-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V/WQkGKKO+RoUdbpO4z2/aPWwKQc8JzLgvxDis5ipsF38xiWGnLP/kgnW0plp40B 91HKssexYitYuZDYs92mZA== 0000875357-02-000002.txt : 20020415 0000875357-02-000002.hdr.sgml : 20020415 ACCESSION NUMBER: 0000875357-02-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOK FINANCIAL CORP ET AL CENTRAL INDEX KEY: 0000875357 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 731373454 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19341 FILM NUMBER: 02588228 BUSINESS ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: PO BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 BUSINESS PHONE: 9185886416 MAIL ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: P O BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 10-K 1 f10k.txt 2001 10-K As filed with the Securities and Exchange Commission on March 27, 2002 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 2001 Commission File No. 0-19341 BOK FINANCIAL CORPORATION Incorporated in the State I.R.S. Employer Identification of Oklahoma No.73-1373454 Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 Registrant's Telephone Number, Including Area Code (918) 588-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (NONE) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK ($.00006 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-X is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the Registrant: $496,420,615 as of February 28, 2002. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 51,286,073 shares of common stock ($.00006 par value) as of the start of business on March 1, 2002. List hereunder the following documents if incorporated by reference and the part of Form 10-K in which the document is incorporated: Part I - Annual Report to Shareholders For Fiscal Year Ended December 31, 2001 (designated portions only) Part II - Annual Report to Shareholders For Fiscal Year Ended December 31, 2001 (designated portions only) Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for April 30, 2002 (designated portions only) Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31, 2001 (designated portions only) =============================================================================== BOK FINANCIAL CORPORATION FORM 10-K ANNUAL REPORT INDEX ITEM PAGE PART I 1. Business 3 2. Properties 5 3. Legal Proceedings 5 4. Submission of Matters to a Vote of Security Holders 5 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 5 6. Selected Financial Data 6 7. Management's Discussion and Analysis of Financial Condition and 6 Results of Operations 7A. Quantitative and Qualitative Disclosures About Market Risk 6 8. Financial Statements and Supplementary Data 6 9. Changes in and Disagreements with Accountants on Accounting and 6 Financial Disclosure PART III 10. Directors and Executive Officers of the Registrant 6 11. Executive Compensation 6 12. Security Ownership of Certain Beneficial Owners and Management 7 13. Certain Relationships and Related Transactions 7 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 7 - 12 Signatures 13 PART I ITEM 1 - Business General Development of Business Developments relating to individual aspects of the business of BOK Financial Corporation ("BOK Financial") are described below. Additional discussion of BOK Financial's activities during the current year is incorporated by reference to "Management's Assessment of Operations and Financial Condition" (pages 10 - 28) in BOK Financial's 2001 Annual Report to Shareholders. Information regarding BOK Financial's acquisitions is incorporated by reference to Note 2 of "Notes to Consolidated Financial Statements" (page 38) in BOK Financial's 2001 Annual Report to Shareholders. Narrative Description of Business BOK Financial is a financial holding company whose activities are limited by the Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act. BOK Financial's banking and bank-related activities are primarily performed through Bank of Oklahoma, N.A. ("BOk"), Bank of Texas, N.A., Bank of Albuquerque N.A., and Bank of Arkansas, N.A. Other significant operating subsidiaries include BOSC, Inc., which is a full-service securities firm with specialized expertise in public and municipal finance and private placements. Other nonbank subsidiary operations are not significant. As of December 31, 2001, BOK Financial and its subsidiaries had 3,392 full-time equivalent employees. Industry Segments BOK Financial operates four principal lines of business under its BOk franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth principal line of business, regional banks, which includes banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Discussion of these principal lines of business is incorporated by reference to Lines of Business in "Management's Assessment of Operations and Financial Condition " (pages 13 - 15) and Note 18 of "Notes to Consolidated Financial Statements" (pages 52 - 55) in BOK Financial's 2001 Annual Report to Shareholders. Competition The banking industry in each of our markets is highly competitive. BOK Financial, through four subsidiary banks, competes with other banks in obtaining deposits, making loans and providing additional services related to banking. All market share information below is based on share of deposits in specified area. BOk is the largest banking subsidiary of BOK Financial. It has the largest market share in Oklahoma and a leading position in eight of the eleven Oklahoma counties in which it operates. BOk competes with two super-regional banks, several regional and numerous locally owned banks in both the Tulsa and Oklahoma City areas, as well as in every other community in which we do business throughout the rest of the state. BOK Financial competes in the Dallas-Ft. Worth combined metropolitan area, in the Houston, Texas area, in the Albuquerque, New Mexico market, and in Fayetteville, Arkansas through subsidiary banks. Bank of Texas competes against numerous financial institutions, including some of the largest in the United States. Bank of Texas's market share is approximately 2% in the Dallas-Ft. Worth area and 1% in the Houston market. Bank of Albuquerque has a number four market share position in the Albuquerque area behind two super-regional competitors, some regional banks and several locally-owned smaller community banks. Bank of Arkansas operates as a community bank serving Benton and Washington counties in Arkansas. Supervision and Regulation Financial holding companies and banks are extensively regulated under both federal and state law. The following information, to the extent it describes statutory or regulatory provisions, is qualified in its entirety by reference to the particular statutory and regulatory provisions. It is not possible to predict the changes, if any, that may be made to existing banking laws and regulations or whether such changes, if made, would have a materially adverse effect on the business and prospects of BOK Financial, BOk, Bank of Texas, Bank of Albuquerque, or Bank of Arkansas. BOK Financial As a financial holding company, BOK Financial is subject to regulation under the BHCA (as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act) and to supervision by the Board of Governors of the Federal Reserve System (the "Reserve Board"). Under the BHCA, BOK Financial files with the Reserve Board quarterly reports and such other additional information as the Reserve Board may require. The Reserve Board may also make examinations of BOK Financial and its subsidiaries. The BHCA requires notification to the Reserve Board in any case where a financial holding company proposes to acquire control of more than five percent of the voting shares of any bank, unless it already controls a majority of such voting shares. Additionally, approval must also be obtained before a financial holding company may acquire all or substantially all of the assets of another bank or before it may merge or consolidate with another financial holding company. The BHCA further provides that the Reserve Board shall not approve any such acquisition, merger or consolidation that will substantially lessen competition, tend to create a monopoly or be in restraint of trade, unless it finds the anti-competitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. The BHCA also requires a financial holding company to notify the Reserve Board within 30 days of engaging in new activities the Reserve Board has determined to be financial in nature. These activities include dealing in and underwriting debt and equity, operating a mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; servicing loans and other extensions of credit; providing investment and financial advice; acting as an insurance underwriter and/or agent; owning and operating savings and loan associations; and leasing personal property on a full pay-out, nonoperating basis. BOKF is already engaged in some of these activities and has notified the Federal Reserve. A financial holding company and its subsidiaries are further prohibited under the BHCA from engaging in certain tie-in arrangements in connection with the provision of any credit, property or services. Thus, a subsidiary of a financial holding company may not extend credit, lease or sell property, furnish any services or fix or vary the consideration for these activities on the condition that (1) the customer obtain or provide some additional credit, property or services from or to the financial holding company or any subsidiary thereof or (2) the customer may not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to insure the soundness of credit extended. The Federal Deposit Insurance Corporation Improvement Act of 1991 established five capital rating tiers ranging from "well capitalized" to "critically undercapitalized". A financial institution is considered to be well capitalized if its Leverage, Tier 1 and Total Capital ratios are at 5%, 6% and 10%, respectively. Any institution experiencing significant growth or acquiring other institutions or branches is expected to maintain capital ratios above the well capitalized level. At December 31, 2001, BOK Financial's Leverage, Tier 1 and Total Capital ratios were 6.38%, 8.08% and 11.56%, respectively. Further discussion of regulatory capital is incorporated by reference to Note 16 of "Notes to Consolidated Financial Statements" (page 50 - 51) in BOK Financial's 2001 Annual Report to Shareholders. Bank Subsidiaries BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas are national banking associations and are subject to the National Banking Act and other federal statutes governing national banks. Under federal law, the Office of the Comptroller of the Currency ("Comptroller") charters and serves as the primary regulator of national banks. In addition, the Comptroller must approve certain corporate or structural changes, including an increase or decrease in capitalization, payment of dividends, change of place of business, establishment of a branch and establishment of an operating subsidiary. The Comptroller performs its functions through national bank examiners who provide the Comptroller with information concerning the soundness of a national bank, the quality of management and directors, and compliance with applicable laws, rules and regulations. The National Banking Act authorizes the Comptroller to examine every national bank as often as necessary. Although the Comptroller has primary supervisory responsibility for national banks, such banks must also comply with Reserve Board rules and regulations as members of the Federal Reserve System. Bank of Arkansas is also subject to certain consumer-protection laws incorporated in the Arkansas Constitution, which, among other restrictions, limit the maximum interest rate on general loans to five percent above the Federal Reserve Discount Rate. The rate on consumer loans is five percent above the discount rate or seventeen percent, whichever is lower. Applicable federal statutes and regulations require national banks to meet certain leverage and risk-based capital requirements. At December 31, 2001, all of BOK Financial Corporation's leverage and risk-based capital ratios were well above the required minimum ratios. Additional discussion regarding regulatory capital is incorporated by reference to Note 16 of "Notes to Consolidated Financial Statements" (page 50 - 51) in BOK Financial's 2001 Annual Report to Shareholders. Governmental Policies and Economic Factors The operations of BOK Financial and its subsidiaries are affected by legislative changes and by the policies of various regulatory authorities and, in particular, the credit policies of the Reserve Board. An important function of the Reserve Board is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Reserve Board to implement its objectives are: open market operations in U.S. Government securities; changes in the discount rate on bank borrowings; and changes in reserve requirements on bank deposits. The effect of such policies in the future on the business and earnings of BOK Financial and its subsidiaries cannot be predicted with certainty. Foreign Operations BOK Financial does not engage in operations in foreign countries, nor does it lend to foreign governments. ITEM 2 - Properties BOK Financial, through BOk, BOk's subsidiaries, Bank of Texas, Bank of Albuquerque and Bank of Arkansas, owns improved real estate that was carried at $93 million, net of depreciation and amortization, as of December 31, 2001. BOK Financial conducts its operations through 64 locations in Oklahoma, 21 locations in Texas, 18 locations in New Mexico, and 3 locations in Arkansas as of December 31, 2001. BOK Financial's facilities are suitable for their respective uses and present needs. The information set forth in Notes 6 and 14 of "Notes to Consolidated Financial Statements" (pages 43 and 50, respectively) of BOK Financial's 2001 Annual Report to Shareholders provides further discussion related to properties and is incorporated herein by reference. ITEM 3 - Legal Proceedings The information set forth in Note 14 of "Notes to Consolidated Financial Statements" (page 50) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 4 - Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended December 31, 2001. PART II ITEM 5 - Market for Registrant's Common Equity and Related Stockholder Matters BOK Financial's $.00006 par value common stock is traded over-the-counter and is reported on the facilities of the National Association of Securities Dealers Automated Quotation system ("NASDAQ"), with the symbol BOKF. At December 31, 2001, common shareholders of record numbered 1,077 with 51,195,914 shares outstanding. BOK Financial's quarterly market information follows: First Second Third Fourth --------------- -------------- -------------- --------------- 2001: Low 21.31 23.12 26.00 28.81 High 24.56 26.90 32.56 32.75 2000: Low $15.31 $15.63 $16.75 $21.25 High 20.56 17.56 18.75 17.50 BOK Financial has not purchased any stock under its common stock repurchase program during 2001. Under this program BOK Financial has authority to repurchase up to 800,000 shares. These purchases have been made from time-to-time in accordance with SEC Rule 10(b)18 transactions. Since the original authorization announced in 1998, BOK Financial has repurchased 617,051 shares. The information set forth under the captions "Table 1 - Consolidated Selected Financial Data" (page 9), "Table 10 - Selected Quarterly Financial Data" (page 17) and Note 16 of "Notes to Consolidated Financial Statements" (page 50 - 51) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 6 - Selected Financial Data The information set forth under the caption "Table 1 - Consolidated Selected Financial Data" (page 9) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations The information set forth under the captions "Management's Assessment of Operations and Financial Condition" (pages 10 - 28), "Annual Financial Summary - Unaudited" (pages 60 - 61) and "Quarterly Financial Summary Unaudited" (pages 62 - - 63) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk The information set forth under the caption "Market Risk" (pages 25 -27) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 8 - Financial Statements and Supplementary Data The supplementary data regarding quarterly results of operations set forth under the caption "Table 10 - Selected Quarterly Financial Data" (page 17) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. ITEM 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III ITEM 10 - Directors and Executive Officers of the Registrant The information set forth under the captions "Election of Directors" and "Executive Compensation" in BOK Financial's 2002 Annual Proxy Statement for its Annual Meeting of Shareholders scheduled for April 30, 2002 ("2002 Annual Proxy Statement") is incorporated herein by reference. ITEM 11 - Executive Compensation The information set forth under the caption "Executive Compensation" in BOK Financial's 2002 Annual Proxy Statement is incorporated herein by reference. ITEM 12 - Security Ownership of Certain Beneficial Owners and Management The information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Election of Directors" in BOK Financial's 2002 Annual Proxy Statement is incorporated herein by reference. ITEM 13 - Certain Relationships and Related Transactions The information set forth under the caption "Certain Transactions" in BOK Financial's 2002 Annual Proxy Statement is incorporated herein by reference. The information set forth under Note 5 and Note 10 of "Notes to Consolidated Financial Statements" (pages 42 - 43 and page 46) of BOK Financial's 2001 Annual Report to Shareholders is incorporated herein by reference. PART IV ITEM 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K (A)(1) List of Financial Statements filed. The following financial statements and reports included in BOK Financial's Annual Report to Shareholders for the Fiscal Year Ended December 31, 2001 are incorporated by reference in Parts I and II of this Annual Report on Form 10-K. Description Page Number Consolidated Selected Financial Data 9 Selected Quarterly Financial Data 17 Report of Management on Financial Statements 28 Report of Independent Auditors 28 Consolidated Statements of Earnings 29 Consolidated Balance Sheets 30 Consolidated Statements of Cash Flows 31 Consolidated Statements of Changes in Shareholders' Equity 32 - 33 Notes to Consolidated Financial Statements 34 - 59 Annual Financial Summary - Unaudited 60 - 61 Quarterly Financial Summary - Unaudited 62 - 63 (A)(2) List of Financial Statement Schedules filed. The schedules to the consolidated financial statements required by Regulation S-X are not required under the related instructions or are inapplicable and are therefore omitted. (A)(3) List of Exhibits filed. Exhibit Number Description of Exhibit 3.0 The Articles of Incorporation of BOK Financial, incorporated by reference to (i) Amended and Restated Certificate of Incorporation of BOK Financial filed with the Oklahoma Secretary of State on May 28, 1991, filed as Exhibit 3.0 to S-1 Registration Statement No. 33-90450, and (ii) Amendment attached as Exhibit A to Information Statement and Prospectus Supplement filed November 20, 1991. 3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit 3.1 of S-1 Registration Statement No. 33-90450. 4.0 The rights of the holders of the Common Stock and Preferred Stock of BOK Financial are set forth in its Certificate of Incorporation. 10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.0 of S-1 Registration Statement No. 33-90450. 10.1 Amendment to Purchase and Sale Agreement effective March 29, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.2 of S-1 Registration Statement No. 33-90450 10.2 Letter agreement dated April 12, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.3 of S-1 Registration Statement No. 33-90450. 10.3 Second Amendment to Purchase and Sale Agreement effective April 15, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.4 of S-1 Registration Statement No. 33-90450. 10.4 Employment agreements. 10.4(a) Employment Agreement between BOK Financial and Stanley A. Lybarger, incorporated by reference to Exhibit 10.4(a) of Form 10-K for the fiscal year ended December 31, 1991. 10.4(b) Amendment to 1991 Employment Agreement between BOK Financial and Stanley A. Lybarger, as filed herin for fiscal year ended December 31, 2001. 10.5 Director indemnification agreement dated June 30, 1987, between BOk and Kaiser, incorporated by reference to Exhibit 10.5 of S-1 Registration Statement No. 33-90450. Substantially similar director indemnification agreements were executed between BOk and the following: Date of Agreement James E. Barnes June 30, 1987 William H. Bell June 30, 1987 James S. Boese June 30, 1987 Dennis L. Brand June 30, 1987 Chester E. Cadieux June 30, 1987 William B. Cleary June 30, 1987 Glenn A. Cox June 30, 1987 William E. Durrett June 30, 1987 Leonard J. Eaton, Jr. June 30, 1987 William B. Fader December 5, 1990 Gregory J. Flanagan June 30, 1987 Jerry L. Goodman June 30, 1987 David A. Hentschel July 7, 1987 Philip N. Hughes July 8, 1987 Thomas J. Hughes, III June 30, 1987 William G. Kerr June 30, 1987 Philip C. Lauinger, Jr. June 30, 1987 Stanley A. Lybarger December 5, 1990 Patricia McGee Maino June 30, 1987 Robert L. Parker, Sr. June 30, 1987 James A. Robinson June 30, 1987 William P. Sweich June 30, 1987 10.6 Capitalization and Stock Purchase Agreement dated May 20, 1991, between BOK Financial and Kaiser, incorporated by reference to Exhibit 10.6 of S-1 Registration Statement No. 33-90450. 10.7 BOK Financial Corporation 1991 Special Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-44122. 10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-55312. 10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-70102. 10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-79834. 10.7.4 BOK Financial Corporation 1994 Stock Option Plan (Typographical Error Corrected January 16, 1995), incorporated by reference to Exhibit 10.7.4 of Form 10-K for the fiscal year ended December 31, 1994. 10.7.5 BOK Financial Corporation 1997 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 333-32649. 10.7.6 BOK Financial Corporation 2000 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 333-93957. 10.7.7 BOK Financial Corporation Directors' Stock Compensation Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-79836. 10.7.8 Bank of Oklahoma Thrift Plan (Amended and Restated Effective as of January 1, 1995), incorporated by reference to Exhibit 10.7.6 of Form 10-K for the year ended December 31, 1994. 10.7.9 Trust Agreement for the Bank of Oklahoma Thrift Plan (December 30, 1994), incorporated by reference to Exhibit 10.7.7 of Form 10-K for the year ended December 31, 1994. 10.8 Lease Agreement between One Williams Center Co. and National Bank of Tulsa (predecessor to BOk) dated June 18, 1974, incorporated by reference to Exhibit 10.9 of S-1 Registration Statement No. 33-90450. 10.9 Lease Agreement between Security Capital Real Estate Fund and BOk dated January 1, 1988, incorporated by reference to Exhibit 10.10 of S-1 Registration Statement No. 33-90450. 10.10 Asset Purchase Agreement (OREO and other assets) between BOk and Phi-Lea-Em Corporation dated April 30, 1991, incorporated by reference to Exhibit 10.11 of S-1 Registration Statement No. 33-90450. 10.11 Asset Purchase Agreement (Tanker Assets) between BOk and Green River Exploration Company dated April 30, 1991, incorporated by reference to Exhibit 10.12 of S-1 Registration Statement No. 33-90450. 10.12 Asset Purchase Agreement (Recovery Rights) between BOk and Kaiser dated April 30, 1991, incorporated by reference to Exhibit 10.13 of S-1 Registration Statement No. 33-90450. 10.13 Purchase and Assumption Agreement dated August 7, 1992 among First Gibraltar Bank, FSB, Fourth Financial Corporation and BOk, as amended, incorporated by reference to Exhibit 10.14 of Form 10-K for the fiscal year ended December 31, 1992. 10.13.1 Allocation Agreement dated August 7, 1992 between BOk and Fourth Financial Corporation, incorporated by reference to Exhibit 10.14.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.14 Merger Agreement among BOK Financial, BOKF Merger Corporation Number Two, Brookside Bancshares, Inc., The Shareholders of Brookside Bancshares, Inc. and Brookside State Bank dated December 22, 1992, as amended, incorporated by reference to Exhibit 10.15 of Form 10-K for the fiscal year ended December 31, 1992. 10.14.1 Agreement to Merge between BOk and Brookside State Bank dated January 27, 1993, incorporated by reference to Exhibit 10.15.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.15 Merger Agreement among BOK Financial, BOKF Merger Corporation Number Three, Sand Springs Bancshares, Inc., The Shareholders of Sand Springs Bancshares, Inc. and Sand Springs State Bank dated December 22, 1992, as amended, incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended December 31, 1992. 10.15.1 Agreement to Merge between BOk and Sand Springs State Bank dated January 27, 1993, incorporated by reference to Exhibit 10.16.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.16 Partnership Agreement between Kaiser-Francis Oil Company and BOK Financial dated December 1, 1992, incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended December 31, 1993. 10.16.1 Amendment to Partnership Agreement between Kaiser-Francis Oil Company and BOK Financial dated May 17, 1993, incorporated by reference to Exhibit 10.16.1 of Form 10-K for the fiscal year ended December 31, 1993. 10.17 Purchase and Assumption Agreement between BOk and FDIC, Receiver of Heartland Federal Savings and Loan Association dated October 9, 1993, incorporated by reference to Exhibit 10.17 of Form 10-K for the fiscal year ended December 31, 1993. 10.18 Merger Agreement among BOk, Plaza National Bank and The Shareholders of Plaza National Bank dated December 20, 1993, incorporated by reference to Exhibit 10.18 of Form 10-K for the fiscal year ended December 31, 1993. 10.18.1 Amendment to Merger Agreement among BOk, Plaza National Bank and The Shareholders of Plaza National Bank dated January 14, 1994, incorporated by reference to Exhibit 10.18.1 of Form 10-K for the fiscal year ended December 31, 1993. 10.19 Stock Purchase Agreement between Texas Commerce Bank, National Association and BOk dated March 11, 1994, incorporated by reference to Exhibit 10.19 of Form 10-K for the fiscal year ended December 31, 1993. 10.20 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation Number Four, Citizens Holding Company and others dated May 11, 1994, incorporated by reference to Exhibit 10.20 of Form 10-K for the fiscal year ended December 31, 1994. 10.21 Stock Purchase and Merger Agreement among Northwest Bank of Enid, BOk and The Shareholders of Northwest Bank of Enid effective as of May 16, 1994, incorporated by reference to Exhibit 10.21 of Form 10-K for the fiscal year ended December 31, 1994. 10.22 Agreement and Plan of Merger among BOK Financial Corporation, BOKF Merger Corporation Number Five and Park Cities Bancshares, Inc. dated October 3, 1996, incorporated by reference to Exhibit C of S-4 Registration Statement No. 333-16337. 10.23 Agreement and Plan of Merger among BOK Financial Corporation and First TexCorp., Inc. dated December 18, 1996, incorporated by reference to Exhibit 10.24 of S-4 Registration Statement No. 333-16337. 10.24 Purchase and Assumption Agreement between Bank of America National Trust and Savings Association and BOK Financial Corporation dated July 27, 1998. 10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation No. Seven, First Bancshares of Muskogee, Inc., First National Bank and Trust Company of Muskogee, and Certain Shareholders of First Bancshares of Muskogee, Inc. dated December 30, 1998. 10.26 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation Number Nine, and Chaparral Bancshares, Inc. dated February 19, 1999. 10.27 Merger Agreement among BOK Financial Corporation, Park Cities Bancshares, Inc., Mid-Cities Bancshares, Inc. and Mid-Cities National Bank dated February 24, 1999. 10.28 Merger Agreement among, BOK Financial Corporation, Park Cities Bancshares, Inc., PC Interim State Bank, Swiss Avenue State Bank and Certain Shareholders of Swiss Avenue State Bank dated March 4, 1999. 10.29 Merger Agreement among, BOK Financial Corporation, Park Cities Bancshares, Inc. and CNBT Bancshares, Inc. dated August 18, 2000. 13.0 Annual Report to Shareholders for the fiscal year ended December 31, 2001. Such report, except for those portions thereof which are expressly incorporated by reference in this filing, is furnished for the information of the Commission and is not deemed to be "filed" as part of this Annual Report on Form 10-K. 21.0 Subsidiaries of BOK Financial. 23.0 Consent of independent auditors - Ernst & Young LLP. 99.0 Additional Exhibits. 99.1 Undertakings incorporated by reference into S-8 Registration Statement No. 33-44121 for Bank of Oklahoma Master Thrift Plan and Trust, incorporated by reference to Exhibit 99.1 of Form 10-K for the fiscal year ended December 31, 1993. 99.2 Undertakings incorporated by reference into S-8 Registration Statement No. 33-44122 for BOK Financial Corporation 1991 Special Stock Option Plan, incorporated by reference to Exhibit 99.2 of Form 10-K for the fiscal year ended December 31, 1993. 99.3 Undertakings incorporated by reference into S-8 Registration Statement No. 33-55312 for BOK Financial Corporation 1992 Stock Option Plan, incorporated by reference to Exhibit 99.3 of Form 10-K for the fiscal year ended December 31, 1993. 99.4 Undertakings incorporated by reference into S-8 Registration Statement No. 33-70102 for BOK Financial Corporation 1993 Stock Option Plan, incorporated by reference to Exhibit 99.4 of Form 10-K for the fiscal year ended December 31, 1993. 99.5 Undertakings incorporated by reference into S-8 Registration Statement No. 33-79834 for BOK Financial Corporation 1994 Stock Option Plan, incorporated by reference to Exhibit 99.5 of Form 10-K for the fiscal year ended December 31, 1994. 99.6 Undertakings incorporated by reference into S-8 Registration Statement No. 33-79836 for BOK Financial Corporation Directors' Stock Compensation Plan, incorporated by reference to Exhibit 99.6 of Form 10-K for the fiscal year ended December 31, 1994. 99.7 Undertakings incorporated by reference into S-8 Registration Statement No. 333-32649 for BOK Financial Corporation 1997 Stock Option Plan, Incorporated by reference to Exhibit 99.7 of Form 10-K for the fiscal year ended December 31, 1997. 99.8 Undertakings incorporated by reference into S-8 Registration Statement No. 333-93957for BOK Financial Corporation 2000 Stock Option Plan, Incorporated by reference to Exhibit 99.8 of Form 10-K for the fiscal year ended December 31, 1999. 99.9 Undertakings incorporated by reference into S-8 Registration Statement No. 333-40280 for BOK Financial Corporation Thrift Plan for Hourly Employees, Incorporated by reference to Exhibit 99.9 of Form 10-K for the fiscal year ended December 31, 2000. (B) Reports on Form 8-K None. (C) Exhibits Required by Item 601 of Regulation S-K The exhibits listed in response to Item 14(A)(3) are filed as part of this report. (D) Financial Statement Schedules None. