,010 3,138
Tax accrual reversal - 3,000 -
Net amortization of securities
discounts and premiums (5,615) (4,975) 1,413
Net gain on sale of assets (47,954) (11,694) (15,039)
Mortgage loans originated for resale (972,066) (494,675) (686,082)
Proceeds from sale of mortgage loans held for resale 1,008,073 547,140 738,109
Change in trading securities 29,538 (25,132) 34,734
Change in accrued revenue receivable 6,253 (7,341) 21
Change in other assets 2,881 73,177 (65,824)
Change in accrued interest, taxes and expense (3,125) (18,393) 24,151
Change in other liabilities 9,599 (15,992) 29,806
- ----------------------------------------------------------------- ------------ ------------ -------------
Net cash provided by operating activities 281,466 220,813 205,106
- ----------------------------------------------------------------- ------------ ------------ -------------
Cash Flows From Investing Activities:
Proceeds from sales of investment securities - 175 -
Proceeds from sales of available for sale securities 9,142,248 1,677,078 1,397,956
Proceeds from maturities of investment securities 80,273 41,764 59,684
Proceeds from maturities of available for sale securities 930,494 445,384 634,527
Purchases of investment securities (88,282) (62,334) (45,330)
Purchases of available for sale securities (10,496,575) (2,227,911) (2,223,829)
Loans originated or acquired net of principal collected (675,612) (974,220) (1,047,291)
Proceeds from sales of assets 68,088 69,201 190,673
Purchases of assets (75,655) (98,822) (93,755)
Cash and cash equivalents of subsidiaries and branches
acquired and sold, net (72,990) (14) 25,584
- ----------------------------------------------------------------- ------------ ------------ -------------
Net cash used by investing activities (1,188,011) (1,129,699) (1,101,781)
- ----------------------------------------------------------------- ------------ ------------ -------------
Cash Flows From Financing Activities:
Net change in demand deposits, transaction
deposits, and savings accounts 346,034 329,483 (20,535)
Net change in certificates of deposit 146,075 453,338 321,702
Net change in other borrowings 141,660 451,574 554,433
Amount due on unsettled security transaction 231,660 - -
Paydown of other borrowings (95,000) - -
Issuance of subordinated debenture 30,000 - -
Issuance of preferred, common and treasury stock, net 2,745 999 823
Purchase of treasury stock - (2,633) (1,574)
Dividends paid (20) (1) (2,744)
- ----------------------------------------------------------------- ------------ ------------ -------------
Net cash provided by financing activities 803,154 1,232,760 852,105
- ----------------------------------------------------------------- ------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents (103,391) 323,874 (44,570)
Cash and cash equivalents at beginning of period 750,729 426,855 471,425
- ----------------------------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at end of period $ 647,338 $ 750,729 $ 426,855
- ----------------------------------------------------------------- ------------ ------------ -------------
Cash paid for interest $ 334,103 $ 361,645 $ 265,548
- ----------------------------------------------------------------- ------------ ------------ -------------
Cash paid for taxes 70,699 51,669 43,664
- ----------------------------------------------------------------- ------------ ------------ -------------
Net loans transferred to repossessed real estate 7,228 2,226 1,857
- ----------------------------------------------------------------- ------------ ------------ -------------
Payment of dividends in common stock 36,371 1,500 32,192
- ----------------------------------------------------------------- ------------ ------------ -------------
See accompanying notes to consolidated financial statements.
BOK FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In Thousands)
Preferred Stock Common Stock
---------------------- -------------------
Shares Amount Shares Amount
---------------------- -------------------
December 31, 19982 250,000 $25 48,112 $3
Comprehensive income: - - - -
Net income
Other comprehensive loss, net of tax:
Unrealized gain on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 9 -
Treasury stock purchase - - - -
Cancel treasury stock - - (725) -
Issuance of common stock to Thrift Plan - - 17 -
Exercise of stock options - - 480 -
Tax benefit on exercise of stock options - - - -
Common stock dividend - - - -
Dividends paid in shares of common stock:
Preferred stock - - 57 -
Common stock - - 1,432 -
- ---------------------------------------------------------------------------------------------------
December 31, 1999 250,000 25 49,382 3
Comprehensive income:
Net income - - - -
Other comprehensive loss, net of tax:
Unrealized gain on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 4 -
Treasury stock purchase - - - -
Exercise of stock options - - 294 -
Tax benefit on exercise of stock options - - - -
Preferred stock dividend - - - -
Dividends paid in shares of common stock:
Preferred stock - - 26 -
- ---------------------------------------------------------------------------------------------------
December 31, 2000 250,000 25 49,706 3
Comprehensive income:
Net income - - - -
Other comprehensive loss, net of tax:
Unrealized gain on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 5 -
Exercise of stock options - - 598 -
Tax benefit on exercise of stock options - - - -
Preferred stock dividend - - - -
Dividends paid in shares of common stock:
Preferred stock - - 51 -
Common stock - - 1,377 -
- ---------------------------------------------------------------------------------------------------
December 31, 2001 250,000 $25 51,737 $3
- ---------------------------------------------------------------------------------------------------
December 31,
-------------------------------------------
2001 2000 1999
-------------------------------------------
1 Changes in net unrealized gains on securities:
Unrealized gains (losses) on available for sale $34,800 $78,759 $(90,852)
securities
Tax (expense) benefit on unrealized gains (losses)
on available for sale securities (12,412) (30,467) 34,697
Reclassification adjustment for (gains) losses
realized and included in net income (30,640) (2,059) 419
Reclassification adjustment for tax expense (benefit)
on realized (gains) losses 10,724 664 (138)
-------------------------------------------
Net unrealized gains on securities $ 2,472 $46,897 $(55,874)
-------------------------------------------
2 Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements.
Accumulated
Other
Comprehensive Capital Retained Treasury Stock
------------------------------------
Income (Loss)1 Surplus Earnings Shares Amount Total
- -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
$12,297 $236,726 $278,365 749 $ (2,623) $524,793
- - 89,226 - - 89,226
(55,874) - - - - (55,874)
---------------
33,352
---------------
- 294 - - - 294
- - - 74 (1,574) (1,574)
- (2,062) - (725) 2,062 -
- 406 - (1) 36 442
- 4,286 - 215 (4,823) (537)
- 3,138 - - - 3,138
- - (2,734) (2,734)
- 1,500 (1,500) -
- 30,692 (30,606) 4 (96) (10)
- -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
(43,577) 274,980 332,751 316 (7,018) 557,164
- - 100,140 - - 100,140
46,897 - - - - 46,897
---------------
147,037
---------------
- 50 - (13) 263 313
- - - 151 (2,633) (2,633)
- 2,554 - 97 (1,868) 686
- 1,010 - - - 1,010
- (1) - - (1)
- 288 (1,500) (63) 1,212 -
- -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
3,320 278,882 431,390 488 (10,044) 703,576
- - 116,302 - - 116,302
2,472 - - - - 2,472
---------------
118,774
---------------
- 165 - (7) 126 291
- 7,551 - 185 (5,097) 2,454
- 3,408 - - - 3,408
- - (1) - - (1)
- 1,114 (1,500) (21) 386 -
- 32,740 (34,890) (104) 2,131 (19)
- -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
$ 5,792 $323,860 $511,301 541 $(12,498) $828,483
- -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
Notes to Consolidated Financial Statements
(1) Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements of BOK Financial Corporation ("BOK
Financial") have been prepared in conformity with accounting principles
generally accepted in the United States, including general practices of the
banking industry. The consolidated financial statements include the accounts of
BOK Financial and its subsidiaries, principally Bank of Oklahoma, N.A. and its
subsidiaries ("BOk"), Bank of Texas, N.A., Bank of Arkansas, N.A., Bank of
Albuquerque, N.A. and BOSC, Inc. Certain prior year amounts have been
reclassified to conform to current year classifications.
Nature of Operations
BOK Financial, through its subsidiaries, provides a wide range of financial
services to commercial and industrial customers, other financial institutions
and consumers throughout Oklahoma, Northwest Arkansas, Dallas and Houston, Texas
metropolitan areas and New Mexico. These services include depository and cash
management; lending and lease financing; mortgage banking; securities brokerage,
trading and underwriting; and personal and corporate trust.
Use of Estimates
Preparation of BOK Financial's consolidated financial statements requires
management to make estimates of future economic activities, including interest
rates, loan collectibility and prepayments and cash flows from customer
accounts. These estimates are based upon current conditions and information
available to management. Actual results may differ significantly from these
estimates.
Acquisitions
Assets and liabilities acquired by purchase are recorded at fair values on
the acquisition dates. Intangible assets are amortized using straight-line and
accelerated methods over the estimated benefit periods. These periods range from
7 to 25 years for goodwill and other identifiable intangible assets and 7 to 10
years for core deposit intangibles. The net book values of intangible assets are
evaluated for impairment when economic conditions indicate an impairment may
exist. These conditions would include an ongoing performance history and a
forecast of anticipated performance that is significantly below management's
expectations for acquired entities. Impairment would be determined by a
comparison of the fair value of assets and liabilities of the acquired entity
plus an estimate of current market premiums paid for similar entities. The
Consolidated Statements of Earnings include the results of purchases from the
dates of acquisition. The financial statements of companies acquired in
pooling-of-interests transactions are combined with the Consolidated Financial
Statements of BOK Financial at historical cost as if the mergers occurred at the
beginning of the earliest period presented.
Cash Equivalents
Due from banks, funds sold (generally federal funds sold for one-day
periods) and resell agreements (which generally mature within one to 30 days)
are considered cash equivalents.
Securities
Securities are identified as trading, investment (held to maturity) or
available for sale at the time of purchase based upon the intent of management,
liquidity and capital requirements, regulatory limitations and other relevant
factors. Trading securities, which are acquired for profit through resale, are
carried at market value with unrealized gains and losses included in current
period earnings. Investment securities are carried at amortized cost.
Amortization is computed by methods that approximate level yield and is adjusted
for changes in prepayment estimates. Investment securities may be sold or
transferred to trading or available for sale classification in certain limited
circumstances specified in generally accepted accounting principles. Securities
identified as available for sale are carried at fair value. Unrealized gains and
losses are recorded, net of deferred income taxes, as accumulated other
comprehensive income (loss) in shareholders' equity. Realized gains and losses
on sales of securities are based upon the amortized cost of the specific
security sold. Available for sale securities are separately identified as
pledged to creditors if the creditor has the right to sell or repledge the
collateral.
The purchase or sale of securities is recognized on a trade date basis. A
net receivable or payable is recognized for subsequent transaction settlement.
BOK Financial will periodically commit to purchase or sell to-be-announced
("TBA") mortgage-backed securities. These commitments are not reflected in BOK
Financial's balance sheet until settlement date, in accordance with the
accounting guidance of the Comptroller of the Currency. However, any losses from
TBA securities sales are recognized as of the commitment date.
Derivative Instruments
BOK Financial adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") on
January 1, 2001.
Derivative instruments, primarily interest rate swaps and forward sales
contracts, are used as part of an interest rate risk management strategy.
Interest rate swaps modify the interest income and expense on certain long-term,
fixed rate assets and liabilities. Amounts payable to or receivable from the
counterparties are reported in interest income and expense using the accrual
method. The fair value of the interest rate swaps is included in other assets or
liabilities. Changes in the fair value of interest rate swaps are included in
other operating revenue.
In certain circumstances, interest rate swaps may be designated as fair
value hedges and may qualify for hedge accounting. Changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk are
reported in other operating revenue. These changes may partially or completely
offset the mark-to-market adjustments of the interest rate swaps. Fair value
hedges are considered to be effective if the cumulative fair value adjustments
of the interest rate swaps are within a range of 80% to 120% of the cumulative
fair value adjustment of the hedged assets or liabilities.
Interest rate swaps may be designated as cash flow hedges of variable rate
assets or liabilities or anticipated transactions. Changes in fair value of
interest rate swaps are recorded in other comprehensive income to the extent
they are effective. Amounts recorded as other comprehensive income are
recognized in net income in the same periods as the cash flows from the hedged
transactions.
In conjunction with its mortgage banking activities, BOK Financial enters
into mortgage loan commitments that are considered derivative instruments under
FAS 133. Forward sales contracts are used to hedge these mortgage loan
commitments and mortgage loans held for sale. Changes in the fair value of the
mortgage loan commitments and forward sales contracts are recognized in other
operating revenue.
Energy swaps are used to assist certain customers in hedging their risk of
adverse changes in natural gas and oil prices. BOK Financial serves as an
intermediary between its energy customers and the commodities market by
arranging fixed price / floating price swaps. Each swap between BOK Financial
and its customer is offset by a swap between BOK Financial and dealers in the
commodities market. The fair value of these swaps are carried in other assets
and other liabilities. Compensation for credit risk and reimbursement of
administrative costs are recognized over the life of the swaps.
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.
Interest is accrued at the applicable interest rate on the principal amount
outstanding. Loans are placed on nonaccrual status when, in the opinion of
management, full collection of principal or interest is uncertain, generally
when the collection of principal or interest is 90 days or more past due.
Interest previously accrued but not collected is charged against interest income
when the loan is placed on nonaccrual status. Payments on nonaccrual loans are
applied to principal or reported as interest income, according to management's
judgment as to the collectibility of principal.
Loan origination and commitment fees and direct loan acquisition and
origination costs, when significant, are deferred and amortized as an adjustment
to yield over the life of the loan or over the commitment period, as applicable.
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value, including estimated losses on unfunded commitments and gains or
losses on related forward sales contracts. Effective with the adoption of FAS
133, mortgage loans held for sale that are designated as hedged assets are
carried at fair value based on sales commitments or market quotes. Changes in
fair value after the date of designation of an effective hedge are recorded in
other operating revenue.
Reserve for Loan Losses
The adequacy of the reserve for loan losses is assessed by management,
based upon an ongoing quarterly evaluation of the probable estimated losses
inherent in the portfolio, and includes probable losses on both outstanding
loans and unused commitments to provide financing. A consistent methodology has
been developed that includes reserves assigned to specific criticized loans,
general reserves that are based upon a statistical migration analysis for each
category of loans, and a nonspecific allowance that is based upon an analysis of
current economic conditions, loan concentrations, portfolio growth and other
relevant factors. The reserve for loan losses related to loans that are
identified for evaluation in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS
114"), is based on discounted cash flows using the loan's initial effective
collateral dependent loans. 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 agreement. This is substantially the same
criteria used to determine when a loan should be placed on nonaccrual status.
This evaluation is inherently subjective as it requires material estimates
including the amounts and timing of future cash flows expected to be received on
impaired loans that may be susceptible to significant change.
In accordance with the provisions of FAS 114, management has excluded small
balance, homogeneous loans from the impairment evaluation specified in FAS 114.
Such loans include 1-4 family mortgage loans, consumer loans, and commercial
loans with committed amounts less than $1 million. The adequacy of the reserve
for loan losses applicable to these loans is evaluated in accordance with
generally accepted accounting principles and standards established by the
banking regulatory authorities and adopted as policy by BOK Financial.
A provision for loan losses is charged against earnings in amounts
necessary to maintain an adequate reserve for loan losses. Loans are charged off
when the loan balance or a portion of the loan balance is no longer covered by
the paying capacity of the borrower based on an evaluation of available cash
resources and collateral value. Loans are evaluated quarterly and charge-offs
are taken in the quarter in which the loss is identified. Additionally, all
unsecured or under-secured loans that are past due by 180 days or more are
charged off within 30 days. Recoveries of loans previously charged off are added
to the reserve.
