As filed with the Securities and Exchange Commission on May 10, 2004
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File No. 0-19341
BOK FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
------------------
Oklahoma 73-1373454
(State or other jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
(Address of Principal Executive Offices) (Zip Code)
(918) 588-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 57,423,244 shares of
common stock ($.00006 par value) as of April 30, 2004.
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2
BOK Financial Corporation
Form 10-Q
Quarter Ended March 31, 2004
Index
Part I. Financial Information
Management's Discussion and Analysis (Item 2) 2
Quantitative and Qualitative Disclosures about Market Risk (Item 3) 18
Controls and Procedures (Item 4) 20
Report of Management on Consolidated Financial Statements 21
Consolidated Financial Statements (Unaudited) (Item 1) 22
Quarterly Financial Summary - Unaudited (Item 2) 31
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 33
Item 6. Exhibits and Reports on Form 8-K 33
Signatures 34
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Summary of Performance
BOK Financial Corporation ("BOK Financial") recorded net income of $39.2 million
or $0.60 per diluted common share for the first quarter of 2004 compared to
$43.5 million or $0.67 per diluted common share for the same period of 2003. The
annualized returns on average assets and equity were 1.16% and 12.59% for the
quarter ended March 31, 2004 compared to returns of 1.43% and 15.80% for the
first quarter of 2003. The decrease in return on average equity between the two
quarters resulted from lower net income and a 12% increase in average
shareholders' equity, which is consistent with the company's strategy of
retaining earnings to support asset growth.
The $4.3 million or 10% decrease in net income was due primarily to a $3.3
million decrease in net after-tax gains on sales of securities and
mark-to-market of derivative contracts and the $1.4 million after-tax cost of
appreciated securities contributed to the BOk Charitable Foundation. In addition
to these changes, net interest revenue increased $7.3 million or 8% due
primarily to earning asset growth. The provision for loan losses decreased $2.9
million due to improvement in credit quality indicators. Fees and commission
revenue grew $3.7 million or 5%, primarily due to increased trust, deposit and
transaction card fees. This growth in fee revenue was partially offset by a 50%
reduction in mortgage banking revenue. Operating expenses, excluding the cost of
securities contributed to the BOk Charitable Foundation, increased $12.8 million
due primarily to higher personnel and data processing costs.
Net Interest Revenue
Tax-equivalent net interest revenue totaled $104.0 million for the first quarter
of 2004 compared to $96.9 million for the same period of 2003. The increase in
net interest revenue was due to a $962 million increase in average earning
assets, partially offset by a 12 basis point decrease in net interest margin.
The growth in average earning assets included a $445 million increase in
securities and a $533 million increase in net loans. The growth in average
earning assets was funded by a $738 million increase in average interest-bearing
liabilities and a $352 million increase in average noninterest-bearing demand
deposits. The growth in interest-bearing liabilities included $531 million in
transaction deposit accounts and $255 million in funds purchased. Table 1
reflects the effects on net interest revenue of changes in average balances and
interest rates for the various types of earning assets and interest-bearing
liabilities.
3
Yields on average earning assets and rates paid on interest-bearing liabilities
both declined in the first quarter of 2004 compared to the first quarter of
2003. The net interest margin, the ratio of tax-equivalent net interest revenue
to average earning assets, declined to 3.45% from 3.57% for the same period of
2003. The decrease in net interest margin was due to yields on earning assets
falling more than rates paid on interest-bearing liabilities. The yield on the
securities portfolio decreased 46 basis points and the yield on the loan
portfolio decreased 35 basis points compared to the previous year. The mix of
earning assets remained constant at 39% securities and 60% loans for both the
first quarter of 2004 and 2003. The cost of interest-bearing liabilities
decreased 28 basis points for the same periods. The effects of declining
interest rates on asset yields and rates paid for the past five quarters are
presented in the Quarterly Financial Summary.
- ------------------------------------------------------------------------------
Table 1 - Volume / Rate Analysis
(In thousands)
Three Months Ended
March 31, 2004 / 2003
-----------------------------------
Change Due To (1)
------------------------
Yield /
Change Volume Rate
-----------------------------------
Tax-equivalent interest revenue:
Securities $ 1,881 $ 6,569 $ (4,688)
Trading securities 110 67 43
Loans 1,924 7,598 (5,674)
Funds sold and resell agreements (67) (90) 23
- ------------------------------------------------------------------------------
Total 3,848 14,144 (10,296)
- ------------------------------------------------------------------------------
Interest expense:
Transaction deposits (1,194) 1,263 (2,457)
Savings deposits (63) 11 (74)
Time deposits (1,334) 72 (1,406)
Federal funds purchased and repurchase
agreements (59) 676 (735)
Other borrowings (503) (201) (302)
Subordinated debentures (84) (7) (77)
- ------------------------------------------------------------------------------
Total (3,237) 1,814 (5,051)
- ------------------------------------------------------------------------------
Tax-equivalent net interest revenue 7,085 12,330 (5,245)
Decrease in tax-equivalent adjustment 206
- ------------------------------------------------------------------------------
Net interest revenue $ 7,291
- ------------------------------------------------------------------------------
(1) Changes attributable to both volume and yield/rate are allocated to both
volume and yield/rate on an equal basis.
BOK Financial follows a strategy of fully utilizing its capital resources by
borrowing funds in the capital markets to supplement deposit growth. The
proceeds of these borrowed funds are invested in securities. The primary
objective of this strategy is to enhance revenue opportunities. In the current
market conditions, this strategy also helps manage our overall 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 deposits. Although this strategy may reduce net interest margin, it provides
positive net interest revenue. We estimate that for the first quarter of 2004,
this strategy enhanced net interest revenue $14.9 million, compared to $13.6
million for the first quarter of 2003. Excluding this strategy, net interest
margin for the first quarter of 2004 was 3.51% compared to 3.62% for the first
quarter of 2003. Average securities purchased and funds borrowed under this
strategy were $1.9 billion in first quarter of 2004 and 2003. As more fully
discussed in the Market Risk section of this report, we employ various
techniques to manage, within certain parameters, the interest rate and liquidity
risks inherent in this strategy. The effectiveness of these techniques is
reflected in the overall change in net interest revenue due to changes in
interest rates as shown in Table 17.
4
Other Operating Revenue
Other operating revenue for the first quarter of 2004 decreased $1.4 million or
2% compared to the first quarter of 2003. Fees and commissions increased $3.7
million or 5% and continue to represent a significant portion of total revenue.
Fees and commissions represented 42% of total revenue, excluding gains and
losses on securities and derivatives, in the first quarter of 2004. This is
compared to 43% for the same period of 2003. Trust fees and commissions grew
$3.5 million or 35% due to increased fair value of assets managed and the
acquisition of Colorado State Bank and Trust ("CSBT") during 2003. The fair
value of trust assets increased 24% to $21 billion compared to a year ago,
including $2.6 billion due to value appreciation and new business and $1.6
billion from the CSBT acquisition. Service charges on deposit accounts increased
$3.2 million or 17% and transaction card revenue increased $2.0 million or 16%.
The growth in transaction card revenue was due to increased volume. Mortgage
banking revenue decreased $7.8 million or 50%. The causes of this decrease are
more fully discussed in the Lines of Business - Mortgage Banking section of this
report.
BOK Financial realized net gains on securities sales of $4.3 million during the
first quarter of 2004 compared to net gains of $9.7 million during the first
quarter of 2003. These amounts included net gains from sales of securities
designated as an economic hedge of the mortgage servicing portfolio of $2.2
million in 2004 compared to net gains of $3.2 million in 2003. The remaining net
gains on sales of securities, which resulted from total return management of the
securities portfolio, were $2.1 million in 2004 compared to net gains of $6.5
million in 2003. The expected duration of the securities portfolio at March 31,
2004 was 3 years, approximately the same as December 31, 2003 and within
established guidelines. Our strategies during the first quarter of 2004 were to
increase the size of the securities portfolio by approximately $200 million and
to continue management of extension risk. Approximately $1.2 billion of sales
proceeds were generated from securities sales during the first quarter and $212
million was received from maturities. A total of $1.6 billion was invested in
the securities portfolio during the quarter.
Net losses on derivatives primarily represent the mark to market of the
derivative portfolio used for interest rate risk management. Additional
discussion regarding BOK Financial's use of derivative instruments is located in
the Market Risk section of this report.
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Table 2 - Other Operating Revenue
(In thousands)
Three Months Ended
-------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
-------------------------------------------------------------------------------
Brokerage and trading revenue $ 10,011 $ 9,259 $ 12,220 $ 10,459 $ 9,214
Transaction card revenue 14,724 14,496 14,260 14,059 12,676
Trust fees and commissions 13,709 12,976 11,762 10,845 10,180
Service charges and fees
on deposit accounts 22,155 22,346 21,106 19,606 18,984
Mortgage banking revenue, net 7,744 7,457 12,735 16,609 15,535
Leasing revenue 887 905 949 795 859
Other revenue 6,624 6,752 7,098 5,555 4,660
- --------------------------------------------------------------------------------------------------------------------------
Total fees and commissions 75,854 74,191 80,130 77,928 72,108
- --------------------------------------------------------------------------------------------------------------------------
Gain on sale of assets 684 70 14 8 730
Gain (loss) on sales of securities, net 4,277 (951) (12,007) 10,457 9,689
Loss on derivatives, net (995) (2,259) (4,709) (1,111) (1,296)
- --------------------------------------------------------------------------------------------------------------------------
Total other operating revenue $ 79,820 $ 71,051 $ 63,428 $ 87,282 $ 81,231
- --------------------------------------------------------------------------------------------------------------------------
Other Operating Expense
Other operating expense for the quarter ended March 31, 2004 totaled $116.0
million, a $16.9 million increase compared to the first quarter of 2003.
Operating expenses in 2004 included a $4.1 million contribution of appreciated
securities to the BOk Charitable Foundation. Operating expenses increased $12.8
million or 13% excluding this contribution.
5
Personnel expense increased $4.4 million or 8% compared to the first quarter of
2003. This increase included $2.6 million from CSBT and $1.6 million from
executive deferred compensation plans. The cost of these plans varies with
changes in the value of BOK Financial common stock, which increased $2.28 or 6%
per share during the first quarter of 2004. Additionally, the cost of these
plans may vary with changes in performance measured against pre-defined targets.
Excluding the effects of the CBST acquisition and the deferred compensation
plans, personnel expense increased $214 thousand to $54.0 million. Regular
compensation expense increased $835 thousand or 2% to $34.7 million. Average
regular compensation per full time equivalent employee ("FTE") increased 6%
while the number of FTE decreased by 108. Incentive compensation, which totaled
$10.3 million, decreased $238 thousand from last year. Employee benefit costs
decreased $396 thousand or 4% to $9.0 million.
Data processing costs increased $2.9 million or 25% due primarily to $1.1
million of expenses related to higher transaction card, trust and deposit
processing volumes. Amortization expense from our new core data processing
system implemented in the fourth quarter of 2003 contributed $566 thousand to
the increase in data processing expense.