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOK FINANCIAL CORPORATION /s/ George B. Kaiser DATE: March 26, 2002 BY: ------------------------------------- George B. Kaiser, Chairman of the Board of Directors Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 26, 2002, by the following persons on behalf of the Registrant and in the capacities indicated. OFFICERS /s/ George B. Kaiser /s/ Stanley A. Lybarger - --------------------------- ----------------------------- George B. Kaiser, Stanley A. Lybarger, Chairman of the Board of Directors Director, President and Chief Executive Officer /s/ Steven E. Nell /s/ John C. Morrow - --------------------------- ----------------------------- Steven E. Nell, John C. Morrow Executive Vice President and Senior Vice President and Director of Chief Financial Officer Financial Accounting and Reporting DIRECTORS /s/ Robert J. LaFortune - ----------------------------------- ---------------------------------------- C. Fred Ball, Jr. Robert J. LaFortune /s/ Sharon J. Bell - ----------------------------------- ---------------------------------------- Sharon J. Bell Philip C. Lauinger, Jr. /s/ Peter C. Boylan, III - ----------------------------------- ---------------------------------------- Peter C. Boylan, III John C. Lopez /s/ Joseph E. Cappy - ----------------------------------- ---------------------------------------- Joseph E. Cappy Frank A. McPherson - ----------------------------------- ---------------------------------------- Luke R. Corbett Steven E. Moore - ----------------------------------- ---------------------------------------- William E. Durrett J. Larry Nichols /s/ James O. Goodwin - ----------------------------------- ---------------------------------------- James O. Goodwin Robert L. Parker, Sr. /s/ V. Burns Hargis /s/ James A. Robinson - ----------------------------------- ---------------------------------------- V. Burns Hargis James A. Robinson /s/ Howard E. Janzen /s/ L. Francis Rooney, III - ----------------------------------- ---------------------------------------- Howard E. Janzen L. Francis Rooney, III /s/ E. Carey Joullian, IV /s/ Scott F. Zarrow - ----------------------------------- ---------------------------------------- E. Carey Joullian, IV Scott F. Zarrow - ----------------------------------- David L. Kyle BOK Financial Corporation Exhibit 10.4(b) Employment Agreement BOK FINANCIAL CORPORATION Amendment to 1991 Employment Agreement This amendment to 1991 Employment Agreement (the "First Amendment") is made this 31st, day of July 2001 (the "Amendment Date") between the following parties (the "Parties"): i. Stanley A. Lybarger, an individual residing in Tulsa, Oklahoma ("Executive"); and, ii. Bank of Oklahoma, National Association ("Bank"). The Bank and Executive, in exchange for the promises hereafter set forth and other good and valuable consideration (the receipt and adequacy of which the Parties hereby acknowledge), and intending to be legally bound hereby, agree as follows: 1. Purpose of this Agreement. The Parties have heretofore entered in that certain Employment Agreement effected June 7, 1991 and signed December 17, 1991 (the "Employment Agreement"). The purpose of this First Amendment is to amend the Employment Agreement as herein provided. BOK Financial Corporation ("BOKF") owns all of the issued and outstanding capital stock of Bank. 2. Special Provisions Respecting Executive's Employee Stock Options. Executive has heretofore been awarded options to acquire BOKF Common Stock pursuant to the BOKF 1997 Stock Option Plan, the BOKF 1996 Stock Option Plan, the BOKF 1995 Stock Option Plan, the BOKF 1994 Stock Option Plan and the BOKF 1993 Stock Option Plan and may be awarded options to acquire BOKF Common Stock pursuant to future BOKF stock option plans (collectively, the "Stock Option Plans" and the "Stock Options"). a. Notwithstanding any provisions of the Stock Option Plans to the contrary, all Stock Options which have been awarded to Executive as of Termination shall fully vest, subject to the following conditions precedent: i. Unless terminated by BOKF without cause or terminated by Executive pursuant to Paragraph 6(a) of the Employment Agreement ("Termination By the Executive Following Occurrence of a Termination Event"), Executive shall have satisfactorily (as determined by the agreement of the Chairman of the Board and Executive) served as Chief Executive Officer until Executive reaches 57 years of age; ii. Executive shall have recruited a chief operating officer for BOKF ( the "COO"); iii. At the time of recruitment, the COO possessed the experience and qualifications on the basis of which the Chairman of the Board and Executive mutually agree it is reasonable to assume the COO should become qualified to be the Chief Executive Officer of BOKF at Termination; iv. The Board of Directors of BOKF approve the employment of the COO; v. The COO shall have completed a minimum of three years employment with BOKF as of Termination; vi. The Chairman of the Board and Executive, each in the exercise of his good faith judgment, agree that the COO is qualified to be the Chief Executive Officer of the Corporation at Termination; vii. The Board of directors of BOKF shall approve the election of the COO and Chief Executive Officer of BOKF; and, viii.The Chairman of the Board and Executive, each in the exercise of his good faith judgment, agree that BOKF has maintained satisfactory performance through the term of this Agreement and is satisfactorily performing at Termination, in each instance giving due consideration to the performance of the United States economy in general and peer group financial institutions in the United States in particular. ix. In the event the Chairman of the Board and Executive do not, each in the exercise of his good faith judgment, reach the agreements described in sub-paragraphs a(i), a(iii) and a(viii) above, the issue or issues shall be presented to the full Board of Directors of Bank for determination and the determination of the Bank Board of Directors shall be binding upon Bank and Executive. b. Notwithstanding any provisions of the Stock Option Plans to the contrary, all Stock Options which have been awarded to Executive and which have vested as of the Termination (whether pursuant to the provisions of the preceding subparagraph or otherwise) shall terminate, if not sooner exercised, six months following Termination. 3. Executive's Continued Involved with BOKF Beyond Termination and Prior to Age 65. In the event of Termination prior to reaching age 65, Executive will be permitted to continue to be involved in the business and affairs of BOKF as a part-time special employee, consultant, director with special duties, or in some other capacity to the extent reasonably required to permit Executive to continue to participate in BOKF's employee health care benefits until age 65, but only for so long as Executive continues to owe a duty of loyalty to BOKF. The costs of such participation shall be allocated between Bank and Executive equitably depending upon the level of Executive's continued involvement with BOKF. 4. Agreement Not To Compete. In consideration for the foregoing, Executive agrees not to Compete (as hereafter defined) for a period of two years following Termination except in the case of Termination by the Bank without cause. Executive agrees that (i) the restrictions imposed upon Executive by this Non-Competition Agreement are essential and necessary to ensure BOKF continues to enjoy the goodwill of the Bank, and (iii) all the restrictions (including particularly the time and geographical limitations) are fair and reasonable. a. As used herein, Compete means to directly or indirectly (whether individually or as an officer, director, employee, partner, stockholder, creditor, agent, or representative of other persons or entities) (i) engage in the banking business generally, or in any business in which the Bank or any of the Bank's affiliates has as of the date of such termination engaged, in any metropolitan area or any County contiguous thereto in which the Bank or any of the Bank's affiliates maintains an office as of the date of such termination, (ii) solicit clients of Bank or Bank's affiliates for banking business generally or for any business in which the Bank or any of Bank's affiliates have engaged as of the date of such termination, or accept business therefrom, or (iii) solicit any employee of Bank or any of Bank's affiliates to seek employment with any person or entity except the Bank and its affiliates, whether, in either case, such solicitation is made within or without the area described herein. b. Executive agrees that any remedy at law for any breach of this promise would be inadequate and, in the event of any such breach, BOKF shall be entitled to both immediate and permanent injunctive relief without the necessity of posting any bond therefor to preclude any such breach (in addition to any remedies of law which BOKF may be entitled). 5. Ratification of Employment Agreement. As amended by this First Amendment, the Employment Agreement shall remain in full force and effect in accordance with its terms. 6. Miscellaneous Provisions The Miscellaneous Provisions of Paragraph 8 of the Employment Agreement shall apply to this First Amendment. Dated as of the Agreement Date. Bank of Oklahoma, National Association By /s/ George B. Kaiser -------------------------------------- Stanley A. Lybarger /s/ Stanley A. Lybarger --------------------------------------- BOK FINANCIAL CORPORATION EXHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS Table of Contents Consolidated Selected Financial Data 9 Management's Assessment of Operations and Financial Condition 10 Selected Quarterly Financial Data 17 Report of Management on Financial Statements 28 Report of Independent Auditors 28 Consolidated Financial Statements 29 Notes to Consolidated Financial Statements 34 Annual Financial Summary - Unaudited 60 Quarterly Financial Summary - Unaudited 62 Appendix A - Graph Data 69 2001 Annual Report BOK FINANCIAL CORPORATION 1 Management Letter 10 Management's Assessment of Operations and Financial Condition 28 Report of Management on Financial Statements 28 Report of Independent Auditors 29 Consolidated Financial Statements 64 Shareholder and Corporate Information BOK Financial Corporation Net Income and Acquisition Timeline Graph Data Net Income* 03/31/91 2,609 1991 - BOK Financial Corporation, purchases Bank of Oklahoma; George B. Kaiser becomes chairman. 06/30/91 2,824 1991 - Company acquires eight Oklahoma City locations of Continental Federal Savings & Loan Association. 09/30/91 4,748 12/31/91 2,661 03/31/92 5,223 1992 - BOk purchases 19 offices of Sooner Federal Savings & Loan Association 06/30/92 6,257 09/30/92 6,830 12/31/92 7,333 03/31/93 9,613 1993 - Company acquires Brookside State Bank and Sand Springs State Bank. 06/30/93 8,404 09/30/93 8,807 12/31/93 8,950 03/31/94 10,658 1994 - BOK expands outside of its home state with the acquisition of Citizens Holding Co., operating in 06/30/94 11,279 Muskogee, OK and Feyetteville, AR. 09/30/94 11,390 12/31/94 11,738 03/31/95 11,967 06/30/95 12,082 09/30/95 12,493 12/31/95 12,663 03/31/96 12,995 1996 - Company announces agreements to purchase two Dallas banks, FNB Park Cities and First 06/30/96 13,591 Texas Bank, totaling $390 million in assets. 09/30/96 12,975 12/31/96 14,566 03/31/97 15,347 1997 - BOK Financial's assets top $5 billion and trust assets top $10 billion. 06/30/97 16,064 09/30/97 16,376 12/31/97 16,818 03/31/98 16,313 1998 - Company purchases Bank of America branches in New Mexico, leading to the 06/30/98 20,438 creation of Bank of Albuquerque. 09/30/98 18,750 12/31/98 19,215 03/31/99 21,237 1999 - Dallas presence is expanded with the acquisition of three metroplex banks, adding $417 million in 06/30/99 22,056 assets and $354 million of deposits. 09/30/99 22,736 12/31/99 23,197 03/31/00 24,813 2000 - BOK Financial's earnings exceed $100 million for the first time. 06/30/00 24,194 09/30/00 25,637 12/31/00 25,496 03/31/01 27,402 2001 - BOK Financial enters Houston market with the purchase of CNBT Bancshares, with $442 06/30/01 28,981 million in assets and seven branch locations. 09/30/01 29,787 12/31/01 30,132 * Net income as reported and not restated for any subsequent years pooling-of-interests or changes in accounting.
TO BE THE BEST AT EVERYTHING WE DO Financial Highlights (Dollars In Thousands Except Per Share Data) 2001 2000 1999 ------------------------------------ For the Years Ended December 31 Net income $ 116,302 $ 100,140 $ 89,226 Earnings per share: Basic 2.25 1.95 1.73 Diluted 2.01 1.75 1.55 Book value per share $ 16.18 $ 13.88 $ 11.02 Return on average assets 1.14% 1.15% 1.17% Return on average shareholders' equity 14.93 16.46 16.45 -------------------------------------------------------------------------------------------- Tangible operating results1: Tangible net income $ 124,566 $ 105,487 $ 94,926 Tangible net income per diluted share 2.15 1.84 1.65 Tangible return on average assets 1.22% 1.21% 1.25% Tangible return on average shareholders' equity 15.99 17.34 17.50 -------------------------------------------------------------------------------------------- As of December 31 Loans, net of reserves $ 6,193,473 $ 5,435,207 $ 4,567,255 Assets 11,130,388 9,748,334 8,373,997 Deposits 6,905,744 6,046,005 5,263,184 Shareholders' equity 828,483 703,576 557,164 Nonperforming assets2 50,708 43,599 22,943 -------------------------------------------------------------------------------------------- Tier 1 capital ratio 8.08% 8.06% 7.27% Total capital ratio 11.56 11.23 10.72 Leverage ratio 6.38 6.51 5.92 Average shareholders' equity to average assets 7.62 7.00 7.12 Reserve for loan losses to nonperforming loans2 233.90 207.95 391.65 Reserve for loan losses to loans3 1.66 1.51 1.66 Net charge offs to average loans3 .35 .22 .04 -------------------------------------------------------------------------------------------- 1 Operating results excluding the after-tax effect of certain goodwill amortization that will be discontinued after 2001 (see Note 1 to Consolidated Financial Statements). 2 Includes nonaccrual loans, renegotiated loans and assets acquired in satisfaction of loans. Excludes loans past due 90 days or more and still accruing. 3 Excludes residential mortgage loans held for sale.
To Our Shareholders, Customers, Employees, and Friends: For BOK Financial Corporation, 2001 capped a decade of record earnings growth. Work begun 10 years ago to build on Bank of Oklahoma's traditional local strengths has since created a regional financial company doing business in six states. BOK Financial offers an array of products and services for consumers and businesses and has provided consistent asset and income growth for shareholders. With this annual report, we celebrate past successes, present efforts and future plans without forgetting our most valuable asset - employees who enabled the company to emerge as a leader. In 2001, growth was sustained by record net income of $116.3 million, an increase of 16 percent over 2000. Earnings per diluted share* increased 15 percent, to $2.01. Income growth was driven by a 22 percent rise in net interest revenue. Fees and commissions grew 18 percent in 2001, and accounted for 40 percent of total revenue, still near the top of our peer group, though down from prior periods. Transaction card revenue was up 15 percent, driven primarily by merchant fees and debit card transactions that continue to become more popular with consumers. Mortgage banking revenue benefited in 2001 from declining interest rates and rose 35 percent. We diversified our brokerage and trading offerings and increased business 36 percent. Loans rose 14 percent to $6.3 billion at the end of the year, despite a slow-down in the second half. Deposits grew 14 percent as well, keeping pace with the growth in loans. In addition to strengthening our leadership position in Oklahoma during 2001, we saw even faster growth outside the state. Our operations elsewhere accounted for 32 percent of the company's loans and 31 percent of deposits at year end. The growth in lending was led by a 35 percent increase in the Texas portfolio. Texas loans expanded by 17 percent, excluding the acquisition of CNBT Bancshares of Houston. In New Mexico, loans rose 14 percent. Our growth from serving the needs of longstanding customers, attracting new business from rivals and making strategic acquisitions boosted total assets above $11 billion last year. That was more than five times the assets at the end of 1991 and more than double our size just five years ago. In addition to an ongoing expansion in Texas and New Mexico, we opened a commercial loan office in Denver in January 2002. Throughout the company, newer technologies were implemented to enable us to better serve customers and maintain operating efficiencies. Despite the challenges of a slowing economy last year, we were pleased with our performance and look forward to more success in the future. This annual report commemorates the 10th year for BOK Financial and outlines the progress we've made. As always, we will look to our strong local banking roots to maintain our customer service strengths as we pursue new opportunities to expand our products and presence and create new value for customers, employees and shareholders. Sincerely, Stanley A. Lybarger George B. Kaiser President and Chief Executive Officer Chairman * All per share figures are restated to reflect the 3 percent stock dividend paid in May 2001. Net income would have been $124.6 million, or $2.15 per diluted share, if a new accounting standard had been effective that permits some amortization of goodwill to be discontinued. The new standard becomes effective as of January 1, 2002. NATIONALLY COMPETITIVE PRODUCTS DELIVERED WITH COMMUNITY BANK SERVICE A DECADE OF CHANGE AND CHALLENGE Preserving our heritage. Maintaining our leadership. Expanding our reach. That's the essence of our steadfast mission of the past decade and our vision for the future. For 10 years, BOK Financial Corporation has consistently built quality assets and achieved record earnings by delivering an array of sophisticated big bank offerings with community bank service. We have kept our edge by enhancing longstanding relationships, attracting new business from rivals and targeting acquisitions in growing markets where we fill key niches under-served during a wave of mega-bank mergers. Through growth and change, BOK Financial's goal remains the same -- satisfy customers who have helped make us a regional leader while we remain sensitive to the needs of shareholders and employees. Much has changed since BOK Financial was formed in 1991 and acquired Bank of Oklahoma. Large banks acquired smaller ones in a wave of mergers. Bigger banks themselves were then bought up, leaving behind a swell of dissatisfied customers. Four of the five largest locally owned banks in Oklahoma disappeared. The only stand-alone survivor, Bank of Oklahoma, emerged as the largest full-service, home-owned bank in the state by maintaining local authority over service issues important to our customers. We have since carried this approach forward to banks in Arkansas, New Mexico and Texas, where local decision-making and responsiveness set us apart from the competition. SERVICE STRATEGY From our strong local ties, we have grown into a thriving, middle-market bank with more than 100 locations in six states. We balance our regional size and specific focus by recruiting strong local management and staff in each market we serve. Then, we centralize our support functions in order to maximize efficiencies and streamline work processes. The result is a mix of products and services giving the customer the best of both worlds. Asset Graph - See Appendix A Loan Graph - See Appendix A We enjoyed tremendous success in 2001 across our network, from our community banks in Oklahoma to our urban banks in large cities throughout the Southwest. Each of our franchises has unique characteristics. Some are retail oriented, and others specialize in commercial lending while various offices focus exclusively on mortgage or private banking. Across the board, however, our commitment to quality remains constant through the efforts of our exceptional employees. SUCCESS ACROSS THE REGION In our home state of Oklahoma, we are the leader in practically every market segment. Now at 12 percent, market share for Bank of Oklahoma continues to grow while that of our largest competitors declines. Last year, loans and deposits grew 9 percent and 7 percent, respectively, in the state. Oklahoma operations were responsible for $84.7 million of BOK Financial's net income, up 8 percent. Our three-year-old Bank of Albuquerque franchise is thriving. Acquired as a branch network focused largely on retail banking, today the bank is No. 4 in the market with a full array of products and services. Last year we expanded our branch network from 16 to 18, adding our first two Albertsons supermarket branches and moving a branch to an upgraded location. We added key managers and completed the staffing of our private banking and trust groups and now have personal, corporate and employee benefit trust services. Loans in New Mexico grew 14 percent in 2001 and have almost tripled since we opened our doors in December 1998. Deposits last year grew 14 percent and fee-based revenue 15 percent. BOK Financial's net income attributable to New Mexico doubled to $8.2 million. Deposits Graph - See Appendix A The company's Bank of Texas franchise continues to expand in the economically vibrant markets of Dallas and Houston, where native Texans with local roots manage our banks. Internal growth and acquisitions have boosted Texas assets to $2.1 billion, or 19 percent of BOK Financial's total. The company's overall net income from Texas rose to $21 million, up 30 percent. The acquisition of CNBT Bancshares of Houston highlighted our growth last year in the Lone Star State. Like Dallas, we entered the Houston market by acquiring a solid local mid-sized bank and arrived with a plan to compete on a broader scale. We have a great platform in Houston and a pool of top-notch local talent. We combined CNBT's expertise in consumer and small business banking with the strength of Bank of Texas' middle-market and private banking services. The Houston operation now has stronger fee-based services than most local competitors and a greater expertise and capacity in commercial lending. In Texas, loans and deposits grew 35 percent and 48 percent, respectively, over 2000 (or 17 percent and 11 percent excluding the impact of the CNBT acquisition). Fee revenue grew 40 percent in Texas, or 16 percent when excluding CNBT. Our efforts in northwest Arkansas remain focused on commercial lending and related fee services at Bank of Arkansas. Loans grew almost 17 percent in 2001. Deposits grew 8 percent. BOK Financial's Arkansas operations accounted for $2.5 million of company net income, a 67 percent increase. TRADITIONAL BANKING SERVICES - COMMERCIAL & CONSUMER Although we value strong ties to our past, we aren't afraid to break with tradition when a change enables us to better serve customers and expand our market share. Among our most successful endeavors during 2001 was the introduction of free checking. It led to significant growth in new accounts, checking balances and related fees. We have 107 branches in four states. For the last decade, much of our focus has been on expanding our extended-hours services through supermarket branches, Internet banking, and 24-hour telephone banking. Now, we are focusing more on expanding our branch system. In the Dallas-Fort Worth Metroplex, we opened a new location in Grapevine and acquired land for a new location due to open this fall in Plano. Plans are also underway for construction of a new branch in the Houston suburb of Katy. A new branch has opened in Edmond, Okla., to better serve the needs of one of Oklahoma's fastest growing communities. Last year we introduced a long-term sales and service initiative called "Perfect Banking." The vision is based on one overriding reality - that banking is still about people, and that quality service is a critical reason that people choose to do their banking with us. With a strong commitment to professional training, consumer bankers now profile clients to determine current and future financial needs with the goal of creating an exceptional experience with each and every contact. We believe favorable interaction with a service representative is paramount, and we are dedicated to constantly improving each client's experience. Commercial banking has been a major part of our organization since its inception. In fact, when the original bank first formed in 1910, its main purpose was to provide funding to Oklahoma's then-new oil and gas business. Today we still meet the needs of the region's growing companies. Overall, loan growth in 2001 was realized in every segment, with loan volumes up 14 percent. Fee Based Revenue Graph - See Appendix A Our Treasury Services group is closely aligned with commercial banking and continued to prosper in 2001, reflected in a 19 percent growth in revenue. We assist our customers with currency exchange, letters of credit and a full complement of sophisticated cash management products. Last year we completed the implementation of our new image-based retail remittance service. BOK Financial ranks 40th among all U.S. banks in ACH payments with a growth rate of 38 percent. FEE BASED REVENUE While our traditional consumer and commercial banking services continue expanding, our fee-based lines of business remain one of our greatest success stories of the past 10 years. Fee-based revenue grew by 18 percent in 2001 and comprises 40 percent of total revenue. This compares with an average of 31 percent in our peer group. We emphasize fee-based revenue because the underlying businesses are less capital-intensive and provide stability through economic cycles. Our fee revenue is very diverse and continued growth remains a top priority. Our trust assets grew last year to over $18 billion, continued evidence of this historical strength of BOK Financial. Assets under management reached $9.7 billion. The trust division manages a family of proprietary mutual funds, including one named the best in the nation. Lipper Inc. recognized the American Performance Short-Term Income Fund as the No. 1 performing short-term bond fund over the past five years. The fund returned 7.04 percent annually for the period ending December 31, 2001, compared with an industry average of 5.93 percent. We also manage employee benefit plans for 110,000 participants. We offer a specialized self-directed 401(k) product that we have successfully marketed coast to coast to law firms, medical clinics and closely-held companies. A few years ago, BOK Financial acquired the leading public finance firm in Oklahoma, Leo Oppenheim. Last year we also entered the corporate finance sector of the investment banking business, giving us the opportunity to leverage the bank's current market presence in the corporate sector through the Oppenheim division of BOSC Inc., our broker/dealer. This new diversification, in addition to favorable reception to our product mix in newer markets, helped boost our brokerage and trading revenue 36 percent, to $21.8 million. Our mortgage banking operation is among the most successful in the country. We offer mortgage services in all our banking markets plus the greater Kansas City area. Benefiting from declining interest rates, mortgage banking revenue grew 35 percent in 2001. Originations totaled $1.1 billion and generated revenue of $17.8 million. This compares to $590 million and $4.8 million, respectively, in 2000. Among the most successful of our fee-based businesses during the last decade was TransFund, our electronic funds transfer network. TransFund is the 13th largest network nationally and has experienced a compound annual growth rate in transactions exceeding 16 percent, to 95.3 million last year. The system had no non-Oklahoma clients in 1991. Today one third of the 324 financial institutions served are located outside of Oklahoma, with recent growth principally in Texas, Colorado and Kansas. The number of cardholders increased from 378,000 a decade ago to 1.47 million at the end of 2001. IMPROVEMENTS IN TECHNOLOGY AND EFFICIENCY With our ongoing commitment to efficiency and service, 2001 marked another important milestone in the history of BOK Financial - the completed occupancy of the new BOK Technology Center in Tulsa. With 184,000 square-feet in one state-of-the-art facility, we have simplified our workflow process and have given ourselves room to grow efficiently. In previous years, the processes were handled in five separate buildings. Net Income Graph - See Appendix A Two new technologies have vastly improved our service quality. We completed installing a new imaging technology for the retail remittance business with 100 percent of existing customers opting for the service. We also converted all signature cards to images, enabling instant company-wide access for signature verification. Last year we implemented a new fraud and kite detection system expected to minimize fraud losses. Our customers now have quicker access to even more up-to-date account information because of a new check-processing center we opened in Dallas. Through all the progress, we will remain focused on preserving our community bank heritage and close-knit relationships with all our customers. We will continually update and expand our offerings to maintain our leadership in the financial services arena. We will expand our reach through greater market share in existing lines of business and through new ventures that help us achieve our consistent goal of being the best for customers-- for the next 10 years and beyond. MAINTAIN OKLAHOMA LEADERSHIP WHILE PURSUING OPPORTUNITIES IN HIGH-GROWTH METROPOLITAN MARKETS Table 1 Consolidated Selected Financial Data (Dollars In Thousands Except Per Share Data) December 31, --------------------------------------------------------------------- 2001 2000 1999 19982 19972 --------------------------------------------------------------------- Selected Financial Data For the year: Interest revenue $ 654,633 $ 638,730 $ 500,274 $ 402,832 $ 357,074 Interest expense 327,859 369,843 264,150 212,406 194,842 Net interest revenue 326,774 268,887 236,124 190,426 162,232 Provision for loan losses 37,610 17,204 10,365 14,591 9,256 Net income 116,302 100,140 89,226 79,611 68,155 Period-end: Loans, net of reserve 6,193,473 5,435,207 4,567,255 3,581,177 2,801,977 Assets 11,130,388 9,748,334 8,373,997 7,059,507 5,613,233 Deposits 6,905,744 6,046,005 5,263,184 4,607,727 3,924,405 Subordinated debentures 186,302 148,816 148,642 146,921 148,356 Shareholders' equity 828,483 703,576 557,164 524,793 451,880 Nonperforming assets3 50,708 43,599 22,943 18,762 25,249 Profitability Statistics Earnings per share (based on average equivalent shares): Basic $ 2.25 $ 1.95 $ 1.73 $ 1.55 $ 1.32 Diluted 2.01 1.75 1.55 1.38 1.19 Percentages (based on daily averages): Return on average assets 1.14% 1.15% 1.17% 1.34% 1.29% Return on average shareholders' equity 14.93 16.46 16.45 16.38 16.78 Average shareholders' equity to average assets 7.62 7.00 7.12 8.17 7.71 Common Stock Performance Per Share: Book Value $ 16.18 $ 13.88 $ 11.02 $ 10.57 $ 9.08 Market price: December 31 close 31.51 21.25 20.19 23.38 19.40 Market range - High trade 32.75 21.25 25.94 25.63 22.00 - Low trade 21.31 15.31 18.94 19.50 13.88 Selected Balance Sheet Statistics Period-end: Tier 1 capital ratio 8.08% 8.06% 7.27% 7.93% 9.87% Total capital ratio 11.56 11.23 10.72 12.02 14.95 Leverage ratio 6.38 6.51 5.92 6.60 7.06 Reserve for loan losses to nonperforming loans3 233.90 207.95 391.65 467.70 270.65 Reserve for loan losses to loans1 1.66 1.51 1.66 1.86 1.95 Miscellaneous (at December 31) Number of employees (FTE) 3,392 3,003 3,101 2,850 2,404 Number of banking locations 114 105 100 91 76 Number of TransFund locations 1,325 1,111 1,020 998 785 Mortgage loan servicing portfolio $ 6,645,868 $ 6,874,995 $ 7,028,247 $ 6,375,239 $ 6,981,744 - ------------------------------------------------------------------------------------------------------------------------------- 1 Excludes residential mortgage loans held for sale. 2 Restated for pooling of interest in 1999. 3 Includes nonaccrual loans, renegotiated loans and assets acquired in satisfaction of loans. Excludes loans past due 90 days or more and still accruing.