Asset Securitization
BOK Financial periodically securitizes and sells pools of assets. These
transactions are designed to comply with the requirements of generally accepted
accounting principles for treatment as a sale. BOK Financial may retain the
right to service the assets and a residual interest in excess cash flows
generated by the assets. The fair value of these retained assets is determined
by a discounting of expected future net cash to be received using assumed market
interest rates for these instruments. Residual interests are carried at fair
value. Changes in fair values are recorded in income. Servicing rights are
carried at the lower of amortized cost or fair value. A valuation allowance is
provided when amortized cost of servicing rights exceeds fair value.
Real Estate and Other Repossessed Assets
Real estate and other repossessed assets are assets acquired in partial or
total forgiveness of debt. These assets are carried at the lower of cost, which
is determined by fair value at date of foreclosure, or current fair value less
estimated selling costs. Income generated by these assets is recognized as
received, and operating expenses are recognized as incurred.
Premises and Equipment
Premises and equipment are carried at cost including capitalized interest,
when appropriate, less accumulated depreciation and amortization. Depreciation
and amortization are computed on a straight-line basis over the estimated useful
lives of the assets or, for leasehold improvements, over the shorter of the
estimated useful lives or remaining lease terms. Repair and maintenance costs
are charged to expense as incurred.
Mortgage Servicing Rights
Capitalized mortgage servicing rights are carried at the lower of amortized
cost, adjusted for the effect of hedging activities, or fair value. Amortization
is determined in proportion to the projected cash flows over the estimated lives
of the servicing portfolios. The actual cash flows are dependent upon the
prepayment of the mortgage loans and may differ significantly from the
estimates.
Fair value is determined by discounting the estimated cash flows of
servicing revenue, less projected servicing costs, using risk-adjusted rates,
which is the assumed market rate for these instruments. Prepayment assumptions
are based on industry consensus provided by independent reporting sources.
Changes in current interest rates may significantly affect these assumptions by
changing loan refinancing activity. Amortized cost and fair value are stratified
by interest rate and loan type. A valuation allowance is provided when the net
amortized cost of any strata exceeds the calculated fair value.
Originated mortgage servicing rights are recognized when either mortgage
loans are originated pursuant to an existing plan for sale or, if no such plan
exists, when the mortgage loans are sold. Substantially all fixed rate mortgage
loans originated by BOK Financial are sold under existing commitments. The right
to service mortgage loans sold is generally retained. The fair value of the
originated servicing rights is determined at closing based upon current market
rates.
Hedging of Mortgage Servicing Rights
During 1998 through the first quarter of 2000, BOK Financial entered into
futures contracts and call and put options on futures contracts to hedge against
the risk of loss on mortgage servicing rights due to accelerated loan
prepayments during periods of falling interest rates. Contracts on underlying
securities that were expected to have a similar duration to the mortgage
servicing portfolio, such as ten-year U.S. Treasury notes, were used for these
hedges. The combination of contracts selected was expected to achieve a high
degree of correlation between changes in the fair value of the mortgage
servicing rights and changes in the market value of the contracts. These
contracts were designated as hedges on the trade date. Both unrealized and
realized gains and losses on futures contracts and option contracts were
deferred as part of the capitalized mortgage servicing rights. These deferred
gains and losses are amortized over the estimated life of the loan servicing
portfolio. This derivatives-based hedging program was discontinued in 2000. BOK
Financial currently acquires mortgage-backed and principal only securities when
the prepayment risk exceeds certain levels to serve as an economic hedge against
changes in value of its portfolio of mortgage servicing rights. The fair value
of these securities is expected to vary inversely to the value of the mortgage
servicing rights. These securities are classified as available for sale and
carried at fair value. Changes in fair value are recorded, net of deferred
income taxes, as other accumulated comprehensive income (loss) in shareholders'
equity. Management may sell these securities and recognize gains when necessary
to offset losses on the mortgage servicing rights.
Federal and State Income Taxes
BOK Financial utilizes the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based upon
the difference between the values of the assets and liabilities as reflected in
the financial statement and their related tax basis using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled. As changes in tax law or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
BOK Financial and its subsidiaries file consolidated tax returns. The
subsidiaries provide for income taxes on a separate return basis, and remit to
BOK Financial amounts determined to be currently payable.
Employee Benefit Plans
BOK Financial sponsors various plans, including a defined benefit pension
plan ("Pension Plan"), qualified profit sharing plans ("Thrift Plans"), and
employee healthcare plans. Employer contributions to the Thrift Plans, which
match employee contributions subject to percentage and years of service limits,
are expensed when incurred. Pension Plan costs, which are based upon actuarial
computations of current costs, are expensed annually. Unrecognized prior service
cost and net gains or losses are amortized on a straight-line basis over the
estimated remaining lives of the participants. BOK Financial recognizes the
expense of health care benefits on the accrual method. Employer contributions to
the Pension Plan and various health care plans are in accordance with Federal
income tax regulations.
Executive Benefit Plans
BOK Financial has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock options on the date of grant, no compensation expense is
recorded. BOK Financial has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), included in Note 13.
Fiduciary Services
Fees and commissions on approximately $18 billion of assets managed by BOK
Financial under various fiduciary arrangements are recognized on the accrual
method.
Effect of Pending Statements of Financial Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("FAS 141") and No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS
141 eliminated the pooling of interests method of accounting for business
combinations and provided new definitions for intangible assets that must be
recognized apart from goodwill. FAS 141 was adopted on July 1, 2001. FAS 142
established new rules of accounting for intangible assets. Under these new
rules, intangible assets with indefinite lives such as goodwill will no longer
be amortized but will be subject to impairment testing. Other intangible assets
will continue to be amortized over their useful lives. Subsequent to the
issuance of FAS 142, the FASB issued an interpretation that the unidentifiable
intangible asset that results from certain business combinations, such as branch
acquisitions, must continue to be amortized over periods determined by the
expected lives of the acquired assets and deposits. The FASB is currently
reconsidering this interpretation.
BOK Financial will adopt FAS 142 as of January 1, 2002. Net income and
earnings per fully diluted share for 2001 and 2000 would have been $124.6
million or $2.15 and $105.5 million or $1.84 if FAS 142 had been effective for
those years. During 2002, BOK Financial will perform the first of the required
impairment tests of goodwill. The effect of these tests on earnings and
financial position has not yet been determined.
(2) Acquisitions
On January 11, 2001, BOK Financial paid $91 million to acquire all
outstanding common shares of CNBT Bancshares, Inc. and its subsidiary Citizen
National Bank of Texas in Houston (collectively "CNBT").
This transaction was accounted for by the purchase method of accounting.
Aggregate allocation of the purchase price to the net assets acquired were as
follows (in thousands):
2001
----------------
Cash and cash equivalents $ 17,973
Securities 226,922
Loans 184,461
Less reserve for loan losses 2,300
----------------
Loans, net 182,161
Premises and equipment 10,678
Core deposit premium 13,715
Other assets 4,447
----------------
Total assets acquired 455,896
Deposits:
Noninterest bearing 78,482
Interest bearing 287,305
----------------
Total deposits 365,787
Borrowed funds 41,000
Other liabilities 7,575
----------------
Net assets acquired 41,534
Less purchase price 90,963
----------------
Goodwill $ 49,429
----------------
The following unaudited condensed consolidated pro forma statement of
earnings for BOK Financial presents the effects on income had the purchase
acquisition described above occurred at the beginning of 2000:
Condensed Consolidated Pro Forma Statement of Earnings For
the Year ended December 31, 2000.
(In Thousands Except Per Share Data)
(Unaudited)
Net interest revenue $283,891
Provision for loan losses 18,752
- --------------------------------------------- -------------
Net interest revenue after
provision for loan losses 265,139
Other operating revenue 202,118
Other operating expense 313,970
- --------------------------------------------- -------------
Income before taxes 153,287
Federal and state income tax 48,675
- --------------------------------------------- -------------
Net income $104,612
- --------------------------------------------- -------------
Earnings per share:
Basic net income $2.04
Diluted net income 1.82
- --------------------------------------------- -------------
Average shares:
Basic 50,666
Diluted 57,329
- --------------------------------------------- -------------
There is no material impact to BOK Financial's results of operations in 2001
due to timing of the 2001 acquisition.
(3) Securities
Investment Securities
The amortized cost and fair values of investment securities are as follows
(in thousands):
December 31,
----------------------------------------------------------------------------------------------
2001 2000
----------------------------------------------- ----------------------------------------------
Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized
------------------------ ------------------------
Cost Value Gain Loss Cost Value Gain Loss
----------------------------------------------------------------------------------------------
U.S. Treasury $ 7,982 $ 7,981 $ - $ (1) $ $ $ - $ -
- -
Municipal and other tax-exempt 222,195 223,487 2,634 (1,342) 207,177 207,641 1,847 (1,383)
Mortgage-backed U.S. agency
Securities 7,381 7,620 240 (1) 11,541 11,567 64 (38)
Other debt securities 3,555 3,540 - (15) 14,653 14,659 6 -
- -----------------------------------------------------------------------------------------------------------------------------
Total $241,113 $242,628 $2,874 $(1,359) $233,371 $233,867 $1,917 $(1,421)
- -----------------------------------------------------------------------------------------------------------------------------
The amortized cost and fair values of investment securities at December 31,
2001, by contractual maturity, are as shown in the following table (dollars in
thousands):
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity4
------------ -------------- ------------- ------------- ------------- -------------
U.S. Treasuries:
Amortized cost $ 7,982 $ - $ - $ - $ 7,982 0.10
Fair value 7,981 - - - 7,981
Nominal yield 1.59% - - - 1.59%
Municipal and other tax-exempt:
Amortized cost $60,046 $125,197 $35,047 $1,905 $222,195 2.77
Fair value 60,146 126,364 35,119 1,858 223,487
Nominal yield(1) 6.81% 7.05% 7.72% 9.38% 7.11%
Other debt securities:
Amortized cost $ 346 $ 3,034 $ 125 $ 50 $ 3,555 2.86
Fair value 346 3,034 116 44 3,540
Nominal yield 1.52% 5.42% 7.00% 7.00% 5.12%
------------ -------------- ------------- ------------- ------------- -------------
Total fixed maturity securities:
Amortized cost $68,374 $128,231 $35,172 $1,955 $233,732 2.68
Fair value 68,473 129,398 35,235 1,902 235,008
Nominal yield 6.17% 7.01% 7.72% 9.32% 6.89%
------------ -------------- ------------- -------------
Mortgage-backed securities:
Amortized cost $ 7,381 -(2)
Fair value 7,620
Nominal yield(3) 6.74%
-------------
Total investment securities:
Amortized cost $ 241,113
Fair value 242,628
Nominal yield 6.89%
-------------
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 0.54 years
based upon current prepayment assumptions.
(3) 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.
(4) Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without penalty.
During 2000, BOK Financial sold a mortgage-backed security with a remaining
amortized cost of $175 thousand. The acquisition cost of this security was $4.9
million. Therefore, these sales were permitted under the sales deemed to be at
maturity provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Available for Sale Securities
The amortized cost and fair value of available for sale securities are as
follows (in thousands):
December 31,
----------------------------------------------------------------------------------------------
2001 2000
---------------------------------------------- -----------------------------------------------
Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized
---------------------- ----------------------
Cost Value Gain Loss Cost Value Gain Loss
----------------------------------------------------------------------------------------------
U.S. Treasury $ 34,538 $ 35,197 $ 659 $ - $ 85,656 $ 85,564 $ 71 $ (163)
Municipal and other tax-exempt 4,262 4,299 55 (18) 14,492 14,552 90 (30)
Mortgage-backed securities:
U. S. agencies 2,637,636 2,638,425 26,660 (25,871) 2,050,100 2,046,318 9,340 (13,122)
Other 669,057 673,737 6,270 (1,590) 478,065 486,170 8,183 (78)
- ------------------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 3,306,693 3,312,162 32,930 (27,461) 2,528,165 2,532,488 17,523 (13,200)
- ------------------------------------------------------------------------------------------------------------------------------
Other debt securities 536 538 2 - 242 245 3 -
Equity securities and mutual 93,918 97,353 3,688 (253) 129,823 130,971 2,884 (1,736)
funds
- ------------------------------------------------------------------------------------------------------------------------------
Total $3,439,947 $3,449,549 $37,334 $(27,732) $2,758,378 $2,763,820 $20,571 $(15,129)
- ------------------------------------------------------------------------------------------------------------------------------
The amortized cost and fair values of available for sale securities at
December 31, 2001, by contractual maturity, are as shown in the following table
(dollars in thousands):
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity5
------------- ------------- ------------- ------------- --------------- -----------
U.S. Treasuries:
Amortized cost $ 19,097 $ 15,441 $ - $ - $ 34,538 1.49
Fair value 19,339 15,858 - - 35,197
Nominal yield 5.12% 4.77% - - 4.96%
Municipal and other tax-exempt:
Amortized cost $ 714 $ 2,097 $ 1,451 $ - $ 4,262 3.59
Fair value 708 2,111 1,480 - 4,299
Nominal yield(1) 6.57% 7.43% 8.84% - 7.77%
Other debt securities:
Amortized cost $ - $ 28 $ 97 $ 411 $ 536 15.13
Fair value - 26 98 414 538
Nominal yield(1) - 6.93% 6.30% 6.64% 6.59%
------------- ------------- ------------- ------------- --------------- -----------
Total fixed maturity securities:
Amortized cost $ 19,811 $ 17,566 $ 1,548 $ 411 $ 39,336 1.90
Fair value 20,047 17,995 1,578 414 40,034
Nominal yield 5.17% 5.09% 8.68% 6.64% 5.29%
------------- ------------- ------------- -------------
Mortgage-backed securities:
Amortized cost $3,306,693 -(2)
Fair value 3,312,162
Nominal yield4 5.96%
---------------
Equity securities and mutual funds:
Amortized cost $ 93,918 -(3)
Fair value 97,353
Nominal yield 5.29%
---------------
Total available-for-sale securities:
Amortized cost $ 3,439,947
Fair value 3,449,549
Nominal yield 5.93%
---------------
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 3.66 years
based upon current prepayment assumptions.
(3) Primarily common stock and preferred stock of U.S. Government agencies 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.
(5) Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without penalty.
At December 31, 2001, there were outstanding commitments to buy $277 million
securities that have not yet been issued.
Sales of available for sale securities resulted in gains and losses as
follows (in thousands):
2001 2000 1999
----------- ----------- ----------
Proceeds $9,142,248 $1,677,078 $1,397,956
Gross realized gains 55,418 6,969 4,069
Gross realized losses 24,778 4,910 4,488
Related federal and state
income tax expense 10,724 664 (138)
(benefit)
- --------------------------- ----------- ----------- ----------
In addition to securities that have been reclassified as pledged to
creditors, securities with an amortized cost of $1.9 billion and $1.7 billion at
December 31, 2001 and 2000 have been pledged as collateral for repurchase
agreements, public and trust funds on deposit and for other purposes as required
by law. The secured parties do not have the right to sell or repledge these
securities.