Mortgage banking expenses, including the provision for impairment of mortgage
servicing rights, increased $2.9 million compared with the first quarter of
2003. Variations in these expenses, which are both affected by changes in
interest rates, are more fully discussed in the Lines of Business section of
this report.
- ----------------------------------------------------------------------------------------------------------------------
Table 3 - Other Operating Expense
(In thousands)
Three Months Ended
----------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
----------------------------------------------------------------------------------
Personnel $ 58,209 $ 58,639 $ 56,915 $ 53,584 $ 53,784
Business promotion 3,350 3,773 2,912 2,781 3,471
Contribution of stock to
BOk Charitable Foundation 4,125 - - - -
Professional fees and services 3,899 4,312 4,454 5,404 3,765
Net occupancy and equipment 11,851 12,066 11,600 11,240 11,061
Data processing & communications 14,641 13,869 13,008 12,940 11,720
FDIC and other insurance 604 632 589 530 516
Printing, postage and supplies 3,317 3,589 3,459 3,523 3,359
Net gains and operating expenses
on repossessed assets 114 (355) 283 335 8
Amortization of intangible assets 2,138 2,588 1,959 1,777 1,777
Mortgage banking costs 5,843 6,105 8,268 11,481 14,442
Provision (recovery) for impairment
of mortgage servicing rights 3,703 (2,260) (16,186) 3,353 (7,830)
Other expense 4,249 5,363 3,510 4,916 3,082
- ---------------------------------------------------------------------------------------------------------------------
Total $ 116,043 $ 108,321 $ 90,771 $ 111,864 $ 99,155
- ---------------------------------------------------------------------------------------------------------------------
Income Taxes
Income tax expense totaled $20.4 million or 34% of book taxable income for the
first quarter of 2004 compared to $24.2 million or 36% for the same period of
2003. The reduction in income tax expense as a percent of book taxable income
for 2004 reflected the benefit of contributing appreciated securities to the BOk
Charitable Foundation. Excluding this benefit, income tax expense would have
been $21.6 million or 36% of book taxable income.
Lines of Business
BOK Financial operates four principal lines of business under its Bank of
Oklahoma ("BOk") franchise: corporate banking, consumer banking, mortgage
banking and wealth management. It also operates a fifth principal line of
business, regional banks, which includes all banking functions for Bank of
Albuquerque, N.A., Bank of Arkansas, N.A., Bank of Texas, N.A., and Colorado
State Bank and Trust, N.A. In addition to its lines of business, BOK Financial
has a funds management unit. The primary purpose of this unit is to manage the
overall liquidity needs and
6
interest rate risk of the company. Each line of business borrows funds from and
provides funds to the funds management unit as needed to support their
operations.
BOK Financial allocates resources and evaluates performance of its lines of
business after allocation of funds, certain indirect expenses, taxes and capital
costs. The cost of funds borrowed from the funds management unit by the
operating lines of business is transfer priced at rates that approximate market
for funds with similar duration. Market is generally based on the applicable
LIBOR or interest rate swap rates, adjusted for prepayment risk. This method of
transfer-pricing funds that support assets of the operating lines of business
tends to insulate them from interest rate risk.
The value of funds provided by the operating lines of business to the funds
management unit is based on applicable Federal Home Loan Bank advance rates.
Deposit accounts with indeterminate maturities, such as demand deposit accounts
and interest-bearing transaction accounts, are transfer-priced at a rolling
average based on expected duration of the accounts. The expected duration ranges
from 90 days for certain rate-sensitive deposits to five years. Economic capital
is assigned to the business units based on an allocation method that reflects
management's assessment of risk. Management uses a third-party developed capital
allocation model. This model assigns capital based upon credit, operating,
interest rate and market risk inherent in our business lines and recognizes the
diversification benefits among the units. The level of assigned economic capital
is a combination of the risk taken by each business line, based on its actual
exposures and calibrated to its own loss history where possible. Additional
capital is assigned to the regional banks line of business based on BOK
Financial's investment in those entities.
Corporate Banking
The Corporate Banking Division provides loan and lease financing and treasury
and cash management services to businesses principally in Oklahoma. 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
and includes the TransFund ATM network. The Corporate Banking Division
contributed $16.2 million or 41% to consolidated net income for the first
quarter of 2004. This compares to $14.1 million or 32% of consolidated net
income for the first quarter of 2003. Net interest revenue increased $2.2
million or 8% due primarily to a 7% increase in average assets. Other operating
revenue increased $3.1 million or 17% due primarily to a $1.8 million increase
in TransFund revenue. Operating expenses increased to $23.0 million for the
first quarter of 2004 from $21.0 million for the same period of the prior year
primarily due to a $1.4 million increase in TransFund transaction processing
costs.
Table 4 - Corporate Banking
(Dollars in Thousands)
Three months ended March 31,
------------------------------
2004 2003
------------------------------
NIR (expense) from external sources $ 36,305 $ 36,434
NIR (expense) from internal sources (5,629) (8,001)
---------- ----------
Total net interest revenue 30,676 28,433
Other operating revenue 21,664 18,528
Operating expense 23,005 21,022
Net loans charged off 2,765 2,854
Net income 16,235 14,106
Average assets $ 4,642,770 $ 4,325,849
Average equity 334,590 297,100
Return on assets 1.41% 1.32%
Return on equity 19.52% 19.25%
Efficiency ratio 43.95% 44.76%
7
Consumer Banking
The Consumer Banking Division provides a full line of deposit, loan and
fee-based services to customers throughout Oklahoma through four major
distribution channels: traditional branches, supermarket branches, the 24-hour
ExpressBank call center and Online Banking. Additionally, the division is a
significant referral source for the Bank of Oklahoma Mortgage Division ("BOk
Mortgage") and BOSC, Inc.'s retail brokerage division. BOSC, Inc. is a full
service broker/dealer subsidiary of BOK Financial. The Consumer Banking Division
contributed $2.3 million or 6% to consolidated net income for the first quarter
of 2004. This compares to $1.9 million or 4% of consolidated net income for the
first quarter of 2003. Other operating revenue increased $1.8 million, or 16%
over the first quarter of 2003 due primarily to increases in deposit service
charges. Operating expenses increased $1.8 million or 11% due primarily to
growth in personnel costs.
Table 5 - Consumer Banking
(Dollars in Thousands)
Three months ended March 31,
-----------------------------
2004 2003
-----------------------------
NIR (expense) from external sources $ (3,991) $ (4,424)
NIR (expense) from internal sources 14,681 14,521
----------- -----------
Total net interest revenue 10,690 10,097
Other operating revenue 13,017 11,235
Operating expense 18,169 16,360
Net loans charged off 1,789 1,918
Net income 2,291 1,866
Average assets $ 2,650,517 $ 2,447,310
Average equity 62,290 61,820
Return on assets 0.35% 0.31%
Return on equity 14.79% 12.24%
Efficiency ratio 76.64% 76.69%
Mortgage Banking
BOK Financial engages in mortgage banking activities through BOk Mortgage. These
activities include the origination, marketing and servicing of conventional and
government-sponsored mortgage loans. Consolidated mortgage banking revenue,
which is included in other operating revenue, decreased $7.8 million or 50%
compared to the first quarter of 2003. Mortgage servicing revenue fell by $1.4
million due to an 18% decrease in the principal balance of loans serviced for
others. Secondary marketing gains decreased $6.4 million as the volume of loans
funded fell.
BOK Mortgage is comprised of two sectors, loan production and loan servicing.
The loan production sector generally performs best when mortgage interest rates
are low and loan origination volumes are high. Conversely, the loan servicing
sector generally performs best when mortgage interest rates are relatively high
and prepayments are low. A sharp increase in interest rates in mid-2003 from
historic lows significantly reduced the volume of loan applications in
subsequent quarters. This resulted in lower loan production revenue during the
first quarter. Additionally, interest rates decreased slightly during the first
quarter of 2004, which required a provision for impairment of mortgage servicing
rights.
Loan Production Sector
Pre-tax income from loan production decreased to $1.9 million for the first
quarter of 2004 compared to $10.8 million for the previous year's first quarter.
Operating revenue from loan production was $3.9 million in the first quarter of
2004, including $3.2 million of capitalized mortgage servicing rights, compared
to revenue from loan production of $11.1 million in the first quarter of 2003,
including $5.5 million of capitalized mortgage servicing rights. Mortgage loans
funded totaled $160 million in the first quarter of 2004 compared to $331
million during the same period last year. The decrease in loan production
revenue and volume of loans funded reflected the effects of higher interest
rates on refinancing activities. Approximately 43% of loans funded during the
first quarter of 2004 were for refinanced loans compared to 74% for the first
quarter of 2003. The pipeline of mortgage loan applications totaled $300 million
at
8
March 31, 2004, compared to $208 million at the end of the preceding quarter.
Loan Servicing Sector
The loan servicing sector incurred a pre-tax loss of $2.5 million for the first
quarter of 2004 compared to pre-tax income of $4.1 million for the same period
of 2003. This change in pre-tax operating results was due primarily to the
effects of falling interest rates during the first quarter of 2004, which
required a provision for impairment of mortgage servicing rights of $3.7
million. This provision was partially offset by gains on sales of securities
designated as an economic hedge which totaled $2.2 million. During the first
quarter of 2003, rising interest rates resulted in a $7.8 million partial
recovery of the provision for impairment of mortgage servicing rights. We also
recognized gains of $3.2 million from sales of securities designated as an
economic hedge. Changes in interest rates also affected amortization expense,
which is based on both actual and anticipated loan prepayments. Amortization
expense decreased to $5.2 million in 2004 compared to $13.1 million in 2003 due
to rising interest rates and a reduction in loan prepayment speeds relative to a
year ago.
Servicing revenue totaled $4.8 million in 2004 compared to $6.1 million in 2003.
The decrease in servicing revenue was due primarily to a lower outstanding
principal balance of loans serviced. The average outstanding balance of loans
serviced, including loans serviced for BOk, was $4.7 billion for the first
quarter of 2004 compared to $5.6 billion for the first quarter of 2003. The
decrease in loans serviced reflected both the rapid refinancing of mortgage
loans and our decision to curtail purchases of mortgage loan servicing.
The valuation allowance for impairment of mortgage servicing rights totaled $26
million at March 31, 2004 compared to $47 million at March 31, 2003 and $32
million at December 31, 2003. A valuation allowance is provided to reduce the
carrying value of servicing rights to the lower of fair value or amortized cost
segregated by impairment strata. Impairment strata are determined by interest
rate bands and by loan types, either conventional or government-backed. The fair
value of servicing rights is based on estimated revenues that will be generated
over the servicing period, less estimated costs to service the loans. The
valuation allowance may be reversed, in part or in whole, if the fair value of
servicing rights in a particular impairment strata increase or if the amortized
cost of servicing rights in a particular strata decrease. Fair value may
increase if anticipated loan prepayment speeds decrease. Amortized cost of a
particular impairment stratum will decrease through amortization. We
periodically review the various impairment strata to determine whether the
values of the impaired servicing rights are likely to recover. When it becomes
probable that the impairment is other than temporary based on an estimate of
fair values over a range of interest rates and prepayment speeds, a permanent
impairment write-down of the servicing rights is charged against the valuation
allowance. A $10.1 million write-down of mortgage servicing rights against the
valuation allowance was recorded during the first quarter of 2004.