Management's Assessment of Operations and Financial Condition BOK Financial Corporation ("BOK Financial") is a financial holding company that offers full service banking in Oklahoma, Northwest Arkansas, Dallas and Houston, Texas metropolitan areas and New Mexico. BOK Financial's principal subsidiaries are Bank of Oklahoma, N.A., ("BOk"), Bank of Texas, N.A., Bank of Albuquerque, N.A., and Bank of Arkansas, N.A. Other subsidiaries include BOSC, Inc., a broker/dealer that engages in retail and institutional securities sales and municipal underwriting. Assessment of Operations Summary of Performance BOK Financial recorded net income of $116.3 million or $2.01 per diluted share for 2001 compared to $100.1 million or $1.75 per diluted share for 2000. Prior years' earnings per share have been restated to reflect a 3% stock dividend in 2001. Returns on average assets and average equity were 1.14% and 14.93%, respectively, for 2001 compared to 1.15% and 16.46%, respectively, for 2000. Net income in 2000 included a $3.0 million reduction in income tax expense due to favorable resolution of an Internal Revenue Service examination. Diluted earnings per share were $1.69, return on equity was 16.05%, and return on average assets was 1.12% excluding this resolution. Net interest revenue grew $57.9 million or 22% during 2001 due primarily to an increase in average earning assets of $1.4 billion. Fees and commissions revenue grew $35.7 million or 18%, which included increases in all major categories of fee income compared to 2000. Gain on sales of securities included gains on sales of securities used as an economic hedge of the mortgage-servicing portfolio. The net impact of these sales and the provision for impairment of the mortgage-servicing portfolio was a gain of $2.8 million. Excluding the securities gains on this hedge, net gains on sales of securities were $17.9 million. Operating expenses increased $32.5 million or 11% excluding $20.7 million from Citizens National Bank of Texas ("CNBT"), which was acquired in January 2001 and $15.6 million provision for impairment of mortgage servicing rights. The provision for loan loss increased $20.4 million to $37.6 million. Net income for the fourth quarter of 2001 was $30.1 million or $0.52 per diluted common share, an increase of 18% over the same period of 2000. These increases included an increase of $17.8 million or 26% in net interest revenue and a $10.6 million or 20% increase in fees and commissions. These increases were partially offset by a $17.2 million or 23% increase in other operating expense, excluding provisions for impairment of mortgage servicing rights. This increase was due primarily to amortization of mortgage servicing rights. Net income for 1999 was $89.2 million or $1.55 per diluted common share. Returns on average assets and equity were 1.17% and 16.45%, respectively. Net Interest Revenue Tax equivalent net interest revenue totaled $334.8 million for 2001 compared to $276.7 million for 2000. The increase in net interest revenue was primarily due to an increase in average earning assets. Average earning assets increased by $1.4 billion during 2001, most notably average loan growth of $1.1 billion. This growth in loans improved the mix of earning assets since loans generally have higher yields than other types of earning assets. Average loans now comprise 65% of average earning assets compared to 63% in 2000. The growth in average earning assets was funded by a $1.2 billion increase in interest-bearing liabilities, including an $845 million increase in interest-bearing deposits. Table 2 reflects the effect on net interest revenue of changes in average balances and interest rates for the various types of earning assets and interest-bearing liabilities. Net interest margin, the ratio of net interest revenue to average earning assets, increased from 3.56% in 2000 to 3.64% in 2001. This increase reflects the effect of changes in interest rates on BOK Financial's earning assets and interest-bearing liabilities. BOK Financial's interest-bearing liabilities react more quickly to changes in interest rates than its earning assets, causing the net interest margin to increase during periods of declining interest rates. Management expects the favorable effect of declining interest rates to moderate as yields on earning assets decline and as overall market rates stabilize. Table 2 Volume/Rate Analysis (In Thousands) 2001/2000 2000/1999 ------------------------------------- ------------------------------------ Change Due To(1) Change Due To(1) ------------------------ ------------------------ Change Volume Yield/Rate Change Volume Yield/Rate ------------ ----------- ------------ ----------- ------------ ----------- Tax-equivalent interest revenue: Securities $17,329 $ 26,009 $ (8,680) $ 20,384 $11,444 $ 8,940 Trading securities (250) 226 (476) (841) (1,683) 842 Loans 1,149 88,815 (87,666) 117,643 77,933 39,710 Funds sold and resell agreements (2,133) (1,516) (617) 743 164 579 - ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ ----------- Total 16,095 113,534 (97,439) 137,929 87,858 50,071 - ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ ----------- Interest expense: Transaction deposits (5,126) 9,642 (14,768) 8,509 4,847 3,662 Savings deposits (422) 50 (472) (268) (174) (94) Time deposits 5,686 26,304 (20,618) 49,387 28,452 20,935 Borrowed funds (42,608) 15,392 (58,000) 46,962 22,154 24,808 Subordinated debenture 486 2,059 (1,573) 1,103 15 1,088 - ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ ----------- Total (41,984) 53,447 (95,431) 105,693 55,294 50,399 - ---------------------------------------- ------------ -- ----------- ----------- ------------ ------------ ----------- Tax-equivalent net interest revenue 58,079 $ 60,087 $ (2,008) 32,236 $32,564 $ (328) ----------- ------------ ------------ ----------- (Increase) decrease in tax-equivalent adjustment (192) 527 - ---------------------------------------- ------------ -- ----------- Net interest revenue $57,887 $ 32,763 - ---------------------------------------- ------------ -- ----------- 4th Qtr 2001/4th Qtr 2000 ----------------------------------- Change Due To(1) ----------------------- Change Volume Yield/Rate ----------- ----------- ----------- Tax-equivalent interest revenue: Securities $ 1,534 $ 7,337 $ (5,803) Trading securities (160) 67 (227) Loans (26,211) 18,863 (45,074) Funds sold and resell agreements (703) (360) (343) - ------------------------------------------ ----------- ----------- ----------- Total (25,540) 25,907 (51,447) - ------------------------------------------ ----------- ----------- ----------- Interest expense: Transaction deposits (5,713) 3,202 (8,915) Savings deposits (184) 55 (239) Time deposits (12,493) 2,315 (14,808) Borrowed funds (24,807) 3,494 (28,301) Subordinated debenture 97 619 (522) - ------------------------------------------ ----------- ----------- ----------- Total (43,100) 9,685 (52,785) - ------------------------------------------ ----------- ----------- ----------- Tax-equivalent net interest revenue 17,560 $16,222 $ 1,338 ----------- ----------- Decrease in tax-equivalent adjustment 267 - ------------------------------------------ ----------- Net interest revenue $17,827 - ------------------------------------------ ----------- (1) Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
Since inception in 1990, BOK Financial has followed a strategy of fully utilizing its capital resources by borrowing funds in the capital markets to supplement deposit growth and to invest in securities. The primary objective of this strategy is to reduce total interest rate risk. The interest rate on these borrowed funds, which generally reacts quickly to changes in market interest rates, tends to match the effect of changes in interest rates on the loan portfolio. Interest rates earned on the securities purchased with the proceeds of these borrowed funds are affected less quickly by changes in market interest rates. The timing of changes in interest rates earned on securities more closely matches the timing of changes in interest rates paid on deposit accounts. Although this strategy frequently results in a net interest margin that falls below those normally seen in the commercial banking industry, it provides net interest revenue as well as a reduction in interest rate risk. Management estimates that this strategy resulted in a 31 basis point decrease in net interest margin for 2001. However, this strategy contributed $38.8 million to net interest revenue. Net interest margin, excluding this strategy, was 3.95% for 2001. As more fully discussed in the subsequent Market Risk Section, management employs various techniques to control, within established parameters, the interest rate and liquidity risk inherent in this strategy. The effectiveness of these strategies are reflected in the overall changes in net interest revenue due to changes in interest rates as shown in Table 2. Tax-equivalent net interest revenue for the fourth quarter of 2001 was $88.8 million compared to $71.3 million for the fourth quarter of 2000. This increase was due to the growth in average earning assets, which increased $1.4 billion or 17%. Net interest margin increased 22 basis points to 3.69% due to the effect of declining rates over the past year as discussed above. Tax-equivalent net interest revenue totaled $276.7 million for 2000 compared to $244.5 million in 1999. The increase in net interest revenue during 2000 was primarily due to an increase in average earning assets. Average earning assets increased by $1.0 billion during 2000. Additionally, the mix of earning assets improved during 2000. Average loans, which generally have higher yields than other types of earning assets, increased to 63% of earning assets in 2000 compared to 60% in 1999. These volume factors contributed $87.9 million to the increase in net interest revenue. The financial service environment in BOK Financial's primary markets is highly competitive due to a large number of commercial banks, thrifts, credit unions and brokerage firms. Additionally, many customers have access to national and regional financial institutions for many products and services. Management expects that BOK Financial will continue to be able to successfully compete with these financial institutions by delivering the loan and deposit products and other financial services traditionally associated with a large bank with the responsiveness of a smaller, community bank. Other Operating Revenue Other operating revenue increased $60.4 million or 30% compared to 2000, including a $24.5 million increase from gains on financial instruments. Fees and commissions continue to represent a significant portion of BOK Financial's total revenue at 40% during 2001. Included in 2001 were fees and commissions of $2.8 million from the CNBT acquisition, including service charges on deposit accounts of $2.3 million. All major categories of fees and commissions increased over the same period in 2000. Most notably, mortgage banking revenue increased $13.0 million or 35% due to improved conditions for sales of loans into the secondary market. Service charges and fees on deposit accounts grew $8.4 million or 19% over 2000 due to growth in nonsufficient fund charges and growth of treasury services revenue. When interest rates fall, more corporate customers pay for banking services through treasury services fees instead of maintaining compensating deposit balances. Brokerage and trading grew 36% to $21.8 million during 2001. This growth was driven by diversification into corporate bonds, favorable reception to the product mix in our newer markets and continued expansion in revenue from traditional brokerage products. Growth in transaction card revenue of $5.7 million or 15% was due to growth in merchant fees, which are directly related to the level of consumer spending and growth in debit card fees that continue to become more popular with consumers. Trust fees grew 3% despite declining stock market values on which many fees are based. Securities and derivatives net gains totaled $26.6 million for 2001. These gains included $17.9 million from the general securities portfolio, gains of $12.8 million on a securities portfolio that management has designated as an economic hedge against the risk of loss on mortgage servicing rights, and losses of $4.1 million from fair value adjustments of derivative instruments. Additional discussion about the mortgage servicing rights and related hedge portfolio and BOK Financial's use of derivative instruments is located in the Market Risk section of this report. Table 3 Other Operating Revenue (In Thousands) Years ended December 31, ------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------- ----------- ----------- ----------- ----------- Brokerage and trading revenue $ 21,822 $ 16,074 $ 16,233 $ 15,301 $ 9,556 Transaction card revenue 44,481 38,753 32,648 24,426 19,339 Trust fees and commissions 40,567 39,316 35,127 29,956 24,072 Service charges and fees on deposit accounts 51,284 42,932 41,067 33,920 30,181 Mortgage banking revenue 50,155 37,179 36,986 41,733 32,235 Leasing revenue 3,745 4,244 3,725 7,111 5,861 Other revenue 20,087 17,965 17,589 11,688 10,330 - ------------------------------------------------ ------------- ----------- ----------- ----------- ----------- Total fees and commissions 232,141 196,463 183,375 164,135 131,574 - ------------------------------------------------ ------------- ----------- ----------- ----------- ----------- Gain on sale of student loans 557 529 600 1,548 1,311 Gain on loan securitization - - 270 - - Gain (loss) on sales of other assets - (148) 4,626 - - Gain (loss) on sales of securities, net 30,640 2,059 (419) 9,337 (1,329) Loss on derivatives, net (4,062) - - - - - ------------------------------------------------ ------------- ----------- ----------- ----------- ----------- Total other operating revenue $259,276 $198,903 $188,452 $175,020 $131,556 - ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Other operating revenue for the fourth quarter of 2001 totaled $55.3 million compared to $54.9 million for the fourth quarter of 2000. Included in the fourth quarter 2001 were $676 thousand of fees and commissions from the CNBT acquisition, including service charges on deposit accounts of $594 thousand. The fourth quarter of 2001 included securities losses of $3.8 million compared to gains of $3.3 million in the fourth quarter of 2000. Net securities losses from the portion of the available for sale portfolio, which serves as an economic hedge of mortgage servicing rights, totaled $11.1 million. Net securities gains on the remaining available for sale portfolio totaled $7.3 million. Changes in the components of other revenue during the fourth quarter were consistent with the year to date changes. Service charges and fees on deposit accounts increased $2.8 million. Mortgage banking revenue increased $4.8 million. Other operating revenue in 2000 increased $10.5 million or 6% compared to 1999. Fees and commissions, which are included in other operating revenue, increased $13.1 million or 7% while gains on asset sales decreased $2.6 million. Revenue generated by card-based transactions, such as the TransFund ATM network, bankcards and related merchant discounts, increased by 19% to $38.8 million. These increases are generally due to a higher volume of transactions processed in 2000. Other revenue included $4.5 million of private placement and underwriting fees. Management expects continued growth in other operating revenue. However, increased competition, market saturation and the level of economic activity could affect the future rate of increase. Additionally, BOK Financial's ability to generate fee revenue is affected by interest rates, values in the equity market and consumer spending, all of which can be volatile. Lines of Business BOK Financial operates four principal lines of business under its Bank of Oklahoma franchise: corporate banking, consumer banking, mortgage banking and trust services. BOK Financial also operates a fifth principal line of business, regional banks, which includes banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Other lines of business include: TransFund ATM network which contributed $7.8 million in 2001, $7.1 million in 2000 and $5.3 million in 1999 to net income; and BOSC, Inc. which contributed $1.4 million in 2001, $406 thousand in 2000 and $534 thousand in 1999 to net income. Corporate Banking The Corporate Banking Division provides loan and lease financing and treasury and cash management services to businesses throughout Oklahoma and seven surrounding states. In addition to serving the banking needs of small businesses, middle market and larger customers, the Corporate Banking Division has specialized groups that serve customers in the energy, agriculture, healthcare and banking/finance industries. The Corporate Banking Division contributed 39% of consolidated net income for 2001 compared to 43% of consolidated net income for 2000. The reduction in the percent of consolidated earnings contributed by the Corporate Banking Division reflects the growth in the Regional Banks Division, most notably Bank of Texas. Total revenue for this division increased 11% primarily due to a 13% increase in outstanding loans. This increase in revenue was partially offset by increases in internal funding rates charged to the Corporate Banking Division. Operating expense for this division increased 7%. The provision for loan loss represents net loans charged off or recovered for the Corporate Banking Division. Table 4 Corporate Banking (In Thousands) Years ended December 31, ---------------------------------------- 2001 2000 1999 ---------------------------------------- Revenue (interest expense) from external sources $ 229,277 $ 264,623 $ 207,926 Revenue (interest expense)from internal sources (86,615) (136,367) (92,844) Operating expense 57,322 53,451 47,025 Provision for loan loss 10,493 3,658 (1,111) Net income 45,580 43,471 42,262 Average assets $3,854,310 $3,370,044 $2,933,619 Average equity 442,870 392,711 330,091 Return on assets 1.18% 1.29% 1.44% Return on equity 10.29 11.07 12.80 Efficiency ratio 40.18 41.68 40.86 Consumer Banking The Consumer Banking Division provides its customers throughout Oklahoma with a full line of deposit, loan and fee-based services through four major distribution channels: traditional branches, supermarket branches, the 24-hour ExpressBank call center and the Internet. Additionally, the division is a significant referral source for the Bank of Oklahoma Mortgage Division ("BOk Mortgage") and BOSC's retail brokerage division. The Consumer Banking Division contributed 14% of consolidated net income for 2001 and 17% of consolidated net income for 2000. Net expense from external sources decreased $16.1 million due primarily to lower rates paid on deposits. This decrease was partially offset by lower revenue from internal sources due to rates charged to other operating units. Operating expenses increased $4.2 million or 8% during 2001, including a $2.0 million increase in personnel costs. Table 5 Consumer Banking (In Thousands) Years ended December 31, ------------------------------------------- 2001 2000 1999 ------------- ------------ -------------- Revenue (interest expense)from external sources $ (4,054) $ (20,154) $ (1,065) Revenue (interest expense)from internal sources 94,393 107,172 80,973 Operating expense 59,099 54,906 53,545 Net income 16,539 17,379 14,602 Average assets $2,192,698 $2,140,383 $2,100,368 Average equity 69,102 60,813 58,824 Return on assets .75% .81% .70% Return on equity 23.93 28.58 24.82 Efficiency ratio 65.42 63.10 67.01 Mortgage Banking BOK Financial engages in mortgage banking activities through the BOk Mortgage Division of Bank of Oklahoma. These activities include the origination, marketing and servicing of conventional and government-sponsored mortgage loans. BOk Mortgage contributed 7% of net income in 2001 compared to 3% in 2000. Mortgage banking revenue, which is included in other operating revenue, totaled $50.2 million in 2001, an increase of $13.0 million compared to 2000. Declining interest rates throughout 2001 were favorable for mortgage lending. Mortgage loans originated totaled $1.1 billion during 2001, including $562 million for home purchases and $566 million of loans refinanced. Mortgage loans originated during 2000 totaled $590 million. The increase in volume of new loans combined with improved pricing resulted in an increase in revenue from loan production to $17.8 million in 2001 compared to $4.8 million in 2000. Revenue from loan production included $22.7 million in 2001 and $11.3 million in 2000 from capitalized originated mortgage loan servicing rights. Income before taxes from loan origination and marketing activities was $12.1 million in 2001 compared to a loss of $3.1 million in 2000. Approximately 71% of the mortgage loans originated during 2001 were in Oklahoma. The declining interest rate environment had an unfavorable effect on BOk Mortgage's loan servicing portfolio, as both actual and anticipated prepayments increased significantly. Total servicing revenue was $32.3 million for 2001 compared to $32.9 million for 2000. Amortization of servicing rights, which is included in operating expense, increased by $8.3 million to $23.5 million due to the higher level of prepayments. Additionally, an impairment provision of $15.6 million was recognized in 2001 for actual run-off and anticipated prepayments. Net gains from the sales of securities that have been designated as an economic hedge of the loan servicing portfolio totaled $12.8 million in 2001 and $5.3 million in 2000. These factors combined to reduce pretax income on loan servicing activities to $378 thousand during 2001 compared to pretax income of $7.8 million for 2000. See the Market Risk section of this report for additional discussion of the prepayment risk of the mortgage servicing portfolio and related hedging strategies. BOk Mortgage services approximately $6.6 billion of mortgage loans. Approximately 60% of these loans are in BOK Financial's primary market area and 21% are in the southeastern United Sates. Information regarding stratification of the servicing portfolio by primary risk characteristics is presented in Note 8 to the Consolidated Financial Statements. Table 6 Mortgage Banking (In Thousands) Years ended December 31, ------------------------------------- 2001 2000 1999 ------------------------------------- Revenue (interest expense)from external sources $ 62,664 $ 44,907 $ 39,675 Capitalized mortgage servicing rights 22,695 11,267 11,483 Revenue (interest expense)from internal sources (20,867) (15,006) (8,296) Operating expense 47,750 37,762 39,422 Provision for impairment of mortgage servicing rights 15,551 2,900 - Gain on sales of securities, net 12,757 5,257 - Net income 8,493 3,486 2,051 Average assets $ 651,103 $ 412,219 $ 355,887 Average equity 50,891 32,053 32,006 Return on assets 1.30% .85% .58% Return on equity 16.69 10.88 6.41 Efficiency ratio 74.04 91.73 91.97 Trust Services BOK Financial provides a wide range of trust services, including institutional, investment and retirement products and services to affluent individuals and businesses, not-for-profit organizations and governmental agencies. Trust services are primarily provided to clients in Oklahoma, Texas, Arkansas and New Mexico. Additionally, trust services include a nationally competitive, self-directed 401-k program with clients in Dallas, Chicago, New York and Los Angeles. At December 31, 2001 and 2000, trust assets with an aggregate market value of $18 billion were subject to various fiduciary arrangements. BOK Financial has sole or joint discretionary authority over $10 billion of trust assets at December 31, 2001 compared to $9 billion at the end of 2000. Trust services contributed 8% to consolidated net income for 2001 compared to 10% for 2000. Growth in trust fees was limited by the declining stock market values during 2001 on which many fees are based. Total revenue from trust services increased $2.2 million or 4% during 2001, while operating expenses increased $2.6 million or 7% due primarily to $921 thousand in personnel costs. Table 7 Trust Services (In Thousands) Years ended December 31, -------------------------------------- 2001 2000 1999 ------------- ----------- ------------ Revenue (interest expense)from external sources $ 41,064 $ 43,433 $ 39,809 Revenue (interest expense)from internal sources 13,589 8,995 7,243 Operating expense 38,534 35,916 33,481 Net income 9,771 10,087 8,249 Average assets $ 475,715 $ 355,150 $ 332,297 Average equity 41,290 37,895 33,473 Return on assets 2.05% 2.84% 2.48% Return on equity 23.66 26.62 24.64 Efficiency ratio 70.51 68.51 71.16 Regional Banks Regional banks include Bank of Texas, Bank of Arkansas and Bank of Albuquerque. Each of these banks provides a full range of corporate and consumer banking, treasury services and retail investments in its respective market. Small businesses and middle-market corporations are the regional banks' primary customer focus. Regional banks contributed $31.7 million or 27% to consolidated net income in 2001 compared to $21.7 million or 22% in 2000. Total revenue for 2001 increased $40.5 million compared to 2000, while operating expenses increased $23.0 million. The increase in operating expenses included a $5.0 million increase in intangible amortization expense. BOK Financial's operations in Texas, New Mexico and Arkansas contributed $21.0 million, $8.2 million, and $2.5 million, respectively, to consolidated net income for 2001. This compared to net income of $16.1 million, $4.1 million, and $1.5 million for 2000. Table 8 Regional Banks (In Thousands) Years ended December 31, ----------------------------------------- 2001 2000 1999 ------------------------------------------- Revenue (interest expense)from external sources $ 158,510 $ 119,036 $ 83,512 Revenue (interest expense)from internal sources (11,690) (12,709) (10,458) Operating expense 91,253 68,224 60,662 Gains (losses) on sales of securities 484 (356) (53) Net income 31,651 21,705 7,856 Tangible net income 46,848 31,916 14,807 Average assets $3,352,155 $2,467,530 $1,860,667 Average equity 409,622 282,223 214,226 Tangible return on assets 1.40% 1.29% .80% Tangible return on equity 11.44 11.31 6.91 Efficiency ratio 62.15 64.16 83.04 Average equity assigned to the regional banks included both an amount based on management's assessment of risk and an additional amount based upon BOK Financial's investment in these entities. Management excludes the amortization of all intangible assets when evaluating the performance of the regional banks on a tangible return basis. Other Operating Expense Other operating expense totaled $368.8 million for 2001 compared to $302.8 million in 2000. Excluding a $15.6 million provision for impairment of mortgage servicing rights in 2001 compared to $2.9 million in 2000 and $20.7 million of operating expenses from the CNBT acquisition in 2001, other operating expense increased $32.5 million or 11%. The following discussion excludes CNBT operating expenses (most notably personnel of $6.3 million, net occupancy and equipment of $1.7 million and amortization of intangible assets of $7.4 million) to improve comparability. Personnel costs increased $11.4 million or 8%. Regular compensation (including overtime and temporary assistance) and benefits increased $9.3 million or 7%. Average staffing on a full time equivalent ("FTE") basis increased by 141 employees or 5% while average compensation expense per FTE increased by 3%. Incentive compensation increased by $2.0 million or 10% compared to 2000 due to growth in revenue over pre-determined targets. Professional fees for 2001 increased $3.4 million or 36%, which included $1.5 million in consulting fees for public finance business at BOSC, Inc. and $320 thousand for the Perfect Banking sales and service program. Net occupancy and equipment expense for 2001 increased $5.6 million or 16% due primarily to a $3.2 million increase in depreciation expense. This increase reflects additional investments in facilities and technology improvements over the past two years. Data processing and communications increased $4.4 million or 13% primarily in transaction card servicing and external processing due to increased volumes. Mortgage banking costs increased $8.0 million or 36% due primarily to amortization of mortgage servicing rights, which is caused by an increase in loan prepayments. A provision for impairment of mortgage servicing rights of $15.6 million was taken during 2001 due primarily to the interest rate and prepayment environment. Table 9 Other Operating Expense (In Thousands) Years ended December 31, ------------------------------------------------------ 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- Personnel expense $163,835 $146,215 $136,010 $109,437 $ 90,625 Business promotion 10,658 8,395 9,077 8,220 8,886 Contribution of stock to BOk Charitable Foundation - - - 2,257 3,638 Professional fees and services 13,391 9,618 9,584 9,781 6,906 Net occupancy and equipment 42,764 35,447 30,789 21,811 18,720 Data processing and communications 40,013 34,962 32,038 23,764 19,444 FDIC and other insurance 1,717 1,569 1,356 1,368 1,380 Printing, postage and supplies 12,329 11,260 11,599 9,524 8,067 Net gains and operating expenses on repossessed assets 1,401 (1,283) (3,473) (474) (3,831) Amortization of intangible assets 20,113 15,478 15,823 9,515 8,968 Mortgage banking costs 30,261 22,274 23,932 25,949 19,968 Provision for impairment of mortgage servicing rights 15,551 2,900 - (2,290) 4,100 Other expense 16,729 15,980 13,781 15,133 12,983 - --------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Total $368,762 $302,815 $280,516 $233,995 $199,854 - --------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Other operating expenses for the fourth quarter of 2001 totaled $84.8 million compared to $79.3 million for the fourth quarter of 2000. The fourth quarter of 2001 included an $8.9 million reversal of previous provisions compared to a $2.9 million provision for impairment of mortgage servicing rights during 2000. Excluding the effects of this impairment charge, operating expenses for the fourth quarter of 2001 increased by 23% from 2000 due to reasons consistent with those discussed above. Other operating expense totaled $302.8 million for 2000 compared to $280.5 million in 1999, an increase of 8%. Personnel, net occupancy and equipment and data processing and communications comprised most of the increase. In 2000, personnel costs increased $10.2 million or 8% compared to 1999. Regular compensation (including overtime and temporary assistance) and benefits increased $6.1 million or 6%. Average staffing on a full time equivalent ("FTE") basis increased by 77 employees or 3% while average compensation expense per FTE increased by 5%. Incentive compensation increased by $3.4 million or 20% compared to 1999 due to growth in revenue over pre-determined targets and growth in the number of business units covered by incentive plans. Net occupancy and equipment expense for 2000 increased $4.7 million or 15% compared to 1999. Equipment expense increased by $3.1 million due primarily to depreciation of computer equipment purchased in 1998 and 1999. Data processing and communications increased $2.9 million or 9% due primarily to a $1.6 million increase in processing charges. Income Taxes Income tax expense was $63.6 million, $47.6 million and $44.5 million for 2001, 2000 and 1999, respectively, representing 35%, 32% and 33%, respectively, of book taxable income. Tax expense currently payable totaled $74.2 million in 2001 compared to $38.4 million in 2000 and $43.8 million in 1999. The Internal Revenue Service is currently examining the carryback of $30.8 million of capital loss generated in 1999. Such loss was applied against capital gains generated in 1997 and 1998 resulting in a $9.8 million refund. Management expects no material adverse impact on the financial statements as a result of this examination. The Internal Revenue Service closed its examination of 1996 during 2000. As a result of the outcome of this examination, BOK Financial reduced its tax accrual by $3.0 million. Income tax expense for 2000 was 34% of pre-tax book income excluding the reversal of this accrual. During 1999 the Internal Revenue Service examination for 1995 was closed with no significant adjustments. Table 10 Selected Quarterly Financial Data (In Thousands Except Per Share Data) Fourth Third Second First ------------ ------------ ------------ ------------ 2001 --------------------------------------------------- Interest revenue $148,222 $161,863 $168,270 $176,278 Interest expense 61,203 77,337 88,653 100,666 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Net interest revenue 87,019 84,526 79,617 75,612 Provision for loan losses 10,517 11,023 8,497 7,573 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Net interest revenue after provision for loan losses 76,502 73,503 71,120 68,039 Other operating revenue 62,330 57,450 58,496 54,422 Gain (loss) on sales of securities, net (3,770) 19,746 2,030 12,634 Gain (loss) on derivatives, net (3,300) (1,105) (303) 646 Other operating expense 84,801 103,591 86,584 93,786 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Income before taxes 46,961 46,003 44,759 41,955 Income tax expense 16,829 16,216 15,778 14,789 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Net income before cumulative effect of a change in accounting principle, net of tax 30,132 29,787 28,981 27,166 Transition adjustment of adoption of FAS 133 - - - 236 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Net income $ 30,132 $ 29,787 $ 28,981 $ 27,402 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Earnings per share: Basic $ .58 $ .58 $ .56 $ .53 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Diluted $ .52 $ .51 $ .50 $ .48 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Average shares: Basic 51,138 51,015 50,906 50,828 - ------------------------------------------------------------ ------------ ------------ ------------ ------------ Diluted 58,201 58,095 57,837 57,626 - ------------------------------------------------------------ ------------ ------------ ------------ ------------