(4) Derivatives
BOK Financial adopted FAS 133 on January 1, 2001. FAS 133 requires all
derivative instruments to be carried on the balance sheet at fair value. Changes
in fair value are generally reported in net income. The transition provisions of
FAS 133 required an initial recording of all derivatives at fair value and a
one-time adjustment of all hedged assets and liabilities to fair value. The
accumulated transition adjustments, net of income taxes, are reported as a
cumulative effect of a change in accounting principles.
FAS 133 provides more restrictive rules for determining when a derivative
instrument qualifies as a hedge than previous generally accepted accounting
principles. Interest rate swaps that converted BOk's $150 million fixed-rate
subordinated debt to floating rate were the only derivative instruments to
qualify for hedge accounting under these new rules. BOk continued to adjust this
subordinated debt to fair value after the initial adoption of FAS 133. Changes
in fair value of the subordinated debt were included in net income.
The interest rate swaps that hedged the BOk subordinated debt were
terminated in May 2001. The cumulative fair value adjustment of the subordinated
debt was $8.0 million at the termination date. This amount will be amortized as
a reduction of the cost of this debt over its remaining life.
Interest Rate Swaps
Fair values of interest rate swaps at December 31, 2001 are reflected in
the table below. Losses from fair value adjustments of interest rate swaps
during 2001 totaled $3.8 million, excluding the FAS 133 transition adjustment.
During 2001 and 2000, net interest revenue was increased by $6.1 million and
$2.2 million, respectively, from the period settlement of amounts receivable or
payable on interest rate swaps.
Interest Rate Swaps (in thousands):
Notional Pay Receive Positive Negative
Amount Rate Rate Fair Value Fair Value
--------------------------------------------------------------------
Expiration:
2002 $ 10,000 1.88(1) 6.88 $ 132 $ -
2004 147,210 1.87(1)- 4.22 1.87(1)- 7.36 5,022 -
2006 495,420 1.88(1)- 5.65 1.87(1)- 5.99 - (7,835)
2007 10,000 7.48 1.88(1) - (229)
2009 5,656 1.87(1)- 4.75 1.87(1)- 4.75 - -
2011 49,059 5.21 - 5.51 1.87(1) - (1,085)
------------------------
$ 5,154 $ (9,149)
------------------------
(1) Rates are variable based on LIBOR and reset monthly, quarterly or
semiannually.
Scheduled repricing periods for the swaps are as follows (notional value in
thousands):
31-90 91-365 Over
Days Days 1 Year Total
---------------------------------------------------------
Pay floating $(422,828) $ - $ - $(422,828)
Receive fixed - - 422,828 422,828
Pay fixed - - (294,518) (294,518)
Receive floating 294,518 - - 294,518
- -------------------------------------------------------------------------------
Total $(128,310) $ - $128,310 $ -
- -------------------------------------------------------------------------------
Energy Derivatives
During 2001 BOK Financial developed a program that permits its
energy-producing customers to hedge against price fluctuations through energy
option and swap contracts. These contracts are executed between BOk and its
customers. Offsetting contracts are executed between BOk and selected energy
dealers. The dealer contracts are identical to the customer contracts, except
for a fixed pricing spread paid to BOk as compensation for administrative costs,
credit risk and profit.
This program creates credit risk for potential amounts due to BOk from the
customers and dealers. Customer credit risk is monitored through existing
lending policies and procedures. The value of energy production is evaluated
across a range of prices to determine a maximum exposure BOk is willing to
accept individually to any customer or collectively to all energy producers.
Dealer credit risk is monitored through existing policies and procedures used to
evaluate counterparty risk. This evaluation considers all relationships between
BOK Financial and each counterparty. Individual limits are established by
management and approved by the Risk Oversight Committee of the Board of
Directors. Margin collateral is required if the exposure to a counterparty
exceeds established limits. BOK Financial had no energy contracts with Enron
Corp.
BOK Financial carries the energy contracts at fair value in other assets
and other liabilities. At December 31, 2001, other assets included $28 million
and other liabilities included $29 million of energy contracts. Changes in fair
value are recorded in income. Closing prices on the New York Mercantile Exchange
are used to determine fair value. At December 31, 2001 losses on derivatives
included a $250 thousand loss from market value adjustments on energy
derivatives.
(5) Loans
Significant components of the loan portfolio are as follows (in thousands):
December 31,
-----------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------ ----------------------------------------------
Fixed Variable Non- Fixed Variable Non-
Rate Rate accrual Total Rate Rate accrual Total
------------------------------------------------ ----------------------------------------------
Commercial $ 739,532 $2,900,143 $35,075 $3,674,750 $ 510,427 $2,700,460 $37,146 $3,248,033
Commercial real estate 411,453 926,466 3,856 1,341,775 331,585 938,748 161 1,270,494
Residential mortgage 575,536 123,404 4,140 703,080 458,562 177,627 1,855 638,044
Residential mortgage - held 166,093 - - 166,093 48,901 - - 48,901
for sale
Consumer 294,099 115,112 469 409,680 192,428 119,463 499 312,390
- ------------------------------------------------------------------------------------------------------------------------------
Total $2,186,713 $4,065,125 $43,540 $6,295,378 $ 1,541,903 $3,936,298 $39,661 $5,517,862
- ------------------------------------------------------------------------------------------------------------------------------
Foregone interest on nonaccrual loans $ 5,163 $ 3,803
- ------------------------------------------------------------------------------------------------------------------------------
The majority of the commercial and consumer loan portfolios and
approximately 74% of the residential mortgage loan portfolio (excluding loans
held for sale) are loans to businesses and individuals in Oklahoma. This
geographic concentration subjects the loan portfolio to the general economic
conditions within this area.
Within the commercial loan classification, loans to energy-related
businesses total $988 million, or 16% of total loans. Other notable segments
include wholesale/ retail, $600 million; manufacturing, $467 million;
agriculture, $171 million, which includes $150 million loans to the cattle
industry; and services, $1.1 billion, which include nursing homes of $162
million, hotels of $69 million and healthcare of $115 million.
Approximately 44% of commercial real estate loans are secured by properties
located in Oklahoma, primarily in the Tulsa or Oklahoma City metropolitan areas.
An additional 29% of commercial real estate loans are secured by property
located in Texas. The major components of these properties are multifamily
residences, $292 million; construction and land development, $327 million;
retail facilities, $220 million; and office buildings, $256 million.
Related Party
Included in loans at December 31 are loans to executive officers, directors
or principal shareholders of BOK Financial, as defined in Regulation S-X of the
Securities and Exchange Commission. Such loans have been made on substantially
the same terms as those prevailing at the time for loans to other customers in
comparable transactions. Information relating to loans to executive officers,
directors or principal shareholders is summarized as follows (in thousands):
2001 2000
------------ ------------
Beginning balance $96,621 $94,861
Advances 12,436 4,040
Payments (17,602) (1,395)
Adjustments (743) (885)
------------------------------- ------------ ------------
Ending balance $90,712 $96,621
------------------------------- ------------ ------------
Adjustments are primarily due to certain individuals being included for the
first time or no longer being included as an executive officer or director of
BOK Financial.
Reserve for Loan Loss
The activity in the reserve for loan losses is summarized as follows (in
thousands):
2001 2000 1999
--------------------------------
Beginning balance $ 82,655 $76,234 $65,922
Provision for loan losses 37,610 17,204 10,365
Loans charged off (25,248) (14,801) (7,348)
Recoveries 4,588 4,018 5,770
Addition due to 2,300 - 1,525
acquisitions
-----------------------------------------------------------
Ending balance $101,905 $82,655 $76,234
-----------------------------------------------------------
Impaired Loans
Investments in loans considered to be impaired under FAS 114 were as follows (in
thousands):
December 31,
--------------------------------
2001 2000 1999
--------------------------------
Investment in loans
impaired
under FAS 114 (all of
which were on a
nonaccrual basis) $39,848 $37,822 $15,600
Loans with specific
reserves
for loss 10,723 19,789 9,084
Specific reserve balance 2,509 7,991 2,468
No specific related reserve
for loss 29,125 18,033 6,516
Average recorded investment
in impaired loans 44,474 27,750 15,300
Interest income recognized on impaired loans during 2001, 2000 and 1999 was not
significant.
Loan Securitization
During 1999, BOK Financial sold approximately $100 million of automobile
loans and retained the right to service the loans and a residual interest in
certain excess cash flows generated by the loans. The proceeds of the sale were
provided by the issuance of debt certificates that totaled $96 million by an
independent special purpose entity. A spread account was maintained by a trustee
to hold excess cash received. Funds were released from the spread account to BOK
Financial as certain criteria were met. At December 31, 2000, the carrying
values of the servicing rights asset and residual interest were $143 thousand
and $5.2 million, respectively. The carrying value of the residual interest
would have been reduced to $5.0 million assuming a 250 basis point increase in
the discount rate and a 25% increase in the assumed default rate on the
underlying loans. During 2001, BOK Financial repurchased the outstanding
principal balance of these loans for $9.0 million. The debt certificates were
redeemed and the servicing rights and residual interest were terminated.
Significant information and assumptions used to determine the value of these
assets at December 31, 2000 were:
Current outstanding loan principal $27,796
Average interest rate on loans sold 11.26%
Current outstanding debt
certificates $23,907
Interest rate on debt certificates 6.07%
Current spread account balance $1,112
Estimated remaining life including
prepayments 18 Months
Discount rates:
Servicing rights 10.00%
Residual interest 12.15%
Delinquency rate 1.81%
Net charge-offs $ 854
Cash distributed to BOK Financial:
Servicing fees $ 419
Return on residual interest $5,741
(6) Premises and Equipment
Premises and equipment at December 31 are summarized as follows (in
thousands):
December 31,
------------------------
2001 2000
----------- ------------
Land $ 28,212 $ 22,838
Buildings and improvements 97,812 82,646
Software 15,457 13,422
Furniture and equipment 101,138 92,566
- ------------------------------------ ----------- -----------
Subtotal 242,619 211,472
Less accumulated depreciation 101,194 79,406
- ------------------------------------ ----------- -----------
Total $ 141,425 $ 132,066
- ------------------------------------ ----------- -----------
Depreciation expense of premises was $21.0 million, $17.3 million and $13.3
million for the years ended December 31, 2001, 2000 and 1999, respectively.
(7) Intangible Assets
The following table presents the original cost and accumulated amortization
of intangible assets (in thousands):
December 31,
-----------------------
2001 2000
----------- -----------
Core deposit premiums $ 71,950 $ 58,235
Less accumulated amortization 49,418 40,572
- ------------------------------------- ----------- -----------
Net core deposit premiums 22,532 17,663
Other unidentifiable intangible assets 38,263 38,263
Less accumulated amortization 19,626 16,624
- ------------------------------------- ----------- -----------
Net other unidentifiable intangible
assets 18,637 21,639
Goodwill 142,746 93,317
Less accumulated depreciation 31,839 23,574
- ------------------------------------- ----------- -----------
Net goodwill 110,907 69,743
- ------------------------------------- ----------- -----------
Total intangible assets, net $152,076 $109,045
- ------------------------------------- ----------- -----------
The net amortized cost of intangible assets at December 31, 2001 is assigned to
reporting units as follows (in thousands):
Core deposit premiums:
Bank of Albuquerque $ 4,945
Bank of Texas 17,587
- ------------------------------------ -----------
$ 22,532
- ------------------------------------ -----------
Other unidentifiable intangible
assets:
Bank of Albuquerque $ 15,273
Bank of Oklahoma 3,364
- ------------------------------------ -----------
$ 18,637
- ------------------------------------ -----------
Goodwill:
Bank of Oklahoma $ 5,550
Bank of Texas 104,863
BOSC, Inc. 494
- ------------------------------------ -----------
$ 110,907
- ------------------------------------ -----------
Expected amortization expense for intangible assets that will continue to be
amortized under FAS 142 (in thousands):
Core Other
Deposit Unidentified
Premiums Intangible Assets Total
-------------- ----------------- -------------
2002 $ 7,020 $ 3,190 $10,210
2003 5,949 1,768 7,717
2004 4,039 1,484 5,523
2005 2,888 1,484 4,372
2006 1,521 1,484 3,005
Thereafter 1,115 9,227 10,342
- ---------------- -------------- ----------------- -------------
$22,532 $18,637 $41,169
- ---------------- -------------- ----------------- -------------
(8) Mortgage Banking Activities
BOK Financial engages in mortgage banking activities through the BOk
Mortgage Division of BOk. Residential mortgage loans held for sale totaled $166
million and $49 million and outstanding mortgage loan commitments totaled $261
million and $123 million at December 31, 2001 and 2000. Mortgage loan
commitments are generally outstanding for 60 to 90 days and 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 hedged through the use of mortgage-backed securities forward sales
contracts. These contracts set the price for loans that will be delivered in the
next 60 to 90 days. At December 31, 2001, the notional amount of forward sales
contracts totaled $208 million, with a fair value of $2.6 million. Mortgage
loans held for sale are carried at the lower of aggregate cost or market value,
including estimated losses on unfunded commitments and gains or losses on
forward sales contracts.
At December 31, 2001, BOk owned the rights to service 88,916 mortgage loans
with outstanding principal balances of $6.6 billion, including $209 million
serviced for BOk, and held related funds of $177 million for investors and
borrowers. The weighted average interest rate and remaining term was 7.30% and
266 months, respectively. Mortgage loans sold with recourse totaled $2.4 million
at December 31, 2001. At December 31, 2000, BOk owned the rights to service
mortgage loans with outstanding principal balances of $6.9 billion and held
related funds of $79 million for investors and borrowers.
The portfolio of mortgage servicing rights exposes BOk to interest rate
risk. During periods of falling interest rates, mortgage loan prepayments
increase, reducing the value of the mortgage servicing rights. During 1998
through the first quarter of 2000, BOk used a combination of futures contracts
and options related to 10-year U.S. Treasury securities to hedge this risk. See
Note 1 for specific accounting policies for mortgage servicing rights and the
related hedges.
Activity in capitalized mortgage servicing rights and related valuation
allowance during 2001, 2000 and 1999 are as follows (in thousands):
Capitalized Mortgage Servicing Valuation Hedging
Rights
-------------------------------------
Purchased Originated Total Allowance (Gain)/Loss Net
-------------------------------------------------------------------------
Balance at December 31, 1998 $65,607 $26,101 $ 91,708 $ - $(22,484) $ 69,224
Additions 16,099 11,483 27,582 - - 27,582
Amortization expense (11,297) (4,266) (15,563) - 734 (14,829)
Realized hedge losses - - - - 28,293 28,293
Unrealized hedge losses - - - - 3,864 3,864
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 70,409 33,318 103,727 - 10,407 114,134
Additions 2,449 11,267 13,716 - - 13,716
Amortization expense (9,497) (4,260) (13,757) - (1,445) (15,202)
Provision for impairment - - - (2,900) - (2,900)
Realized hedge losses - - - - 4,389 4,389
Unrealized hedge gains - - - - (3,346) (3,346)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 63,361 40,325 103,686 (2,900) 10,005 110,791
Additions 4,400 22,695 27,095 - - 27,095
Amortization expense (12,705) (9,409) (22,114) - (1,425) (23,539)
Provision for impairment - - - (15,551) - (15,551)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 $55,056 $53,611 $108,667 $(18,451) $ 8,580 $ 98,796
- --------------------------------------------------------------------------------------------------------------------------
Estimated fair value of mortgage servicing rights at:
December 31, 19991 $83,279 $37,547 $120,826 $120,826
December 31, 20001 $74,400 $42,125 $116,525 $116,525
December 31, 20011 $53,174 $46,789 $ 99,963 $ 99,963
- --------------------------------------------------------------------------------------------------------------------------
1 Excludes approximately, $9 million, $8 million and $5 million at December
31, 1999, 2000 and 2001, respectively, of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
Fair value is determined by discounting the projected net cash flows.