Table 6 - Mortgage Banking
(Dollars in Thousands)
Three months ended March 31,
-----------------------------
2004 2003
-----------------------------
NIR (expense) from external sources $ 5,785 $ 7,689
NIR (expense) from internal sources (3,038) (2,798)
---------- ----------
Total net interest revenue 2,747 4,891
Capitalized mortgage servicing rights 2,696 5,521
Other operating revenue 5,967 12,798
Operating expense 9,966 18,830
Provision (recovery) for impairment of
mortgage servicing rights 3,703 (7,830)
Gains on sales of financial instruments, net 2,233 3,193
Net income (loss) (100) 9,313
Average assets $ 588,758 $ 656,632
Average equity 61,470 36,990
Return on assets (0.07)% 5.75%
Return on equity (0.65)% 102.11%
Efficiency ratio 87.34% 81.13%
9
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
securities and U.S. government agency debentures are acquired and held as
available for sale when prepayment risks exceed certain levels. We may also use
"to be announced" ("TBA") securities as part of our economic hedging strategy.
These TBA securities are considered derivative instruments. Because the fair
values of these securities and derivatives are expected to vary inversely to the
fair value of the servicing rights, they are expected to offset risk. No special
hedge accounting treatment is applicable to either the mortgage servicing rights
or the assets designated as an economic hedge. Changes in fair value of
available for sale securities are recognized in shareholders' equity, net of
taxes, and changes in the fair value of TBA securities are recognized in income.
This hedging strategy presents certain risks. A well-developed market determines
the fair value for securities and related derivatives. However, 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.
At March 31, 2004, assets with a fair value of $220 million were held for the
economic hedge program. The interest rate sensitivity of the mortgage servicing
rights and assets held as a hedge is modeled over a range of +/- 50 basis
points. Additionally, the estimated effect of a +100 basis point change in
interest rates is presented due to the rise in interest rates that has occurred
subsequent to March 31, 2004. At March 31, 2004, the pre-tax results of this
modeling on reported earnings were:
Table 7 - Interest Rate Sensitivity - Mortgage Servicing
(Dollars in Thousands)
50 bp increase 50 bp decrease 100 bp increase
-------------- -------------- ---------------
Anticipated change in:
Fair value of mortgage servicing rights $ 9,308 $ (14,247) $ 15,491
Fair value of hedging securities (7,911) 10,202 (12,790)
----------------------------------------------------
Net $ 1,397 $ (4,045) $ 2,701
----------------------------------------------------
Wealth Management
BOK Financial provides a wide range of financial services through its wealth
management line of business, including trust and private financial services and
brokerage and trading activities. This line of business includes the activities
of BOSC, Inc., a registered broker/dealer. Trust and private financial services
include sales of institutional, investment and retirement products, loans and
other services to affluent individuals, businesses, not-for-profit
organizations, and governmental agencies. Trust services are primarily provided
to clients in Oklahoma, Texas, Arkansas and New Mexico. Trust services provided
through Colorado State Bank and Trust are included in the regional banking line
of business. Additionally, trust services include a nationally competitive,
self-directed 401-(k) program. Brokerage and trading activities within the
wealth management line of business consist of retail sales of mutual funds,
securities and annuities, institutional sales of securities and derivatives,
bond underwriting and other financial advisory services.
Wealth management contributed $2.9 million or 7% to consolidated net income for
the first quarter of 2004 compared to $2.3 million or 5% in the first quarter of
last year. The increase was due primarily to growth in trust fees, which
increased $2.0 million or 19%. At March 31, 2004, the wealth management line of
business was responsible for trust assets with aggregate market values of $19
billion under various fiduciary arrangements, compared to $16 billion a year
ago. The growth in trust assets reflected increased market value of assets
managed in addition to new business generated. We have sole or joint
discretionary authority over $7.7 billion of trust assets at March 31, 2004
compared to $6.7 billion at March 31, 2003.
10
Table 8 - Wealth Management
(Dollars in Thousands)
Three months ended March 31,
-----------------------------
2004 2003
-----------------------------
NIR (expense) from external sources $ 1,038 $ 329
NIR (expense) from internal sources 1,811 2,250
------------- -------------
Total net interest revenue 2,849 2,579
Other operating revenue 22,930 20,485
Operating expense 20,985 19,244
Net income 2,895 2,308
Average assets $ 713,077 $ 637,316
Average equity 73,600 69,370
Return on assets 1.63% 1.47%
Return on equity 15.82% 13.49%
Efficiency ratio 81.40% 83.44%
Regional Banking
Regional banks include Bank of Texas, Bank of Albuquerque, Bank of Arkansas, and
Colorado State Bank and Trust. Each of these banks provides a full range of
corporate and consumer banking services in their respective markets. Regional
banks contributed $13.2 million or 34% to consolidated net income for the first
quarter of 2004. This compares to $9.7 million or 22% of consolidated net income
for the first quarter of 2003.
BOK Financial's operations in Texas, New Mexico, Arkansas and Colorado
contributed $8.7 million, $3.2 million, $585 thousand and $748 thousand,
respectively, to consolidated net income for the first quarter of 2004. This
compared to $6.2 million, $2.7 million, $354 thousand and $498 thousand,
respectively, for the first quarter of 2003. Net income from operations in Texas
increased $2.5 million or 40% compared to last year. Net interest revenue grew
$2.8 million or 12% while operating expenses decreased $392 thousand or 2%. Net
income from operations in New Mexico increased $528 thousand or 20% due
primarily to a $757 thousand or 29% increase in other operating revenue.
Average assets increased $840 million or 18% compared to the first quarter of
2003. This increase included $396 million from the acquisition of Colorado State
Bank and Trust. In addition, a 14% increase in deposits for both Texas and New
Mexico funded asset growth, including increased outstanding loans of 4% in New
Mexico and 3% in Texas.
Table 9 - Regional Banks
(Dollars in Thousands)
Three months ended March 31,
-----------------------------
2004 2003
-----------------------------
NIR (expense) from external sources $ 46,459 $ 38,490
NIR (expense) from internal sources (3,847) (2,932)
------------- ------------
Total net interest revenue 42,612 35,558
Other operating revenue 10,832 7,823
Operating expense 31,571 27,062
Net loans charged off 1,118 1,317
Gains on sales of financial instruments, net - 339
Net income 13,226 9,725
Average assets $ 5,465,683 $ 4,626,151
Average equity 502,550 424,170
Return on assets 0.97% 0.85%
Return on equity 10.58% 9.30%
Efficiency ratio 59.07% 62.38%
11
Discussion and Analysis of Operations
Loans
The aggregate loan portfolio at March 31, 2004 totaled $7.5 billion and
increased $17 million during the quarter. Residential mortgage loans, including
loans held for sale, increased $44 million. This was partially offset by a $17
million reduction in outstanding commercial loans and an $11 million decrease in
commercial real estate loans.
- ---------------------------------------------------------------------------------------------------------------------
Table 10 - Loans
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
---------------------------------------------------------------------------------
Commercial:
Energy $ 1,107,866 $ 1,231,599 $ 1,144,354 $ 1,121,285 $ 1,147,875
Manufacturing 501,296 482,657 531,242 532,849 523,055
Wholesale/retail 717,409 668,202 670,151 693,175 626,362
Agricultural 228,334 228,222 188,925 164,480 163,823
Services 1,400,521 1,383,835 1,303,186 1,247,129 1,254,894
Other commercial and industrial 364,239 342,187 342,364 331,070 297,226
- ---------------------------------------------------------------------------------------------------------------------
Total commercial 4,319,665 4,336,702 4,180,222 4,089,988 4,013,235
- ---------------------------------------------------------------------------------------------------------------------
Commercial real estate:
Construction and land development 451,119 436,087 414,288 363,956 371,680
Multifamily 253,272 271,119 296,136 287,613 306,409
Other real estate loans 914,834 922,886 861,659 812,282 783,674
- ---------------------------------------------------------------------------------------------------------------------
Total commercial real estate 1,619,225 1,630,092 1,572,083 1,463,851 1,461,763
- ---------------------------------------------------------------------------------------------------------------------
Residential mortgage:
Secured by 1-4 family
residential properties 1,032,396 1,015,643 1,002,080 921,320 951,415
Residential mortgages held for sale 83,556 56,543 109,035 144,890 146,092
- ---------------------------------------------------------------------------------------------------------------------
Total residential mortgage 1,115,952 1,072,186 1,111,115 1,066,210 1,097,507
- ---------------------------------------------------------------------------------------------------------------------
Consumer 445,734 444,909 428,136 422,839 403,984
- ---------------------------------------------------------------------------------------------------------------------
Total $ 7,500,576 $ 7,483,889 $ 7,291,556 $ 7,042,888 $ 6,976,489
- ---------------------------------------------------------------------------------------------------------------------
Outstanding loans to energy customers totaled $1.1 billion or 15% of total loans
at March 31, 2004. Approximately $916 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 loan category also included loans to borrowers involved in
the transportation of oil and gas and loans to borrowers that manufacture
equipment and provide other services to the energy industry. The aggregate
outstanding balance of energy loans decreased $124 million or 10% during the
first quarter as currently high prices for oil and natural gas provided cash
flow to the industry. This included a decrease of $76 million in our Oklahoma
markets, $38 million in Texas and $10 million in Colorado. Outstanding loans to
the services industry totaled $1.4 billion at March 31, 2004. Services included
loans that totaled $257 million to nursing homes and $136 million to the
healthcare industry. Agriculture loans, which were unchanged during the quarter,
included $187 million of loans to the cattle industry. Outstanding loans to the
wholesale/retail sector of the portfolio increased $49 million or 7%. Loans to
the manufacturing sector increased $19 million or 4% with growth noted in all
markets. Other notable loan concentrations by primary industry of the borrowers
are presented in Table 10.
Commercial real estate loans totaled $1.6 billion at March 31, 2004 or 22% of
the total loan portfolio. Construction and land development loans increased $15
million. Construction and land development loans included $292 million for
single-family residential lots and premises. Multifamily real estate loans
decreased $18 million or 7% due primarily to a $22 million reduction in
multifamily loans in Texas. The major components of other commercial real estate
loans were office buildings - $306 million and retail facilities - $299 million.
Residential mortgage loans, excluding loans held for sale, included $377 million
of home equity loans, $277 million of loans held for business relationship, $231
million of adjustable rate mortgage loans and $133 million of loans held for
12
community development. Consumer loans included $209 million of indirect
automobile loans. Substantially all of these loans were purchased from dealers
in Oklahoma. Approximately 14% of the indirect automobile loan portfolio was
considered sub-prime.