2000 ---------------------------------------------------- Interest revenue $173,495 $163,577 $156,314 $145,344 Interest expense 104,303 95,430 88,444 81,666 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Net interest revenue 69,192 68,147 67,870 63,678 Provision for loan losses 6,000 5,031 3,534 2,639 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Net interest revenue after provision for loan losses 63,192 63,116 64,336 61,039 Other operating revenue 51,628 50,378 48,030 46,808 Gain (loss) on sales of securities, net 3,296 (538) (682) (17) Other operating expense 79,318 73,964 74,917 74,616 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Income before taxes 38,798 38,992 36,767 33,214 Income tax expense 13,302 13,355 12,573 8,401 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Net income $ 25,496 $ 25,637 $ 24,194 $ 24,813 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Earnings per share: Basic $ .50 $ .50 $ .47 $ .48 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Diluted $ .44 $ .45 $ .42 $ .43 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Average shares: Basic 50,705 50,625 50,718 50,712 - ------------------------------------------------------------ ------------ ------------ ------------ ------------- Diluted 57,371 57,292 57,370 57,380 - ------------------------------------------------------------ ------------ ------------ ------------ -------------
Assessment of Financial Condition Securities Portfolio Securities are identified as either investment or available for sale based upon asset/liability management strategies, liquidity and profitability objectives and regulatory requirements. Investment securities, which consist primarily of Oklahoma municipal bonds and other short-term instruments, are carried at cost, adjusted for amortization of premiums or accretion of discounts. Available for sale securities, which may be sold prior to maturity based upon asset/liability management decisions, are carried at fair value. Unrealized gains or losses on available for sale securities, less deferred taxes, are recorded as accumulated other comprehensive income in stockholders' equity. During 2001, the amortized cost of available for sale securities increased by $682 million. Mortgage-backed securities increased by $779 million to $3.3 billion. Approximately $619 million of the increase in mortgage-backed securities reflected BOK Financial's strategy of fully utilizing available capital resources by borrowing funds in the capital markets as previously discussed in the Net Interest Revenue section of this report. Additionally, mortgage-backed securities designated as an economic hedge of the mortgage servicing rights increased $159 million to $362 million. At December 31, 2001, available for sale securities with an amortized cost of $1.3 billion were pledged as collateral for repurchase agreement borrowings. BOK Financial realized net gains from securities sales of $30.6 million in 2001 and $2.1 million in 2000. These amounts included net gains from securities designated as hedges of the mortgage servicing portfolio of $12.8 million in 2001 and $5.3 million in 2000. The increase in net realized gains reflected the active management of the securities portfolio as interest rates declined in 2001. Net unrealized gains in the securities portfolio increased from $5.4 million at December 31, 2000 to $9.6 million at December 31, 2001. The expected duration of the mortgage-backed securities portfolio extended to approximately 3.0 years during 2001. Management currently intends to reduce the expected duration of the mortgage-backed securities portfolio to approximately 2.8 years. Additional information about the securities portfolio is presented in Note 3 to the Consolidated Financial Statements. Table 11 Securities (In Thousands) December 31, ----------------------------------------------------------------------------- 2001 2000 1999 ------------------------- ------------------------- ------------------------- Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value ------------ ------------ ------------ ------------ ------------ ------------ Investment: U.S. Treasury $ 7,982 $ 7,981 $ - $ - $ 196 $ 198 Municipal and other tax-exempt 222,195 223,487 207,177 207,641 186,177 184,748 Mortgage-backed U.S. agency securities 7,381 7,620 11,541 11,567 18,051 17,926 Other debt securities 3,555 3,540 14,653 14,659 8,756 8,752 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Total $ 241,113 $ 242,628 $ 233,371 $ 233,867 $ 213,180 $ 211,624 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Available for sale: U.S. Treasury $ 34,538 $ 35,197 $ 85,656 $ 85,564 $ 112,902 $ 111,860 Municipal and other tax-exempt 4,262 4,299 14,492 14,552 13,086 13,094 Mortgage-backed securities: U.S. agencies 2,637,636 2,638,425 2,050,100 2,046,318 2,174,916 2,106,094 Other 669,057 673,737 478,065 486,170 202,229 200,558 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Total mortgage-backed securities 3,306,693 3,312,162 2,528,165 2,532,488 2,377,145 2,306,652 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Other debt securities 536 538 242 245 353 353 Equity securities and mutual funds 93,918 97,353 129,823 130,971 156,476 156,745 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Total $3,439,947 $3,449,549 $2,758,378 $2,763,820 $2,659,962 $2,588,704 - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Loans The aggregate loan portfolio at December 31, 2001 totaled $6.3 billion, an increase of $778 million since December 31, 2000. Growth in the loan portfolio included $184 million from the CNBT acquisition and $117 million of residential mortgage loans held for sale. Excluding these items, total loans increased 9% during 2001. Commercial loans increased $427 million during the year. This increase was primarily in the energy, services and wholesale/retail sectors of the loan portfolio. Additionally, the consumer loan portfolio increased $97 million since December 31, 2000. Table 12 Loans (In Thousands) December 31, ---------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ Commercial: Energy $ 987,556 $ 837,223 $ 606,561 $ 468,700 $ 333,988 Manufacturing 467,260 421,046 344,175 245,268 205,836 Wholesale/retail 600,470 499,017 407,785 279,265 264,029 Agriculture 170,861 185,407 173,653 160,241 155,868 Services 1,084,480 963,171 807,184 635,585 482,476 Other commercial and industrial 364,123 342,169 325,343 200,214 107,260 Commercial real estate: Construction and land development 327,455 311,700 249,160 174,059 104,322 Multifamily 291,687 271,459 257,187 181,525 103,218 Other real estate loans 722,633 687,335 588,195 404,985 284,220 Residential mortgage: Secured by 1-4 family residential properties 703,080 638,044 531,058 500,690 435,753 Residential mortgages held for sale 166,093 48,901 57,057 100,269 79,779 Consumer 409,680 312,390 296,131 296,298 299,272 - ---------------------------------------------------- ------------ ------------ ------------ ------------ ------------ Total $6,295,378 $5,517,862 $4,643,489 $3,647,099 $2,856,021 - ---------------------------------------------------- ------------ ------------ ------------ ------------ ------------
Outstanding loans to energy customers totaled $988 million or 16% of total loans at December 31, 2001. This represents an increase of 18% over last year. Small- and medium-size customers in the Houston, Texas; Denver, Colorado and West Texas markets were the primary source of this loan growth. Approximately $768 million of the energy loan portfolio was to oil and gas producers. The amount of credit available to these customers generally depends on the value of their proven energy reserves based on current prices. The energy category also included loans to borrowers involved in the transportation and sale of oil and gas and loans to borrowers that manufacture equipment and provide other services to the energy industry. Outstanding loans to the services industry totaled $1.1 billion, an increase of 13%. Services included loans that totaled $162 million to nursing homes, $115 million to the healthcare industry and $69 million to the hotel industry. Loans to the wholesale/retail industry increased 20% to $600 million. Approximately $40 million of this increase resulted from increased efforts in New Mexico. Agriculture included $150 million of loans to the cattle industry. Other notable loan concentrations by the primary industry of the borrowers are presented in Table 12. BOK Financial participates in shared national credits when appropriate to obtain or maintain business relationships with local customers. At December 31, 2001, the outstanding principal balance of these loans totaled $659 million, including $637 million to borrowers with local market relationships. BOK Financial is the agent lender in approximately 25% of these loans. Commercial real estate loans totaled $1.3 billion or 21% of the loan portfolio at December 31, 2001. This represented a 6% increase from the previous year-end. Construction and land development loans included $265 million for single-family residential lots and premises. The major components of other commercial real estate loans were office buildings - $256 million and retail facilities - $220 million. Residential mortgage loans included $296 million of home equity loans, $253 million of mortgage loans held for business relationship purposes, and $154 million of adjustable rate mortgage loans. Consumer loans included $177 million of indirect automobile loans at December 31, 2001, an increase of $62 million since the previous year-end. Substantially all of these loans were purchased from dealers in Oklahoma. Approximately 26% of the indirect automobile loan portfolio were considered sub-prime. Table 13 Loan Maturity and Interest Rate Sensitivity at December 31, 2001 (In Thousands) Remaining Maturities of Selected Loans -------------------------------------- Total Within 1 Year 1-5 Years After 5 Years -------------- ------------ ------------ ------------ Loan maturity: Commercial $3,674,750 $1,371,647 $1,775,114 $527,989 Commercial real estate 1,341,775 553,363 622,007 166,405 - --------------------------------------------- -------------- ------------ ------------ ------------ Total $5,016,525 $1,925,010 $2,397,121 $694,394 - --------------------------------------------- -------------- ------------ ------------ ------------ Interest rate sensitivity for selected loans with: Predetermined interest rates $1,174,615 $ 190,371 $ 687,061 $297,183 Floating or adjustable interest rates 3,841,910 1,734,639 1,710,060 397,211 - --------------------------------------------- -------------- ------------ ------------ ------------ Total $5,016,525 $1,925,010 $2,397,121 $694,394 - --------------------------------------------- -------------- ------------ ------------ ------------
While BOK Financial continued to increase geographic diversification through expansion into Texas and New Mexico, geographic concentration subjects the loan portfolio to the general economic conditions in Oklahoma. Table 14 reflects the distribution of the major loan categories among BOK Financial's principal market areas. Table 14 Loans by Principal Market Area (In Thousands) December 31, ---------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ Oklahoma: Commercial $2,606,977 $2,480,825 $2,172,268 $1,785,961 $1,399,900 Commercial real estate 739,419 768,232 704,999 538,529 363,329 Residential mortgage 642,116 458,395 376,806 427,004 459,646 Consumer 314,060 250,298 236,565 266,453 272,197 ------------ ------------ ------------ ------------ ------------ Total Oklahoma $4,302,572 $3,957,750 $3,490,638 $3,017,947 $2,495,072 ------------ ------------ ------------ ------------ ------------ Texas: Commercial $ 775,788 $ 549,505 $ 383,460 $ 154,593 $ 120,672 Commercial real estate 380,602 299,357 227,748 105,208 69,950 Residential mortgage 136,181 122,082 102,888 58,185 50,639 Consumer 85,347 53,397 50,923 23,431 23,666 ------------ ------------ ------------ ------------ ------------ Total Texas $1,377,918` $1,024,341 $ 765,019 $ 341,417 $ 264,927 ------------ ------------ ------------ ------------ ------------ Albuquerque: Commercial $ 219,257 $ 167,023 $ 63,370 $ 13,480 $ 450 Commercial real estate 136,425 118,492 87,759 45,331 10,138 Residential mortgage 85,309 101,920 103,684 109,741 - Consumer 8,200 6,107 5,410 3,038 - ------------ ------------ ------------ ------------ ------------ Total Albuquerque $ 449,191 $ 393,542 $ 260,223 $ 171,590 $ 10,588 ------------ ------------ ------------ ------------ ------------ Northwest Arkansas: Commercial $ 72,728 $ 50,680 $ 45,603 $ 35,239 $ 28,435 Commercial real estate 85,329 84,413 74,036 71,501 48,343 Residential mortgage 5,567 4,548 4,737 6,029 5,247 Consumer 2,073 2,588 3,233 3,376 3,409 ------------ ------------ ------------ ------------ ------------ Total Northwest Arkansas $ 165,697 $ 142,229 $ 127,609 $ 116,145 $ 85,434 ------------ ------------ ------------ ------------ ------------
Other Derivatives with Credit Risk During 2001 BOK Financial developed a program that permits its energy-producing customers to hedge against price fluctuations through energy option and swap contracts. These contracts are executed between BOk and its customers. Offsetting contracts are executed between BOk and selected energy dealers to minimize the risk of changes in energy prices. The dealer contracts are identical to the customer contracts, except for a fixed pricing spread paid to BOk as compensation for administrative costs, credit risk and profit. This program creates credit risk for potential amounts due to BOk from the customers and dealers. Customer credit risk is monitored through existing lending policies and procedures. The value of energy production is evaluated across a range of prices to determine a maximum exposure BOk is willing to have individually to any customer or collectively to all energy producers. Dealer credit risk is monitored through existing policies and procedures used to evaluate counterparty risk. This evaluation considers all relationships between BOK Financial and each counterparty. Individual limits are established by management and approved by the Risk Oversight Committee of the Board of Directors. Margin collateral is required if the exposure to a counterparty exceeds established limits. BOK Financial had no energy contracts with Enron Corp. BOK Financial carries the energy contracts at fair value in other assets and other liabilities. Changes in fair value are recorded in income. Closing prices on the New York Mercantile Exchange are used to determine fair value. At December 31, 2001, other assets included $28 million and other liabilities included $29 million of energy contracts. The primary counterparties on asset contracts were Bank of Montreal, $10.6 million; Goldman Sachs, $5.7 million; Morgan Stanley, $5.6 million and J. P. Morgan Chase, $5.4 million. A deterioration in the credit standing of one or more of the counterparties may result in BOK Financial recognizing a loss as the fair value of the affected contracts may no longer move in tandem with the offsetting contracts. Summary of Loan Loss Experience The reserve for loan losses, which is available to absorb losses inherent in the loan portfolio, totaled $102 million at December 31, 2001 compared to $83 million at December 31, 2000. This represented 1.66% and 1.51% of total loans, excluding loans held for sale, at December 31, 2001 and 2000, respectively. Losses on loans held for sale, principally mortgage loans accumulated for placement in security pools, are charged to earnings through adjustments in the carrying value. The increase in loan charge-offs reflected the general trend toward a slower economy in 2001. Commercial loan charge-offs included $5.9 million from two shared national credits to manufacturers with ties to the local economy. Table 15 presents statistical information regarding the reserve for loan losses for the past five years. Table 15 Summary of Loan Loss Experience (Dollars In Thousands) Years ended December 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------------------------------------------------------------- Beginning balance $ 82,655 $76,234 $65,922 $54,044 $45,907 Loans charged off: Commercial 18,042 7,747 2,136 3,219 3,350 Commercial real estate 71 1,176 35 175 698 Residential mortgage 308 285 617 202 440 Consumer 6,827 5,593 4,560 4,000 4,791 - ------------------------------------------------------------------------------------------------------------------------ Total 25,248 14,801 7,348 7,596 9,279 - ------------------------------------------------------------------------------------------------------------------------ Recoveries of loans previously charged off: Commercial 1,151 1,126 3,110 1,487 2,543 Commercial real estate 653 428 487 1,398 957 Residential mortgage 57 157 17 162 557 Consumer 2,727 2,307 2,156 1,836 1,578 - ------------------------------------------------------------------------------------------------------------------------ Total 4,588 4,018 5,770 4,883 5,635 - ------------------------------------------------------------------------------------------------------------------------ Net loans charged off 20,660 10,783 1,578 2,713 3,644 Provision for loan losses 37,610 17,204 10,365 14,591 9,256 Additions due to acquisitions 2,300 - 1,525 - 2,525 - ------------------------------------------------------------------------------------------------------------------------ Ending balance $101,905 $82,655 $76,234 $65,922 $54,044 - ------------------------------------------------------------------------------------------------------------------------ Reserve for loan losses to loans outstanding at 1.66% 1.51% 1.66% 1.86% 1.95% year-end1 Net charge-offs to average loans1 .35 .22 .04 .09 .14 Provision for loan losses to average loans1 .63 .35 .26 .48 .35 Recoveries to gross charge-offs 18.17 27.15 78.52 64.28 60.73 Reserve as a multiple of net charge-offs 4.93x 7.67x 48.31x 24.30x 14.83x - ------------------------------------------------------------------------------------------------------------------------ Problem Loans - ------------------------------------------------------------------------------------------------------------------------ Loans past due (90 days) $ 8,108 $15,467 $11,336 $ 9,553 $10,710 Nonaccrual2 43,540 39,661 19,465 14,095 19,761 Renegotiated 27 87 - - 207 - ------------------------------------------------------------------------------------------------------------------------ Total $ 51,675 $55,215 $30,801 $23,648 $30,678 - ------------------------------------------------------------------------------------------------------------------------ Foregone interest on nonaccrual loans2 $ 5,163 $ 3,803 $ 2,321 $ 2,271 $ 2,981 - ------------------------------------------------------------------------------------------------------------------------ 1 Excludes residential mortgage loans held for sale. 2 Interest collected and recognized on nonaccrual loans was $3.3 million in 1998 and was not significant in 2001 and previous years disclosed.
The reserve for loan losses is assessed by management based upon an ongoing evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments to provide financing. A consistent well-documented methodology has been developed that includes reserves assigned to specific criticized loans, general reserves that are based on a statistical migration analysis and nonspecific reserves that are based on analysis of current economic conditions, loan concentrations, portfolio growth and other relevant factors. An independent Credit Administration department is responsible for performing this evaluation for all of BOK Financial's subsidiaries to ensure that the methodology is applied consistently. Table 16 Loan Loss Reserve Allocation (Dollars in Thousands) December 31, ------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------------ ------------------- ------------------- ------------------- ------------------ % of % of % of % of % of Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1 Reserve3 Loans1 --------- -------- --------- --------- --------- --------- --------- --------- --------- -------- Loan category: Commercial2 $ 61,164 59.95% $55,187 59.39% $47,261 58.10% $37,570 56.09% $35,009 55.81% Commercial real estate 15,923 21.89 12,393 23.23 11,216 23.86 7,949 21.44 3,236 17.71 Residential mortgage 3,774 11.47 2,019 11.67 2,137 11.58 1,807 14.12 1,783 15.70 Consumer 6,890 6.69 6,407 5.71 6,721 6.46 6,689 8.35 5,763 10.78 Nonspecific allowance 14,154 - 6,649 - 8,899 - 11,907 - 8,253 - - -------------------------- --------- -------- --------- --------- --------- --------- --------- --------- --------- -------- Total $101,905 100.00% $82,655 100.00% $76,234 100.00% $65,922 100.00% $54,044 100.00% - -------------------------- --------- -------- --------- --------- --------- --------- --------- --------- --------- -------- 1 Excludes residential mortgage loans held for sale. 2 Specific allocation for Year 2000 risks were $2.0 million in 1999, $3.6 million in 1998 and $4.8 million in 1997. 3 Specific allocation for the loan concentration risks are included in the appropriate category: Energy, Agriculture and Hotel/Motel.
All significant criticized loans are reviewed quarterly. Specific reserves for impairment are determined through evaluation of estimated future cash flow and collateral value in accordance with generally accepted accounting principles and regulatory standards. At December 31, 2001 specific impairment reserves totaled $2.5 million on total impaired loans of $40 million. The general reserve for loan losses is determined primarily through an internally developed migration analysis model. The purpose of this model is to determine the probability that each loan in the portfolio has an inherent loss based on historic trends. Management uses an eight-quarter aggregate accumulation of net loan losses as the basis for this model. Greater emphasis is placed on loan losses in the more recent periods. This model is used to assign a general allowance for loan losses to all commercial loans and leases, excluding loans that have a specific impairment allowance, residential mortgage loans and consumer loans. A nonspecific allowance for loan losses is maintained for risks beyond those factors specific to a particular loan or those identified by the migration analysis. These factors include trends in the general economic conditions in BOK Financial's primary lending areas, duration of the business cycle, specific conditions in industries where BOK Financial has a concentration of loans and overall growth in the loan portfolio. Additional factors considered are bank regulatory examination results, error potential in the migration analysis model or the underlying data, and other relevant factors. A range of potential losses is determined for each factor identified. At December 31, 2001 the range of potential losses for the more significant factors were: General economic conditions - $3.2 million to $4.0 million Concentration of large loans - $1.0 million to $1.9 million Loan portfolio growth - $700 thousand to $1.4 million. Allocation of the loan loss reserve to the major loan categories is presented in Table 16. The increase in the nonspecific allowance was due primarily to the effect of general economic conditions and overall growth in the loan portfolio. A provision for loan losses is charged against earnings in amounts necessary to maintain an adequate loan loss reserve. These provisions totaled $37.6 million for 2001, $17.2 million for 2000 and $10.4 million for 1999. The increase reflected the growth in net loans charged-off for each of those years, growth in nonperforming and potential problem loans. Evaluation of the loan loss reserve requires a significant level of assumptions by management including estimation of future cash flows, collateral values, relevance of historic loss trends to the loan portfolio and assessment of the effect of current economic conditions on borrowers' ability to repay. The required loan loss reserve could be materially affected by changes in these assumptions. The loan loss reserve is adequate to absorb losses inherent in the loan portfolio based upon current conditions and information available to management. However, actual losses may differ significantly due to changing conditions or information that is currently not available. Nonperforming Assets Information regarding nonperforming assets, which totaled $51 million at December 31, 2001 and $44 million at December 31, 2000 is presented in Table 17. Nonperforming assets included nonaccrual and renegotiated loans and excluded loans 90 days or more past due but still accruing interest. Nonaccrual loans increased by $3.9 million during 2001. Newly identified nonaccruing loans totaled $31.3 million during 2001. This amount included $11.4 million for one borrower whose acquisition strategy was adversely affected by market conditions. Total nonaccrual loans decreased by $12.4 million of cash payments received, $9.7 million of losses charged against the reserve for loan losses and $3.8 million of transfers to real estate and other repossessed assets. Table 17 Nonperforming Assets (Dollars in Thousands) December 31, ----------------------------------------------------------------- 2001 2000 1999 1998 1997 ------------ ------------ ------------ ------------ ------------- Nonperforming loans Nonaccrual loans: Commercial $35,075 $37,146 $12,686 $ 8,394 $12,745 Commercial real estate 3,856 161 2,046 1,950 3,276 Residential mortgage 4,140 1,855 3,383 2,583 2,985 Consumer 469 499 1,350 1,168 755 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- Total nonaccrual loans 43,540 39,661 19,465 14,095 19,761 Renegotiated loans 27 87 - - 207 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- Total nonperforming loans 43,567 39,748 19,465 14,095 19,968 Other nonperforming assets 7,141 3,851 3,478 4,667 5,281 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- Total nonperforming assets $50,708 $43,599 $22,943 $18,762 $25,249 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- Ratios: Reserve for loan losses to nonperforming loans 233.90% 207.95% 391.65% 467.70% 270.65% Nonperforming loans to period-end loans2 .71 .73 .42 .40 .72 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- Loans past due (90 days)1 $ 8,108 $15,467 $11,336 $ 9,553 $10,710 - ----------------------------------------------------- ------------ ------------ ------------ ------------ ------------- 1 Includes residential mortgages guaranteed by agencies of the U.S. Government. $ 6,222 $ 7,616 $ 8,538 $ 8,122 $ 7,072 Excludes residential mortgages guaranteed by agencies of the U.S. Government in foreclosure. 4,396 5,630 8,310 6,953 7,396 2 Excludes residential mortgage loans held for sale.