Significant assumptions are:
Discount rate - Risk adjusted rates by loan product, ranging from 9.00% to
20.00%.
Prepayment rate - Annual prepayment estimates ranging from 7.50% to 68.52%
from an independent reporting source based upon loan interest rate, original
term and loan type.
Loan servicing costs - $40 to $50 per loan based upon loan type.
Stratification of the mortgage loan servicing portfolio, outstanding
principal of loans serviced, and related hedging information by interest
rate at December 31, 2001 follows (in thousands):
Greater
than
< 6.50% 6.50% - 7.49% 7.50% - 8.49% 8.50% Total
-------------------------------------------------------------------------
Cost less accumulated amortization $ 17,370 $ 63,181 $ 25,882 $ 2,234 $108,667
Deferred hedge losses - 7,583 997 - 8,580
- -------------------------------------------------------------------------------------------------------------------
Adjusted cost $ 17,370 $ 70,764 $ 26,879 $ 2,234 $117,247
- -------------------------------------------------------------------------------------------------------------------
Fair value $ 15,914 $ 62,097 $ 19,286 $ 2,666 $ 99,963
- -------------------------------------------------------------------------------------------------------------------
Impairment2 $ 2,009 $ 8,689 $ 7,593 $ 160 $ 18,451
- -------------------------------------------------------------------------------------------------------------------
Outstanding principal of loans serviced1 $884,228 $3,746,212 $1,453,738 $191,923 $6,276,101
- -------------------------------------------------------------------------------------------------------------------
1 Excludes outstanding principal of $370 million for loans serviced by BOk for
which there are no capitalized mortgage servicing rights.
2 Impairment is determined by both an interest rate and loan type stratification.
(9) Deposits
Interest expense on deposits is summarized as follows (in thousands):
2001 2000 1999
-----------------------------------
Transaction deposits $ 49,893 $ 55,019 $ 46,510
Savings 2,281 2,703 2,971
Time:
Certificates of
deposits under 61,626 56,570 41,418
$100,000
Certificates of
deposits $100,000 81,524 81,721 49,166
and over
Other time deposits 13,063 12,236 10,556
- -------------------------------------------------------------
Total time 156,213 150,527 101,140
- -------------------------------------------------------------
Total $208,387 $208,249 $150,621
- -------------------------------------------------------------
The aggregate amounts of time deposits in denominations of $100,000 or more
at December 31, 2001 and 2000 were $1.6 billion and $1.4 billion, respectively.
Time deposit maturities are as follows: 2002 - $1.8 billion, 2003 - $186
million, 2004 - $252 million, 2005 - $38 million, 2006 - $529 million, and $345
thousand thereafter.
Interest expense on time deposits during 2001 and 2000 was reduced by net
income from interest rate swaps of $3.1 million and $876 thousand, respectively.
(10) Other Borrowings
Information relating to other borrowings is summarized as follows (dollars
in thousands):
December 31
----------------------------------------------------------------------------------------------
2001 2000
----------------------------------------------------------------------------------------------
Maximum Maximum
Outstanding Outstanding
At Any At Any
Balance Rate Month End Balance Rate Month End
----------------------------------------------------------------------------------------------
Parent Company:
Revolving, unsecured line $ 95,000 2.77% $ 95,000 $ 95,000 7.60% $ 105,000
Subordinated debenture 30,000 3.86 30,000 - - -
Other 95 6.23 132 132 6.23 132
-------------- ------------------
Total parent company 125,095 3.03 95,132 7.60
-------------- ------------------
Subsidiary Banks:
Funds purchased and
repurchase agreements 1,601,989 1.71 1,949,260 1,853,073 7.03 1,853,073
Federal Home Loan Bank
advances 1,096,194 2.37 1,121,494 759,041 6.80 876,909
Subordinated debenture 156,302 6.15 158,890 148,816 7.02 148,816
Other 29,659 2.14 30,320 28,031 5.70 28,031
-------------- ------------------
Total subsidiary bank 2,884,144 2.21 2,788,961 6.95
-------------- ------------------
Total other borrowings $3,009,239 2.28 $2,884,093 6.53
-------------- ------------------
Aggregate annual repayments of long-term debt at December 31, 2001 are as
follows (in thousands):
Parent Subsidiary
Company Banks
---------------------------
2002 $ 95 $2,302,891
2003 - 402,723
2004 95,000 4,325
2005 - 1,247
2006 - 4,782
Thereafter 30,000 168,176
---------------------------
Total $125,095 $2,884,144
---------------------------
Borrowings from the Federal Home Loan Bank are used for funding purposes.
In accordance with policies of the Federal Home Loan Bank, BOK Financial has
granted a blanket pledge of eligible assets (generally unencumbered U.S.
Treasury and mortgage-backed securities, 1-4 family loans and multifamily loans)
as collateral for these advances. The unused credit available to BOK Financial
at December 31, 2001 pursuant to the Federal Home Loan Bank's collateral
policies is $187 million.
BOK Financial has a revolving, unsecured credit agreement from certain
banks at December 31, 2001 with available credit of $122.5 million. Interest is
based on either the London Interbank Offering Rate ("LIBOR") plus a defined
margin that is determined by the principal balance outstanding and BOK
Financial's credit rating or a base rate. The base rate is defined as the
greater of the daily federal funds rate plus 0.5% or the prime rate. Interest is
paid quarterly. Facility fees are paid quarterly on the average daily undrawn
commitment at a rate of 0.20% - 0.30% as determined by BOK Financial's current
debt rating. This credit agreement includes certain restrictive covenants that
limit BOK Financial's ability to borrow additional funds and to pay cash
dividends on common stock. These covenants also require BOK Financial and its
subsidiaries to maintain minimum capital levels and to exceed minimum net worth
ratios. BOK Financial met all of the restrictive covenants at December 31, 2001.
In 1997, BOk issued $150 million of 7.125% fixed rate subordinated
debentures that mature in 2007. Interest rate swaps were used as a fair value
hedge to convert the fixed interest on these debentures to a LIBOR-based
floating rate. This permitted BOk to adjust the carrying value of the
subordinated debentures to fair value. In 2001, the interest rate swaps were
terminated. The related market value adjustment of the subordinated debenture of
$8 million will be recognized over the remaining life of the debt.
BOK Financial issued a $30 million, seven year subordinated debenture,
bearing interest at LIBOR plus 1.75%, on March 23, 2001 to its principal
shareholder George B. Kaiser ("Kaiser").
Funds purchased generally mature within one to ninety days from the
transaction date. At December 31, 2001, securities sold under agreements to
repurchase totaled $1.0 billion with related accrued interest payable of $1.3
million. Additional information relating to repurchase agreements at December
31, 2001 is as follows (dollars in thousands):
Carrying Market Repurchase Average
Security Sold/Maturity Value Value Liability1 Rate
- -------------------------------------------------------------------------------
U.S. Agency Securities:
Overnight $ 590,007 $ 595,594 $ 349,762 1.36%
Term of up to 30 days 45,589 45,842 41,028 1.84
Term of 30 to 90 days 631,234 634,479 625,373 2.01
- ---------------------------------------------------------------------
Total Agency Securities $1,266,830 $1,275,915 $1,016,163 1.78%
- ---------------------------------------------------------------------
1 BOK Financial maintains control over the securities underlying overnight
repurchase agreements and generally transfers control over securities
underlying longer-term dealer repurchase agreements to the respective
counterparty.
(11) Federal and State Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets and liabilities are as follows (in thousands):
December 31,
----------------------
2001 2000
----------------------
Deferred tax liabilities:
Available for sale securities
mark-to-market $ 3,600 $ 4,000
Pension contributions in excess
of book expense 5,200 4,500
Valuation adjustments 17,200 9,300
Mortgage servicing 23,800 20,400
Other 8,100 5,300
- -------------------------------------------------------------
Total deferred tax liabilities 57,900 43,500
- -------------------------------------------------------------
Deferred tax assets:
Available for sale securities
mark-to-market - 1,800
Loan loss reserve 38,900 31,600
Valuation adjustments 15,700 9,700
Book expense in excess of tax 5,200 3,600
Deferred book income 14,500 6,500
Other 6,500 8,400
- -------------------------------------------------------------
Total deferred tax assets 80,800 61,600
- -------------------------------------------------------------
Deferred tax assets in
excess of
deferred tax liabilities $22,900 $18,100
- -------------------------------------------------------------
The Internal Revenue Service closed its examination of 1995 during 1999
with no material impact on the financial statements. In addition, the Internal
Revenue Service closed its examination of 1996 during the first quarter of 2000.
As a result of the outcome of this examination, BOK Financial reduced its
federal income tax expense by $3.0 million. The Internal Revenue Service is
currently examining the carryback of $30.8 million of capital loss generated in
1999. Such loss was applied against capital gains generated in 1997 and 1998,
resulting in a $9.8 million refund. Management expects no material adverse
impact on the financial statements as a result of this examination.
At December 31, 2001, BOK Financial has a capital loss carryforward of $5.6
million for income tax purposes that expires in years 2004 through 2006. The
carryforward results primarily from the hedging losses incurred related to the
mortgage-servicing portfolio. A valuation allowance has not been established
since it is more likely than not that this benefit will be realized.
The significant components of the provision for income taxes attributable
to continuing operations for BOK Financial are shown below (in thousands):
Years ended December 31,
-----------------------------------
2001 2000 1999
-----------------------------------
Current:
Federal $69,971 $37,258 $40,860
State 4,240 1,112 2,948
- ------------------------------------------------------------
Total current 74,211 38,370 43,808
- ------------------------------------------------------------
Deferred:
Federal (8,964) 7,833 559
State (1,635) 1,428 102
- ------------------------------------------------------------
Total deferred (10,599) 9,261 661
- ------------------------------------------------------------
Total income tax $63,612 $47,631 $44,469
- ------------------------------------------------------------
The reconciliations of income attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense are as
follows (in thousands):
Years ended December 31,
-------------------------------
2001 2000 1999
-------------------------------
Amount:
Federal statutory tax $62,887 $51,720 $46,793
Tax exempt revenue (3,600) (3,250) (3,715)
Effect of state income taxes,
net of federal benefit 2,605 2,540 3,050
Goodwill amortization 3,965 3,144 2,987
Utilization of tax credits (800) (600) (786)
Reduction of tax accrual - (3,000) -
Income taxed at shareholder
level - - (1,026)
Other, net (1,445) (2,923) (2,834)
- -------------------------------------------------------------
Total $63,612 $47,631 $44,469
- -------------------------------------------------------------
Years ended December 31,
-------------------------------
2001 2000 1999
-------------------------------
Percent of pretax income:
Federal statutory rate 35% 35% 35%
Tax-exempt revenue (2) (2) (3)
Effect of state income taxes,
net of federal benefit 2 2 3
Goodwill amortization 2 2 2
Utilization of tax credits (1) (1) (1)
Reduction of tax accrual - (2) -
Income taxed at shareholder
level - - (1)
Other, net (1) (2) (2)
- --------------------------------------------------------------
Total 35% 32% 33%
- --------------------------------------------------------------
(12) Employee Benefits
BOK Financial sponsors a defined benefit Pension Plan for all employees who
satisfy certain age and service requirements. The following table presents
information regarding this plan (dollars in thousands):
December 31,
----------------------
2001 2000
----------------------
Change in projected benefit obligation:
Projected benefit obligation, at beginning of year $ 19,837 $ 16,892
Service cost 3,320 3,245
Interest cost 1,527 1,291
Actuarial loss 964 326
Benefits paid (1,507) (1,917)
- --------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 24,141 $ 19,837
- --------------------------------------------------------------------------------
Change in plan assets:
Plan assets at fair value, at beginning of year $ 26,084 $ 25,403
Actual return on plan assets (867) (1,063)
Company contributions 3,597 3,661
Benefits paid (1,507) (1,917)
- --------------------------------------------------------------------------------
Plan assets at fair value at end of year $ 27,307 $ 26,084
- --------------------------------------------------------------------------------
Reconciliation of prepaid (accrued) and total amount recognized:
Benefit obligation $(24,141) $(19,837)
Fair value of assets 27,307 26,084
- --------------------------------------------------------------------------------
Funded status of the plan 3,166 6,247
Unrecognized net loss 9,149 4,412
Unrecognized prior service cost 622 681
- --------------------------------------------------------------------------------
Prepaid pension costs $ 12,937 $ 11,340
- --------------------------------------------------------------------------------
Components of net periodic benefit costs:
Service cost $ 3,320 $ 3,245
Interest cost 1,527 1,291
Expected return on plan assets (2,906) (2,559)
Amortization of unrecognized amounts:
Prior service cost 60 60
- --------------------------------------------------------------------------------
Net periodic pension cost $ 2,001 $ 2,037
- --------------------------------------------------------------------------------
Weighted-average assumptions as of December 31, 2001:
Discount rate 7.50% 8.00%
Expected return on plan assets 10.00% 10.00%
Rate of compensation increase 5.25% 5.25%
Assets of the Pension Plan consist primarily of shares in cash management
funds, common stock and bond funds, and guaranteed investment contract funds.
Benefits are based on the employee's age and length of service.
Employee contributions to the Thrift Plans are matched by BOK Financial up
to 5% of base compensation, based upon years of service. Participants may direct
the investments of their accounts in a variety of options, including BOK
Financial Common Stock. Employer contributions vest over five years. Expenses
incurred by BOK Financial for the Thrift Plans totaled $2.8 million, $2.3
million and $2.4 million for 2001, 2000 and 1999, respectively.
BOK Financial also sponsors a defined benefit post-retirement employee
medical plan which pays 50 percent of annual medical insurance premiums for
retirees who meet certain age and service requirements. Assets of the retiree
medical plan consist primarily of shares in a cash management fund. Eligibility
for the post-retirement plan is limited to current retirees and certain
employees currently age 60 or older at the time the plan was frozen in 1993.
Under various performance incentive plans, participating employees may be
granted awards based on defined formulas or other criteria. Earnings were
charged $27.2 million in 2001, $22.2 million in 2000 and $19.3 million in 1999,
for such awards.
(13) Executive Benefit Plans
The Board of Directors of BOK Financial has approved various stock option
plans. The number of options awarded and the employees to receive the options
are determined by the Chairman of the Board and the President, subject to
approval of the Board of Directors or a committee thereof. None of these plans
have been or are required to be approved by BOK Financial's shareholders.
Options awarded under these plans are subject to vesting requirements.
Generally, one-seventh of the options awarded vest annually and expire three
years after vesting.