While BOK Financial continued to increase geographic diversification through
expansion into Texas, New Mexico and Colorado, geographic concentration subjects
the loan portfolio to the general economic conditions in Oklahoma. Table 11
presents the distribution of the major loan categories among BOK Financial's
principal market areas.
- ---------------------------------------------------------------------------------------------------------------------
Table 11 - Loans by Principal Market Area
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
---------------------------------------------------------------------------------
Oklahoma:
Commercial $ 2,811,555 $ 2,802,852 $ 2,713,411 $ 2,754,718 $ 2,613,235
Commercial real estate 833,317 789,868 742,444 770,486 782,842
Residential mortgage 716,512 699,274 691,233 644,942 679,727
Residential mortgage held for sale 83,556 56,543 109,035 144,890 146,092
Consumer 332,036 324,305 313,113 309,632 299,404
---------------------------------------------------------------------------------
Total Oklahoma $ 4,776,976 $ 4,672,842 $ 4,569,236 $ 4,624,668 $ 4,521,300
---------------------------------------------------------------------------------
Texas:
Commercial $ 932,302 $ 963,340 $ 898,075 $ 840,470 $ 889,127
Commercial real estate 460,659 477,561 460,292 444,162 459,605
Residential mortgage 205,163 204,481 197,814 202,423 195,179
Consumer 91,331 101,269 96,668 100,148 91,182
---------------------------------------------------------------------------------
Total Texas $ 1,689,455 $ 1,746,651 $ 1,652,849 $ 1,587,203 $ 1,635,093
---------------------------------------------------------------------------------
Albuquerque:
Commercial $ 317,488 $ 297,896 $ 296,710 $ 297,371 $ 298,051
Commercial real estate 161,529 175,745 167,412 180,000 155,240
Residential mortgage 64,887 66,179 65,853 68,374 71,598
Consumer 10,837 11,070 10,371 10,703 11,040
---------------------------------------------------------------------------------
Total Albuquerque $ 554,741 $ 550,890 $ 540,346 $ 556,448 $ 535,929
---------------------------------------------------------------------------------
Northwest Arkansas:
Commercial $ 58,398 $ 63,480 $ 68,977 $ 58,346 $ 61,805
Commercial real estate 59,181 75,452 77,607 69,203 64,076
Residential mortgage 8,271 6,245 5,209 5,581 4,911
Consumer 2,970 2,671 2,480 2,356 2,358
---------------------------------------------------------------------------------
Total Northwest Arkansas $ 128,820 $ 147,848 $ 154,273 $ 135,486 $ 133,150
---------------------------------------------------------------------------------
Colorado (1):
Commercial $ 199,922 $ 209,134 $ 203,049 $ 139,083 $ 151,017
Commercial real estate 104,539 111,466 124,328 - -
Residential mortgage 37,563 39,464 41,971 - -
Consumer 8,560 5,594 5,504 - -
---------------------------------------------------------------------------------
Total Colorado $ 350,584 $ 365,658 $ 374,852 $ 139,083 $ 151,017
---------------------------------------------------------------------------------
Total BOK Financial loans $ 7,500,576 $ 7,483,889 $ 7,291,556 $ 7,042,888 $ 6,976,489
---------------------------------------------------------------------------------
(1) Includes Denver loan production office.
Other Derivatives with Credit Risk
BOK Financial offers a program that permits its customers to hedge various
risks. Much of the focus of these programs had been on assisting energy
producing customers to hedge against price fluctuations and to take positions
through energy derivative contracts. We have added or expanded programs to
assist customers in managing their interest rate and foreign exchange risks
during 2003. Each of these programs work essentially the same way. Derivative
contracts are executed between the customers and BOk. Offsetting contracts are
executed between BOk and selected
13
counterparties to minimize the risk to us of changes in energy prices, interest
rates or foreign exchange rates. The counterparty contracts are identical to the
customer contracts, except for a fixed pricing spread or fee paid to BOk as
compensation for administrative costs, credit risk and profit.
These programs create credit risk for amounts due to BOk from its customers and
counterparties. Customer and counterparty credit risks are monitored through
existing policies. Margin collateral may be required from customers and
counterparties based on assessment of credit risk.
A deterioration of the credit standing of one or more 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. This could occur if
the credit standing of a counterparty deteriorated such that either the fair
value of energy production no longer supported the contract or the
counterparty's ability to provide margin collateral was impaired.
Derivative contracts are carried at fair value. At March 31, 2004, the fair
value derivative contracts reported as assets under these programs totaled $221
million. This included energy contracts with fair values of $216 million and
foreign exchange contracts with fair values of $5 million. The aggregate fair
values of offsetting liability contracts totaled $223 million. Approximately 65%
of the fair value of asset contracts was with customers. The remaining 35% was
with counterparties. Conversely, approximately 69% of the fair value of
liability contracts was with counterparties. The remaining 31% was due to
various customers. The maximum exposure to any single customer or counterparty
totaled $33 million.
Summary of Loan Loss Experience
The reserve for loan losses, which is available to absorb losses inherent in the
loan portfolio, totaled $130 million at March 31, 2004 compared to $129 million
at December 31, 2003 and $120 million at March 31, 2003. These amounts represent
1.75%, 1.73% and 1.75%, respectively, of total loans, excluding loans held for
sale. 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 reserve for loan losses also represented 280% of
nonperforming loans at March 31, 2004, up from 244% at December 31, 2003 and
236% at March 31, 2003. Net loans charged-off during the first quarter totaled
$5.8 million, compared to $6.3 million in the fourth quarter of 2003 and $6.3
million in the first quarter of 2003. Based on credit quality indicators, the
provision for loan losses was reduced from $9.9 million in the first quarter of
2003 to $7.0 million in the first quarter of 2004. Table 12 presents statistical
information regarding the reserve for loan losses.
- -------------------------------------------------------------------------------------------------------------------
Table 12 - Summary of Loan Loss Experience
(In thousands)
Three Months Ended
--------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
--------------------------------------------------------------------------------
Beginning balance $ 128,639 $ 126,971 $ 122,772 $ 119,699 $ 116,070
Loans charged-off:
Commercial 4,188 3,116 4,362 4,709 4,144
Commercial real estate - 37 46 - 5
Residential mortgage 349 594 590 137 400
Consumer 3,425 3,802 3,158 2,873 3,502
- -------------------------------------------------------------------------------------------------------------------
Total 7,962 7,549 8,156 7,719 8,051
- -------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Commercial 580 111 553 128 95
Commercial real estate 17 2 40 3 8
Residential mortgage 20 6 25 14 38
Consumer 1,517 1,097 1,234 1,144 1,627
- -------------------------------------------------------------------------------------------------------------------
Total 2,134 1,216 1,852 1,289 1,768
- -------------------------------------------------------------------------------------------------------------------
Net loans charged off 5,828 6,333 6,304 6,430 6,283
Provision for loan losses 7,027 8,001 8,220 9,503 9,912
Additions due to acquisitions - - 2,283 - -
- -------------------------------------------------------------------------------------------------------------------
Ending balance $ 129,838 $ 128,639 $ 126,971 $ 122,772 $ 119,699
- -------------------------------------------------------------------------------------------------------------------
Reserve to loans outstanding
at period-end (1) 1.75% 1.73% 1.77% 1.78% 1.75%
Net loan losses (annualized)
to average loans (1) 0.31 0.35 0.36 0.38 0.37
- -------------------------------------------------------------------------------------------------------------------
(1) Excludes residential mortgage loans held for sale.
14
Specific reserves for impairment are determined through evaluation of estimated
future cash flows and collateral value. At March 31, 2004, specific impairment
reserves totaled $3.7 million on total impaired loans of $40 million.
Nonspecific reserves are maintained for risks beyond factors specific to an
individual loan or those identified through migration analysis. A range of
potential losses is determined for each factor identified. At March 31, 2004 the
range of potential losses for the more significant factors was:
General economic conditions $ 6.4 million - $ 9.3 million
Concentration of large loans $ 1.5 million - $ 3.1 million
Evaluation of the loan loss reserve requires a significant level of assumptions
by management including estimation of future cash flows, collateral values,
relevance of historical loss trends to the loan portfolio and assessment of
current economic conditions on the 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 not currently available.
Nonperforming Assets
Information regarding nonperforming assets, which totaled $52 million at March
31, 2004, $60 million at December 31, 2003 and $56 million at March 31, 2003 is
presented in Table 13. Nonperforming assets included nonaccrual loans and
excluded loans 90 days or more past due but still accruing interest. Nonaccrual
loans decreased $6.3 million during the first quarter of 2004, including $9.2
million from cash payments received and $3.4 million from charge-offs and
foreclosure. This decrease was partially offset by newly identified nonaccruing
loans of $7.8 million.
- ---------------------------------------------------------------------------------------------------------------------
Table 13 - Nonperforming Assets
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
----------------------------------------------------------------------
Nonperforming loans:
Nonaccrual loans:
Commercial $ 30,751 $ 41,360 $ 38,253 $ 41,364 $ 39,576
Commercial real estate 5,953 2,311 2,528 4,719 3,585
Residential mortgage 8,649 7,821 8,568 8,323 6,202
Consumer 1,024 1,189 1,439 1,213 1,350
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 46,377 52,681 50,788 55,619 50,713
Other nonperforming assets 5,954 7,186 7,920 5,713 5,350
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 52,331 $ 59,867 $ 58,708 $ 61,332 $ 56,063
- ---------------------------------------------------------------------------------------------------------------------
Ratios:
Reserve for loan losses to
nonperforming loans 279.96% 244.18% 250.00% 220.74% 236.03%
Nonperforming loans to
period-end loans (2) 0.63 0.71 0.71 0.81 0.74
- ---------------------------------------------------------------------------------------------------------------------
Loans past due (90 days) (1) $ 16,376 $ 14,944 $ 12,372 $ 6,996 $ 7,921
- ---------------------------------------------------------------------------------------------------------------------
(1) Includes residential mortgages
guaranteed by agencies of the U.S.
Government. $ 4,420 $ 4,132 $ 4,519 $ 4,669 $ 5,185
(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 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. Known information does, however, cause management to have
concerns as to the borrowers' ability to comply with current repayment terms.
Potential problem loans totaled $69 million at March 31, 2004 compared to $56
million at December 31, 2003 and $56 million at March 31, 2003. At March 31,
2004 the
15
composition of potential problem loans by primary industry categories included
energy and related services - $24 million, healthcare - $10 million and
manufacturing - $10 million.
Deposits
Total deposits increased $146 million to $9.4 billion during the first quarter
of 2004. Demand deposits increased $273 million to $1.9 billion. This increase
was partially offset by a $183 million decrease in interest-bearing transaction
accounts. Core deposits which we define as deposits of less than $100,000
excluding public funds and broker deposits, decreased $78 million or 2%. Public
funds increased $122 million or 20% during the quarter due to the timing of tax
receipts for municipalities and school districts. Brokered deposits decreased
$30 million to $243 million at March 31, 2004. The remaining deposits, which
were comprised of account balances in excess of $100,000 increased $102 million
or 3% during the quarter.