The loan review process also identifies loans that possess more than the normal amount of risk due to deterioration in the financial condition of the borrower or the value of the collateral. Because the borrowers are still performing in accordance with the original terms of the loan agreements and no loss of principal or interest is anticipated, these loans are not included in Nonperforming Assets. However, known information causes management to have concerns as to the borrower's ability to comply with current repayment terms. Potential problem loans totaled $50 million at December 31, 2001 and $24 million at December 31, 2000. At December 31, 2001, the composition of potential problem loans by primary industry categories included manufacturing, $24 million; healthcare, $12 million; and telecommunications, $10 million. Deposits Average deposits for 2001 increased $968 million or 18% compared to 2000. Most notably, average transaction deposit accounts increased $377 million or 20%; time deposits of $100,000 or more increased $254 million or 19% and other time deposits increased $211 million or 18%. Average time deposits of $100,000 or more were $1.6 billion in 2001 compared to $1.3 billion in 2000. At December 31, 2001, the outstanding balance of time deposits of $100,000 or more decreased to $1.3 billion while the balance of other time deposits increased to $1.5 billion. This reflected a determination to reduce the level of large time deposits as a funding source. Table 18 Average Deposits (In Thousands) 2001 2000 ---------------------------- Core deposits $3,331,210 $3,293,456 Public funds 447,846 400,467 Uninsured deposits 2,706,038 1,823,192 - ------------------------------------------------------------ Total $6,485,094 $5,517,115 - ------------------------------------------------------------ Average core deposits as a percent of total deposits decreased to 51% in 2001 compared to 60% in 2000 and 65% in 1999. Concurrently, average uninsured deposits represented 42% of total deposits in 2001, 33% in 2000 and 27% in 1999. Uninsured deposits as used in this presentation are based on a simple analysis of account balances and do not reflect combined ownership and other account styling that would determine insurance based on FDIC regulations. Table 19 Maturity of Domestic CDs and Public Funds in Amounts of $100,000 or More (In Thousands) December 31, --------------------------- 2001 2000 --------------------------- Months to maturity: 3 or less $ 625,686 $ 534,960 Over 3 through 6 311,743 395,537 Over 6 through 12 221,264 303,260 Over 12 449,263 210,107 - ------------------------------------------------------------ Total $1,607,956 $1,443,864 - ------------------------------------------------------------ The distribution of deposit accounts among BOK Financial's principal markets is shown in Table 20. Deposit growth in Texas included $366 million from the acquisition of CNBT. Excluding this acquisition, deposits in Texas grew by $108 million or 11%. BOK Financial competes for deposits by offering a broad range of products and services to its customers. This includes offering competitive rates and fees, convenience and service to its customers. BOK Financial offered free checking accounts during 2001. This product helped to increase the number of new checking accounts opened during 2001 to over 46 thousand compared to approximately 17 thousand in 2000. Management believes that the growth in deposit balances and the value of additional customer contact opportunities more than offset any lost fee income. Bank of Oklahoma offers banking convenience through 114 locations, including 33 supermarket locations. Bank of Texas has 14 locations in the Dallas metropolitan area and 7 in Houston. Bank of Albuquerque has 18 banking locations in Albuquerque, New Mexico and Bank of Arkansas has 3 locations in northwest Arkansas. A 24-hour ExpressBank call center is available to serve customers from all of BOK Financial's subsidiary banks. Table 20 Deposits by Principal Market Area (In Thousands) December 31, ---------------------------- 2001 2000 ---------------------------- Oklahoma: Demand $ 992,663 $ 937,163 Interest-bearing: Transaction 1,650,269 1,407,083 Savings 101,433 93,598 Time 2,041,025 2,036,274 ---------------------------- Total interest-bearing 3,792,727 3,536,955 ---------------------------- Total Oklahoma $ 4,785,390 $ 4,474,118 ---------------------------- Texas: Demand $ 305,745 $ 250,347 Interest-bearing: Transaction 670,728 406,446 Savings 28,918 22,910 Time 451,031 303,203 ---------------------------- Total interest-bearing 1,150,677 732,559 ---------------------------- Total Texas $1,456,422 $ 982,906 ---------------------------- December 31, ---------------------------- 2001 2000 ---------------------------- Albuquerque: Demand $ 57,648 $ 45,803 Interest-bearing: Transaction 224,265 161,027 Savings 26,848 25,843 Time 241,549 250,876 ---------------------------- Total interest-bearing 492,662 437,746 ---------------------------- Total Albuquerque $ 550,310 $ 483,549 ---------------------------- Northwest Arkansas: Demand $ 10,634 $ 10,453 Interest-bearing: Transaction 14,452 11,114 Savings 1,035 1,030 Time 87,501 82,835 ---------------------------- Total interest-bearing 102,988 94,979 ---------------------------- Total Northwest Arkansas $ 113,622 $ 105,432 ---------------------------- Borrowings and Capital Parent Company BOK Financial (parent company) negotiated a $122.5 million unsecured revolving credit agreement with certain banks during 2001. This credit agreement, which matures in October 2004, replaced a $125 million credit agreement that was scheduled to mature in November 2002. The outstanding principal balance of this credit agreement at December 31, 2001 was $95 million. Interest is based on either the London Interbank Offering Rate ("LIBOR") plus a defined margin that is determined by the principal balance outstanding and BOK Financial's credit rating or a base rate. The base rate is defined as the greater of the daily federal funds rate plus 0.5% or the prime rate. This credit agreement includes certain restrictive covenants that limit BOK Financial's ability to borrow additional funds and to pay cash dividends on common stock. These covenants also require BOK Financial and its subsidiaries to maintain minimum capital levels and to exceed minimum net worth ratios. BOK Financial met all of the restrictive covenants at December 31, 2001. BOK Financial filed a shelf registration statement with the Securities and Exchange Commission for the issuance of up to $250 million of senior debt securities during the fourth quarter of 1998. These securities are direct, unsecured obligations and are not insured by the Federal Deposit Insurance Corporation or guaranteed by any governmental agency. None of this debt had been issued at December 31, 2001. BOK Financial borrowed $30 million during 2001 from its principal shareholder, George B. Kaiser, by issuing a subordinated debenture. This debenture matures in March 2008. Interest is based on LIBOR plus 1.75%, payable quarterly. The proceeds of this borrowing were used to support asset growth, including the CNBT acquisition. The primary sources of liquidity available to BOK Financial are earnings on deposits and investments and dividends from subsidiaries. Dividends from subsidiary banks are generally limited by various banking regulations to net profits, as defined, for the year plus retained net profits for the preceding two years. Dividends are further restricted by minimum capital regulations. Based on the most restrictive limitations, BOK Financial's subsidiary banks could declare up to $102 million of dividends without regulatory approval. Management has developed and the Board of Directors has approved an internal capital policy that is more restrictive than the regulatory capital standards. The subsidiary banks could declare up to $68 million under this policy. Subsidiary Banks BOK Financial's subsidiary banks use borrowings to supplement deposits as a source of funds for loan and securities growth. These sources include federal funds purchased, securities repurchase agreements, and advances from the Federal Home Loan Bank. Interest rates and maturity dates for the various sources of funds are matched with specific types of assets in the asset / liability management process. See Note 10 to the Consolidated Financial Statements for additional information about the interest rates and maturity dates of these borrowings. In 1997, BOk issued $150 million of 7.125% fixed rate subordinated debentures that mature in 2007. Interest rate swaps were used as a fair value hedge to convert the fixed interest on these debentures to a LIBOR-based floating rate. This permitted BOk to adjust the carrying value of the subordinated debentures to fair value. In 2001, the interest rate swaps were terminated. The related market value adjustment of the subordinated debenture of $8 million will be recognized over the remaining life of the debt. Equity capital for BOK Financial increased by $125 million to $828 million during 2001. Earnings provided $116 million of this increase. The remainder was primarily due to the effects of stock options exercised during the year. The present policy of BOK Financial is to retain earnings for capital and future growth. Management has no current plans to recommend payments of cash dividends on common stock. Management presently plans to recommend continued payment of an annual dividend in shares of common stock. BOK Financial and its subsidiary banks are subject to various capital requirements administered by federal agencies. Failure to meet minimum capital requirements can result in certain mandatory and additional discretionary actions by regulators that could have a material effect on operations. These capital requirements include quantitative measures of assets, liabilities and off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators. The capital ratios for BOK Financial and each of its subsidiary banks generally increased by a small amount during 2001 as retained capital was used to support asset growth. See Note 16 to the Consolidated Financial Statements for additional information regarding regulatory capital. Market Risk Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices, or equity prices. Additionally, the financial instruments subject to market risk can be classified either as held for trading or held for purposes other than trading. BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its portfolio of assets held for purposes other than trading and trading assets. The effect of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. The responsibility for managing market risk rests with the Asset/Liability Committee that operates under policy guidelines established by the Board of Directors. The negative acceptable variation in net interest revenue and economic value of equity due to a 200 basis point increase or decrease in interest rates is generally limited by these guidelines to +/- 10%. These guidelines also establish maximum levels for short-term borrowings, short-term assets and public and brokered deposits and establish minimum levels for unpledged assets, among other things. Compliance with these guidelines is reviewed monthly. Interest Rate Risk Management (Other than Trading) BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including embedded option positions on net interest revenue, net income and economic value of equity. A simulation model is used to estimate the effect of changes in interest rates over the next twelve months based on three interest rate scenarios. These are a "most likely" rate scenario and two "shock test" scenarios, the first assuming a sustained parallel 200 basis point increase and the second a sustained parallel 100 basis point decrease in interest rates. Management historically evaluated interest rate sensitivity for a sustained 200 basis point decrease in interest rates. However, the results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful. An independent source is used to determine the most likely interest rates for the next year. The Federal Reserve Bank's discount rate affects short-term borrowings, the prime lending rate and the LIBOR. These rates in turn are the basis for much of the variable-rate loan pricing. Additionally, the 30-year mortgage rate directly affects the prepayment speeds for mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. Sensitivity of fee income to market interest rate levels, such as those related to cash management services and mortgage servicing are also included. The model incorporates assumptions regarding the level of interest rate or balance changes on indeterminable maturity deposits (demand deposits, interest-bearing transaction accounts and savings accounts) for a given level of market rate changes. The assumptions have been developed through a combination of historical analysis and future expected pricing behavior. Interest rate swaps on all products are included to the extent that they are effective in the 12-month simulation period. Changes in prepayment behavior of mortgage-backed securities and residential mortgage loans and mortgage servicing in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. The effect of changes in interest rates on the value of mortgage servicing rights is excluded from Table 21 due to the extreme volatility over such a large rate range. The effect of changes in interest rates on the value of mortgage servicing rights and hedge securities is shown in Table 22. The impact of planned growth and new business activities is factored into the simulation model. At December 31, 2001 and 2000, this modeling indicated interest rate sensitivity as follows: Table 21 Interest Rate Sensitivity (Dollars in Thousands) Decrease ---------------------------- 200 bp Increase 100 bp 200 bp Most Likely -------------------------------------------------------------------------------- 2001 2000 2001 2000 2001 2000 -------------------------------------------------------------------------------- Anticipated impact over the next twelve months: Net interest revenue $ 7,380 $ (199) $ (10,403) $ 2,269 $ 3,896 $ 3,837 2.0% (0.1)% (2.8)% 0.7% 1.1% 1.3% - ------------------------------------------------------------------------------------------------------------------ Net income $ 4,612 $ (124) $ (6,502) $ 1,418 $ 2,435 $ 2,398 3.3% (0.1)% (4.6)% 1.3% 1.7% 2.1% - ------------------------------------------------------------------------------------------------------------------ Economic value of equity $ 705 $ (32,142) $(109,487) $(10,113) $ (398) $33,255 0.1% (2.8)% (8.5)% (0.9)% - 2.9% - ------------------------------------------------------------------------------------------------------------------
The estimated changes in interest rates on net interest revenue, net income, and economic value of equity is within guidelines established by the Board of Directors for all interest rate scenarios. BOK Financial also has risk associated with its portfolio of mortgage servicing rights. The primary risk is due to loan prepayments. Generally, the value of mortgage servicing rights declines when interest rates fall due to an increase in loan prepayments. The decrease in value of the servicing rights is recorded as an impairment allowance. Both the amortized cost and the fair value of the servicing rights are stratified by interest rate and loan type. An impairment provision is charged against earnings whenever the amortized cost exceeds the fair value of each stratum. Generally, the value of mortgage servicing rights increases when interest rates rise due to a decrease in loan prepayments. However, this increase in value can only be recognized up to the amortized cost. Any increase in fair value beyond amortized cost is not recognized. There is no active market for trading servicing rights. Therefore, fair value is determined by using industry consensus prepayment speeds to project future cash flows. Additional assumptions are made regarding servicing costs, earnings on escrow deposits and ancillary income and discount rates. Management consistently uses independent sources to provide many of these assumptions. However, actual fair values may differ significantly from computed fair values due to assumption changes or modeling errors. BOK Financial designates a portion of its securities portfolio as an economic hedge against the risk of loss on its mortgage servicing rights. Mortgage-backed and principal only securities are acquired and held as available for sale when the prepayment risk exceeds certain levels. The fair value of these securities is expected to vary inversely to the fair value of the mortgage servicing rights. Management may sell these securities and realize gains or losses when necessary to offset losses or gains on the mortgage servicing rights. However, this strategy presents certain risks. A well- developed market determines fair values for securities. As previously noted, there is no comparable market for mortgage servicing rights. Therefore, the computed change in value of the servicing rights for a specified change in interest rates may not correlate to the change in value of the securities. The relationship between the fair value of mortgage servicing rights and mortgage-backed securities has become more volatile. Since September 30, 2001, industry projections of prepayment speeds have changed significantly due to factors other than interest rates, including duration of the low interest rate environment and borrower prepayment behavior. As a result, the hedge program was less effective during the fourth quarter of 2001. At December 31, 2001, securities with a fair value of $340 million and an aggregate unrealized loss of $22 million were held for the hedge program. This unrealized loss, net of income taxes, is included in shareholders' equity as part of other accumulated comprehensive income. The interest rate sensitivity of the mortgage servicing portfolio and securities held as a hedge is modeled over a range of + / - 50 basis points. At December 31, 2001, the pre-tax results on this modeling on reported earnings were: Table 22 Interest Rate Sensitivity - Mortgage Servicing (Dollars in Thousands) 2001 ----------------------------- 50 bp 50 bp Decrease Increase ----------------------------- Anticipated change in: Mortgage servicing rights $10,670(1) $(18,001) Hedging instruments (12,135) (2) - --------------------------------------------------------- Net $ (1,465) $(18,001) - --------------------------------------------------------- (1) Total anticipated increase in value is $12.3 million. However, only $10.7 million can be recognized due to risk strata limits. (2) Anticipated increase in value of hedging instrument totals $12.6 million, which would reduce the existing unrealized loss. However, gains would not be available to be realized. The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest revenue, net income or economic value of equity or precisely predict the impact of higher or lower interest rates on net interest revenue, net income or economic value of equity. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors. BOK Financial uses interest rate swaps, a form of off-balance sheet derivative product, in managing its interest rate sensitivity. These products are generally used to more closely match interest paid on certain fixed rate loans with funding sources and long-term certificates of deposit with earning assets. During 2001 and 2000, net interest income increased $6.1 million and $2.2 million. Credit risk from these swaps is closely monitored and counterparties to these contracts are selected on the basis of their credit worthiness, among other factors. Derivative products are not used for speculative purposes. See Note 4 to the Consolidated Financial Statements for additional information. Trading Activities BOK Financial enters into trading account activities both as an intermediary for customers and for its own account. As an intermediary, BOK Financial will take positions in securities, generally mortgage-backed securities, government agency securities, and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations and financial institutions. BOK Financial will also take trading positions in U.S. Treasury securities mortgage-backed securities, municipal securities and financial futures for its own account through either BOk or BOSC, Inc. These positions are taken with the objective of generating trading profits. Both of these activities involve interest rate risk. A variety of methods are used to manage the interest rate risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs. The Risk Management Department monitors trading activity daily and reports to senior management and the Risk Oversight and Audit Committee of the BOK Financial Board of Directors any exceptions to trading position limits and risk management policy exceptions. BOK Financial uses a Value at Risk ("VAR") methodology to measure the market risk inherent in its trading activities. VAR is calculated based upon historical simulations over the past five years using a variance/co-variance matrix of interest rate changes. It represents an amount of market loss that is likely to be exceeded only one out of every 100 two-week periods. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the nominal aggregate trading positions to $100 million and the VAR to $6.5 million. At December 31, 2001, the nominal aggregate trading positions were $42 million and the VAR was $946 thousand. The greatest value at risk during 2001 was $1.7 million. New Accounting Standards In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141") and No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 eliminated the pooling of interests method of accounting for business combinations and provided new definitions for intangible assets that must be recognized apart from goodwill. FAS 141 was adopted on July 1, 2001. FAS 142 established new rules of accounting for intangible assets. Under these new rules, intangible assets with indefinite lives such as goodwill will no longer be amortized but will be subject to impairment testing. Other intangible assets will continue to be amortized over their useful lives. Subsequent to the issuance of FAS 142, the Financial Accounting Standards Board issued an interpretation that the unidentifiable intangible asset that results from certain business combinations, such as branch acquisitions, must continue to be amortized over periods determined by the expected lives of the acquired assets and deposits. The Board is currently reconsidering this interpretation. BOK Financial will adopt FAS 142 as of January 1, 2002. Net income and earnings per fully diluted share for 2001 and 2000 would have been $124.6 million or $2.15 and $105.5 million or $1.84 if FAS 142 had been effective for those years. During 2002, BOKF will perform the first of the required impairment tests of goodwill. The effect of these tests on earnings and financial position has not yet been determined. Forward-Looking Statements This Annual Report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about BOK Financial, the financial services industry and the economy in general. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "plans," "projects," variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the provision and reserve for loan losses involve judgments as to expected events and are inherently forward-looking statements. Assessments that BOK Financial's acquisitions and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in part on information provided by others that BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to: (1) the ability to fully realize expected cost savings from mergers within the expected time frames, (2) the ability of other companies on which BOK Financial relies to provide goods and services in a timely and accurate manner, (3) changes in interest rates and interest rate relationships, (4) demand for products and services, (5) the degree of competition by traditional and nontraditional competitors, (6) changes in banking regulations, tax laws, prices, levies and assessments, (7) the impact of technological advances and (8) trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Report of Management on Financial Statements Management is responsible for the consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. In management's opinion, the consolidated financial statements present fairly the financial conditions, results of operations and cash flows of BOK Financial and its subsidiaries at the dates and for the periods indicated. BOK Financial and its subsidiaries maintain a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with management's general or specific authorization, and are recorded as necessary to maintain accountability for assets and to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States. This system includes written policies and procedures, a corporate code of conduct, an internal audit program and standards for the hiring and training of qualified personnel. The Board of Directors of BOK Financial maintains a Risk Oversight and Audit Committee consisting of outside directors that meet periodically with management and BOK Financial's internal and independent auditors. The Committee considers the audit and nonaudit services to be performed by the independent auditors, makes arrangements for the internal and independent audits and recommends BOK Financial's selection of independent auditors. The Committee also reviews the results of the internal and independent audits, considers and approves certain of BOK Financial's accounting principles and practices, and reviews various shareholder reports and other reports and filings. Ernst & Young LLP, certified public accountants, have been engaged to audit the consolidated financial statements of BOK Financial and its subsidiaries. Their audit is conducted in accordance with auditing standards generally accepted in the United States and their report on BOK Financial's consolidated financial statements is set forth below. Report of Independent Auditors We have audited the accompanying consolidated balance sheets of BOK Financial Corporation as of December 31, 2001 and 2000, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BOK Financial Corporation at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Tulsa, Oklahoma January 23, 2002 BOK FINANCIAL CORPORATION Consolidated Statements of Earnings (Dollars In Thousands Except Per Share Data) 2001 2000 1999 ----------------- ----------------- ----------------- Interest Revenue Loans $455,332 $454,077 $336,630 Taxable securities 184,464 167,493 144,901 Tax-exempt securities 12,979 12,782 14,233 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total securities 197,443 180,275 159,134 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Trading securities 1,029 1,416 2,291 Funds sold and resell agreements 829 2,962 2,219 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total interest revenue 654,633 638,730 500,274 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Interest Expense Deposits 208,387 208,249 150,621 Borrowed funds 108,549 151,157 104,195 Subordinated debentures 10,923 10,437 9,334 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total interest expense 327,859 369,843 264,150 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Net Interest Revenue 326,774 268,887 236,124 Provision for Loan Losses 37,610 17,204 10,365 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Net Interest Revenue After Provision for Loan Losses 289,164 251,683 225,759 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Other Operating Revenue Brokerage and trading revenue 21,822 16,074 16,233 Transaction card revenue 44,481 38,753 32,648 Trust fees and commissions 40,567 39,316 35,127 Service charges and fees on deposit accounts 51,284 42,932 41,067 Mortgage banking revenue 50,155 37,179 36,986 Leasing revenue 3,745 4,244 3,725 Other revenue 20,087 17,965 17,589 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total fees and commissions 232,141 196,463 183,375 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Gain on sale of student loans 557 529 600 Gain on loan securitization - - 270 Gain (loss) on sales of other assets - (148) 4,626 Gain (loss) on sales of securities, net 30,640 2,059 (419) Loss on derivatives, net (4,062) - - - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total other operating revenue 259,276 198,903 188,452 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Other Operating Expense Personnel expense 163,835 146,215 136,010 Business promotion 10,658 8,395 9,077 Professional fees and services 13,391 9,618 9,584 Net occupancy and equipment 42,764 35,447 30,789 Data processing and communications 40,013 34,962 32,038 FDIC and other insurance 1,717 1,569 1,356 Printing, postage and supplies 12,329 11,260 11,599 Net gains and operating expenses on repossessed assets 1,401 (1,283) (3,473) Amortization of intangible assets 20,113 15,478 15,823 Mortgage banking costs 30,261 22,274 23,932 Provision for impairment of mortgage servicing rights 15,551 2,900 - Other expense 16,729 15,980 13,781 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Total other operating expense 368,762 302,815 280,516 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Income Before Taxes 179,678 147,771 133,695 Federal and state income tax 63,612 47,631 44,469 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Income Before Cumulative Effect of a Change in Accounting Principle, Net of Tax 116,066 100,140 89,226 Transition adjustment of adoption of FAS 133 236 - - - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Net Income $116,302 $100,140 $ 89,226 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Earnings Per Share: Basic: Before cumulative effect of change in accounting principle $ 2.25 $ 1.95 $ 1.73 Transition adjustment of adoption of FAS 133 - - - - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Net Income $ 2.25 $ 1.95 $ 1.73 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Diluted: Before cumulative effect of change in accounting principle $ 2.01 $ 1.75 $ 1.55 Transition adjustment of adoption of FAS 133 - - - - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Net Income $ 2.01 $ 1.75 $ 1.55 - ------------------------------------------------------------------------- ----------------- ----------------- ----------------- Average Shares Used in Computation: Basic 50,972,642 50,665,525 50,598,351 Diluted 57,937,534 57,328,915 57,599,259 - ------------------------------------------------------------------------- ----------------- ----------------- -----------------