The following table presents options outstanding during 1999, 2000 and 2001
under these plans:
Weighted-
Average
Exercise
Number Price
--------------------------
Options outstanding at
December 31, 1998 3,062,623 $13.47
Options awarded 552,569 19.92
Options exercised (447,911) 9.10
Options forfeited (118,706) 14.76
Options expired (603) 9.00
- -------------------------------------------------------------
Options outstanding at
December 31, 1999 3,047,972 15.23
Options awarded 601,855 19.00
Options exercised (229,394) 8.90
Options forfeited (168,644) 16.23
Options expired (847) 7.82
- -------------------------------------------------------------
Options outstanding at
December 31, 2000 3,250,942 16.32
Options awarded 680,666 30.43
Options exercised (603,482) 12.50
Options forfeited (45,687) 17.04
Options expired (996) 17.72
- -------------------------------------------------------------
Options outstanding at
December 31, 2001 3,281,443 $19.88
- -------------------------------------------------------------
Options vested at
December 31, 2001 992,697 $15.17
- -------------------------------------------------------------
The following table summarizes information concerning currently outstanding
and vested options:
Options Outstanding Options Vested
- -------------------------------------------------- ------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Vested Price
- -----------------------------------------------------------------------
$5.92 24,204 0.92 $ 5.92 24,204 $ 5.92
8.80 - 10.59 556,654 2.40 9.63 390,969 9.45
17.66 412,841 3.34 17.66 167,860 17.66
18.98 - 20.79 1,625,407 4.16 19.86 409,664 20.16
30.26 - 31.23 662,337 6.01 30.43 - -
Under APB 25 no compensation expense is recognized at the date of grant
since the exercise price of BOK Financial's employee stock option equals the
market price of the underlying stock on the date of grant.
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires
disclosure of pro forma information regarding net income and earnings per share
as if BOK Financial accounted for employee stock options granted subsequent to
December 31, 1994 under the fair value method of the Statement.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:
2001 2000 1999
--------- --------- ---------
Average risk-free interest 6.04% 5.99% 6.12%
rate
Dividend yield None None None
Volatility factors .195 .194 .192
Weighted-average
expected life 7 years 7 years 7 years
The weighted-average fair value of options granted during 2001, 2000 and
1999 was $6.40, $5.98 and $6.16, respectively. The Black-Scholes option
valuation model was developed for use in estimating the fair value of
traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the expected
stock price volatility. Because BOK Financial's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The following
table represents the required pro forma disclosures for options granted
subsequent to December 31, 1994 (in thousands, except per share data):
20011 20001 19991
-------------------------------
Pro forma net income $ 114,439 $ 98,665 $ 87,536
Pro forma earnings per
share:
Basic $ 2.22 $ 1.92 $ 1.70
Diluted 1.98 1.72 1.52
1 Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
2003.
(14) Commitments and Contingent Liabilities
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 be material in the
aggregate.
BOk is obligated under a long-term lease for its bank premises located in
downtown Tulsa. The lease term, which began November 1, 1976, is for fifty-seven
years with options to terminate in 2013 and 2023. Annual base rent is $3.3
million. BOk subleases portions of its space for annual rents of $406 thousand
in years 2002 through 2003, $388 thousand for 2004, $384 thousand in 2005 and
$213 thousand in 2006. Net rent expense on this lease was $2.9 million in 2001,
$3.1 million in 2000, and $2.8 million in 1999. Total rent expense for BOK
Financial was $11.8 million in 2001, $10.5 million in 2000, and $10.2 million in
1999.
At December 31, 2001, the future minimum lease payments for equipment and
premises under operating leases were as follows: $9.7 million in 2002, $8.9
million in 2003, $8.4 million in 2004, $7.7 million in 2005, $7.0 million in
2006 and a total of $105.5 million thereafter.
BOk and Williams Companies, Inc. guaranteed 30 percent and 70 percent,
respectively, of the $13 million debt, which matures May 15, 2007, and operating
deficit of two parking facilities operated by the Tulsa Parking Authority. Total
expenditures related to this guarantee were $441 thousand in 2001, $319 thousand
in 2000, and $273 thousand in 1999.
The Federal Reserve Bank requires member banks to maintain certain minimum
average cash balances. These balances were approximately $262 million for 2001
and $231 million for 2000.
(15) Financial Instruments with Off-Balance Sheet Risk
BOK Financial is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to manage interest rate risk. Those financial instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized
in BOK Financial's Consolidated Balance Sheets. Exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
notional amount of those instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. At December 31, 2001, outstanding commitments
totaled $2.5 billion. Since some of the 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 on management's credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. Since 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. At December 31, 2001, outstanding
standby letters of credit totaled $249 million.
Commercial letters of credit are used to facilitate customer trade
transactions with the drafts being drawn when the underlying transaction is
consummated. At December 31, 2001, outstanding commercial letters of credit
totaled $8 million.
(16) Shareholders' Equity
Preferred Stock
One billion shares of preferred stock with a par value of $0.00005 per
share are authorized. A single series of 250,000,000 shares designated as Series
A Preferred Stock ("Series A Preferred Stock") is currently issued and
outstanding. The Series A Preferred Stock has no voting rights except as
otherwise provided by Oklahoma corporate law and may be converted into one share
of Common Stock for each 39 shares of Series A Preferred Stock at the option of
the holder. Dividends are cumulative at an annual rate of ten percent of the
$0.06 per share liquidation preference value when declared and are payable in
cash. Aggregate liquidation preference is $15 million. During 2001, 2000 and
1999, 72,141 shares, 88,628 shares and 57,340 shares, respectively, of BOK
Financial common stock were issued in payment of dividends on the Series A
Preferred Stock in lieu of cash by mutual agreement of BOK Financial and the
holders of the Series A Preferred Stock. These shares were valued at $1.5
million in 2001, 2000 and 1999, based on average market price, as defined, for a
65 business day period preceding declaration. Kaiser owns substantially all
Series A Preferred Stock.
Various officers own 125 nonvoting units in an entity owned by BOk. These
units are eligible for an annual, cumulative distribution of $8 per unit and
have a preferred value upon liquidation of $100 per unit.
Common Stock
Common stock consists of 2.5 billion authorized shares with a $0.00006 par
value. Holders of common shares are entitled to one vote per share at the
election of the Board of Directors and on any question arising at any
shareholders' meeting and to receive dividends when and as declared. No common
stock dividends can be paid unless all accrued dividends on the Series A
Preferred Stock have been paid. The present policy of BOK Financial is to retain
earnings for capital and future growth, and management has no current plans to
recommend payment of cash dividends on common stock. Additionally, regulations
restrict the ability of national banks and bank holding companies to pay
dividends, and BOK Financial's credit agreement restricts the payment of
dividends by the holding company.
During 2001 and 1999, 3% dividends payable in shares of BOK Financial
common stock were declared and paid. The shares issued were valued at $35
million and $31 million, respectively, based on the average closing bid/ask
prices on the day preceding declaration. No common stock dividends were paid in
2000. Per share data has been restated to reflect these stock dividends.
Presently, management plans to recommend continued payment of an annual dividend
in shares of common stock.
All share and per share amounts for years previous to 1999 have been
retroactively adjusted for a two-for-one stock split effected in the form of a
stock dividend declared January 26, 1999 for stockholders of record on February
8, 1999.
Subsidiary Banks
The amounts of dividends that BOK Financial's subsidiary banks can declare
and the amounts of loans the subsidiary banks can extend to affiliates are
limited by various federal and state banking regulations. Generally, dividends
declared during a calendar year are limited to net profits, as defined, for the
year plus retained profits for the preceding two years. The amounts of dividends
are further restricted by minimum capital requirements. Pursuant to the most
restrictive of the regulations at December 31, 2001, BOK Financial's subsidiary
banks could declare dividends up to $102 million without prior regulatory
approval. The subsidiary banks declared and paid dividends of $92 million in
2001, $8 million in 2000, and $63 million in 1999.
Loans to a single affiliate may not exceed 10.0% and loans to all
affiliates may not exceed 20.0% of unimpaired capital and surplus, as defined.
Additionally, loans to affiliates must be fully secured. As of December 31, 2001
and 2000, these loans totaled $16 million and $27 million, respectively. The
entire balance of affiliate loans in 2001 was to consolidated entities. Total
loan commitments to affiliates at December 31, 2001 were $82 million.
Regulatory Capital
BOK Financial and its banking subsidiaries are subject to various capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and additional
discretionary actions by regulators that could have a material effect on BOK
Financial's operations. These capital requirements include quantitative measures
of assets, liabilities and certain off-balance sheet items. The capital
standards are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
For a banking institution to qualify as well capitalized, its Tier I, Total
and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. Tier
I capital consists primarily of common stockholders' equity, excluding
unrealized gains or losses on available for sale securities, less goodwill, core
deposit premiums, and certain other intangible assets. Total capital consists
primarily of Tier I capital plus preferred stock, subordinated debt and reserves
for loan losses, subject to certain limitations. All of BOK Financial's banking
subsidiaries exceeded the regulatory definition of well capitalized.
December 31,
-------------------------------------
2001 2000
-------------------------------------
Amount Ratio Amount Ratio
-------------------------------------
(Dollars in thousands)
Total Capital (to Risk Weighted Assets):
Consolidated $959,703 11.56% $823,063 11.23%
BOk 769,031 11.39 700,380 11.43
Bank of Texas 156,380 12.27 105,188 11.66
Bank of Albuquerque 70,969 15.42 60,182 13.23
Bank of Arkansas 12,824 17.29 12,442 15.76
Tier I Capital (to Risk Weighted Assets):
Consolidated $670,600 8.08% $591,185 8.06%
BOk 536,267 7.94 485,492 7.93
Bank of Texas 140,421 11.02 93,899 10.41
Bank of Albuquerque 66,465 14.44 57,560 12.66
Bank of Arkansas 11,886 16.03 11,454 14.51
Tier I Capital (to Average Assets):
Consolidated $670,600 6.38% $591,185 6.51%
BOk 536,267 6.23 485,492 6.59
Bank of Texas 140,421 8.28 93,899 8.58
Bank of Albuquerque 66,465 6.35 57,560 6.32
Bank of Arkansas 11,886 8.99 11,454 8.05
(17) Earnings Per Share
The following table presents the computation of basic and diluted earnings
per share (dollars in thousands except per share data):
Years ended December 31,
--------------------------------------------
2001 2000 1999
--------------------------------------------
Numerator:
Net income $ 116,302 $ 100,140 $ 89,226
Preferred stock dividends (1,500) (1,500) (1,500)
- ----------------------------------------------------------------------------------------------------------------------
Numerator for basic earnings per share - income
available to common stockholders 114,802 98,640 87,726
- ----------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Preferred stock dividends 1,500 1,500 1,500
- ----------------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share - income available
to common stockholders after assumed conversion $ 116,302 $ 100,140 $ 89,226
- ----------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share -weighted average shares 50,972,642 50,665,525 50,598,351
Effect of dilutive securities:
Employee stock options1 631,046 329,544 667,062
Convertible preferred stock 6,333,846 6,333,846 6,333,846
- ----------------------------------------------------------------------------------------------------------------------
Dilutive potential common shares 6,964,892 6,663,390 7,000,908
- ----------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 57,937,534 57,328,915 57,599,259
- ----------------------------------------------------------------------------------------------------------------------
Basic earnings per share $2.25 $1.95 $1.73
- ----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $2.01 $1.75 $1.55
- ----------------------------------------------------------------------------------------------------------------------
1 Excludes employee stock options with exercise price 580,320 1,660,657 611,974
greater than current market price
(18) Reportable Segments
BOK Financial operates four principal lines of business under its Bank of
Oklahoma franchise: corporate banking, consumer banking, mortgage banking and
trust services. It also operates a fifth principal line of business, regional
banks, which includes all banking functions for Bank of Albuquerque, Bank of
Arkansas and Bank of Texas. These five principal lines of business combined
account for approximately 87% of total revenue. Other lines of business include
the TransFund ATM network and BOSC, Inc. The Corporate Banking segment consists
of eight operating units that provide credit and lease financing, deposit and
cash management and international collection services to commercial and
industrial customers and to other financial institutions in Oklahoma and
surrounding states. The Consumer Banking segment consists of two operating units
that provide direct and indirect consumer loans and deposit services to
individuals primarily within Oklahoma. The Mortgage Banking segment consists of
two operating units that originate a full range of mortgage products from
federally sponsored programs to "jumbo loans" on higher priced homes in BOK
Financial's primary market areas. The Mortgage Banking segment also services
mortgage loans acquired from throughout the United States. The Trust Services
segment consists of one operating unit that provides financial services to both
individual and corporate clients. Individual financial services include personal
trust management, administration of estates and management of investment and
custodial accounts. Individual financial services also include lending and
investment services to select individuals. Corporate financial services include
administration of employee benefit plans, transfer and paying agent services and
investment advisory services. Regional Banks include Bank of Arkansas, Bank of
Albuquerque and Bank of Texas.
BOK Financial identifies reportable segments by type of service provided
for the Mortgage Banking and the Trust Services segments and by type of customer
for the Corporate Banking and Consumer Banking segments. Regional Banks are
identified by legal entity. Operating results are adjusted for intercompany loan
participations and allocated service costs and management fees.
BOK Financial evaluates performance and allocates resources based upon a
measurement of performance after the allocation of certain indirect expenses,
taxes and capital cost. Capital is assigned to the lines of business based on an
internal allocation method that reflects management's assessment of risk. An
additional amount of capital is assigned to the regional banks based upon BOK
Financial's investment in these entities. The accounting policies of the
reportable segments generally follow those described in the summary of
significant account policies except interest income is reported on a fully
tax-equivalent basis, loan losses are based on actual net amounts charged off
and the amortization of intangible assets is generally excluded. The cost of
funds provided from one segment to another is transfer-priced at rates that
approximate market for funds with similar duration. Assessment of performance is
based on net interest revenue after internal funds transfer pricing.
Nonreportable business segments include TransFund ATM networks and BOSC,
Inc. The sources of revenue in these segments include interest, commissions
earned on securities transactions, securities trading gains or losses and fees
earned on various banking activities, including merchant discounts and
interchange fees.
Substantially all revenue is from domestic customers. No single external
customer accounts for more than 10% of total revenue.