The distribution of deposit accounts among BOK Financial's principal markets is
shown in Table 14. Total deposits grew by $152 million or 2% during the first
quarter primarily in the Oklahoma and Texas markets. This growth was partially
offset by a $23 million decrease in deposits in Northwest Arkansas due primarily
to a decrease in large time deposits.
16
- ---------------------------------------------------------------------------------------------------------------------
Table 14 - Deposits by Principal Market Area
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
---------------------------------------------------------------------------------
Oklahoma:
Demand $ 1,137,710 $ 1,025,483 $ 944,670 $ 1,216,746 $ 1,014,983
Interest-bearing:
Transaction 2,212,752 2,246,675 2,098,537 2,100,705 2,099,096
Savings 101,656 98,611 103,292 107,591 109,954
Time 2,439,732 2,403,293 2,498,235 2,380,844 2,572,531
---------------------------------------------------------------------------------
Total interest-bearing 4,754,140 4,748,579 4,700,064 4,589,140 4,781,581
---------------------------------------------------------------------------------
Total Oklahoma $ 5,891,850 $ 5,774,062 $ 5,644,734 $ 5,805,886 $ 5,796,564
---------------------------------------------------------------------------------
Texas:
Demand $ 562,089 $ 421,292 $ 427,473 $ 412,301 $ 344,228
Interest-bearing:
Transaction 1,087,918 1,213,777 1,064,835 1,004,029 1,023,917
Savings 34,734 35,702 36,594 36,289 36,965
Time 526,082 505,463 507,702 532,402 542,101
---------------------------------------------------------------------------------
Total interest-bearing 1,648,734 1,754,942 1,609,131 1,572,720 1,602,983
---------------------------------------------------------------------------------
Total Texas $ 2,210,823 $ 2,176,234 $ 2,036,604 $ 1,985,021 $ 1,947,211
---------------------------------------------------------------------------------
Albuquerque:
Demand $ 124,557 $ 106,050 $ 103,262 $ 104,896 $ 89,464
Interest-bearing:
Transaction 347,763 370,294 348,579 308,901 307,411
Savings 20,306 20,728 22,720 24,621 27,036
Time 329,063 317,924 306,920 299,877 296,492
---------------------------------------------------------------------------------
Total interest-bearing 697,132 708,946 678,219 633,399 630,939
---------------------------------------------------------------------------------
Total Albuquerque $ 821,689 $ 814,996 $ 781,481 $ 738,295 $ 720,403
---------------------------------------------------------------------------------
Northwest Arkansas:
Demand $ 12,402 $ 16,351 $ 15,788 $ 12,723 $ 11,761
Interest-bearing:
Transaction 24,003 28,411 22,226 21,652 21,756
Savings 1,545 1,341 1,059 1,039 1,269
Time 90,699 105,598 123,789 126,566 135,756
---------------------------------------------------------------------------------
Total interest-bearing 116,247 135,350 147,074 149,257 158,781
---------------------------------------------------------------------------------
Total Northwest Arkansas $ 128,649 $ 151,701 $ 162,862 $ 161,980 $ 170,542
---------------------------------------------------------------------------------
Colorado:
Demand $ 84,505 $ 79,424 $ 75,183 $ - $ -
Interest-bearing:
Transaction 166,179 162,651 164,350 - -
Savings 19,847 18,347 17,140 - -
Time 42,032 42,448 44,871 - -
---------------------------------------------------------------------------------
Total interest-bearing 228,058 223,446 226,361 - -
---------------------------------------------------------------------------------
Total Colorado $ 312,563 $ 302,870 $ 301,544 $ - $ -
---------------------------------------------------------------------------------
Total BOK Financial deposits $ 9,365,574 $ 9,219,863 $ 8,927,225 $ 8,691,182 $ 8,634,720
---------------------------------------------------------------------------------
17
Capital
Shareholders' equity increased $67 million during the first quarter of 2004 and
totaled $1.3 billion at March 31, 2004. The increase was primarily due to net
income for the quarter and a $27 million increase in accumulated other
comprehensive income. The increase in accumulated other comprehensive income
resulted from appreciation in the fair value of BOK Financial's portfolio of
available for sale securities.
BOK Financial and its subsidiary banks are subject to various capital
requirements administered by the federal banking 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 certain off-balance sheet items. The capital standards are also
subject to qualitative judgments by the regulatory agencies about components,
risk weightings and other factors. For a banking institution to qualify as well
capitalized, as defined by the banking agencies, its Tier I, Total and Leverage
capital ratios must be at least 6%, 10% and 5%, respectively. BOK Financial's
capital ratios are presented in Table 15. Additionally, each subsidiary bank
exceeds the regulatory definition of well capitalized.
- ---------------------------------------------------------------------------------------------------------
Table 15 - Capital Ratios
March 31, Dec. 31, Sept. 30, June 30, March 31,
2004 2003 2003 2003 2003
------------------------------------------------------------------------
Average shareholders' equity
to average assets 9.24% 9.06% 9.03% 9.19% 9.02%
Risk-based capital:
Tier 1 capital 9.32 9.15 8.84 9.32 9.20
Total capital 11.45 11.31 11.02 11.85 12.11
Leverage 7.34 7.17 7.03 7.21 7.03
During 2002, BOK Financial issued shares of common stock for its purchase of
Bank of Tanglewood. In addition, BOK Financial agreed to a limited price
guarantee on a portion of the shares issued in this purchase. Pursuant to this
guarantee, any holder of BOK Financial common shares issued in this acquisition
may annually make a claim for the excess of the guaranteed price and the actual
sales price of any shares sold during a 60-day period after each of the first
five anniversary dates after October 25, 2002. The maximum annual number of
shares subject to this guarantee is 203,951. BOK Financial may elect, in its
sole discretion, to issue additional shares of common stock to satisfy any
obligation under the price guarantee or to pay cash.
The following table presents the estimated number of common shares that would be
required to be issued and the cash value equivalent if the market value of BOK
Financial's common stock remained at $41.00, its closing price on March 31,
2004, and if all holders exercised their rights under the price guarantee
agreement.
Cash
Equivalent
of
Additional Additional
Number Shares Shares
Benchmark Benchmark Of To (In
Period Price Shares Issue Thousands)
- ------------------------------------------------------------------------------------------------------------
October 25, 2004 - December 24, 2004 36.30 203,951 - -
October 25, 2005 - December 24, 2005 38.80 203,951 - -
October 25, 2006 - December 24, 2006 41.30 203,951 1,502 62
October 25, 2007 - December 24, 2007 43.81 203,951 13,953 572
18
Quantitative and Qualitative Disclosures about 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 prices, commodity
prices or equity prices. Financial instruments that are subject to market risk
can be classified either as held for trading or held for purposes other than
trading.
BOK Financial is subject to market risk primarily through the effect of changes
in interest rates on both its assets held for purposes other than trading and
trading assets. The effects of other changes, such as foreign exchange rates,
commodity prices or equity prices do not pose significant market risk to BOK
Financial. BOK Financial has no material investments in assets that are affected
by changes in foreign exchange rates or equity prices. Energy derivative
contracts, which are affected by changes in commodity prices, are matched
against offsetting contracts as previously discussed.
Responsibility for managing market risk rests with the Asset / Liability
Committee that operates under policy guidelines established by the Board of
Directors. The acceptable negative variation in net interest revenue, net income
or economic value of equity due to a specified basis point increase or decrease
in interest rates is generally limited by these guidelines to +/- 10%. These
guidelines also set maximum levels for short-term borrowings, short-term assets,
public funds, and brokered deposits, and establish minimum levels for unpledged
assets, among other things. Compliance with these guidelines is reviewed
monthly.
Interest Rate Risk - Other than Trading
BOK Financial has a large portion of its earning assets in variable rate loans
and a large portion of its liabilities in demand deposit accounts and
interest-bearing transaction accounts. Changes in interest rates affect earning
assets more rapidly than interest-bearing liabilities in the short term.
Management has adopted several strategies to reduce this interest rate
sensitivity. As previously noted in the Net Interest Revenue section of this
report, management acquires securities that are funded by borrowings in the
capital markets. These securities have an expected average duration of 3 years
while the related funds borrowed have an average duration of 90 days. Securities
purchased and funds borrowed under this strategy averaged $1.9 billion during
the first quarter of 2004.
Additionally, BOK Financial uses interest rate swaps in managing its interest
rate sensitivity. These products are generally used to more closely match
interest on certain loans with funding sources and long-term certificates of
deposit with earning assets. During the first quarters of 2004 and 2003, net
interest revenue increased $2.4 million and $3.3 million, respectively, from
periodic settlements of these contracts. Additionally, a net loss of $995
thousand was recognized in the first quarter of 2004 compared to a net loss of
$1.3 million in the first quarter of 2003 from adjustments of interest rate
swaps to fair value. Credit risk from these swaps is closely monitored.
Derivative contracts are not used for speculative purposes.
- ---------------------------------------------------------------------------------------------------------------------
Table 16 - Interest Rate Swaps
(In Thousands)
Notional Pay Receive Positive Negative
Amount Rate Rate Fair Value Fair Value
-----------------------------------------------------------------------------------------------------
Expiration:
2004 $19,444 1.11%(1) - 4.22% 1.09%(1) - 6.98% $ 9 $ (30)
2006 30,771 1.09%(1) - 5.43% 1.09%(1) - 2.10% 75 (1,012)
2007 285,000 1.09%(1) - 1.11%(1) 3.10% - 4.51% 3,238 -
2008 112,000 1.09%(1) 2.08% - 5.99% 1,576 -
2009 10,000 1.09%(1) 3.26% 30 -
2010 10,000 1.09%(1) 3.77% 104 -
2011 66,587 1.09%(1) - 5.51% 1.09%(1) - 4.10% 725 (2,702)
- ---------------------------------------------------------------------------------------------------------------------
$ 5,757 $ (3,744)
-----------------------------------
(1) Rates are variable based on LIBOR and reset monthly or quarterly.
The effectiveness of these strategies in managing the overall interest rate risk
is evaluated through the use of an asset/liability model. BOK Financial performs
a sensitivity analysis to identify more dynamic interest rate risk exposures,
including embedded option positions, on net interest revenue, net income and
economic value of equity. A
19
simulation model is used to estimate the effect of changes in interest rates
over the next twelve months based on eight interest rate scenarios. Three
specified interest rate scenarios are used to evaluate interest rate risk
against policy guidelines. These are a "most likely" rate scenario and two
"shock test" scenarios, first assuming a sustained parallel 200 basis point
increase and second assuming a sustained parallel 100 basis point decrease in
interest rates. Management historically evaluated interest rate sensitivity for
a sustained 200 basis point decrease in rates. However, these results are not
meaningful in the current low-rate environment. An independent source is used to
determine the most likely interest rate scenario.