See accompanying notes to consolidated financial statements. Consolidated Balance Sheets (In Thousands Except Share Data) December 31, ------------------------------- 2001 2000 --------------- --------------- Assets Cash and due from banks $ 643,938 $ 701,424 Funds sold and resell agreements 3,400 49,305 Trading securities 10,327 39,865 Securities: Available for sale 2,815,070 2,105,619 Available for sale securities pledged to creditors 634,479 658,201 Investment (fair value: 2001 - $242,628; 2000 - $233,867) 241,113 233,371 - ------------------------------------------------------------------------------ --------------- --------------- Total securities 3,690,662 2,997,191 - ------------------------------------------------------------------------------ --------------- --------------- Loans 6,295,378 5,517,862 Less reserve for loan losses (101,905) (82,655) - ------------------------------------------------------------------------------ --------------- --------------- Net loans 6,193,473 5,435,207 - ------------------------------------------------------------------------------ --------------- --------------- Premises and equipment, net 141,425 132,066 Accrued revenue receivable 68,728 74,981 Intangible assets, net 152,076 109,045 Mortgage servicing rights, net 98,796 110,791 Real estate and other repossessed assets 7,141 3,851 Bankers' acceptances 4,179 6,925 Other assets 116,243 87,683 - ------------------------------------------------------------------------------ --------------- --------------- Total assets $11,130,388 $9,748,334 - ------------------------------------------------------------------------------ --------------- --------------- Liabilities and Shareholders' Equity Noninterest-bearing demand deposits $ 1,366,690 $1,243,766 Interest-bearing deposits: Transaction 2,559,714 1,985,670 Savings 158,234 143,381 Time 2,821,106 2,673,188 - ------------------------------------------------------------------------------ --------------- --------------- Total deposits 6,905,744 6,046,005 - ------------------------------------------------------------------------------ --------------- --------------- Funds purchased and repurchase agreements 1,601,989 1,853,073 Other borrowings 1,220,948 882,204 Subordinated debentures 186,302 148,816 Accrued interest, taxes and expense 67,014 77,860 Bankers' acceptances 4,179 6,925 Amount due on unsettled security transactions 231,660 - Other liabilities 84,069 29,875 - ------------------------------------------------------------------------------ --------------- --------------- Total liabilities 10,301,905 9,044,758 - ------------------------------------------------------------------------------ --------------- --------------- Shareholders' equity: Preferred stock 25 25 Common stock ($.00006 par value; 2,500,000,000 shares authorized; issued: 2001 - 51,737,154; 2000 - 49,706,055) 3 3 Capital surplus 323,860 278,882 Retained earnings 511,301 431,390 Treasury stock (shares at cost: 2001 - 541,240; 2000 - 487,553) (12,498) (10,044) Accumulated other comprehensive income 5,792 3,320 - ------------------------------------------------------------------------------ --------------- --------------- Total shareholders' equity 828,483 703,576 - ------------------------------------------------------------------------------ --------------- --------------- Total liabilities and shareholders' equity $11,130,388 $9,748,334 - ------------------------------------------------------------------------------ --------------- ---------------
See accompanying notes to consolidated financial statements. BOK FINANCIAL CORPORATION Consolidated Statements of Cash Flows (In Thousands) 2001 2000 1999 ------------ ------------ ------------- Cash Flows From Operating Activities: Net income $ 116,302 $ 100,140 $ 89,226 Adjustments to reconcile net income to net cash provided by operating activities: Provisions for loan losses 37,610 17,204 10,365 Provisions for mortgage servicing rights 15,551 2,900 - Transition adjustment of adoption of FAS 133 (236) - - Unrealized losses from derivatives 12,082 - - Depreciation and amortization 69,165 54,444 41,088 Tax benefit on exercise of stock options 3,408 1,010 3,138 Tax accrual reversal - 3,000 - Net amortization of securities discounts and premiums (5,615) (4,975) 1,413 Net gain on sale of assets (47,954) (11,694) (15,039) Mortgage loans originated for resale (972,066) (494,675) (686,082) Proceeds from sale of mortgage loans held for resale 1,008,073 547,140 738,109 Change in trading securities 29,538 (25,132) 34,734 Change in accrued revenue receivable 6,253 (7,341) 21 Change in other assets 2,881 73,177 (65,824) Change in accrued interest, taxes and expense (3,125) (18,393) 24,151 Change in other liabilities 9,599 (15,992) 29,806 - ----------------------------------------------------------------- ------------ ------------ ------------- Net cash provided by operating activities 281,466 220,813 205,106 - ----------------------------------------------------------------- ------------ ------------ ------------- Cash Flows From Investing Activities: Proceeds from sales of investment securities - 175 - Proceeds from sales of available for sale securities 9,142,248 1,677,078 1,397,956 Proceeds from maturities of investment securities 80,273 41,764 59,684 Proceeds from maturities of available for sale securities 930,494 445,384 634,527 Purchases of investment securities (88,282) (62,334) (45,330) Purchases of available for sale securities (10,496,575) (2,227,911) (2,223,829) Loans originated or acquired net of principal collected (675,612) (974,220) (1,047,291) Proceeds from sales of assets 68,088 69,201 190,673 Purchases of assets (75,655) (98,822) (93,755) Cash and cash equivalents of subsidiaries and branches acquired and sold, net (72,990) (14) 25,584 - ----------------------------------------------------------------- ------------ ------------ ------------- Net cash used by investing activities (1,188,011) (1,129,699) (1,101,781) - ----------------------------------------------------------------- ------------ ------------ ------------- Cash Flows From Financing Activities: Net change in demand deposits, transaction deposits, and savings accounts 346,034 329,483 (20,535) Net change in certificates of deposit 146,075 453,338 321,702 Net change in other borrowings 141,660 451,574 554,433 Amount due on unsettled security transaction 231,660 - - Paydown of other borrowings (95,000) - - Issuance of subordinated debenture 30,000 - - Issuance of preferred, common and treasury stock, net 2,745 999 823 Purchase of treasury stock - (2,633) (1,574) Dividends paid (20) (1) (2,744) - ----------------------------------------------------------------- ------------ ------------ ------------- Net cash provided by financing activities 803,154 1,232,760 852,105 - ----------------------------------------------------------------- ------------ ------------ ------------- Net increase (decrease) in cash and cash equivalents (103,391) 323,874 (44,570) Cash and cash equivalents at beginning of period 750,729 426,855 471,425 - ----------------------------------------------------------------- ------------ ------------ ------------- Cash and cash equivalents at end of period $ 647,338 $ 750,729 $ 426,855 - ----------------------------------------------------------------- ------------ ------------ ------------- Cash paid for interest $ 334,103 $ 361,645 $ 265,548 - ----------------------------------------------------------------- ------------ ------------ ------------- Cash paid for taxes 70,699 51,669 43,664 - ----------------------------------------------------------------- ------------ ------------ ------------- Net loans transferred to repossessed real estate 7,228 2,226 1,857 - ----------------------------------------------------------------- ------------ ------------ ------------- Payment of dividends in common stock 36,371 1,500 32,192 - ----------------------------------------------------------------- ------------ ------------ -------------
See accompanying notes to consolidated financial statements. BOK FINANCIAL CORPORATION Consolidated Statements of Changes in Shareholders' Equity (In Thousands) Preferred Stock Common Stock ---------------------- ------------------- Shares Amount Shares Amount ---------------------- ------------------- December 31, 19982 250,000 $25 48,112 $3 Comprehensive income: - - - - Net income Other comprehensive loss, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 9 - Treasury stock purchase - - - - Cancel treasury stock - - (725) - Issuance of common stock to Thrift Plan - - 17 - Exercise of stock options - - 480 - Tax benefit on exercise of stock options - - - - Common stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 57 - Common stock - - 1,432 - - --------------------------------------------------------------------------------------------------- December 31, 1999 250,000 25 49,382 3 Comprehensive income: Net income - - - - Other comprehensive loss, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 4 - Treasury stock purchase - - - - Exercise of stock options - - 294 - Tax benefit on exercise of stock options - - - - Preferred stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 26 - - --------------------------------------------------------------------------------------------------- December 31, 2000 250,000 25 49,706 3 Comprehensive income: Net income - - - - Other comprehensive loss, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 5 - Exercise of stock options - - 598 - Tax benefit on exercise of stock options - - - - Preferred stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 51 - Common stock - - 1,377 - - --------------------------------------------------------------------------------------------------- December 31, 2001 250,000 $25 51,737 $3 - ---------------------------------------------------------------------------------------------------
December 31, ------------------------------------------- 2001 2000 1999 ------------------------------------------- 1 Changes in net unrealized gains on securities: Unrealized gains (losses) on available for sale $34,800 $78,759 $(90,852) securities Tax (expense) benefit on unrealized gains (losses) on available for sale securities (12,412) (30,467) 34,697 Reclassification adjustment for (gains) losses realized and included in net income (30,640) (2,059) 419 Reclassification adjustment for tax expense (benefit) on realized (gains) losses 10,724 664 (138) ------------------------------------------- Net unrealized gains on securities $ 2,472 $46,897 $(55,874) ------------------------------------------- 2 Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements. Accumulated Other Comprehensive Capital Retained Treasury Stock ------------------------------------ Income (Loss)1 Surplus Earnings Shares Amount Total - -------------------- ----------------- ----------------- ----------------- ------------------ --------------- $12,297 $236,726 $278,365 749 $ (2,623) $524,793 - - 89,226 - - 89,226 (55,874) - - - - (55,874) --------------- 33,352 --------------- - 294 - - - 294 - - - 74 (1,574) (1,574) - (2,062) - (725) 2,062 - - 406 - (1) 36 442 - 4,286 - 215 (4,823) (537) - 3,138 - - - 3,138 - - (2,734) (2,734) - 1,500 (1,500) - - 30,692 (30,606) 4 (96) (10) - -------------------- ----------------- ----------------- ----------------- ------------------ --------------- (43,577) 274,980 332,751 316 (7,018) 557,164 - - 100,140 - - 100,140 46,897 - - - - 46,897 --------------- 147,037 --------------- - 50 - (13) 263 313 - - - 151 (2,633) (2,633) - 2,554 - 97 (1,868) 686 - 1,010 - - - 1,010 - (1) - - (1) - 288 (1,500) (63) 1,212 - - -------------------- ----------------- ----------------- ----------------- ------------------ --------------- 3,320 278,882 431,390 488 (10,044) 703,576 - - 116,302 - - 116,302 2,472 - - - - 2,472 --------------- 118,774 --------------- - 165 - (7) 126 291 - 7,551 - 185 (5,097) 2,454 - 3,408 - - - 3,408 - - (1) - - (1) - 1,114 (1,500) (21) 386 - - 32,740 (34,890) (104) 2,131 (19) - -------------------- ----------------- ----------------- ----------------- ------------------ --------------- $ 5,792 $323,860 $511,301 541 $(12,498) $828,483 - -------------------- ----------------- ----------------- ----------------- ------------------ ---------------
Notes to Consolidated Financial Statements (1) Significant Accounting Policies Basis of Presentation The Consolidated Financial Statements of BOK Financial Corporation ("BOK Financial") have been prepared in conformity with accounting principles generally accepted in the United States, including general practices of the banking industry. The consolidated financial statements include the accounts of BOK Financial and its subsidiaries, principally Bank of Oklahoma, N.A. and its subsidiaries ("BOk"), Bank of Texas, N.A., Bank of Arkansas, N.A., Bank of Albuquerque, N.A. and BOSC, Inc. Certain prior year amounts have been reclassified to conform to current year classifications. Nature of Operations BOK Financial, through its subsidiaries, provides a wide range of financial services to commercial and industrial customers, other financial institutions and consumers throughout Oklahoma, Northwest Arkansas, Dallas and Houston, Texas metropolitan areas and New Mexico. These services include depository and cash management; lending and lease financing; mortgage banking; securities brokerage, trading and underwriting; and personal and corporate trust. Use of Estimates Preparation of BOK Financial's consolidated financial statements requires management to make estimates of future economic activities, including interest rates, loan collectibility and prepayments and cash flows from customer accounts. These estimates are based upon current conditions and information available to management. Actual results may differ significantly from these estimates. Acquisitions Assets and liabilities acquired by purchase are recorded at fair values on the acquisition dates. Intangible assets are amortized using straight-line and accelerated methods over the estimated benefit periods. These periods range from 7 to 25 years for goodwill and other identifiable intangible assets and 7 to 10 years for core deposit intangibles. The net book values of intangible assets are evaluated for impairment when economic conditions indicate an impairment may exist. These conditions would include an ongoing performance history and a forecast of anticipated performance that is significantly below management's expectations for acquired entities. Impairment would be determined by a comparison of the fair value of assets and liabilities of the acquired entity plus an estimate of current market premiums paid for similar entities. The Consolidated Statements of Earnings include the results of purchases from the dates of acquisition. The financial statements of companies acquired in pooling-of-interests transactions are combined with the Consolidated Financial Statements of BOK Financial at historical cost as if the mergers occurred at the beginning of the earliest period presented. Cash Equivalents Due from banks, funds sold (generally federal funds sold for one-day periods) and resell agreements (which generally mature within one to 30 days) are considered cash equivalents. Securities Securities are identified as trading, investment (held to maturity) or available for sale at the time of purchase based upon the intent of management, liquidity and capital requirements, regulatory limitations and other relevant factors. Trading securities, which are acquired for profit through resale, are carried at market value with unrealized gains and losses included in current period earnings. Investment securities are carried at amortized cost. Amortization is computed by methods that approximate level yield and is adjusted for changes in prepayment estimates. Investment securities may be sold or transferred to trading or available for sale classification in certain limited circumstances specified in generally accepted accounting principles. Securities identified as available for sale are carried at fair value. Unrealized gains and losses are recorded, net of deferred income taxes, as accumulated other comprehensive income (loss) in shareholders' equity. Realized gains and losses on sales of securities are based upon the amortized cost of the specific security sold. Available for sale securities are separately identified as pledged to creditors if the creditor has the right to sell or repledge the collateral. The purchase or sale of securities is recognized on a trade date basis. A net receivable or payable is recognized for subsequent transaction settlement. BOK Financial will periodically commit to purchase or sell to-be-announced ("TBA") mortgage-backed securities. These commitments are not reflected in BOK Financial's balance sheet until settlement date, in accordance with the accounting guidance of the Comptroller of the Currency. However, any losses from TBA securities sales are recognized as of the commitment date. Derivative Instruments BOK Financial adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") on January 1, 2001. Derivative instruments, primarily interest rate swaps and forward sales contracts, are used as part of an interest rate risk management strategy. Interest rate swaps modify the interest income and expense on certain long-term, fixed rate assets and liabilities. Amounts payable to or receivable from the counterparties are reported in interest income and expense using the accrual method. The fair value of the interest rate swaps is included in other assets or liabilities. Changes in the fair value of interest rate swaps are included in other operating revenue. In certain circumstances, interest rate swaps may be designated as fair value hedges and may qualify for hedge accounting. Changes in the fair value of the hedged asset or liability that are attributable to the hedged risk are reported in other operating revenue. These changes may partially or completely offset the mark-to-market adjustments of the interest rate swaps. Fair value hedges are considered to be effective if the cumulative fair value adjustments of the interest rate swaps are within a range of 80% to 120% of the cumulative fair value adjustment of the hedged assets or liabilities. Interest rate swaps may be designated as cash flow hedges of variable rate assets or liabilities or anticipated transactions. Changes in fair value of interest rate swaps are recorded in other comprehensive income to the extent they are effective. Amounts recorded as other comprehensive income are recognized in net income in the same periods as the cash flows from the hedged transactions. In conjunction with its mortgage banking activities, BOK Financial enters into mortgage loan commitments that are considered derivative instruments under FAS 133. Forward sales contracts are used to hedge these mortgage loan commitments and mortgage loans held for sale. Changes in the fair value of the mortgage loan commitments and forward sales contracts are recognized in other operating revenue. Energy swaps are used to assist certain customers in hedging their risk of adverse changes in natural gas and oil prices. BOK Financial serves as an intermediary between its energy customers and the commodities market by arranging fixed price / floating price swaps. Each swap between BOK Financial and its customer is offset by a swap between BOK Financial and dealers in the commodities market. The fair value of these swaps are carried in other assets and other liabilities. Compensation for credit risk and reimbursement of administrative costs are recognized over the life of the swaps. Loans Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower's difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures. Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccrual status when, in the opinion of management, full collection of principal or interest is uncertain, generally when the collection of principal or interest is 90 days or more past due. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccrual status. Payments on nonaccrual loans are applied to principal or reported as interest income, according to management's judgment as to the collectibility of principal. Loan origination and commitment fees and direct loan acquisition and origination costs, when significant, are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable. Mortgage loans held for sale are carried at the lower of aggregate cost or market value, including estimated losses on unfunded commitments and gains or losses on related forward sales contracts. Effective with the adoption of FAS 133, mortgage loans held for sale that are designated as hedged assets are carried at fair value based on sales commitments or market quotes. Changes in fair value after the date of designation of an effective hedge are recorded in other operating revenue. Reserve for Loan Losses The adequacy of the reserve for loan losses is assessed by management, based upon an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, and includes probable losses on both outstanding loans and unused commitments to provide financing. A consistent methodology has been developed that includes reserves assigned to specific criticized loans, general reserves that are based upon a statistical migration analysis for each category of loans, and a nonspecific allowance that is based upon an analysis of current economic conditions, loan concentrations, portfolio growth and other relevant factors. The reserve for loan losses related to loans that are identified for evaluation in accordance with Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114"), is based on discounted cash flows using the loan's initial effective collateral dependent loans. Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreement. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. In accordance with the provisions of FAS 114, management has excluded small balance, homogeneous loans from the impairment evaluation specified in FAS 114. Such loans include 1-4 family mortgage loans, consumer loans, and commercial loans with committed amounts less than $1 million. The adequacy of the reserve for loan losses applicable to these loans is evaluated in accordance with generally accepted accounting principles and standards established by the banking regulatory authorities and adopted as policy by BOK Financial. A provision for loan losses is charged against earnings in amounts necessary to maintain an adequate reserve for loan losses. Loans are charged off when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value. Loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Additionally, all unsecured or under-secured loans that are past due by 180 days or more are charged off within 30 days. Recoveries of loans previously charged off are added to the reserve. Asset Securitization BOK Financial periodically securitizes and sells pools of assets. These transactions are designed to comply with the requirements of generally accepted accounting principles for treatment as a sale. BOK Financial may retain the right to service the assets and a residual interest in excess cash flows generated by the assets. The fair value of these retained assets is determined by a discounting of expected future net cash to be received using assumed market interest rates for these instruments. Residual interests are carried at fair value. Changes in fair values are recorded in income. Servicing rights are carried at the lower of amortized cost or fair value. A valuation allowance is provided when amortized cost of servicing rights exceeds fair value. Real Estate and Other Repossessed Assets Real estate and other repossessed assets are assets acquired in partial or total forgiveness of debt. These assets are carried at the lower of cost, which is determined by fair value at date of foreclosure, or current fair value less estimated selling costs. Income generated by these assets is recognized as received, and operating expenses are recognized as incurred. Premises and Equipment Premises and equipment are carried at cost including capitalized interest, when appropriate, less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the estimated useful lives or remaining lease terms. Repair and maintenance costs are charged to expense as incurred. Mortgage Servicing Rights Capitalized mortgage servicing rights are carried at the lower of amortized cost, adjusted for the effect of hedging activities, or fair value. Amortization is determined in proportion to the projected cash flows over the estimated lives of the servicing portfolios. The actual cash flows are dependent upon the prepayment of the mortgage loans and may differ significantly from the estimates. Fair value is determined by discounting the estimated cash flows of servicing revenue, less projected servicing costs, using risk-adjusted rates, which is the assumed market rate for these instruments. Prepayment assumptions are based on industry consensus provided by independent reporting sources. Changes in current interest rates may significantly affect these assumptions by changing loan refinancing activity. Amortized cost and fair value are stratified by interest rate and loan type. A valuation allowance is provided when the net amortized cost of any strata exceeds the calculated fair value. Originated mortgage servicing rights are recognized when either mortgage loans are originated pursuant to an existing plan for sale or, if no such plan exists, when the mortgage loans are sold. Substantially all fixed rate mortgage loans originated by BOK Financial are sold under existing commitments. The right to service mortgage loans sold is generally retained. The fair value of the originated servicing rights is determined at closing based upon current market rates. Hedging of Mortgage Servicing Rights During 1998 through the first quarter of 2000, BOK Financial entered into futures contracts and call and put options on futures contracts to hedge against the risk of loss on mortgage servicing rights due to accelerated loan prepayments during periods of falling interest rates. Contracts on underlying securities that were expected to have a similar duration to the mortgage servicing portfolio, such as ten-year U.S. Treasury notes, were used for these hedges. The combination of contracts selected was expected to achieve a high degree of correlation between changes in the fair value of the mortgage servicing rights and changes in the market value of the contracts. These contracts were designated as hedges on the trade date. Both unrealized and realized gains and losses on futures contracts and option contracts were deferred as part of the capitalized mortgage servicing rights. These deferred gains and losses are amortized over the estimated life of the loan servicing portfolio. This derivatives-based hedging program was discontinued in 2000. BOK Financial currently acquires mortgage-backed and principal only securities when the prepayment risk exceeds certain levels to serve as an economic hedge against changes in value of its portfolio of mortgage servicing rights. The fair value of these securities is expected to vary inversely to the value of the mortgage servicing rights. These securities are classified as available for sale and carried at fair value. Changes in fair value are recorded, net of deferred income taxes, as other accumulated comprehensive income (loss) in shareholders' equity. Management may sell these securities and recognize gains when necessary to offset losses on the mortgage servicing rights. Federal and State Income Taxes BOK Financial utilizes the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the financial statement and their related tax basis using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. As changes in tax law or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. BOK Financial and its subsidiaries file consolidated tax returns. The subsidiaries provide for income taxes on a separate return basis, and remit to BOK Financial amounts determined to be currently payable. Employee Benefit Plans BOK Financial sponsors various plans, including a defined benefit pension plan ("Pension Plan"), qualified profit sharing plans ("Thrift Plans"), and employee healthcare plans. Employer contributions to the Thrift Plans, which match employee contributions subject to percentage and years of service limits, are expensed when incurred. Pension Plan costs, which are based upon actuarial computations of current costs, are expensed annually. Unrecognized prior service cost and net gains or losses are amortized on a straight-line basis over the estimated remaining lives of the participants. BOK Financial recognizes the expense of health care benefits on the accrual method. Employer contributions to the Pension Plan and various health care plans are in accordance with Federal income tax regulations. Executive Benefit Plans BOK Financial has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25") and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of employee stock options equals the market price of the underlying stock options on the date of grant, no compensation expense is recorded. BOK Financial has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("FAS 123"), included in Note 13. Fiduciary Services Fees and commissions on approximately $18 billion of assets managed by BOK Financial under various fiduciary arrangements are recognized on the accrual method. Effect of Pending Statements of Financial Accounting Standards In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141") and No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 eliminated the pooling of interests method of accounting for business combinations and provided new definitions for intangible assets that must be recognized apart from goodwill. FAS 141 was adopted on July 1, 2001. FAS 142 established new rules of accounting for intangible assets. Under these new rules, intangible assets with indefinite lives such as goodwill will no longer be amortized but will be subject to impairment testing. Other intangible assets will continue to be amortized over their useful lives. Subsequent to the issuance of FAS 142, the FASB issued an interpretation that the unidentifiable intangible asset that results from certain business combinations, such as branch acquisitions, must continue to be amortized over periods determined by the expected lives of the acquired assets and deposits. The FASB is currently reconsidering this interpretation. BOK Financial will adopt FAS 142 as of January 1, 2002. Net income and earnings per fully diluted share for 2001 and 2000 would have been $124.6 million or $2.15 and $105.5 million or $1.84 if FAS 142 had been effective for those years. During 2002, BOK Financial will perform the first of the required impairment tests of goodwill. The effect of these tests on earnings and financial position has not yet been determined. (2) Acquisitions On January 11, 2001, BOK Financial paid $91 million to acquire all outstanding common shares of CNBT Bancshares, Inc. and its subsidiary Citizen National Bank of Texas in Houston (collectively "CNBT"). This transaction was accounted for by the purchase method of accounting. Aggregate allocation of the purchase price to the net assets acquired were as follows (in thousands): 2001 ---------------- Cash and cash equivalents $ 17,973 Securities 226,922 Loans 184,461 Less reserve for loan losses 2,300 ---------------- Loans, net 182,161 Premises and equipment 10,678 Core deposit premium 13,715 Other assets 4,447 ---------------- Total assets acquired 455,896 Deposits: Noninterest bearing 78,482 Interest bearing 287,305 ---------------- Total deposits 365,787 Borrowed funds 41,000 Other liabilities 7,575 ---------------- Net assets acquired 41,534 Less purchase price 90,963 ---------------- Goodwill $ 49,429 ---------------- The following unaudited condensed consolidated pro forma statement of earnings for BOK Financial presents the effects on income had the purchase acquisition described above occurred at the beginning of 2000: Condensed Consolidated Pro Forma Statement of Earnings For the Year ended December 31, 2000. (In Thousands Except Per Share Data) (Unaudited) Net interest revenue $283,891 Provision for loan losses 18,752 - --------------------------------------------- ------------- Net interest revenue after provision for loan losses 265,139 Other operating revenue 202,118 Other operating expense 313,970 - --------------------------------------------- ------------- Income before taxes 153,287 Federal and state income tax 48,675 - --------------------------------------------- ------------- Net income $104,612 - --------------------------------------------- ------------- Earnings per share: Basic net income $2.04 Diluted net income 1.82 - --------------------------------------------- ------------- Average shares: Basic 50,666 Diluted 57,329 - --------------------------------------------- ------------- There is no material impact to BOK Financial's results of operations in 2001 due to timing of the 2001 acquisition. (3) Securities Investment Securities The amortized cost and fair values of investment securities are as follows (in thousands): December 31, ---------------------------------------------------------------------------------------------- 2001 2000 ----------------------------------------------- ---------------------------------------------- Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized ------------------------ ------------------------ Cost Value Gain Loss Cost Value Gain Loss ---------------------------------------------------------------------------------------------- U.S. Treasury $ 7,982 $ 7,981 $ - $ (1) $ $ $ - $ - - - Municipal and other tax-exempt 222,195 223,487 2,634 (1,342) 207,177 207,641 1,847 (1,383) Mortgage-backed U.S. agency Securities 7,381 7,620 240 (1) 11,541 11,567 64 (38) Other debt securities 3,555 3,540 - (15) 14,653 14,659 6 - - ----------------------------------------------------------------------------------------------------------------------------- Total $241,113 $242,628 $2,874 $(1,359) $233,371 $233,867 $1,917 $(1,421) - -----------------------------------------------------------------------------------------------------------------------------