All
Corporate Consumer Mortgage Trust Regional Other/
(In Thousands) Banking Banking Banking Services Banks Eliminations Total
-----------------------------------------------------------------------------------------------
Year ended December 31, 2001
Net interest
revenue/(expense)
from external sources $ 199,771 $ (34,049) $ 32,545 $ 209 $ 138,846 $ (10,548) $ 326,774
Net interest
revenue/(expense)
from internal sources (86,615) 94,393 (20,867) 13,589 (11,690) 11,190 -
- ----------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 113,156 60,344 11,678 13,798 127,156 642 326,774
Provision for loan losses 10,493 4,171 47 128 5,970 16,801 37,610
Operating revenue 29,506 29,995 52,814 40,855 19,664 59,864 232,698
Financial instruments
gains/(losses) (250) - 12,757 - 484 13,587 26,578
Operating expense 57,322 59,099 47,750 38,534 91,253 59,253 353,211
Provision for impairment of
mortgage servicing rights - - 15,551 - - - 15,551
Income taxes 29,017 10,530 5,408 6,220 18,430 (5,993) 63,612
Transition adjustment of
adoption of FAS 133 - - - - - 236 236
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 45,580 $ 16,539 $ 8,493 $ 9,771 $ 31,651 $ 4,268 $ 116,302
- ----------------------------------------------------------------------------------------------------------------------------
Average assets $3,854,310 $2,192,698 $651,103 $475,715 $3,352,155 $(308,947) $10,217,034
Average equity 442,870 69,102 50,891 41,290 409,622 (234,931) 778,844
Performance measurements:
Return on assets 1.18% 0.75% 1.30% 2.05% 0.94% - 1.14%
Return on equity 10.29 23.93 16.69 23.66 7.73 - 14.93
Efficiency ratio 40.18 65.42 74.04 70.51 62.15 - 63.13
Reconciliation to Consolidated Financial Statements
Net Other Other
Interest Operating Operating Average
Revenue Revenue(1) Expense Assets
--------------------------------------------------
Total reeportable segments $326,132 $172,834 $309,509 $10,525,981
Total nonreportable segments 586 59,829 45,355 30,630
Unallocated items:
Tax-equivalent adjustment 8,045 - - -
Funds management 15,177 (408) 7,946 323,113
All others (including
eliminations), net (23,166) 443 5,952 (662,690)
- --------------------------------------------------------------------------------
BOK Financial consolidated $326,774 $232,698 $368,762 $10,217,034
- --------------------------------------------------------------------------------
(1)Excluding financial instrument gains/(losses)
All
Corporate Consumer Mortgage Trust Regional Other/
(In Thousands) Banking Banking Banking Services Banks Eliminations Total
-----------------------------------------------------------------------------------------------
Year ended December 31, 2000
Net interest
revenue/(expense)
from external sources $ 238,610 $ (46,916) $ 16,434 $ 3,429 $ 105,849 $ (48,519) $ 268,887
Net interest
revenue/(expense)
from internal sources (136,367) 107,172 (15,006) 8,995 (12,709) 47,915 -
- ----------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 102,243 60,256 1,428 12,424 93,140 (604) 268,887
Provision for loan losses 3,658 3,669 57 3 3,532 6,285 17,204
Operating revenue 26,013 26,762 39,740 40,004 13,187 51,138 196,844
Securities gains/(losses) - - 5,257 - (356) (2,842) 2,059
Operating expense 53,451 54,906 37,762 35,916 68,224 49,656 299,915
Provision for impairment of
mortgage servicing rights - - 2,900 - - - 2,900
Income taxes 27,676 11,064 2,220 6,422 12,510 (12,261) 47,631
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 43,471 $ 17,379 $ 3,486 $ 10,087 $ 21,705 $ 4,012 $ 100,140
- ----------------------------------------------------------------------------------------------------------------------------
Average assets $ 3,370,044 $ 2,140,383 $ 412,219 $ 355,150 $ 2,467,530 $ (53,822) $8,691,504
Average equity 392,711 60,813 32,053 37,895 282,223 (197,453) 608,242
Performance measurements:
Return on assets 1.29% 0.81% 0.85% 2.84% 0.88% - 1.15%
Return on equity 11.07 28.58 10.88 26.62 7.69 - 16.46
Efficiency ratio 41.68 63.10 91.73 68.51 64.16 - 64.40
Reconciliation to Consolidated Financial Statements
Other Other
Net Interest Operating Operating Average
Revenue Revenue(1) Expense Assets
--------------------------------------------------------
Total reportable segments $269,491 $145,706 $253,159 $8,745,326
Total nonreportable segments 723 49,660 37,460 28,978
Unallocated items:
Tax-equivalent adjustment 7,853 - - -
Funds management 12,083 914 8,560 199,231
All others (including
eliminations), net (21,263) 564 3,636 (282,031)
- --------------------------------------------------------------------------------
BOK Financial consolidated $268,887 $196,844 $302,815 $8,691,504
- --------------------------------------------------------------------------------
(1)Excluding financial instrument gains/(losses)
All
Corporate Consumer Mortgage Trust Regional Other/
(In Thousands) Banking Banking Banking Services Banks Eliminations Total
--------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Net interest revenue/(expense)
from external sources $ 180,353 $ (27,891) $ 11,626 $ 3,622 $ 72,050 $ (3,636) $ 236,124
Net interest revenue/(expense)
from internal sources (92,844) 80,973 (8,296) 7,243 (10,458) 23,382 -
- --------------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 87,509 53,082 3,330 10,865 61,592 19,746 236,124
Provision for loan losses (1,111) 2,463 82 70 36 8,825 10,365
Operating revenue 27,573 26,826 39,532 36,187 11,462 47,291 188,871
Securities losses - - - - (53) (366) (419)
Operating expense 47,025 53,545 39,422 33,481 60,662 46,381 280,516
Income taxes 26,906 9,298 1,307 5,252 4,447 (2,741) 44,469
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 42,262 $ 14,602 $ 2,051 $ 8,249 $ 7,856 $ 14,206 $ 89,226
- --------------------------------------------------------------------------------------------------------------------------------
Average assets $2,933,619 $ 2,100,368 $355,887 $ 332,297 $ 1,860,667 $ 30,212 $ 7,613,050
Average equity 330,091 58,824 32,006 33,473 214,226 (126,228) 542,392
Performance measurements:
Return on assets 1.44% 0.70% 0.58% 2.48% 0.42% - 1.17%
Return on equity 12.80 24.82 6.41 24.64 3.67 - 16.45
Efficiency ratio 40.86 67.01 91.97 71.16 83.04 - 66.00
Reconciliation to Consolidated Financial Statements
Other Other
Net Interest Operating Operating Average
Revenue Revenue(1) Expense Assets
--------------------------------------------------------
Total reportable segments $216,378 $141,580 $234,135 $7,582,838
Total nonreportable segments 1,210 44,537 35,746 59,505
Unallocated items:
Tax-equivalent adjustment 8,380 - - -
Funds management 29,141 1,057 8,399 148,259
All others (including
eliminations), net (18,985) 1,697 2,236 (177,552)
- --------------------------------------------------------------------------------
BOK Financial consolidated $236,124 $188,871 $280,516 $7,613,050
- --------------------------------------------------------------------------------
(1)Excluding financial instruments gains/(losses)
(19) Fair Value of Financial Instruments
The following table presents the carrying values and estimated fair values
of financial instruments as of December 31, 2001 and 2000 (dollars in
thousands):
Range of Average Estimated
Carrying Contractual Repricing Discount Fair
Value Yields (in years) Rate Value
-------------------------------------------------------------------
2001:
Cash and cash equivalents $ 647,338 $ 647,338
Securities 3,700,989 3,702,504
Loans:
Commercial 3,674,750 2.04 - 17.70% 0.42 1.96 - 4.90% 3,693,209
Commercial real estate 1,341,775 2.25 - 13.90 1.39 4.64 - 4.83 1,402,885
Residential mortgage 703,080 3.81 - 13.00 2.04 4.05 - 7.62 701,349
Residential mortgage - held for sale 166,093 - - - 166,093
Consumer 409,680 2.03 - 21.00 2.73 4.26 - 6.98 438,625
- ----------------------------------------------------------------------------------------------------------------------
Total loans 6,295,378 6,402,161
Reserve for loan losses (101,905) -
- ----------------------------------------------------------------------------------------------------------------------
Net loans 6,193,473 6,402,161
Derivative instruments with positive
fair value 34,131 34,131
Deposits with no stated maturity 4,084,638 - - 4,084,638
Time deposits 2,821,106 1.25 - 7.65 0.64 1.50 - 2.80 2,861,413
Other borrowings 2,822,937 4.17 - 8.51 0.06 1.37 - 3.70 2,824,409
Subordinated debt 186,302 6.03 6.27 5.87 189,775
Derivative instruments with negative
fair value 38,517 38,517
- ----------------------------------------------------------------------------------------------------------------------
2000:
Cash and cash equivalents $ 750,729 $ 750,729
Securities 3,037,056 3,037,552
Loans:
Commercial 3,248,033 4.50 - 17.63% 0.43 6.20 - 9.15% 3,321,380
Commercial real estate 1,270,494 7.00 - 14.00 1.26 8.89 - 9.08 1,262,690
Residential mortgage 638,044 3.81 - 13.40 1.61 7.41 - 7.58 612,616
Residential mortgage - held for sale 48,901 - - - 48,901
Consumer 312,390 4.00 - 21.00 2.35 8.10 - 14.00 302,230
- ----------------------------------------------------------------------------------------------------------------------
Total loans 5,517,862 5,547,817
Reserve for loan losses (82,655) -
- ----------------------------------------------------------------------------------------------------------------------
Net loans 5,435,207 5,547,817
Deposits with no stated maturity 3,372,817 - - - 3,372,817
Time deposits 2,673,188 2.00 - 7.40 0.54 3.55 - 6.49 2,685,773
Other borrowings 2,735,277 5.94 - 9.89 0.14 5.62 - 7.35 2,722,214
Subordinated debt 148,816 7.03 6.27 5.94 165,946
- ----------------------------------------------------------------------------------------------------------------------
The preceding table presents the estimated fair values of financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which involved significant judgments by
management. Fair value is the estimated amount at which financial assets or
liabilities could be exchanged in a current transaction between willing parties,
other than in a
forced or liquidation sale. Because no market exists for certain of these
financial instruments and because management does not intend to sell these
financial instruments, BOK Financial does not know whether the fair values shown
above represent values at which the respective financial instruments could be
sold individually or in the aggregate.
The following methods and assumptions were used in estimating the fair
value of these financial instruments:
Cash and Cash Equivalents
The book value reported in the consolidated balance sheet for cash and
short-term instruments approximates those assets' fair values.
Securities
The fair values of securities are based on quoted market prices or dealer
quotes, when available. If quotes are not available, fair values are based on
quoted prices of comparable instruments.
Derivatives
Fair value is calculated by a third party based on discounted cash flows using a
yield curve and current applicable market rates.
Loans
The fair value of loans, excluding loans held for sale, are based on
discounted cash flow analyses using interest rates currently being offered for
loans with similar remaining terms to maturity and credit risk, adjusted for the
impact of interest rate floors and ceilings. The fair values of classified loans
were estimated to approximate their carrying values less loan loss reserves
allocated to these loans of $29 million and $26 million at December 31, 2001 and
2000, respectively.
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 hedging transactions.
Deposits
The fair values of time deposits are based on discounted cash flow analyses
using interest rates currently being offered on similar transactions. Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments," ("FAS 107") defines the estimated fair value of deposits
with no stated maturity, which includes demand deposits, transaction deposits,
money market deposits and savings accounts, to equal the amount payable on
demand. Although market premiums paid reflect an additional value for these low
cost deposits, FAS 107 prohibits adjusting fair value for the expected benefit
of these deposits. Accordingly, the positive effect of such deposits is not
included in this table.
Other Borrowings and Subordinated Debenture
The fair values of these instruments are based upon discounted cash flow
analyses using interest rates currently being offered on similar instruments.
Off-Balance-Sheet Instruments
The fair values of commercial loan commitments and letters of credit 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 December 31, 2001 and
2000.
(20) Parent Company Only Financial Statements
Summarized financial information for BOK Financial - Parent Company Only
follows:
Balance Sheets
(In Thousands) December 31,
--------------------------
2001 2000
--------------------------
Assets
Cash and cash equivalents $ 12,971 $ 9,755
Securities - available for sale 14,355 12,016
Investment in subsidiaries 926,623 777,054
Other assets 2,029 1,972
- --------------------------------------------------------------------------------
Total assets $955,978 $800,797
- --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Other borrowings $125,095 $ 95,132
Other liabilities 2,400 2,089
- --------------------------------------------------------------------------------
Total liabilities 127,495 97,221
- --------------------------------------------------------------------------------
Preferred stock 25 25
Common stock 3 3
Capital surplus 323,860 278,882
Retained earnings 511,301 431,390
Treasury stock (12,498) (10,044)
Accumulated other comprehensive income 5,792 3,320
- --------------------------------------------------------------------------------
Total shareholders' equity 828,483 703,576
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $955,978 $800,797
- --------------------------------------------------------------------------------
Statements of Earnings
(In Thousands)
2001 2000 1999
-------------------------------------------
Dividends, interest and fees received from $ 91,960 $ 8,082 $63,556
subsidiaries
Other operating revenue 425 637 2,327
- -------------------------------------------------------------------------------------------------
Total revenue 92,385 8,719 65,883
- -------------------------------------------------------------------------------------------------
Interest expense 6,458 7,551 6,225
Personnel expense 2 - 9
Professional fees and services 471 728 600
Other operating expense 265 45 80
- -------------------------------------------------------------------------------------------------
Total expense 7,196 8,324 6,914
- -------------------------------------------------------------------------------------------------
Income before taxes and equity in undistributed
income of subsidiaries 85,189 395 58,969
Federal and state income tax credit (3,092) (3,520) (3,243)
- -------------------------------------------------------------------------------------------------
Income before equity in undistributed income of
subsidiaries 88,281 3,915 62,212
Equity in undistributed income of subsidiaries 28,021 96,225 27,014
- -------------------------------------------------------------------------------------------------
Net income $116,302 $100,140 $89,226
- -------------------------------------------------------------------------------------------------
Statements of Cash Flows
(In Thousands)
2001 2000 1999
-----------------------------------------
Cash flows from operating activities:
Net income $116,302 $100,140 $89,226
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed loss of subsidiaries (28,021) (96,225) (27,014)
Tax benefit on exercise of stock options 3,408 1,010 3,138
Decrease in other assets (57) 1,239 1,036
Decrease in other liabilities 166 (44) (1,980)
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 91,798 6,120 64,406
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of available for sale - - 9,881
securities
Purchases of available for sale securities (1,961) (1,019) -
Investment in subsidiaries (119,309) 3,800 (72,293)
- -------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (121,270) 2,781 (62,412)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in other borrowings 124,963 (10,000) 13,228
Paydown of other borrowings (95,000) - -
Issuance of preferred, common and treasury stock, net 2,745 999 823
Purchase treasury stock - (2,633) (1,574)
Cash dividends (20) (1) (2,744)
- -------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 32,688 (11,635) 9,733
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,216 (2,734) 11,727
Cash and cash equivalents at beginning of period 9,755 12,489 762
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,971 $ 9,755 $12,489
- -------------------------------------------------------------------------------------------------
Payment of dividends in common stock $ 36,371 $ 1,500 $32,192
- -------------------------------------------------------------------------------------------------
Cash paid for interest $ 6,726 $ 7,741 $ 5,933
- -------------------------------------------------------------------------------------------------
BOK FINANCIAL CORPORATION
Annual Financial Summary - Unaudited
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data) 2001
-----------------------------------------------
Average Revenue/ Yield/
Balance Expense1 Rate
-----------------------------------------------
Assets
Taxable securities $2,989,967 $184,464 6.17%
Tax-exempt securities 277,309 19,935 7.19
- ----------------------------------------------------------------------------------------------------------
Total securities 3,267,276 204,399 6.26
- ----------------------------------------------------------------------------------------------------------
Trading securities 18,504 1,200 6.49