BOK Financial's primary interest rate exposures included the Federal Funds rate,
which affects short-term borrowings, and the prime lending rate and the London
Interbank Offering Rate, which are the basis for much of the variable-rate loan
pricing. Additionally, mortgage rates directly affect 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. The model incorporates assumptions regarding
the effects of changes in interest rates and account balances on indeterminable
maturity deposits based on a combination of historical analysis and expected
behavior. The impact of planned growth and new business activities is factored
into the simulation model. The effects of changes in interest rates on the value
of mortgage servicing rights are excluded from Table 17 due to the extreme
volatility over such a large rate range. The effects of interest rate changes on
the value of mortgage servicing rights and securities identified as economic
hedges are presented in the Lines of Business - Mortgage Banking section of this
report.
The simulations used to manage market risk are based on numerous assumptions
regarding the effects of changes in interest rates on the timing and extent of
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, market conditions and management strategies, among other factors.
Table 17 - Interest Rate Sensitivity
(Dollars in Thousands)
Increase Decrease
-------------------------- --------------------------- ------------------------
200 bp 100 bp Most Likely
-------------------------- --------------------------- ------------------------
2004 2003 2004 2003 2004 2003
-------------------------- --------------------------- ------------------------
Anticipated impact over the
next twelve months:
Net interest revenue $ 10,538 $ 12,724 $ (6,630) $ (8,050) $ 4,088 $ 5,178
2.5% 3.1% (1.6)% (1.9)% 1.0% 1.3%
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 6,586 $ 7,953 $ (4,144) $ (5,031) $ 2,555 $ 3,237
3.7% 4.9% (2.3)% (3.1)% 1.4% 2.0%
- ----------------------------------------------------------------------------------------------------------------------
Economic value of equity $ (51,535) $ 20,145 $ (15,362) $ (49,972) $ (12,185) $ 46,077
(3.2)% 1.4% (1.0)% (3.5)% (0.8)% 3.2%
- ----------------------------------------------------------------------------------------------------------------------
Trading Activities
BOK Financial enters into trading activities both as an intermediary for
customers and for its own account. As an intermediary, BOK Financial will take
positions in securities, generally 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 bonds and financial futures
for its own account. 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.
20
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 / covariance 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 VAR to $1.6 million. At March 31, 2004, the VAR was $865 thousand. The
greatest value at risk during the first quarter of 2004 was $1.3 million.
Controls and Procedures
As required by Rule 13a-15(b), BOK Financial's management, including the Chief
Executive Officer and Chief Financial Officer, conducted an evaluation as of the
end of the period covered by their report, of the effectiveness of the company's
disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective as
of the end of the period covered by this report. As required by Rule 13a-15(d),
BOK Financial's management, including the Chief Executive Officer and Chief
Financial Officer, also conducted an evaluation of the company's internal
controls over financial reporting to determine whether any changes occurred
during the quarter covered by this report that have materially affected, or are
reasonably likely to materially affect, the company's internal controls over
financial reporting. Based on that evaluation, there has been no such change
during the quarter covered by this report.
Forward-Looking Statements
This report contains forward-looking statements that are based on management's
beliefs, assumptions, current expectations, estimates, and projections about BOK
Financial, the financial services industry and the economy in general. Words
such as "anticipates," "believes," "estimates," "expects," "forecasts," "plans,"
"projects," variations of such words and similar expressions are intended to
identify such forward-looking statements. Management judgments relating to and
discussion of the provision and 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.
21
Report of Management on Consolidated Financial Statements
Management is responsible for the unaudited consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States and all related information in this report. In
management's opinion, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial conditions, results of operations and
cash flows of BOK Financial and its subsidiaries at the dates and for the
periods presented.
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, critical accounting policies and
practices, and various shareholder reports and other reports and filings.
The financial information included in this interim report has been prepared by
management without audit by independent public accountants and should be read in
conjunction with BOK Financial's 2003 Form 10-K filed with the Securities and
Exchange Commission which contains audited financial statements.
22
- -------------------------------------------------------------------------------
Consolidated Statements of Earnings (Unaudited)
(Dollars In Thousands, Except Per Share Data)
Three Months Ended
March 31,
--------------------------
2004 2003
--------------------------
Interest Revenue
Loans $ 96,495 $ 94,476
Taxable securities 47,516 45,134
Tax-exempt securities 1,820 2,136
- ------------------------------------------------------------------------------
Total securities 49,336 47,270
- ------------------------------------------------------------------------------
Trading securities 136 100
Funds sold and resell agreements 39 106
- ------------------------------------------------------------------------------
Total interest revenue 146,006 141,952
- ------------------------------------------------------------------------------
Interest Expense
Deposits 32,486 35,077
Other borrowings 8,382 8,944
Subordinated debentures 2,336 2,420
- ------------------------------------------------------------------------------
Total interest expense 43,204 46,441
- ------------------------------------------------------------------------------
Net Interest Revenue 102,802 95,511
Provision for Loan Losses 7,027 9,912
- ------------------------------------------------------------------------------
Net Interest Revenue After Provision for Loan
Losses 95,775 85,599
- ------------------------------------------------------------------------------
Other Operating Revenue
Brokerage and trading revenue 10,011 9,214
Transaction card revenue 14,724 12,676
Trust fees and commissions 13,709 10,180
Service charges and fees on deposit accounts 22,155 18,984
Mortgage banking revenue, net 7,744 15,535
Leasing revenue 887 859
Other revenue 6,624 4,660
- ------------------------------------------------------------------------------
Total fees and commissions revenue 75,854 72,108
- ------------------------------------------------------------------------------
Gain on sales of assets 684 730
Gain on sales of securities, net 4,277 9,689
Loss on derivatives (995) (1,296)
- ------------------------------------------------------------------------------
Total other operating revenue 79,820 81,231
- ------------------------------------------------------------------------------
Other Operating Expense
Personnel 58,209 53,784
Business promotion 3,350 3,471
Contribution of stock to BOk Charitable Foundation 4,125 -
Professional fees and services 3,899 3,765
Net occupancy and equipment 11,851 11,061
Data processing and communications 14,641 11,720
FDIC and other insurance 604 516
Printing, postage and supplies 3,317 3,359
Net gains and operating expenses on repossessed
assets 114 8
Amortization of intangible assets 2,138 1,777
Mortgage banking costs 5,843 14,442
Provision (recovery) for impairment of mortgage
servicing rights 3,703 (7,830)
Other expense 4,249 3,082
- ------------------------------------------------------------------------------
Total other operating expense 116,043 99,155
- ------------------------------------------------------------------------------
Income Before Taxes 59,552 67,675
Federal and state income tax 20,400 24,208
- ------------------------------------------------------------------------------
Net Income $ 39,152 $ 43,467
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
23
Earnings Per Share:
Net Income
- ------------------------------------------------------------------------------
Basic $ 0.68 $ 0.76
- ------------------------------------------------------------------------------
Diluted $ 0.60 $ 0.67
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Average Shares Used in Computation:
Basic 57,331,272 56,820,784
- ------------------------------------------------------------------------------
Diluted 64,730,046 64,455,840
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
24
- --------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
(Dollars In Thousands, Except Per Share Data)
March 31, December 31, March 31,
2004 2003 2003
--------------------------------------------------
(Unaudited)
(Unaudited)
Assets
Cash and due from banks $ 554,511 $ 629,480 $ 563,674
Funds sold and resell agreements 12,800 14,432 26,642
Trading securities 18,155 7,823 10,658
Securities:
Available for sale 4,144,251 3,833,449 3,931,517
Available for sale securities pledged to creditors 532,897 685,419 670,852
Investment (fair value: March 31, 2004 - $202,166;
December 31, 2003 - $191,256;
March 31, 2003 - $201,892) 198,679 187,951 199,463
- --------------------------------------------------------------------------------------------------------------------
Total securities 4,875,827 4,706,819 4,801,832
- --------------------------------------------------------------------------------------------------------------------
Loans 7,500,576 7,483,889 6,976,489
Less reserve for loan losses (129,838) (128,639) (119,699)
- --------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 7,370,738 7,355,250 6,856,790
- --------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 173,079 175,901 154,943
Accrued revenue receivable 69,619 74,980 61,935
Intangible assets, net 248,660 250,686 196,256
Mortgage servicing rights, net 42,352 48,550 37,526
Real estate and other repossessed assets 5,954 7,186 5,350
Bankers' acceptances 23,117 30,884 33,210
Derivative contracts 230,464 149,100 130,158
Other assets 134,836 130,652 109,852
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 13,760,112 $ 13,581,743 $ 12,988,826
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits $ 1,921,263 $ 1,648,600 $ 1,460,436
Interest-bearing deposits:
Transaction 3,838,615 4,021,808 3,452,180
Savings 178,088 174,729 175,224
Time 3,427,608 3,374,726 3,546,880
- --------------------------------------------------------------------------------------------------------------------
Total deposits 9,365,574 9,219,863 8,634,720
- --------------------------------------------------------------------------------------------------------------------
Funds purchased and repurchase agreements 1,480,246 1,609,668 1,465,907
Other borrowings 1,012,745 1,016,650 1,057,550
Subordinated debentures 154,027 154,332 155,198
Accrued interest, taxes and expense 69,415 85,409 73,200
Bankers' acceptances 23,117 30,884 33,210
Due on unsettled security transactions 39,100 8,259 251,667
Derivative contracts 231,803 149,326 122,253
Other liabilities 88,214 78,722 55,050
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 12,464,241 12,353,113 11,848,755
- --------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock 12 12 25
Common stock ($.00006 par value; 2,500,000,000
shares authorized; shares issued and outstanding:
March 31, 2004 - 58,271,808; December 31, 2003
- 58,055,697; March 31, 2003 - 55,886,144) 4 4 3
Capital surplus 550,585 546,594 475,840
Retained earnings 736,829 698,052 641,869
Treasury stock (shares at cost: March 31, 2004 - 882,060;
December 31, 2003 - 848,892; March 31, 2003 - 700,327) (26,955) (24,491) (17,979)
Accumulated other comprehensive income 35,396 8,459 40,313
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,295,871 1,228,630 1,140,071
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 13,760,112 $ 13,581,743 $ 12,988,826
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
25
- ---------------------------------------------------------------------------------------------------------------------------
Consolidated Statements of Changes in
Shareholders' Equity (Unaudited)
(In Thousands)
Accumulated
Preferred Stock Common Stock Other Treasury Stock
------------------------------------ Comprehensive Capital Retained --------------------
Shares Amount Shares Amount Income (Loss) Surplus Earnings Shares Amount Total
----------------------------------------------------------------------------------------------------
Balances at
December 31, 2002 250,000 $ 25 55,750 $ 3 $ 43,088 $475,054 $598,777 683 $(17,421) $1,099,526
Comprehensive income:
Net income - - - - - - 43,467 - - 43,467
Other comprehensive
income, net of tax:
Unrealized gain (loss)
on securities
available for sale (1) - - - - (2,775) - - - - (2,775)
----------
Comprehensive income 40,692
----------
Exercise of stock options - - 124 - - 2,429 - 17 (558) 1,871
Stock-based compensation - - - - - (2,018) - - - (2,018)
Dividends paid in shares
of common stock:
Preferred stock - - 12 - - 375 (375) - - -
- ---------------------------------------------------------------------------------------------------------------------------
Balances at
March 31, 2003 250,000 $ 25 55,886 $ 3 $ 40,313 $475,840 $641,869 700 $(17,979) $1,140,071
- ---------------------------------------------------------------------------------------------------------------------------
Balances at
December 31, 2003 250,000 $ 12 58,056 $ 4 $ 8,459 $546,594 $698,052 849 $(24,491) $1,228,630
Comprehensive income:
Net income - - - - - - 39,152 - - 39,152
Other comprehensive
income, net of tax:
Unrealized gain (loss)
on securities
available for sale(1) - - - - 26,937 - - - - 26,937
----------
Comprehensive income 66,089
----------
Exercise of stock options - - 216 - - 4,587 - 33 (2,464) 2,123
Tax benefit on exercise of
stock options - - - - - 920 - - - 920
Stock-based compensation - - - - - (1,516) - - - (1,516)
Cash dividends paid on
preferred stock - - - - - - (375) - - (375)
- ---------------------------------------------------------------------------------------------------------------------------
Balances at
March 31, 2004 250,000 $ 12 58,272 $ 4 $ 35,396 $550,585 $736,829 882 $(26,955) $1,295,871
- ---------------------------------------------------------------------------------------------------------------------------
(1) March 31, 2004 March 31, 2003
-------------- --------------
Changes in other comprehensive income:
Unrealized gains on available for sale $ 46,935 $ 5,367
securities
Tax expense on unrealized gains on
available for sale securities (17,385) (1,921)
Reclassification adjustment for gains
realized included in net income (4,277) (9,689)
Reclassification adjustment for tax
expense on realized gains 1,664 3,468
----------------------------------
Net change in unrealized gains (losses) on $ 26,937 $ (2,775)
securities
----------------------------------
See accompanying notes to consolidated financial statements.