The amortized cost and fair values of investment securities at December 31, 2001, by contractual maturity, are as shown in the following table (dollars in thousands): Weighted Less than One to Five to Over Average One Year Five Years Ten Years Ten Years Total Maturity4 ------------ -------------- ------------- ------------- ------------- ------------- U.S. Treasuries: Amortized cost $ 7,982 $ - $ - $ - $ 7,982 0.10 Fair value 7,981 - - - 7,981 Nominal yield 1.59% - - - 1.59% Municipal and other tax-exempt: Amortized cost $60,046 $125,197 $35,047 $1,905 $222,195 2.77 Fair value 60,146 126,364 35,119 1,858 223,487 Nominal yield(1) 6.81% 7.05% 7.72% 9.38% 7.11% Other debt securities: Amortized cost $ 346 $ 3,034 $ 125 $ 50 $ 3,555 2.86 Fair value 346 3,034 116 44 3,540 Nominal yield 1.52% 5.42% 7.00% 7.00% 5.12% ------------ -------------- ------------- ------------- ------------- ------------- Total fixed maturity securities: Amortized cost $68,374 $128,231 $35,172 $1,955 $233,732 2.68 Fair value 68,473 129,398 35,235 1,902 235,008 Nominal yield 6.17% 7.01% 7.72% 9.32% 6.89% ------------ -------------- ------------- ------------- Mortgage-backed securities: Amortized cost $ 7,381 -(2) Fair value 7,620 Nominal yield(3) 6.74% ------------- Total investment securities: Amortized cost $ 241,113 Fair value 242,628 Nominal yield 6.89% ------------- (1) Calculated on a taxable equivalent basis using a 39% effective tax rate. (2) The average expected lives of mortgage-backed securities were 0.54 years based upon current prepayment assumptions. (3) The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. (4) Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
During 2000, BOK Financial sold a mortgage-backed security with a remaining amortized cost of $175 thousand. The acquisition cost of this security was $4.9 million. Therefore, these sales were permitted under the sales deemed to be at maturity provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Available for Sale Securities The amortized cost and fair value of available for sale securities are as follows (in thousands): December 31, ---------------------------------------------------------------------------------------------- 2001 2000 ---------------------------------------------- ----------------------------------------------- Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized ---------------------- ---------------------- Cost Value Gain Loss Cost Value Gain Loss ---------------------------------------------------------------------------------------------- U.S. Treasury $ 34,538 $ 35,197 $ 659 $ - $ 85,656 $ 85,564 $ 71 $ (163) Municipal and other tax-exempt 4,262 4,299 55 (18) 14,492 14,552 90 (30) Mortgage-backed securities: U. S. agencies 2,637,636 2,638,425 26,660 (25,871) 2,050,100 2,046,318 9,340 (13,122) Other 669,057 673,737 6,270 (1,590) 478,065 486,170 8,183 (78) - ------------------------------------------------------------------------------------------------------------------------------ Total mortgage-backed securities 3,306,693 3,312,162 32,930 (27,461) 2,528,165 2,532,488 17,523 (13,200) - ------------------------------------------------------------------------------------------------------------------------------ Other debt securities 536 538 2 - 242 245 3 - Equity securities and mutual 93,918 97,353 3,688 (253) 129,823 130,971 2,884 (1,736) funds - ------------------------------------------------------------------------------------------------------------------------------ Total $3,439,947 $3,449,549 $37,334 $(27,732) $2,758,378 $2,763,820 $20,571 $(15,129) - ------------------------------------------------------------------------------------------------------------------------------
The amortized cost and fair values of available for sale securities at December 31, 2001, by contractual maturity, are as shown in the following table (dollars in thousands): Weighted Less than One to Five to Over Average One Year Five Years Ten Years Ten Years Total Maturity5 ------------- ------------- ------------- ------------- --------------- ----------- U.S. Treasuries: Amortized cost $ 19,097 $ 15,441 $ - $ - $ 34,538 1.49 Fair value 19,339 15,858 - - 35,197 Nominal yield 5.12% 4.77% - - 4.96% Municipal and other tax-exempt: Amortized cost $ 714 $ 2,097 $ 1,451 $ - $ 4,262 3.59 Fair value 708 2,111 1,480 - 4,299 Nominal yield(1) 6.57% 7.43% 8.84% - 7.77% Other debt securities: Amortized cost $ - $ 28 $ 97 $ 411 $ 536 15.13 Fair value - 26 98 414 538 Nominal yield(1) - 6.93% 6.30% 6.64% 6.59% ------------- ------------- ------------- ------------- --------------- ----------- Total fixed maturity securities: Amortized cost $ 19,811 $ 17,566 $ 1,548 $ 411 $ 39,336 1.90 Fair value 20,047 17,995 1,578 414 40,034 Nominal yield 5.17% 5.09% 8.68% 6.64% 5.29% ------------- ------------- ------------- ------------- Mortgage-backed securities: Amortized cost $3,306,693 -(2) Fair value 3,312,162 Nominal yield4 5.96% --------------- Equity securities and mutual funds: Amortized cost $ 93,918 -(3) Fair value 97,353 Nominal yield 5.29% --------------- Total available-for-sale securities: Amortized cost $ 3,439,947 Fair value 3,449,549 Nominal yield 5.93% --------------- (1) Calculated on a taxable equivalent basis using a 39% effective tax rate. (2) The average expected lives of mortgage-backed securities were 3.66 years based upon current prepayment assumptions. (3) Primarily common stock and preferred stock of U.S. Government agencies with no stated maturity. (4) The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. (5) Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
At December 31, 2001, there were outstanding commitments to buy $277 million securities that have not yet been issued. Sales of available for sale securities resulted in gains and losses as follows (in thousands): 2001 2000 1999 ----------- ----------- ---------- Proceeds $9,142,248 $1,677,078 $1,397,956 Gross realized gains 55,418 6,969 4,069 Gross realized losses 24,778 4,910 4,488 Related federal and state income tax expense 10,724 664 (138) (benefit) - --------------------------- ----------- ----------- ---------- In addition to securities that have been reclassified as pledged to creditors, securities with an amortized cost of $1.9 billion and $1.7 billion at December 31, 2001 and 2000 have been pledged as collateral for repurchase agreements, public and trust funds on deposit and for other purposes as required by law. The secured parties do not have the right to sell or repledge these securities. (4) Derivatives BOK Financial adopted FAS 133 on January 1, 2001. FAS 133 requires all derivative instruments to be carried on the balance sheet at fair value. Changes in fair value are generally reported in net income. The transition provisions of FAS 133 required an initial recording of all derivatives at fair value and a one-time adjustment of all hedged assets and liabilities to fair value. The accumulated transition adjustments, net of income taxes, are reported as a cumulative effect of a change in accounting principles. FAS 133 provides more restrictive rules for determining when a derivative instrument qualifies as a hedge than previous generally accepted accounting principles. Interest rate swaps that converted BOk's $150 million fixed-rate subordinated debt to floating rate were the only derivative instruments to qualify for hedge accounting under these new rules. BOk continued to adjust this subordinated debt to fair value after the initial adoption of FAS 133. Changes in fair value of the subordinated debt were included in net income. The interest rate swaps that hedged the BOk subordinated debt were terminated in May 2001. The cumulative fair value adjustment of the subordinated debt was $8.0 million at the termination date. This amount will be amortized as a reduction of the cost of this debt over its remaining life. Interest Rate Swaps Fair values of interest rate swaps at December 31, 2001 are reflected in the table below. Losses from fair value adjustments of interest rate swaps during 2001 totaled $3.8 million, excluding the FAS 133 transition adjustment. During 2001 and 2000, net interest revenue was increased by $6.1 million and $2.2 million, respectively, from the period settlement of amounts receivable or payable on interest rate swaps. Interest Rate Swaps (in thousands): Notional Pay Receive Positive Negative Amount Rate Rate Fair Value Fair Value -------------------------------------------------------------------- Expiration: 2002 $ 10,000 1.88(1) 6.88 $ 132 $ - 2004 147,210 1.87(1)- 4.22 1.87(1)- 7.36 5,022 - 2006 495,420 1.88(1)- 5.65 1.87(1)- 5.99 - (7,835) 2007 10,000 7.48 1.88(1) - (229) 2009 5,656 1.87(1)- 4.75 1.87(1)- 4.75 - - 2011 49,059 5.21 - 5.51 1.87(1) - (1,085) ------------------------ $ 5,154 $ (9,149) ------------------------ (1) Rates are variable based on LIBOR and reset monthly, quarterly or semiannually. Scheduled repricing periods for the swaps are as follows (notional value in thousands): 31-90 91-365 Over Days Days 1 Year Total --------------------------------------------------------- Pay floating $(422,828) $ - $ - $(422,828) Receive fixed - - 422,828 422,828 Pay fixed - - (294,518) (294,518) Receive floating 294,518 - - 294,518 - ------------------------------------------------------------------------------- Total $(128,310) $ - $128,310 $ - - ------------------------------------------------------------------------------- Energy Derivatives During 2001 BOK Financial developed a program that permits its energy-producing customers to hedge against price fluctuations through energy option and swap contracts. These contracts are executed between BOk and its customers. Offsetting contracts are executed between BOk and selected energy dealers. The dealer contracts are identical to the customer contracts, except for a fixed pricing spread paid to BOk as compensation for administrative costs, credit risk and profit. This program creates credit risk for potential amounts due to BOk from the customers and dealers. Customer credit risk is monitored through existing lending policies and procedures. The value of energy production is evaluated across a range of prices to determine a maximum exposure BOk is willing to accept individually to any customer or collectively to all energy producers. Dealer credit risk is monitored through existing policies and procedures used to evaluate counterparty risk. This evaluation considers all relationships between BOK Financial and each counterparty. Individual limits are established by management and approved by the Risk Oversight Committee of the Board of Directors. Margin collateral is required if the exposure to a counterparty exceeds established limits. BOK Financial had no energy contracts with Enron Corp. BOK Financial carries the energy contracts at fair value in other assets and other liabilities. At December 31, 2001, other assets included $28 million and other liabilities included $29 million of energy contracts. Changes in fair value are recorded in income. Closing prices on the New York Mercantile Exchange are used to determine fair value. At December 31, 2001 losses on derivatives included a $250 thousand loss from market value adjustments on energy derivatives. (5) Loans Significant components of the loan portfolio are as follows (in thousands): December 31, ----------------------------------------------------------------------------------------------- 2001 2000 ------------------------------------------------ ---------------------------------------------- Fixed Variable Non- Fixed Variable Non- Rate Rate accrual Total Rate Rate accrual Total ------------------------------------------------ ---------------------------------------------- Commercial $ 739,532 $2,900,143 $35,075 $3,674,750 $ 510,427 $2,700,460 $37,146 $3,248,033 Commercial real estate 411,453 926,466 3,856 1,341,775 331,585 938,748 161 1,270,494 Residential mortgage 575,536 123,404 4,140 703,080 458,562 177,627 1,855 638,044 Residential mortgage - held 166,093 - - 166,093 48,901 - - 48,901 for sale Consumer 294,099 115,112 469 409,680 192,428 119,463 499 312,390 - ------------------------------------------------------------------------------------------------------------------------------ Total $2,186,713 $4,065,125 $43,540 $6,295,378 $ 1,541,903 $3,936,298 $39,661 $5,517,862 - ------------------------------------------------------------------------------------------------------------------------------ Foregone interest on nonaccrual loans $ 5,163 $ 3,803 - ------------------------------------------------------------------------------------------------------------------------------
The majority of the commercial and consumer loan portfolios and approximately 74% of the residential mortgage loan portfolio (excluding loans held for sale) are loans to businesses and individuals in Oklahoma. This geographic concentration subjects the loan portfolio to the general economic conditions within this area. Within the commercial loan classification, loans to energy-related businesses total $988 million, or 16% of total loans. Other notable segments include wholesale/ retail, $600 million; manufacturing, $467 million; agriculture, $171 million, which includes $150 million loans to the cattle industry; and services, $1.1 billion, which include nursing homes of $162 million, hotels of $69 million and healthcare of $115 million. Approximately 44% of commercial real estate loans are secured by properties located in Oklahoma, primarily in the Tulsa or Oklahoma City metropolitan areas. An additional 29% of commercial real estate loans are secured by property located in Texas. The major components of these properties are multifamily residences, $292 million; construction and land development, $327 million; retail facilities, $220 million; and office buildings, $256 million. Related Party Included in loans at December 31 are loans to executive officers, directors or principal shareholders of BOK Financial, as defined in Regulation S-X of the Securities and Exchange Commission. Such loans have been made on substantially the same terms as those prevailing at the time for loans to other customers in comparable transactions. Information relating to loans to executive officers, directors or principal shareholders is summarized as follows (in thousands): 2001 2000 ------------ ------------ Beginning balance $96,621 $94,861 Advances 12,436 4,040 Payments (17,602) (1,395) Adjustments (743) (885) ------------------------------- ------------ ------------ Ending balance $90,712 $96,621 ------------------------------- ------------ ------------ Adjustments are primarily due to certain individuals being included for the first time or no longer being included as an executive officer or director of BOK Financial. Reserve for Loan Loss The activity in the reserve for loan losses is summarized as follows (in thousands): 2001 2000 1999 -------------------------------- Beginning balance $ 82,655 $76,234 $65,922 Provision for loan losses 37,610 17,204 10,365 Loans charged off (25,248) (14,801) (7,348) Recoveries 4,588 4,018 5,770 Addition due to 2,300 - 1,525 acquisitions ----------------------------------------------------------- Ending balance $101,905 $82,655 $76,234 ----------------------------------------------------------- Impaired Loans Investments in loans considered to be impaired under FAS 114 were as follows (in thousands): December 31, -------------------------------- 2001 2000 1999 -------------------------------- Investment in loans impaired under FAS 114 (all of which were on a nonaccrual basis) $39,848 $37,822 $15,600 Loans with specific reserves for loss 10,723 19,789 9,084 Specific reserve balance 2,509 7,991 2,468 No specific related reserve for loss 29,125 18,033 6,516 Average recorded investment in impaired loans 44,474 27,750 15,300 Interest income recognized on impaired loans during 2001, 2000 and 1999 was not significant. Loan Securitization During 1999, BOK Financial sold approximately $100 million of automobile loans and retained the right to service the loans and a residual interest in certain excess cash flows generated by the loans. The proceeds of the sale were provided by the issuance of debt certificates that totaled $96 million by an independent special purpose entity. A spread account was maintained by a trustee to hold excess cash received. Funds were released from the spread account to BOK Financial as certain criteria were met. At December 31, 2000, the carrying values of the servicing rights asset and residual interest were $143 thousand and $5.2 million, respectively. The carrying value of the residual interest would have been reduced to $5.0 million assuming a 250 basis point increase in the discount rate and a 25% increase in the assumed default rate on the underlying loans. During 2001, BOK Financial repurchased the outstanding principal balance of these loans for $9.0 million. The debt certificates were redeemed and the servicing rights and residual interest were terminated. Significant information and assumptions used to determine the value of these assets at December 31, 2000 were: Current outstanding loan principal $27,796 Average interest rate on loans sold 11.26% Current outstanding debt certificates $23,907 Interest rate on debt certificates 6.07% Current spread account balance $1,112 Estimated remaining life including prepayments 18 Months Discount rates: Servicing rights 10.00% Residual interest 12.15% Delinquency rate 1.81% Net charge-offs $ 854 Cash distributed to BOK Financial: Servicing fees $ 419 Return on residual interest $5,741 (6) Premises and Equipment Premises and equipment at December 31 are summarized as follows (in thousands): December 31, ------------------------ 2001 2000 ----------- ------------ Land $ 28,212 $ 22,838 Buildings and improvements 97,812 82,646 Software 15,457 13,422 Furniture and equipment 101,138 92,566 - ------------------------------------ ----------- ----------- Subtotal 242,619 211,472 Less accumulated depreciation 101,194 79,406 - ------------------------------------ ----------- ----------- Total $ 141,425 $ 132,066 - ------------------------------------ ----------- ----------- Depreciation expense of premises was $21.0 million, $17.3 million and $13.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. (7) Intangible Assets The following table presents the original cost and accumulated amortization of intangible assets (in thousands): December 31, ----------------------- 2001 2000 ----------- ----------- Core deposit premiums $ 71,950 $ 58,235 Less accumulated amortization 49,418 40,572 - ------------------------------------- ----------- ----------- Net core deposit premiums 22,532 17,663 Other unidentifiable intangible assets 38,263 38,263 Less accumulated amortization 19,626 16,624 - ------------------------------------- ----------- ----------- Net other unidentifiable intangible assets 18,637 21,639 Goodwill 142,746 93,317 Less accumulated depreciation 31,839 23,574 - ------------------------------------- ----------- ----------- Net goodwill 110,907 69,743 - ------------------------------------- ----------- ----------- Total intangible assets, net $152,076 $109,045 - ------------------------------------- ----------- ----------- The net amortized cost of intangible assets at December 31, 2001 is assigned to reporting units as follows (in thousands): Core deposit premiums: Bank of Albuquerque $ 4,945 Bank of Texas 17,587 - ------------------------------------ ----------- $ 22,532 - ------------------------------------ ----------- Other unidentifiable intangible assets: Bank of Albuquerque $ 15,273 Bank of Oklahoma 3,364 - ------------------------------------ ----------- $ 18,637 - ------------------------------------ ----------- Goodwill: Bank of Oklahoma $ 5,550 Bank of Texas 104,863 BOSC, Inc. 494 - ------------------------------------ ----------- $ 110,907 - ------------------------------------ ----------- Expected amortization expense for intangible assets that will continue to be amortized under FAS 142 (in thousands): Core Other Deposit Unidentified Premiums Intangible Assets Total -------------- ----------------- ------------- 2002 $ 7,020 $ 3,190 $10,210 2003 5,949 1,768 7,717 2004 4,039 1,484 5,523 2005 2,888 1,484 4,372 2006 1,521 1,484 3,005 Thereafter 1,115 9,227 10,342 - ---------------- -------------- ----------------- ------------- $22,532 $18,637 $41,169 - ---------------- -------------- ----------------- ------------- (8) Mortgage Banking Activities BOK Financial engages in mortgage banking activities through the BOk Mortgage Division of BOk. Residential mortgage loans held for sale totaled $166 million and $49 million and outstanding mortgage loan commitments totaled $261 million and $123 million at December 31, 2001 and 2000. Mortgage loan commitments are generally outstanding for 60 to 90 days and are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest rate fluctuations is partially hedged through the use of mortgage-backed securities forward sales contracts. These contracts set the price for loans that will be delivered in the next 60 to 90 days. At December 31, 2001, the notional amount of forward sales contracts totaled $208 million, with a fair value of $2.6 million. Mortgage loans held for sale are carried at the lower of aggregate cost or market value, including estimated losses on unfunded commitments and gains or losses on forward sales contracts. At December 31, 2001, BOk owned the rights to service 88,916 mortgage loans with outstanding principal balances of $6.6 billion, including $209 million serviced for BOk, and held related funds of $177 million for investors and borrowers. The weighted average interest rate and remaining term was 7.30% and 266 months, respectively. Mortgage loans sold with recourse totaled $2.4 million at December 31, 2001. At December 31, 2000, BOk owned the rights to service mortgage loans with outstanding principal balances of $6.9 billion and held related funds of $79 million for investors and borrowers. The portfolio of mortgage servicing rights exposes BOk to interest rate risk. During periods of falling interest rates, mortgage loan prepayments increase, reducing the value of the mortgage servicing rights. During 1998 through the first quarter of 2000, BOk used a combination of futures contracts and options related to 10-year U.S. Treasury securities to hedge this risk. See Note 1 for specific accounting policies for mortgage servicing rights and the related hedges. Activity in capitalized mortgage servicing rights and related valuation allowance during 2001, 2000 and 1999 are as follows (in thousands): Capitalized Mortgage Servicing Valuation Hedging Rights ------------------------------------- Purchased Originated Total Allowance (Gain)/Loss Net ------------------------------------------------------------------------- Balance at December 31, 1998 $65,607 $26,101 $ 91,708 $ - $(22,484) $ 69,224 Additions 16,099 11,483 27,582 - - 27,582 Amortization expense (11,297) (4,266) (15,563) - 734 (14,829) Realized hedge losses - - - - 28,293 28,293 Unrealized hedge losses - - - - 3,864 3,864 - -------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 70,409 33,318 103,727 - 10,407 114,134 Additions 2,449 11,267 13,716 - - 13,716 Amortization expense (9,497) (4,260) (13,757) - (1,445) (15,202) Provision for impairment - - - (2,900) - (2,900) Realized hedge losses - - - - 4,389 4,389 Unrealized hedge gains - - - - (3,346) (3,346) - -------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 63,361 40,325 103,686 (2,900) 10,005 110,791 Additions 4,400 22,695 27,095 - - 27,095 Amortization expense (12,705) (9,409) (22,114) - (1,425) (23,539) Provision for impairment - - - (15,551) - (15,551) - -------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2001 $55,056 $53,611 $108,667 $(18,451) $ 8,580 $ 98,796 - -------------------------------------------------------------------------------------------------------------------------- Estimated fair value of mortgage servicing rights at: December 31, 19991 $83,279 $37,547 $120,826 $120,826 December 31, 20001 $74,400 $42,125 $116,525 $116,525 December 31, 20011 $53,174 $46,789 $ 99,963 $ 99,963 - -------------------------------------------------------------------------------------------------------------------------- 1 Excludes approximately, $9 million, $8 million and $5 million at December 31, 1999, 2000 and 2001, respectively, of loan servicing rights on mortgage loans originated prior to the adoption of FAS 122.
Fair value is determined by discounting the projected net cash flows. Significant assumptions are: Discount rate - Risk adjusted rates by loan product, ranging from 9.00% to 20.00%. Prepayment rate - Annual prepayment estimates ranging from 7.50% to 68.52% from an independent reporting source based upon loan interest rate, original term and loan type. Loan servicing costs - $40 to $50 per loan based upon loan type. Stratification of the mortgage loan servicing portfolio, outstanding principal of loans serviced, and related hedging information by interest rate at December 31, 2001 follows (in thousands): Greater than < 6.50% 6.50% - 7.49% 7.50% - 8.49% 8.50% Total ------------------------------------------------------------------------- Cost less accumulated amortization $ 17,370 $ 63,181 $ 25,882 $ 2,234 $108,667 Deferred hedge losses - 7,583 997 - 8,580 - ------------------------------------------------------------------------------------------------------------------- Adjusted cost $ 17,370 $ 70,764 $ 26,879 $ 2,234 $117,247 - ------------------------------------------------------------------------------------------------------------------- Fair value $ 15,914 $ 62,097 $ 19,286 $ 2,666 $ 99,963 - ------------------------------------------------------------------------------------------------------------------- Impairment2 $ 2,009 $ 8,689 $ 7,593 $ 160 $ 18,451 - ------------------------------------------------------------------------------------------------------------------- Outstanding principal of loans serviced1 $884,228 $3,746,212 $1,453,738 $191,923 $6,276,101 - ------------------------------------------------------------------------------------------------------------------- 1 Excludes outstanding principal of $370 million for loans serviced by BOk for which there are no capitalized mortgage servicing rights. 2 Impairment is determined by both an interest rate and loan type stratification.