Funds sold and resell agreements 18,419 829 4.50
Loans(2) 5,989,224 456,250 7.62
Less reserve for loan losses 92,392 -
- ----------------------------------------------------------------------------------------------------------
Loans, net of reserve 5,896,832 456,250 7.74
- ----------------------------------------------------------------------------------------------------------
Total earning assets 9,201,031 662,678 7.20
- ----------------------------------------------------------------------------------------------------------
Cash and other assets 1,016,003
- ----------------------------------------------------------------------------------------------------------
Total assets $10,217,034
- ----------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Transaction deposits $ 2,267,032 49,893 2.20%
Savings deposits 154,934 2,281 1.47
Time deposits 2,960,170 156,213 5.28
- ----------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 5,382,136 208,387 3.87
- ----------------------------------------------------------------------------------------------------------
Federal funds purchased and repurchase agreements 1,652,467 64,358 3.89
Other borrowed funds 974,907 44,191 4.53
Subordinated debenture 180,211 10,923 6.06
- ----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,189,721 327,859 4.00
- ----------------------------------------------------------------------------------------------------------
Demand deposits 1,102,958
Other liabilities 145,511
Shareholders' equity 778,844
- ----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $10,217,034
- ----------------------------------------------------------------------------------------------------------
Tax-equivalent Net Interest Revenue 334,819 3.20%
Tax-equivalent Net Interest Revenue to Earning Assets 3.64
Less tax-equivalent adjustment 8,045
- ----------------------------------------------------------------------------------------------------------
Net Interest Revenue 326,774
Provision for loan losses 37,610
Other operating revenue 259,640
Other operating expense 368,762
- ----------------------------------------------------------------------------------------------------------
Income before taxes 180,042
Federal and state income tax 63,740
- ----------------------------------------------------------------------------------------------------------
Net Income $116,302
- ----------------------------------------------------------------------------------------------------------
(1) Tax equivalent at the statutory federal and state rates of 38.9% for the
periods presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discontinued and are stated net of unearned income. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
2000 1999
- ----------------------------------------------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense1 Rate Balance Expense1 Rate
- ----------------------------------------------------------------------------------------------
$2,587,183 $167,493 6.47% $2,383,198 $144,901 6.08%
269,731 19,577 7.26 288,094 21,785 7.56
- ----------------------------------------------------------------------------------------------
2,856,914 187,070 6.55 2,671,292 166,686 6.24
- ----------------------------------------------------------------------------------------------
15,633 1,450 9.28 37,508 2,291 6.11
46,219 2,962 6.41 43,373 2,219 5.12
4,934,462 455,101 9.22 4,046,920 337,458 8.34
80,447 72,306
- ----------------------------------------------------------------------------------------------
4,854,015 455,101 9.38 3,974,614 337,458 8.49
- ----------------------------------------------------------------------------------------------
7,772,781 646,583 8.32 6,726,787 508,654 7.56
- ----------------------------------------------------------------------------------------------
918,723 886,263
- ----------------------------------------------------------------------------------------------
$8,691,504 $7,613,050
- ----------------------------------------------------------------------------------------------
$1,889,806 55,019 2.91% $1,717,314 46,510 2.71%
151,870 2,703 1.78 161,484 2,971 1.84
2,495,038 150,527 6.03 1,983,829 101,140 5.10
- ----------------------------------------------------------------------------------------------
4,536,714 208,249 4.59 3,862,627 150,621 3.90
- ----------------------------------------------------------------------------------------------
1,444,830 91,456 6.33 1,146,917 58,665 5.12
889,919 59,701 6.71 812,098 45,530 5.61
148,728 10,437 7.02 148,509 9,334 6.29
- ----------------------------------------------------------------------------------------------
7,020,191 369,843 5.27 5,970,151 264,150 4.42
- ----------------------------------------------------------------------------------------------
980,401 999,311
82,670 101,196
608,242 542,392
- ----------------------------------------------------------------------------------------------
$8,691,504 $7,613,050
- ----------------------------------------------------------------------------------------------
276,740 3.05% 244,504 3.14%
3.56 3.63
7,853 8,380
- ----------------------------------------------------------------------------------------------
268,887 236,124
17,204 10,365
198,903 188,452
302,815 280,516
- ----------------------------------------------------------------------------------------------
147,771 133,695
47,631 44,469
- ----------------------------------------------------------------------------------------------
$100,140 $ 89,226
- ----------------------------------------------------------------------------------------------
BOK FINANCIAL CORPORATION
Quarterly Financial Summary - Unaudited
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data)
Three Months Ended
-------------------------------------------------------------------------
December 31, 2001 September 30, 2001
---------------------------------- ----------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense1 Rate Balance Expense1 Rate
---------------------------------- ----------------------------------
Assets
Taxable securities $3,177,731 $45,777 5.72% $2,869,680 $44,705 6.18%
Tax-exempt securities 238,634 4,274 7.11 265,608 4,554 6.80
-------------------------------------------------------------------------------------- ----------------------------------
Total securities 3,416,365 50,051 5.81 3,135,288 49,259 6.23
-------------------------------------------------------------------------------------- ----------------------------------
Trading securities 22,508 245 4.32 16,498 223 5.36
Funds sold 14,362 85 2.35 14,229 130 3.62
Loans(2) 6,203,512 99,643 6.37 6,065,512 114,165 7.47
Less reserve for loan losses 99,541 - - 93,884 - -
-------------------------------------------------------------------------------------- ----------------------------------
Loans, net of reserve 6,103,971 99,643 6.48 5,971,628 114,165 7.58
-------------------------------------------------------------------------------------- ----------------------------------
Total earning assets 9,557,206 150,024 6.23 9,137,643 163,777 7.11
-------------------------------------------------------------------------------------- ----------------------------------
Cash and other assets 1,008,111 1,007,684
-------------------------------------------------------------------------------------- ----------------------------------
Total assets $10,565,317 $10,145,327
-------------------------------------------------------------------------------------- ----------------------------------
Liabilities and Shareholders' Equity
Transaction deposits $ 2,429,978 9,933 1.62% $ 2,278,393 11,917 2.08%
Savings deposits 158,040 489 1.23 155,908 575 1.46
Other time deposits 2,839,770 30,744 4.30 3,030,759 38,287 5.01
-------------------------------------------------------------------------------------- ----------------------------------
Total interest-bearing deposits 5,427,788 41,166 3.01 5,465,060 50,779 3.69
-------------------------------------------------------------------------------------- ----------------------------------
Federal funds purchased and repurchase agreements 1,701,655 8,813 2.05 1,440,556 12,976 3.57
Other borrowed funds 1,088,792 8,460 3.08 1,019,123 10,711 4.17
Subordinated debenture 186,409 2,764 5.88 186,631 2,871 6.10
-------------------------------------------------------------------------------------- ----------------------------------
Total interest-bearing liabilities 8,404,644 61,203 2.89 8,111,370 77,337 3.78
-------------------------------------------------------------------------------------- ----------------------------------
Demand deposits 1,150,498 1,093,442
Other liabilities 174,891 143,298
Shareholders' equity 835,284 797,217
-------------------------------------------------------------------------------------- ----------------------------------
Total liabilities and shareholders' equity $10,565,317 $10,145,327
-------------------------------------------------------------------------------------- ----------------------------------
Tax-equivalent Net Interest Revenue 88,821 3.34% 86,440 3.33%
Tax-equivalent Net Interest Revenue to Earning Assets 3.69 3.75
Less tax-equivalent adjustment 1,802 1,914
-------------------------------------------------------------------------------------- ----------------------------------
Net Interest Revenue 87,019 84,526
Provision for loan losses 10,517 11,023
Other operating revenue 55,260 76,091
Other operating expense 84,801 103,591
-------------------------------------------------------------------------------------- ----------------------------------
Income before taxes 46,961 46,003
Federal and state income tax 16,829 16,216
-------------------------------------------------------------------------------------- ----------------------------------
Net Income $ 30,132 $ 29,787
-------------------------------------------------------------------------------------- ----------------------------------
Earnings Per Average Common Share Equivalent:
Net income:
Basic $0.58 $0.58
-------------------------------------------------------------------------------------- ----------------------------------
Diluted $0.52 $0.51
-------------------------------------------------------------------------------------- ----------------------------------
(1) Tax equivalent at the statutory federal and state rates of 38.9% for the
periods presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discounted and are stated net of unearned income. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
Three Months Ended
- ---------------------------------------------------------------------------------------------------------------
June 30, 2001 March 31, 2001 December 31, 2000
- ---------------------------------- ----------------------------------- -----------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense1 Rate Balance Expense1 Rate Balance Expense1 Rate
- ---------------------------------- ----------------------------------- -----------------------------------
$3,012,148 $47,080 6.27% $2,910,580 $ 46,902 6.54% $2,654,996 $ 43,345 6.49%
310,517 5,841 7.54 282,656 5,266 7.56 276,478 5,172 7.44
- ---------------------------------- ----------------------------------- -----------------------------------
3,322,665 52,921 6.39 3,193,236 52,168 6.63 2,931,474 48,517 6.58
- ---------------------------------- ----------------------------------- -----------------------------------
16,566 332 8.04 18,421 400 8.81 18,458 405 8.73
17,221 191 4.45 28,063 423 6.11 45,310 788 6.92
5,944,358 117,080 7.90 5,737,543 125,362 8.86 5,265,300 125,854 9.51
89,824 86,156 83,246
- ---------------------------------- ----------------------------------- -----------------------------------
5,854,534 117,080 8.02 5,651,387 125,362 9.00 5,182,054 125,854 9.66
- ---------------------------------- ----------------------------------- -----------------------------------
9,210,986 170,524 7.43 8,891,107 178,353 8.14 8,177,296 175,564 8.54
- ---------------------------------- ----------------------------------- -----------------------------------
1,010,404 999,606 955,024
- ---------------------------------- ----------------------------------- -----------------------------------
$10,221,390 $9,890,713 $9,132,320
- ---------------------------------- ----------------------------------- -----------------------------------
$ 2,222,838 12,821 2.31% $2,133,537 15,222 2.89% $1,910,167 15,646 3.26%
154,312 569 1.48 151,392 648 1.74 143,969 673 1.86
3,009,880 42,161 5.62 2,960,828 45,021 6.17 2,671,285 43,237 6.44
- ---------------------------------- ----------------------------------- -----------------------------------
5,387,030 55,551 4.14 5,245,757 60,891 4.71 4,725,421 59,556 5.01
- ---------------------------------- ----------------------------------- -----------------------------------
1,767,086 19,181 4.35 1,702,913 23,388 5.57 1,625,497 26,823 6.56%
885,922 11,127 5.04 903,264 13,893 6.24 878,209 15,257 6.91
187,299 2,794 5.98 160,144 2,494 6.32 148,794 2,667 7.13
- ---------------------------------- ----------------------------------- -----------------------------------
8,227,337 88,653 4.32 8,012,078 100,666 5.10 7,377,921 104,303 5.62
- ---------------------------------- ----------------------------------- -----------------------------------
1,119,597 1,047,267 1,002,969
116,200 108,514 86,403
758,256 722,854 665,027
- ---------------------------------- ----------------------------------- -----------------------------------
$10,221,390 $9,890,713 $9,132,320
- ---------------------------------- ----------------------------------- -----------------------------------
81,871 3.11% 77,687 3.04% 71,261 2.92%
3.57 3.54 3.47
2,254 2,075 2,069
- ---------------------------------- ----------------------------------- -----------------------------------
79,617 75,612 69,192
8,497 7,573 6,000
60,223 68,066 54,924
86,584 93,786 79,318
- ---------------------------------- ----------------------------------- -----------------------------------
44,759 42,319 38,798
15,778 14,917 13,302
- ---------------------------------- ----------------------------------- -----------------------------------
$28,981 $27,402 $25,496
- ---------------------------------- ----------------------------------- -----------------------------------
$0.56 $0.53 $0.50
- ---------------------------------- ----------------------------------- -----------------------------------
$0.50 ` $0.48 $0.44
- ---------------------------------- ----------------------------------- -----------------------------------
BOK Financial Corporation Board of Directors
C. Fred Ball, Jr. 3
Chairman & CEO Bank of Texas, N.A.
Sharon J. Bell 1
Managing Partner
Rogers & Bell
Peter C. Boylan, III 1 Co-President & COO Gemstar - TV Guide Int'l.
Joseph E. Cappy 1
Chairman, President & CEO
Dollar Thrifty Automotive Group
Luke R. Corbett
Chairman & CEO
Kerr-McGee Corporation
William E. Durrett
Senior Chairman
American Fidelity Corp.
James O. Goodwin 1
Chief Executive Officer
The Oklahoma Eagle
Publishing Company, Inc. LLC
V. Burns Hargis 1
Vice Chairman
BOK Financial Corporation and Bank of Oklahoma, N.A.
Eugene A. Harris 2
Executive Vice President
BOK Financial Corporation and Bank of Oklahoma, N.A.
Howard E. Janzen 1
President & CEO
Williams Communications
E. Carey Joullian, IV 1
President & CEO
Mustang Fuel Corporation
George B. Kaiser 1
Chairman
BOK Financial Corporation and Bank of Oklahoma, N.A.
David L. Kyle 1
Chairman, President & CEO
ONEOK, Inc.
Robert J. LaFortune
Personal Investments
Philip C. Lauinger, Jr.
Chairman & CEO
Lauinger Publishing Co.
John C. Lopez 1
Chairman & CEO
Lopez Foods, Inc.
Stanley A. Lybarger 1,3
President & CEO
BOK Financial Corporation and Bank of Oklahoma, N.A.
Steven J. Malcolm 1,4
President & CEO
Williams
Frank A. McPherson
Retired Chairman & CEO
Kerr-McGee Corporation
Steven E. Moore
Chairman, President & CEO
OGE Energy Corp.
J. Larry Nichols
Chairman, President & CEO
Devon Energy Corporation
Robert L. Parker, Sr.
Chairman of the Board
Parker Drilling Company
James A. Robinson
Personal Investments
L. Francis Rooney, III 1
Chairman and CEO
Manhattan Construction Company
Scott F. Zarrow 1
President
Foreman Investment Capital LLC
1 Director of BOK Financial Corp.
and Bank of Oklahoma, N.A.
2 Director of Bank of Oklahoma, N.A.
3 Director of BOK Financial Corp.
and Bank of Texas, N.A.
4 Advisory pending election at
shareholders meeting April 30
Executive Officers
George B. Kaiser
Chairman of the Board
Stanley A. Lybarger
President &
Chief Executive Officer
V. Burns Hargis
Vice Chairman
Eugene A. Harris
Executive Vice President
Chief Credit Officer
Steven E. Nell
Executive Vice President
Chief Financial Officer
James L. Huntzinger
Senior Vice Presidnet
Chief Investment Officer
John C. Morrow
Senior Vice President
Director of Financial
Accounting & Reporting
Valerie Toalson
Senior Vice President
Corporate Controller
Frederic Dorwart
Secretary
Bank of Albuquerque, N.A.
Gregory K. Symons
Chairman & CEO
Paul A. Sowards
President
Bank of Arkansas, N.A.
Jeffrey R. Dunn
Chairman, President & CEO
Bank of Oklahoma, N.A.
Steven G. Bradshaw
Executive Vice President
Consumer Banking
Chairman, BOSC, Inc.
Paul M. Elvir
Executive Vice President
Operations & Technology
Mark W. Funke
President, Oklahoma City
H. James Holloman
Executive Vice President
Trust Division
David L. Laughlin
President
BOK Mortgage
W. Jeffrey Pickryl
Executive Vice President
Commercial Banking
Charles D. Williamson
Executive Vice President
Capital Markets
Bank of Texas, N.A.
C. Fred Ball, Jr.
Chairman & CEO
Thomas S. Swiley
President
Ralph Williams
President - Houston
Steven D. Poole
President
Bank of Texas Trust Company
Bank of Albuquerque, N.A. Board of Directors
Susan Barker-Kalangis, Esq.