26
- ---------------------------------------------------------------------------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
Three Months Ended
March 31,
--------------------------------------
2004 2003
--------------------------------------
Cash Flow From Operating Activities:
Net income $ 39,152 $ 43,467
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 7,027 9,912
Provision (recovery) for mortgage servicing rights 3,703 (7,830)
Unrealized (gains) losses from derivatives 974 1,005
Stock-based compensation 2,640 1,152
Tax benefit of stock option exercises 920 -
Depreciation and amortization 13,296 9,338
Net amortization of financial instrument discounts and premiums (678) 2,611
Net gain on sale of assets (9,440) (20,785)
Mortgage loans originated for resale (159,289) (331,162)
Proceeds from sale of mortgage loans held for resale 160,585 330,300
Change in trading securities (10,332) (5,548)
Change in accrued revenue receivable 5,361 10,083
Change in other operating assets 23,088 (16,431)
Change in accrued interest, taxes and expense (15,994) (843)
Change in other liabilities (22,671) 26,311
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 38,342 51,580
- ---------------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities:
Proceeds from maturities of investment securities 11,577 6,646
Proceeds from maturities of available for sale securities 212,174 392,756
Purchases of investment securities (22,361) (8,215)
Purchases of available for sale securities (1,555,592) (2,198,059)
Proceeds from sales of available for sale securities 1,230,805 1,138,490
Loans originated or acquired net of principal collected (74,760) (128,254)
Payments on derivative asset contracts (27,527) (14,385)
Net change in other investment assets 5,132 953
Proceeds from disposition of assets 56,308 70,612
Purchases of assets (6,714) (13,820)
- ---------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (170,958) (753,276)
- ---------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net change in demand deposits, transaction
deposits, money market deposits, and savings accounts 92,829 227,306
Net change in certificates of deposit 52,882 279,079
Net change in other borrowings (133,327) (132,251)
Proceeds from (payments on) derivative liability contracts 27,666 15,337
Net change in derivative margin accounts (16,624) (22,431)
Change in amount due on unsettled security transactions 30,841 298,886
Issuance of preferred, common and treasury stock, net 2,123 1,871
Payment of dividends (375) -
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 56,015 667,797
- ---------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (76,601) (33,899)
Cash and cash equivalents at beginning of period 643,912 624,215
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 567,311 $ 590,316
- ---------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 47,069 $ 47,933
- ---------------------------------------------------------------------------------------------------------------
Cash paid for taxes $ 7,128 $ 8,798
- ---------------------------------------------------------------------------------------------------------------
Net loans transferred to repossessed real estate
and other assets $ 1,208 $ 356
- ---------------------------------------------------------------------------------------------------------------
Payment of dividends in common stock $ - $ 375
- ---------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
27
Notes to Consolidated Financial Statements (Unaudited)
(1) 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., Colorado State Bank and Trust, N.A., and BOSC, Inc. Certain
prior period amounts have been reclassified to conform to current period
classifications.
(2) Mortgage Banking Activities
At March 31, 2004, BOk owned the rights to service 59,555 mortgage loans with
outstanding principal balances of $4.6 billion, including $381 million serviced
for BOk. The weighted average interest rate and remaining term was 6.44% and 266
months, respectively.
Activity in capitalized mortgage servicing rights and related valuation
allowance during the three months ending March 31, 2004 is as follows (in
thousands):
Capitalized Mortgage Servicing Rights
-----------------------------------------------------------------------------------------
Valuation Hedging
Purchased Originated Total Allowance (Gain)/Loss Net
-----------------------------------------------------------------------------------------
Balance at
December 31, 2003 $ 22,380 $ 54,456 $ 76,836 $ (31,995) $ 3,709 $ 48,550
Additions, net - 2,696 2,696 - - 2,696
Amortization expense (1,705) (3,130) (4,835) - (356) (5,191)
Write-off (3,678) (3,069) (6,747) 10,100 (3,353) -
Recovery (provision) for
impairment - - - (3,703) - (3,703)
- -------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2004 $ 16,997 $ 50,953 $ 67,950 $ (25,598) $ - $ 42,352
- -------------------------------------------------------------------------------------------------------------------------
Estimated fair value of
mortgage servicing rights (1) $ 10,645 $ 32,278 $ 42,923 - - $ 42,923
- -------------------------------------------------------------------------------------------------------------------------
(1) Excludes approximately $1.2 million of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
Stratification of the mortgage loan servicing portfolio, outstanding principal
of loans serviced, and related hedging information by interest rate at March 31,
2004 follows (in thousands):
< 5.51% 5.51% - 6.49% 6.50% - 7.49% => 7.50% Total
Cost less accumulated amortization $ 13,315 $ 23,798 $ 23,079 $ 7,758 $ 67,950
- --------------------------------------------------------------------------------------------------------------------
Fair value $ 10,500 $ 14,419 $ 12,709 $ 5,295 $ 42,923
- --------------------------------------------------------------------------------------------------------------------
Impairment (2) $ 3,007 $ 9,380 $ 10,372 $ 2,839 $ 25,598
- --------------------------------------------------------------------------------------------------------------------
Outstanding principal of loans serviced (1) $ 838,000 $1,341,600 $1,362,100 $478,500 $4,020,200
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes outstanding principal of $381 million for loans serviced for BOk
and $114 million of mortgage loans originated prior to FAS 122, for which there
are no capitalized mortgage servicing rights.
(2) Impairment is determined by both an interest rate and loan type
stratification.
28
(3) Disposal of Available for Sale Securities
Sales of available for sale securities resulted in gains and losses as follows
(in thousands):
Three Months Ended March 31,
----------------------------------
2004 2003
-------------- ---------------
Proceeds $ 1,230,805 $ 1,138,490
Gross realized gains 6,484 9,897
Gross realized losses 2,207 208
Related federal and state income
tax expense 1,465 3,469
(4) Employee Benefits
BOK Financial sponsors a defined benefit Pension Plan for all employees who
satisfy certain age and service requirements. The following table presents
components of net periodic pension cost (dollars in thousands):
Three Months Ended March 31,
----------------------------------
2004 2003
--------------- ---------------
Service cost $ 1,677 $ 1,295
Interest cost 579 504
Expected return on plan assets (902) (739)
Amortization of prior service cost 15 15
Amortization of net (gain) loss 265 205
- -----------------------------------------------------------------------------
Net periodic pension cost $ 1,634 $ 1,280
- -----------------------------------------------------------------------------
During the first quarter of 2004, the Company made Pension Plan contributions
totaling $7.7 million, which funded the remaining maximum contribution for 2003
permitted under applicable regulations.
Management has been advised that no minimum contribution will be required for
2004. The maximum allowable contribution has not yet been determined.
(5) Shareholders' Equity
On April 27, 2004, the Board of Directors of BOK Financial declared a 3% stock
dividend payable in shares of BOK Financial common stock. The dividend is
payable on or about May 31, 2004 to shareholders of record on May 10, 2004.
Generally accepted accounting principles require earnings per share information
to be retroactively restated to reflect the new capital structure upon
consummation of a stock dividend. Accordingly, for all financial statements
issued after May 31, 2004, earnings per share will be restated as follows:
Diluted Earnings Per Share:
As Reported Restated
2003:
1st Quarter $ 0.67 $ 0.65
2nd Quarter 0.63 0.61
3rd Quarter 0.60 0.58
4th Quarter 0.55 0.53
Year Ended December 31 2.45 2.38
2004: 1st Quarter $ 0.60 $ 0.59
29
(6) Earnings Per Share
The following table presents the computation of basic and diluted earnings per
share (dollars in thousands, except share data):
Three Months Ended
---------------------------
March 31, March 31,
2004 2003 (2)
---------------------------
Numerator:
Net income $ 39,152 $ 43,467
Preferred stock dividends (375) (375)
- -------------------------------------------------------------------------------------
Numerator for basic earnings per share - income
available to common shareholders 38,777 43,092
- -------------------------------------------------------------------------------------
Effect of dilutive securities:
Preferred stock dividends 375 375
- -------------------------------------------------------------------------------------
Numerator for diluted earnings per share - income available
to common shareholders after assumed conversion $ 39,152 $ 43,467
- -------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share - weighted
average shares 57,331,272 56,820,784
Effect of dilutive securities:
Employee stock compensation plans (1) 654,779 674,728
Convertible preferred stock 6,719,577 6,719,577
Tanglewood market value guarantee 24,418 240,751
- -------------------------------------------------------------------------------------
Dilutive potential common shares 7,398,774 7,635,056
- -------------------------------------------------------------------------------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 64,730,046 64,455,840
- -------------------------------------------------------------------------------------
Basic earnings per share $ 0.68 $ 0.76
- -------------------------------------------------------------------------------------
Diluted earnings per share $ 0.60 $ 0.67
- -------------------------------------------------------------------------------------
(1) Excludes employee stock options with exercise
prices greater than current market price. - 741,875
(2) Restated for 3% dividend paid in common shares in May 2003.