Partner, Modrall,
Sperling, Roehl, Harris and
Sisk P.A.
Steven G. Bradshaw
Executive Vice President
Bank of Oklahoma, N.A.
Douglas M. Brown
President & CEO
Tuition Plan, Inc.
Rudy A. Davolos
Athletic Director
University of New Mexico
William E. Garcia
Sr. Manager, Public Affairs
Intel Corporation
Robert M. Goodman
Vice Chairman
Bank of Albuquerque, N.A.
Thomas D. Growney
President
Tom Growney Equipment, Inc.
Eugene A. Harris
Executive Vice President
BOK Financial Corporation
and Bank of Oklahoma, N.A.
Heather M. Pellerin
Senior Vice President
Bank of Albuquerque, N.A.
W. Jeffrey Pickryl
Executive Vice President
Bank of Oklahoma, N.A.
Michael D. Sivage
Chief Executive Officer
Sivage-Thomas Homes, Inc.
Paul A. Sowards
President
Bank of Albuquerque, N.A.
David L. Sutter
Senior Vice President
Bank of Oklahoma, N.A.
Gregory K. Symons
Chairman & CEO
Bank of Albuquerque, N.A.
Bank of Arkansas, N.A. Board of Directors
John W. Anderson
Senior Vice President
Bank of Oklahoma, N.A.
Jeffrey R. Dunn
Chairman, President & CEO
Bank of Arkansas, N.A.
George C. Faucette, Jr.
President
Coldwell Banker Faucette
Real Estate
Mark W. Funke
President
Bank of Oklahoma-
Oklahoma City
Gerald Jones
President
Jones Motorcars, Inc.
Ronald E. Leffler
Senior Vice President
Bank of Oklahoma, N.A.
Jerry D. Sweetser
Sweetser Properties, Inc.
Bank of Texas, N.A. Board of Directors
C. Thomas Abbott
Vice Chairman
Bank of Texas, N.A.
Charles A. Angel, Jr.
Vice Chairman
Bank of Texas, N.A.
C. Fred Ball, Jr. 2
Chairman & CEO
Bank of Texas, N.A.
C. Huston Bell
President
The Vantage Companies
Edward O. Boshell, Jr.
Columbia General
Investments, L.P.
R. Neal Bright
Managing Partner
Bright & Bright, L.L.P.
Dudley Chambers
Partner,
Jackson & Walker, L.L.P.
H. Lynn Craft
President & CEO
Baptist Foundation of Texas
Edward F. Doran, Sr.
Charles W. Eisemann
Investments
James J. Ellis
Managing Partner
Ellis/Roiser Associates
R. William Gribble, Jr.
President
Gribble Oil Company
J. T. Hairston, Jr.
Investments
Douglas D. Hawthorne
President & CEO
Texas Health Resources
Jerry Lastelick
Attorney
Lastelick, Anderson
and Arneson
Stanley A. Lybarger 2
President & CEO
BOK Financial Corp.
Michael A. McBee
Owner
McBee Operating Co.
Steven Nell1
Chief Financial Officer
BOK Financial Corp.
Thomas S. Swiley
President
Bank of Texas, N.A.
Mrs. Jere W. Thompson
Community Leader
Tom E. Turner 2
Retired Chairman
Bank of Texas, N.A.
John C. Vogt
Investments
Ralph Williams
President
Bank of Texas, N.A. - Houston
1 Park Cities Bancshares, Inc. only
2 Park Cities Bancshares, Inc./
Bank of Texas, N.A.
Major Customer Service Offices
Business Banking Centers
Albuquerque
201 Third St., NW, Suite 1400
(505) 222-8444
Dallas
2650 Royal Lane
(972) 443-2809
Fayetteville
3500 N. College
(479) 973-2660
Houston
5320 Bellaire Blvd.
(713) 578-3400
Oklahoma City
9520 N. May
(405) 936-3700
7701 S. Western
(405) 616-7500
Richardson
333 W. Campbell Rd.
(214) 575-1972
Sherman
307 W. Washington
(903) 891-8106
Tulsa
3237 S. Peoria
(918) 746-7400
Consumer Banking
Albuquerque
4700 Montgomery, NE,
Suite 100
(505) 855-7230
Oklahoma City
2601 N. Meridian
(405) 272-2000
Richardson
333 W. Campbell Rd.
(214) 575-1987
Tulsa
Bank of Oklahoma Tower
One Williams Center, 16th Fl.
(918) 588-6000
Corporate Banking
Albuquerque
201 Third St., NW, Suite 1400
(505) 222-8444
Dallas
5956 Sherry Lane, Suite 1100
(214) 987-8880
Fayetteville
3500 N. College
(479) 973-2660
Houston
2 Houston Center
(713) 289-5844
Oklahoma City
201 Robert S. Kerr
(405) 272-2000
Tulsa
One Williams Center, 8th Fl.
(918) 588-6127
BOSC, Inc.
- -----------
(800) 364-1818
Institutional Investments
Dallas
7600 W. Northwest Hwy.
(214) 706-0382
Houston
2 Houston Center
(713) 289-5847
Little Rock
2200 N. Rodney Parham Rd., Suite 215
(800) 817-2580
Oklahoma City
201 Robert S. Kerr, 4th Fl.
(405) 272-2000
Tulsa
One Williams Center, 9th Fl.
(918) 588-6555
Investment Centers
Albuquerque
2500 Louisiana Blvd., NE,
Suite 100
(505) 837-4122
3901 Southern Blvd.
(505) 837-4122
Dallas
7600 W. Northwest Hwy.
(214) 706-0382
Fayetteville
3500 N. College
(800) 817-2580
Oklahoma City
9520 N. May
(405) 936-3900
Tulsa
3045 S. Harvard
(918) 746-5614
Public Finance
Oppenheim, a division of BOSC, Inc.
Albuquerque
2500 Louisiana Blvd., NE,
Suite 208
(505) 837-4241
Little Rock
2200 N. Rodney Parham Rd.,
Suite 221
(501) 227-3200
Oklahoma City
201 Robert S. Kerr
(405) 272-2383
Corporate Finance
Dallas
5956 Sherry Lane, 7th Fl.
(214) 346-3902
Private Financial Services
Albuquerque
2500 Louisiana Blvd., NE,
Suite 208
(505) 837-4272
Dallas
7600 W. Northwest Hwy.
(214) 706-0373
8255 Walnut Hill Lane
(214) 378-0103
Houston
8 Greenway Plaza, Suite 220
(832) 681-5202
Oklahoma City
9520 N. May, 2nd Fl.
(405) 936-3900
201 Robert S. Kerr
(405) 272-2232
Tulsa
3237 S. Peoria
(918) 746-7487
320 S. Boston
(918) 588-6214
2021 S. Lewis,
Suite 200
(918) 748-7257
6036 S. Yale
(918) 493-5210
Oklahoma
Community Banking
Bartlesville
422 S. Dewey
(918) 335-5300
Enid
2308 N. Van Buren
(580) 548-8500
Eufaula
219 S. Main
(918) 689-2567
Grove
201 S. Main
(918) 787-2700
McAlester
One E. Choctaw
(918) 426-1100
Muskogee
215 S. State
(918) 686-5900
Sand Springs
401 E. Broadway
(918) 241-8000
Trust Services
Bank of Oklahoma
Trust Division
Oklahoma City
9520 N. May, 2nd Floor
(405) 936-3900
Tulsa
One Williams Center, 10th Floor
(918) 588-6437
Southwest
Trust Company
Oklahoma City
9520 N. May, 2nd Floor
(405) 936-3970
Bank of Texas
Trust Division
Dallas
7600 West Northwest Hwy.
(214) 706-0351
5956 Sherry Lane, Suite 1100
(214) 987-8852
Houston
8 Greenway Plaza, Suite 220
(832) 681-5202
Sherman
2009 Independence Dr.
(903) 813-5100
Bank of Albuquerque
Trust Division
Albuquerque
2500 Louisiana Blvd., NE,
Suite 208
(505) 837-4133
Bank of Arkansas
Trust Division
Fayetteville
3500 N. College
(479) 973-2656
Mortgage Services
Arkansas
Bentonville
1706 S.E. Walton Blvd.,
Suite C
(479) 271-6800
Fayetteville
3500 N. College
(479) 973-2600
Kansas
Lenexa
15230 W. 87th St. Parkway
(913) 307-1600
Missouri
Lee's Summit
987 N.E. Rice Rd.
(816) 246-7000
New Mexico
Albuquerque
2500 Louisiana Blvd., NE,
Suite 220
(505) 837-4111
Oklahoma
Edmond
1515 S. Broadway
(405) 272-2307
Enid
2308 N. Van Buren
(580) 548-8528
Lawton
2602 W. Gore Blvd.
(580) 250-0070
Muskogee
215 S. State
(918) 686-5959
Norman
3550 W. Main
(405) 366-3618
Oklahoma City
5015 N. Pennsylvania
(405) 879-8700
7701 S. Western
(405) 879-8700
Owasso
413 E. 2nd Ave.
(918) 588-8650
Tulsa
Copper Oaks
7060 S. Yale, Suite 100
(918) 488-7140
Pine & Lewis
1604 N. Lewis
(918) 588-8608
Texas
Bellaire
5320 Bellaire Blvd.
(713) 578-3438
Dallas
6209 Hillcrest Ave.
(214) 525-5052
Houston
8546 Highway 6 North
(281) 656-3800
Operating Subsidiaries
Bank of Albuquerque, N.A.
Albuquerque
201 Third St., NW, Suite 1400
(505) 222-8469
Bank of Arkansas, N.A.
Fayetteville
3500 N. College
(479) 973-2660
Bank of Oklahoma, N.A.
Oklahoma City
Bank of Oklahoma Plaza
201 Robert S. Kerr
(405) 272-2000
Tulsa
Bank of Oklahoma Tower
One Williams Center
(918) 588-6000
Bank of Texas, N.A.
Dallas
5956 Sherry Lane,
Suite 1100
(214) 987-8880
Houston
5320 Bellaire Blvd.
Bellaire, Texas
(713) 578-3400
Leasing Services
BOKF Equipment Finance, Inc.
Dallas
5956 Sherry Lane, Suite 1100
(214) 987-8864
Shareholder Information
Corporate Headquarters
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
(918) 588-6000
Independent Auditors
Ernst & Young LLP
3900 One Williams Center
Tulsa, Oklahoma 74172
(918) 560-3600
Legal Counsel
Frederic Dorwart Lawyers
Old City Hall
124 E. Fourth St.
Tulsa, Oklahoma 74103-5010
(918) 583-9922
Common Shares:
Traded NASDAQ National Market
NASDAQ Symbol: BOKF
Number of common shareholders of
record at December 31, 2001: 1,077
Market Makers:
CIBC World Markets Corp.
Herzog, Heine, Geduld, Inc.
Howe Barnes Investments
Keefe Bruyette & Woods
Knight Securities LP
Salomon Smith Barney
Schwab Capital Markets
Sherwood Securities
Southwest Securities, Inc.
Spear, Leeds & Kellogg
Stephens, Inc.
Transfer Agent and Registrar
The Bank of New York
(800) 524-4458
Address Shareholder Inquiries to:
Shareholder Relations Department-11E
P.O. Box 11258
Church Street Station
New York, NY 10286
E-Mail Address:
Shareowner-svcs@email.bony.com
Send Certificates for Transfer
and Address Changes to:
Receive and Deliver Department - 11W
P.O. Box 11002
Church Street Station
New York, NY 10286
Copies of BOK Financial Corporation's Annual Report to Shareholders, Quarterly
Reports and Form 10-K to the Securities and Exchange Commission are available
without charge upon written request. Analysts, shareholders and other investors
seeking financial information about BOK Financial Corporation are invited to
contact James F. Ulrich, Senior Vice President, Investor Relations, (918)
588-6752.
Information about BOK Financial is also readily available at our website:
www.bokf.com
Bank of Albuquerque, N.A.
www.bankofalbuquerque.com
Bank of Arkansas, N.A.
www.bankofarkansas.com
Bank of Oklahoma, N.A.
www.bok.com
Bank of Texas, N.A.
www.bankoftexas.com
BOK Financial Corporation
Appendix A
Description Amount CAGR*
Assets $11,130,388 18%
- ----------------------- ----------- -----
Loans 6,295,378 19%
- ----------------------- ----------- -----
Deposits 6,905,744 14%
- ----------------------- ----------- -----
Fee Based Revenue 232,141 17%
- ----------------------- ----------- -----
Net Income 116,302 25%
* CAGR-Compounded annual growth rate from 1991 to 2001.
BOK FINANCIAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Banking Subsidiaries
Bank of Albuquerque, National Association (1)
Bank of Arkansas, National Association (1)
Bank of Oklahoma, National Association (1)
Bank of Texas, National Association (1)
Other subsidiaries of BOK Financial Corporation
BOK Capital Services Corporation
BOK Plaza Holding Corporation
BOSC, Inc.
CNBT Bancshares, Inc.
CNBT Bancshares (Delaware), Inc.
First of Muskogee Insurance Corporation
Park Cities Bancshares, Inc. (3)
Park Cities Corporation (6)
Subsidiaries of Bank of Oklahoma, N.A.
Affiliated BancServices, Inc.
Affiliated Financial Holding Company
Affiliated Financial Insurance Agency, Inc.
Affiliated Financial Life Insurance Company (2)
BancOklahoma Agri-Service Corporation
BancOklahoma Mortgage Corporation
BOK Auto Receivable Corporation
BOK Delaware, Inc. (4)
BOK Equipment Finance, Inc.
BOK Real Estate Trust (3)
BOSC Agency, Inc. (Oklahoma)
BOSC Agency, Inc. (New Mexico) (5)
BOSC Agency, Inc. (Texas) (3)
CVV Management, Inc.
CVV Partnership, an Oklahoma General Partnership
Cottonwood Valley Ventures, Inc.
Investment Concepts, Inc.
Pacesetter Leasing Company
Southwest Trust Company
Subsidiaries of Bank of Texas, N.A.
Bank of Texas Trust Company, National Association (1)
All Subsidiaries listed above were incorporated in Oklahoma, except as noted.
(1) Chartered by the United States Government
(2) Incorporated in Arizona
(3) Incorporated in Texas
(4) Incorporated in Delaware
(5) Incorporated in New Mexico
(6) Incorporated in Nevada
BOK FINANCIAL CORPORATION
Exhibit 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated January 23,
2002, with respect to the consolidated financial statements of BOK Financial
Corporation incorporated by reference in the annual report (Form 10-K) for the
year ended December 31, 2001, in the following registration statements:
o Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer
Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust Agreement.
o Registration Statement (Form S-8, No. 33-44122) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1991 Special Stock Option Plan.
o Registration Statement (Form S-8, No. 33-55312) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1992 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-70102) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1993 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-79834) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1994 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation Directors' Stock Compensation
Plan.
o Registration Statement (Form S-8, No. 333-32649) pertaining to the Reoffer
Prospectus of BOK Financial Corporation 1997 Stock Option Plan.
o Registration Statement (Form S-8, No. 333-93957) pertaining to the Reoffer
Prospectus of BOK Financial Corporation 2000 Stock Option Plan.
o Registration Statement (Form S-8, No. 333-40280 ) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation Thrift Plan for Hourly
Employees.
o Registration Statement (Form S-8, No. 333-62578) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 2001 Stock Option Plan.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
March 27, 2002