(7) Reportable Segments
Reportable segments reconciliation to the Consolidated Financial Statements for
the three months ended March 31, 2004 is as follows (in thousands):
Net Other Other
Interest Operating Operating Net Average
Revenue Revenue(1) Expense Income Assets
--------------------------------------------------------------------------
Total reportable segments $ 89,574 $ 77,106 $ 107,399 $ 34,547 $ 14,060,805
Unallocated items:
Tax-equivalent adjustment 1,197 - - 1,197 -
Funds management 15,036 (673) 3,301 4,154 1,446,058
All others (including eliminations), net (3,005) 105 5,343 (746) (1,974,861)
----------------------------------------------------------------------------
BOK Financial consolidated $ 102,802 $ 76,538 $ 116,043 $ 39,152 $ 13,532,002
============================================================================
(1) Excluding financial instruments gains/(losses).
30
Reportable segments reconciliation to the Consolidated Financial Statements for
the three months ended March 31, 2003 is as follows (in thousands):
Net Other Other
Interest Operating Operating Net Average
Revenue Revenue(1) Expense Income Assets
----------------------------------------------------------------------------
Total reportable segments $ 81,558 $ 76,390 $ 94,688 $ 37,318 $ 12,693,258
Unallocated items:
Tax-equivalent adjustment 1,403 - - 1,403 -
Funds management 16,655 (2,662) 1,678 6,270 1,072,060
All others (including eliminations), net (4,105) (890) 2,789 (1,524) (1,398,653)
---------------------------------------------------------------------------
BOK Financial consolidated $ 95,511 $ 72,838 $ 99,155 $ 43,467 $ 12,366,665
===========================================================================
(1) Excluding financial instruments gains/(losses).
(8) 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.
(9) 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.
As of March 31, 2004, outstanding commitments and letters of credit were as
follows (in thousands):
March 31,
2004
--------------
Commitments to extend credit $ 3,193,345
Standby letters of credit 531,020
Commercial letters of credit 5,379
Commitments to purchase securities 150,464
31
- ------------------------------------------------------------------------------------------------------------------------------
Quarterly Financial Summary - Unaudited
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
-------------------------------------------------------------------------------------
March 31, 2004 December 31, 2003
------------------------------------------ -------------------------------------
Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate
-------------------------------------------------------------------------------------
Assets
Taxable securities (3) $ 4,594,690 $ 47,516 4.22% $ 4,421,278 $ 45,838 4.08%
Tax-exempt securities (3) 193,808 2,886 5.99 189,829 2,958 6.19
- ------------------------------------------------------------------------------------------------------------------------------
Total securities (3) 4,788,498 50,402 4.29 4,611,107 48,796 4.17
- ------------------------------------------------------------------------------------------------------------------------------
Trading securities 15,499 226 5.86 17,325 147 3.37
Funds sold and resell agreements 7,995 39 1.96 26,730 65 0.96
Loans (2) 7,494,713 96,536 5.18 7,359,126 96,059 5.18
Less reserve for loan losses 132,494 - - 129,445 - -
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 7,362,219 96,536 5.27 7,229,681 96,059 5.27
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets (3) 12,174,211 147,203 4.89 11,884,843 145,067 4.83
- ------------------------------------------------------------------------------------------------------------------------------
Cash and other assets 1,357,791 1,342,042
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 13,532,002 $ 13,226,885
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity
Transaction deposits $ 3,819,981 $ 7,583 0.80% $ 3,886,546 $ 7,377 0.75%
Savings deposits 174,958 243 0.56 179,867 255 0.56
Time deposits 3,395,785 24,660 2.92 3,442,358 25,094 2.89
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 7,390,724 32,486 1.77 7,508,771 32,726 1.73
- ------------------------------------------------------------------------------------------------------------------------------
Funds purchased and repurchase
agreements 1,675,722 3,964 0.95 1,679,540 3,921 0.93
Other borrowings 1,010,414 4,418 1.76 1,031,414 4,240 1.63
Subordinated debentures 154,175 2,336 6.09 154,524 2,216 5.69
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 10,231,035 43,204 1.70 10,374,249 43,103 1.65
- ------------------------------------------------------------------------------------------------------------------------------
Demand deposits 1,643,638 1,370,088
Other liabilities 406,461 284,432
Shareholders' equity 1,250,868 1,198,116
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders'equity $ 13,532,002 $ 13,226,885
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Equivalent Net Interest Revenue (3) $ 103,999 3.19% $ 101,964 3.18%
Tax-Equivalent Net Interest Revenue
To Earning Assets (3) 3.45 3.39
Less tax-equivalent adjustment (1) 1,197 1,184
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue 102,802 100,780
Provision for loan losses 7,027 8,001
Other operating revenue 79,820 71,051
Other operating expense 116,043 108,321
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 59,552 55,509
Federal and state income tax 20,400 20,207
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 39,152 $ 35,302
- ------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Net income:
Basic $ 0.68 $ 0.61
- ------------------------------------------------------------------------------------------------------------------------------
Diluted $ 0.60 $ 0.55
- ------------------------------------------------------------------------------------------------------------------------------
(1) Tax equivalent at the statutory federal and state rates for the periods
presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
(3) Yield calculations exclude security trades that have been recorded on trade
date with no corresponding interest income.
32
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- -------------------------------------------------------------------------------------------------------------------------
September 30, 2003 June 30, 2003 March 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
Average Revenue/ Yield Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate Balance Expense(1) /Rate
- -------------------------------------------------------------------------------------------------------------------------
$ 4,360,340 $ 42,698 3.86% $ 4,388,733 $ 46,911 4.30% $ 4,145,472 $ 45,134 4.64%
186,827 3,003 6.38 185,908 3,179 6.86 197,902 3,387 6.94
- -------------------------------------------------------------------------------------------------------------------------
4,547,167 45,701 3.96 4,574,641 50,090 4.41 4,343,374 48,521 4.75
- -------------------------------------------------------------------------------------------------------------------------
27,830 295 4.21 12,207 136 4.47 10,342 116 4.55
32,491 51 0.62 16,669 59 1.42 29,392 106 1.46
7,122,211 93,013 5.18 6,970,905 92,576 5.33 6,949,113 94,612 5.52
125,966 - - 123,095 - - 119,959 - -
- -------------------------------------------------------------------------------------------------------------------------
6,996,245 93,013 5.27 6,847,810 92,576 5.42 6,829,154 94,612 5.62
- -------------------------------------------------------------------------------------------------------------------------
11,603,733 139,060 4.74 11,451,327 142,861 5.01 11,212,262 143,355 5.28
- -------------------------------------------------------------------------------------------------------------------------
1,252,896 1,207,690 1,154,403
- -------------------------------------------------------------------------------------------------------------------------
$ 12,856,629 $ 12,659,017 $ 12,366,665
- -------------------------------------------------------------------------------------------------------------------------
$ 3,715,035 $ 7,200 0.77% $ 3,523,932 $ 7,992 0.91% $ 3,288,874 $ 8,777 1.08%
170,796 200 0.46 172,258 183 0.43 168,730 306 0.74
3,423,920 23,863 2.77 3,491,055 24,688 2.84 3,399,813 25,994 3.10
- -------------------------------------------------------------------------------------------------------------------------
7,309,751 31,263 1.70 7,187,245 32,863 1.83 6,857,417 35,077 2.07
- -------------------------------------------------------------------------------------------------------------------------
1,529,721 3,566 0.92 1,515,597 4,080 1.08 1,420,781 4,023 1.15
1,062,734 4,383 1.64 1,053,573 4,604 1.75 1,059,201 4,921 1.88
154,865 2,421 6.20 155,078 2,420 6.26 155,304 2,420 6.32
- -------------------------------------------------------------------------------------------------------------------------
10,057,071 41,633 1.64 9,911,493 43,967 1.78 9,492,703 46,441 1.98
- -------------------------------------------------------------------------------------------------------------------------
1,323,641 1,252,076 1,292,077
314,583 332,430 465,820
1,161,334 1,163,018 1,116,065
- -------------------------------------------------------------------------------------------------------------------------
$ 12,856,629 $ 12,659,017 $ 12,366,665
- -------------------------------------------------------------------------------------------------------------------------
$ 97,427 3.10% $ 98,894 3.23% $ 96,914 3.30%
3.32 3.47 3.57
1,256 1,327 1,403
- -------------------------------------------------------------------------------------------------------------------------
96,171 97,567 95,511
8,220 9,503 9,912
63,428 87,282 81,231
90,771 111,864 99,155
- -------------------------------------------------------------------------------------------------------------------------
60,608 63,482 67,675
21,792 22,707 24,208
- -------------------------------------------------------------------------------------------------------------------------
$ 38,816 $ 40,775 $ 43,467
- -------------------------------------------------------------------------------------------------------------------------
$ 0.67 $ 0.71 $ 0.76
- -------------------------------------------------------------------------------------------------------------------------
$ 0.60 $ 0.63 $ 0.67
- -------------------------------------------------------------------------------------------------------------------------
33
PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds
The following table provides information with respect to purchases made by or on
behalf of the Company or any "affiliated purchaser" (as defined in Rule
10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company's common
stock during the three months ended March 31, 2004.
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
Total Number Average Price Total Number of Shares Purchased Maximum Number of
of Shares Paid per as Part of Publicly Announced Plans Shares that May Yet Be
Period Purchased (2) Share or Programs (1) Purchased Under the Plans
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
January 1, 2004
to January 31, 2004 14,693 $ 39.41 - 191,058
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
February 1, 2004
to February 29, 2004 725 $ 40.11 - 191,058
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
March 1, 2004
to March 31, 2004 17,750 $ 40.75 - 191,058
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
Total 33,168 -
- ------------------- ----------------- --------------- ------------------------------------- ----------------------------
(1) The Company has a stock repurchase plan that was initially authorized by
the Company's board of directors on February 24, 1998 and amended on May
25, 1999. Under the terms of the plan, the Company may repurchase up to
800,000 shares of its common stock. To date, the Company has repurchased
608,942 shares under this plan.
(2) The Company routinely repurchases mature shares from employees to cover the
exercise price and taxes in connection with employee stock option
exercises.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
31.1 Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(B) Reports on Form 8-K:
On January 28, 2004, a report on Form 8-K was filed reporting under
Item 5 the announcement that BOK Financial Corporation issued a press
release on January 28, 2004 announcing its financial results for the
fourth quarter and full year ended December 31, 2003.
Items 1, 3, 4, and 5 are not applicable and have been omitted.
34
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOK FINANCIAL CORPORATION
(Registrant)
Date: May 10, 2004 /s/ Steven E. Nell
------------------------- ---------------------------------------
Steven E. Nell
Executive Vice President and
Chief Financial Officer
/s/ John C. Morrow
---------------------------------------
John C. Morrow
Senior Vice President and Director
of Financial Accounting & Reporting