(9) Deposits Interest expense on deposits is summarized as follows (in thousands): 2001 2000 1999 ----------------------------------- Transaction deposits $ 49,893 $ 55,019 $ 46,510 Savings 2,281 2,703 2,971 Time: Certificates of deposits under 61,626 56,570 41,418 $100,000 Certificates of deposits $100,000 81,524 81,721 49,166 and over Other time deposits 13,063 12,236 10,556 - ------------------------------------------------------------- Total time 156,213 150,527 101,140 - ------------------------------------------------------------- Total $208,387 $208,249 $150,621 - ------------------------------------------------------------- The aggregate amounts of time deposits in denominations of $100,000 or more at December 31, 2001 and 2000 were $1.6 billion and $1.4 billion, respectively. Time deposit maturities are as follows: 2002 - $1.8 billion, 2003 - $186 million, 2004 - $252 million, 2005 - $38 million, 2006 - $529 million, and $345 thousand thereafter. Interest expense on time deposits during 2001 and 2000 was reduced by net income from interest rate swaps of $3.1 million and $876 thousand, respectively. (10) Other Borrowings Information relating to other borrowings is summarized as follows (dollars in thousands): December 31 ---------------------------------------------------------------------------------------------- 2001 2000 ---------------------------------------------------------------------------------------------- Maximum Maximum Outstanding Outstanding At Any At Any Balance Rate Month End Balance Rate Month End ---------------------------------------------------------------------------------------------- Parent Company: Revolving, unsecured line $ 95,000 2.77% $ 95,000 $ 95,000 7.60% $ 105,000 Subordinated debenture 30,000 3.86 30,000 - - - Other 95 6.23 132 132 6.23 132 -------------- ------------------ Total parent company 125,095 3.03 95,132 7.60 -------------- ------------------ Subsidiary Banks: Funds purchased and repurchase agreements 1,601,989 1.71 1,949,260 1,853,073 7.03 1,853,073 Federal Home Loan Bank advances 1,096,194 2.37 1,121,494 759,041 6.80 876,909 Subordinated debenture 156,302 6.15 158,890 148,816 7.02 148,816 Other 29,659 2.14 30,320 28,031 5.70 28,031 -------------- ------------------ Total subsidiary bank 2,884,144 2.21 2,788,961 6.95 -------------- ------------------ Total other borrowings $3,009,239 2.28 $2,884,093 6.53 -------------- ------------------
Aggregate annual repayments of long-term debt at December 31, 2001 are as follows (in thousands): Parent Subsidiary Company Banks --------------------------- 2002 $ 95 $2,302,891 2003 - 402,723 2004 95,000 4,325 2005 - 1,247 2006 - 4,782 Thereafter 30,000 168,176 --------------------------- Total $125,095 $2,884,144 --------------------------- Borrowings from the Federal Home Loan Bank are used for funding purposes. In accordance with policies of the Federal Home Loan Bank, BOK Financial has granted a blanket pledge of eligible assets (generally unencumbered U.S. Treasury and mortgage-backed securities, 1-4 family loans and multifamily loans) as collateral for these advances. The unused credit available to BOK Financial at December 31, 2001 pursuant to the Federal Home Loan Bank's collateral policies is $187 million. BOK Financial has a revolving, unsecured credit agreement from certain banks at December 31, 2001 with available credit of $122.5 million. Interest is based on either the London Interbank Offering Rate ("LIBOR") plus a defined margin that is determined by the principal balance outstanding and BOK Financial's credit rating or a base rate. The base rate is defined as the greater of the daily federal funds rate plus 0.5% or the prime rate. Interest is paid quarterly. Facility fees are paid quarterly on the average daily undrawn commitment at a rate of 0.20% - 0.30% as determined by BOK Financial's current debt rating. This credit agreement includes certain restrictive covenants that limit BOK Financial's ability to borrow additional funds and to pay cash dividends on common stock. These covenants also require BOK Financial and its subsidiaries to maintain minimum capital levels and to exceed minimum net worth ratios. BOK Financial met all of the restrictive covenants at December 31, 2001. In 1997, BOk issued $150 million of 7.125% fixed rate subordinated debentures that mature in 2007. Interest rate swaps were used as a fair value hedge to convert the fixed interest on these debentures to a LIBOR-based floating rate. This permitted BOk to adjust the carrying value of the subordinated debentures to fair value. In 2001, the interest rate swaps were terminated. The related market value adjustment of the subordinated debenture of $8 million will be recognized over the remaining life of the debt. BOK Financial issued a $30 million, seven year subordinated debenture, bearing interest at LIBOR plus 1.75%, on March 23, 2001 to its principal shareholder George B. Kaiser ("Kaiser"). Funds purchased generally mature within one to ninety days from the transaction date. At December 31, 2001, securities sold under agreements to repurchase totaled $1.0 billion with related accrued interest payable of $1.3 million. Additional information relating to repurchase agreements at December 31, 2001 is as follows (dollars in thousands): Carrying Market Repurchase Average Security Sold/Maturity Value Value Liability1 Rate - ------------------------------------------------------------------------------- U.S. Agency Securities: Overnight $ 590,007 $ 595,594 $ 349,762 1.36% Term of up to 30 days 45,589 45,842 41,028 1.84 Term of 30 to 90 days 631,234 634,479 625,373 2.01 - --------------------------------------------------------------------- Total Agency Securities $1,266,830 $1,275,915 $1,016,163 1.78% - --------------------------------------------------------------------- 1 BOK Financial maintains control over the securities underlying overnight repurchase agreements and generally transfers control over securities underlying longer-term dealer repurchase agreements to the respective counterparty. (11) Federal and State Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands): December 31, ---------------------- 2001 2000 ---------------------- Deferred tax liabilities: Available for sale securities mark-to-market $ 3,600 $ 4,000 Pension contributions in excess of book expense 5,200 4,500 Valuation adjustments 17,200 9,300 Mortgage servicing 23,800 20,400 Other 8,100 5,300 - ------------------------------------------------------------- Total deferred tax liabilities 57,900 43,500 - ------------------------------------------------------------- Deferred tax assets: Available for sale securities mark-to-market - 1,800 Loan loss reserve 38,900 31,600 Valuation adjustments 15,700 9,700 Book expense in excess of tax 5,200 3,600 Deferred book income 14,500 6,500 Other 6,500 8,400 - ------------------------------------------------------------- Total deferred tax assets 80,800 61,600 - ------------------------------------------------------------- Deferred tax assets in excess of deferred tax liabilities $22,900 $18,100 - ------------------------------------------------------------- The Internal Revenue Service closed its examination of 1995 during 1999 with no material impact on the financial statements. In addition, the Internal Revenue Service closed its examination of 1996 during the first quarter of 2000. As a result of the outcome of this examination, BOK Financial reduced its federal income tax expense by $3.0 million. The Internal Revenue Service is currently examining the carryback of $30.8 million of capital loss generated in 1999. Such loss was applied against capital gains generated in 1997 and 1998, resulting in a $9.8 million refund. Management expects no material adverse impact on the financial statements as a result of this examination. At December 31, 2001, BOK Financial has a capital loss carryforward of $5.6 million for income tax purposes that expires in years 2004 through 2006. The carryforward results primarily from the hedging losses incurred related to the mortgage-servicing portfolio. A valuation allowance has not been established since it is more likely than not that this benefit will be realized. The significant components of the provision for income taxes attributable to continuing operations for BOK Financial are shown below (in thousands): Years ended December 31, ----------------------------------- 2001 2000 1999 ----------------------------------- Current: Federal $69,971 $37,258 $40,860 State 4,240 1,112 2,948 - ------------------------------------------------------------ Total current 74,211 38,370 43,808 - ------------------------------------------------------------ Deferred: Federal (8,964) 7,833 559 State (1,635) 1,428 102 - ------------------------------------------------------------ Total deferred (10,599) 9,261 661 - ------------------------------------------------------------ Total income tax $63,612 $47,631 $44,469 - ------------------------------------------------------------ The reconciliations of income attributable to continuing operations computed at the U.S. federal statutory tax rates to income tax expense are as follows (in thousands): Years ended December 31, ------------------------------- 2001 2000 1999 ------------------------------- Amount: Federal statutory tax $62,887 $51,720 $46,793 Tax exempt revenue (3,600) (3,250) (3,715) Effect of state income taxes, net of federal benefit 2,605 2,540 3,050 Goodwill amortization 3,965 3,144 2,987 Utilization of tax credits (800) (600) (786) Reduction of tax accrual - (3,000) - Income taxed at shareholder level - - (1,026) Other, net (1,445) (2,923) (2,834) - ------------------------------------------------------------- Total $63,612 $47,631 $44,469 - ------------------------------------------------------------- Years ended December 31, ------------------------------- 2001 2000 1999 ------------------------------- Percent of pretax income: Federal statutory rate 35% 35% 35% Tax-exempt revenue (2) (2) (3) Effect of state income taxes, net of federal benefit 2 2 3 Goodwill amortization 2 2 2 Utilization of tax credits (1) (1) (1) Reduction of tax accrual - (2) - Income taxed at shareholder level - - (1) Other, net (1) (2) (2) - -------------------------------------------------------------- Total 35% 32% 33% - -------------------------------------------------------------- (12) Employee Benefits BOK Financial sponsors a defined benefit Pension Plan for all employees who satisfy certain age and service requirements. The following table presents information regarding this plan (dollars in thousands): December 31, ---------------------- 2001 2000 ---------------------- Change in projected benefit obligation: Projected benefit obligation, at beginning of year $ 19,837 $ 16,892 Service cost 3,320 3,245 Interest cost 1,527 1,291 Actuarial loss 964 326 Benefits paid (1,507) (1,917) - -------------------------------------------------------------------------------- Projected benefit obligation at end of year $ 24,141 $ 19,837 - -------------------------------------------------------------------------------- Change in plan assets: Plan assets at fair value, at beginning of year $ 26,084 $ 25,403 Actual return on plan assets (867) (1,063) Company contributions 3,597 3,661 Benefits paid (1,507) (1,917) - -------------------------------------------------------------------------------- Plan assets at fair value at end of year $ 27,307 $ 26,084 - -------------------------------------------------------------------------------- Reconciliation of prepaid (accrued) and total amount recognized: Benefit obligation $(24,141) $(19,837) Fair value of assets 27,307 26,084 - -------------------------------------------------------------------------------- Funded status of the plan 3,166 6,247 Unrecognized net loss 9,149 4,412 Unrecognized prior service cost 622 681 - -------------------------------------------------------------------------------- Prepaid pension costs $ 12,937 $ 11,340 - -------------------------------------------------------------------------------- Components of net periodic benefit costs: Service cost $ 3,320 $ 3,245 Interest cost 1,527 1,291 Expected return on plan assets (2,906) (2,559) Amortization of unrecognized amounts: Prior service cost 60 60 - -------------------------------------------------------------------------------- Net periodic pension cost $ 2,001 $ 2,037 - -------------------------------------------------------------------------------- Weighted-average assumptions as of December 31, 2001: Discount rate 7.50% 8.00% Expected return on plan assets 10.00% 10.00% Rate of compensation increase 5.25% 5.25% Assets of the Pension Plan consist primarily of shares in cash management funds, common stock and bond funds, and guaranteed investment contract funds. Benefits are based on the employee's age and length of service. Employee contributions to the Thrift Plans are matched by BOK Financial up to 5% of base compensation, based upon years of service. Participants may direct the investments of their accounts in a variety of options, including BOK Financial Common Stock. Employer contributions vest over five years. Expenses incurred by BOK Financial for the Thrift Plans totaled $2.8 million, $2.3 million and $2.4 million for 2001, 2000 and 1999, respectively. BOK Financial also sponsors a defined benefit post-retirement employee medical plan which pays 50 percent of annual medical insurance premiums for retirees who meet certain age and service requirements. Assets of the retiree medical plan consist primarily of shares in a cash management fund. Eligibility for the post-retirement plan is limited to current retirees and certain employees currently age 60 or older at the time the plan was frozen in 1993. Under various performance incentive plans, participating employees may be granted awards based on defined formulas or other criteria. Earnings were charged $27.2 million in 2001, $22.2 million in 2000 and $19.3 million in 1999, for such awards. (13) Executive Benefit Plans The Board of Directors of BOK Financial has approved various stock option plans. The number of options awarded and the employees to receive the options are determined by the Chairman of the Board and the President, subject to approval of the Board of Directors or a committee thereof. None of these plans have been or are required to be approved by BOK Financial's shareholders. Options awarded under these plans are subject to vesting requirements. Generally, one-seventh of the options awarded vest annually and expire three years after vesting. The following table presents options outstanding during 1999, 2000 and 2001 under these plans: Weighted- Average Exercise Number Price -------------------------- Options outstanding at December 31, 1998 3,062,623 $13.47 Options awarded 552,569 19.92 Options exercised (447,911) 9.10 Options forfeited (118,706) 14.76 Options expired (603) 9.00 - ------------------------------------------------------------- Options outstanding at December 31, 1999 3,047,972 15.23 Options awarded 601,855 19.00 Options exercised (229,394) 8.90 Options forfeited (168,644) 16.23 Options expired (847) 7.82 - ------------------------------------------------------------- Options outstanding at December 31, 2000 3,250,942 16.32 Options awarded 680,666 30.43 Options exercised (603,482) 12.50 Options forfeited (45,687) 17.04 Options expired (996) 17.72 - ------------------------------------------------------------- Options outstanding at December 31, 2001 3,281,443 $19.88 - ------------------------------------------------------------- Options vested at December 31, 2001 992,697 $15.17 - ------------------------------------------------------------- The following table summarizes information concerning currently outstanding and vested options: Options Outstanding Options Vested - -------------------------------------------------- ------------------ Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life (years) Price Vested Price - ----------------------------------------------------------------------- $5.92 24,204 0.92 $ 5.92 24,204 $ 5.92 8.80 - 10.59 556,654 2.40 9.63 390,969 9.45 17.66 412,841 3.34 17.66 167,860 17.66 18.98 - 20.79 1,625,407 4.16 19.86 409,664 20.16 30.26 - 31.23 662,337 6.01 30.43 - - Under APB 25 no compensation expense is recognized at the date of grant since the exercise price of BOK Financial's employee stock option equals the market price of the underlying stock on the date of grant. FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires disclosure of pro forma information regarding net income and earnings per share as if BOK Financial accounted for employee stock options granted subsequent to December 31, 1994 under the fair value method of the Statement. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: 2001 2000 1999 --------- --------- --------- Average risk-free interest 6.04% 5.99% 6.12% rate Dividend yield None None None Volatility factors .195 .194 .192 Weighted-average expected life 7 years 7 years 7 years The weighted-average fair value of options granted during 2001, 2000 and 1999 was $6.40, $5.98 and $6.16, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because BOK Financial's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The following table represents the required pro forma disclosures for options granted subsequent to December 31, 1994 (in thousands, except per share data): 20011 20001 19991 ------------------------------- Pro forma net income $ 114,439 $ 98,665 $ 87,536 Pro forma earnings per share: Basic $ 2.22 $ 1.92 $ 1.70 Diluted 1.98 1.72 1.52 1 Because Statement 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until 2003. (14) Commitments and Contingent Liabilities In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the proceedings will not be material in the aggregate. BOk is obligated under a long-term lease for its bank premises located in downtown Tulsa. The lease term, which began November 1, 1976, is for fifty-seven years with options to terminate in 2013 and 2023. Annual base rent is $3.3 million. BOk subleases portions of its space for annual rents of $406 thousand in years 2002 through 2003, $388 thousand for 2004, $384 thousand in 2005 and $213 thousand in 2006. Net rent expense on this lease was $2.9 million in 2001, $3.1 million in 2000, and $2.8 million in 1999. Total rent expense for BOK Financial was $11.8 million in 2001, $10.5 million in 2000, and $10.2 million in 1999. At December 31, 2001, the future minimum lease payments for equipment and premises under operating leases were as follows: $9.7 million in 2002, $8.9 million in 2003, $8.4 million in 2004, $7.7 million in 2005, $7.0 million in 2006 and a total of $105.5 million thereafter. BOk and Williams Companies, Inc. guaranteed 30 percent and 70 percent, respectively, of the $13 million debt, which matures May 15, 2007, and operating deficit of two parking facilities operated by the Tulsa Parking Authority. Total expenditures related to this guarantee were $441 thousand in 2001, $319 thousand in 2000, and $273 thousand in 1999. The Federal Reserve Bank requires member banks to maintain certain minimum average cash balances. These balances were approximately $262 million for 2001 and $231 million for 2000. (15) Financial Instruments with Off-Balance Sheet Risk BOK Financial is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to manage interest rate risk. Those financial instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in BOK Financial's Consolidated Balance Sheets. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the notional amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2001, outstanding commitments totaled $2.5 billion. Since some of the commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the borrower. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Since the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. At December 31, 2001, outstanding standby letters of credit totaled $249 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At December 31, 2001, outstanding commercial letters of credit totaled $8 million. (16) Shareholders' Equity Preferred Stock One billion shares of preferred stock with a par value of $0.00005 per share are authorized. A single series of 250,000,000 shares designated as Series A Preferred Stock ("Series A Preferred Stock") is currently issued and outstanding. The Series A Preferred Stock has no voting rights except as otherwise provided by Oklahoma corporate law and may be converted into one share of Common Stock for each 39 shares of Series A Preferred Stock at the option of the holder. Dividends are cumulative at an annual rate of ten percent of the $0.06 per share liquidation preference value when declared and are payable in cash. Aggregate liquidation preference is $15 million. During 2001, 2000 and 1999, 72,141 shares, 88,628 shares and 57,340 shares, respectively, of BOK Financial common stock were issued in payment of dividends on the Series A Preferred Stock in lieu of cash by mutual agreement of BOK Financial and the holders of the Series A Preferred Stock. These shares were valued at $1.5 million in 2001, 2000 and 1999, based on average market price, as defined, for a 65 business day period preceding declaration. Kaiser owns substantially all Series A Preferred Stock. Various officers own 125 nonvoting units in an entity owned by BOk. These units are eligible for an annual, cumulative distribution of $8 per unit and have a preferred value upon liquidation of $100 per unit. Common Stock Common stock consists of 2.5 billion authorized shares with a $0.00006 par value. Holders of common shares are entitled to one vote per share at the election of the Board of Directors and on any question arising at any shareholders' meeting and to receive dividends when and as declared. No common stock dividends can be paid unless all accrued dividends on the Series A Preferred Stock have been paid. The present policy of BOK Financial is to retain earnings for capital and future growth, and management has no current plans to recommend payment of cash dividends on common stock. Additionally, regulations restrict the ability of national banks and bank holding companies to pay dividends, and BOK Financial's credit agreement restricts the payment of dividends by the holding company. During 2001 and 1999, 3% dividends payable in shares of BOK Financial common stock were declared and paid. The shares issued were valued at $35 million and $31 million, respectively, based on the average closing bid/ask prices on the day preceding declaration. No common stock dividends were paid in 2000. Per share data has been restated to reflect these stock dividends. Presently, management plans to recommend continued payment of an annual dividend in shares of common stock. All share and per share amounts for years previous to 1999 have been retroactively adjusted for a two-for-one stock split effected in the form of a stock dividend declared January 26, 1999 for stockholders of record on February 8, 1999. Subsidiary Banks The amounts of dividends that BOK Financial's subsidiary banks can declare and the amounts of loans the subsidiary banks can extend to affiliates are limited by various federal and state banking regulations. Generally, dividends declared during a calendar year are limited to net profits, as defined, for the year plus retained profits for the preceding two years. The amounts of dividends are further restricted by minimum capital requirements. Pursuant to the most restrictive of the regulations at December 31, 2001, BOK Financial's subsidiary banks could declare dividends up to $102 million without prior regulatory approval. The subsidiary banks declared and paid dividends of $92 million in 2001, $8 million in 2000, and $63 million in 1999. Loans to a single affiliate may not exceed 10.0% and loans to all affiliates may not exceed 20.0% of unimpaired capital and surplus, as defined. Additionally, loans to affiliates must be fully secured. As of December 31, 2001 and 2000, these loans totaled $16 million and $27 million, respectively. The entire balance of affiliate loans in 2001 was to consolidated entities. Total loan commitments to affiliates at December 31, 2001 were $82 million. Regulatory Capital BOK Financial and its banking subsidiaries are subject to various capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and additional discretionary actions by regulators that could have a material effect on BOK Financial's operations. These capital requirements include quantitative measures of assets, liabilities and certain off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. For a banking institution to qualify as well capitalized, its Tier I, Total and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. Tier I capital consists primarily of common stockholders' equity, excluding unrealized gains or losses on available for sale securities, less goodwill, core deposit premiums, and certain other intangible assets. Total capital consists primarily of Tier I capital plus preferred stock, subordinated debt and reserves for loan losses, subject to certain limitations. All of BOK Financial's banking subsidiaries exceeded the regulatory definition of well capitalized. December 31, ------------------------------------- 2001 2000 ------------------------------------- Amount Ratio Amount Ratio ------------------------------------- (Dollars in thousands) Total Capital (to Risk Weighted Assets): Consolidated $959,703 11.56% $823,063 11.23% BOk 769,031 11.39 700,380 11.43 Bank of Texas 156,380 12.27 105,188 11.66 Bank of Albuquerque 70,969 15.42 60,182 13.23 Bank of Arkansas 12,824 17.29 12,442 15.76 Tier I Capital (to Risk Weighted Assets): Consolidated $670,600 8.08% $591,185 8.06% BOk 536,267 7.94 485,492 7.93 Bank of Texas 140,421 11.02 93,899 10.41 Bank of Albuquerque 66,465 14.44 57,560 12.66 Bank of Arkansas 11,886 16.03 11,454 14.51 Tier I Capital (to Average Assets): Consolidated $670,600 6.38% $591,185 6.51% BOk 536,267 6.23 485,492 6.59 Bank of Texas 140,421 8.28 93,899 8.58 Bank of Albuquerque 66,465 6.35 57,560 6.32 Bank of Arkansas 11,886 8.99 11,454 8.05 (17) Earnings Per Share The following table presents the computation of basic and diluted earnings per share (dollars in thousands except per share data): Years ended December 31, -------------------------------------------- 2001 2000 1999 -------------------------------------------- Numerator: Net income $ 116,302 $ 100,140 $ 89,226 Preferred stock dividends (1,500) (1,500) (1,500) - ---------------------------------------------------------------------------------------------------------------------- Numerator for basic earnings per share - income available to common stockholders 114,802 98,640 87,726 - ---------------------------------------------------------------------------------------------------------------------- Effect of dilutive securities: Preferred stock dividends 1,500 1,500 1,500 - ---------------------------------------------------------------------------------------------------------------------- Numerator for diluted earnings per share - income available to common stockholders after assumed conversion $ 116,302 $ 100,140 $ 89,226 - ---------------------------------------------------------------------------------------------------------------------- Denominator: Denominator for basic earnings per share -weighted average shares 50,972,642 50,665,525 50,598,351 Effect of dilutive securities: Employee stock options1 631,046 329,544 667,062 Convertible preferred stock 6,333,846 6,333,846 6,333,846 - ---------------------------------------------------------------------------------------------------------------------- Dilutive potential common shares 6,964,892 6,663,390 7,000,908 - ---------------------------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 57,937,534 57,328,915 57,599,259 - ---------------------------------------------------------------------------------------------------------------------- Basic earnings per share $2.25 $1.95 $1.73 - ---------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $2.01 $1.75 $1.55 - ---------------------------------------------------------------------------------------------------------------------- 1 Excludes employee stock options with exercise price 580,320 1,660,657 611,974 greater than current market price
(18) Reportable Segments BOK Financial operates four principal lines of business under its Bank of Oklahoma franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth principal line of business, regional banks, which includes all banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Other lines of business include the TransFund ATM network and BOSC, Inc. The Corporate Banking segment consists of eight operating units that provide credit and lease financing, deposit and cash management and international collection services to commercial and industrial customers and to other financial institutions in Oklahoma and surrounding states. The Consumer Banking segment consists of two operating units that provide direct and indirect consumer loans and deposit services to individuals primarily within Oklahoma. The Mortgage Banking segment consists of two operating units that originate a full range of mortgage products from federally sponsored programs to "jumbo loans" on higher priced homes in BOK Financial's primary market areas. The Mortgage Banking segment also services mortgage loans acquired from throughout the United States. The Trust Services segment consists of one operating unit that provides financial services to both individual and corporate clients. Individual financial services include personal trust management, administration of estates and management of investment and custodial accounts. Individual financial services also include lending and investment services to select individuals. Corporate financial services include administration of employee benefit plans, transfer and paying agent services and investment advisory services. Regional Banks include Bank of Arkansas, Bank of Albuquerque and Bank of Texas. BOK Financial identifies reportable segments by type of service provided for the Mortgage Banking and the Trust Services segments and by type of customer for the Corporate Banking and Consumer Banking segments. Regional Banks are identified by legal entity. Operating results are adjusted for intercompany loan participations and allocated service costs and management fees. BOK Financial evaluates performance and allocates resources based upon a measurement of performance after the allocation of certain indirect expenses, taxes and capital cost. Capital is assigned to the lines of business based on an internal allocation method that reflects management's assessment of risk. An additional amount of capital is assigned to the regional banks based upon BOK Financial's investment in these entities. The accounting policies of the reportable segments generally follow those described in the summary of significant account policies except interest income is reported on a fully tax-equivalent basis, loan losses are based on actual net amounts charged off and the amortization of intangible assets is generally excluded. The cost of funds provided from one segment to another is transfer-priced at rates that approximate market for funds with similar duration. Assessment of performance is based on net interest revenue after internal funds transfer pricing. Nonreportable business segments include TransFund ATM networks and BOSC, Inc. The sources of revenue in these segments include interest, commissions earned on securities transactions, securities trading gains or losses and fees earned on various banking activities, including merchant discounts and interchange fees. Substantially all revenue is from domestic customers. No single external customer accounts for more than 10% of total revenue. All Corporate Consumer Mortgage Trust Regional Other/ (In Thousands) Banking Banking Banking Services Banks Eliminations Total ----------------------------------------------------------------------------------------------- Year ended December 31, 2001 Net interest revenue/(expense) from external sources $ 199,771 $ (34,049) $ 32,545 $ 209 $ 138,846 $ (10,548) $ 326,774 Net interest revenue/(expense) from internal sources (86,615) 94,393 (20,867) 13,589 (11,690) 11,190 - - ---------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 113,156 60,344 11,678 13,798 127,156 642 326,774 Provision for loan losses 10,493 4,171 47 128 5,970 16,801 37,610 Operating revenue 29,506 29,995 52,814 40,855 19,664 59,864 232,698 Financial instruments gains/(losses) (250) - 12,757 - 484 13,587 26,578 Operating expense 57,322 59,099 47,750 38,534 91,253 59,253 353,211 Provision for impairment of mortgage servicing rights - - 15,551 - - - 15,551 Income taxes 29,017 10,530 5,408 6,220 18,430 (5,993) 63,612 Transition adjustment of adoption of FAS 133 - - - - - 236 236 - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 45,580 $ 16,539 $ 8,493 $ 9,771 $ 31,651 $ 4,268 $ 116,302 - ---------------------------------------------------------------------------------------------------------------------------- Average assets $3,854,310 $2,192,698 $651,103 $475,715 $3,352,155 $(308,947) $10,217,034 Average equity 442,870 69,102 50,891 41,290 409,622 (234,931) 778,844 Performance measurements: Return on assets 1.18% 0.75% 1.30% 2.05% 0.94% - 1.14% Return on equity 10.29 23.93 16.69 23.66 7.73 - 14.93 Efficiency ratio 40.18 65.42 74.04 70.51 62.15 - 63.13
Reconciliation to Consolidated Financial Statements Net Other Other Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------------------------------------------- Total reeportable segments $326,132 $172,834 $309,509 $10,525,981 Total nonreportable segments 586 59,829 45,355 30,630 Unallocated items: Tax-equivalent adjustment 8,045 - - - Funds management 15,177 (408) 7,946 323,113 All others (including eliminations), net (23,166) 443 5,952 (662,690) - -------------------------------------------------------------------------------- BOK Financial consolidated $326,774 $232,698 $368,762 $10,217,034 - -------------------------------------------------------------------------------- (1)Excluding financial instrument gains/(losses) All Corporate Consumer Mortgage Trust Regional Other/ (In Thousands) Banking Banking Banking Services Banks Eliminations Total ----------------------------------------------------------------------------------------------- Year ended December 31, 2000 Net interest revenue/(expense) from external sources $ 238,610 $ (46,916) $ 16,434 $ 3,429 $ 105,849 $ (48,519) $ 268,887 Net interest revenue/(expense) from internal sources (136,367) 107,172 (15,006) 8,995 (12,709) 47,915 - - ---------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 102,243 60,256 1,428 12,424 93,140 (604) 268,887 Provision for loan losses 3,658 3,669 57 3 3,532 6,285 17,204 Operating revenue 26,013 26,762 39,740 40,004 13,187 51,138 196,844 Securities gains/(losses) - - 5,257 - (356) (2,842) 2,059 Operating expense 53,451 54,906 37,762 35,916 68,224 49,656 299,915 Provision for impairment of mortgage servicing rights - - 2,900 - - - 2,900 Income taxes 27,676 11,064 2,220 6,422 12,510 (12,261) 47,631 - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 43,471 $ 17,379 $ 3,486 $ 10,087 $ 21,705 $ 4,012 $ 100,140 - ---------------------------------------------------------------------------------------------------------------------------- Average assets $ 3,370,044 $ 2,140,383 $ 412,219 $ 355,150 $ 2,467,530 $ (53,822) $8,691,504 Average equity 392,711 60,813 32,053 37,895 282,223 (197,453) 608,242 Performance measurements: Return on assets 1.29% 0.81% 0.85% 2.84% 0.88% - 1.15% Return on equity 11.07 28.58 10.88 26.62 7.69 - 16.46 Efficiency ratio 41.68 63.10 91.73 68.51 64.16 - 64.40
Reconciliation to Consolidated Financial Statements Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------------------------------------------------- Total reportable segments $269,491 $145,706 $253,159 $8,745,326 Total nonreportable segments 723 49,660 37,460 28,978 Unallocated items: Tax-equivalent adjustment 7,853 - - - Funds management 12,083 914 8,560 199,231 All others (including eliminations), net (21,263) 564 3,636 (282,031) - -------------------------------------------------------------------------------- BOK Financial consolidated $268,887 $196,844 $302,815 $8,691,504 - -------------------------------------------------------------------------------- (1)Excluding financial instrument gains/(losses) All Corporate Consumer Mortgage Trust Regional Other/ (In Thousands) Banking Banking Banking Services Banks Eliminations Total -------------------------------------------------------------------------------------------------- Year ended December 31, 1999 Net interest revenue/(expense) from external sources $ 180,353 $ (27,891) $ 11,626 $ 3,622 $ 72,050 $ (3,636) $ 236,124 Net interest revenue/(expense) from internal sources (92,844) 80,973 (8,296) 7,243 (10,458) 23,382 - - -------------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 87,509 53,082 3,330 10,865 61,592 19,746 236,124 Provision for loan losses (1,111) 2,463 82 70 36 8,825 10,365 Operating revenue 27,573 26,826 39,532 36,187 11,462 47,291 188,871 Securities losses - - - - (53) (366) (419) Operating expense 47,025 53,545 39,422 33,481 60,662 46,381 280,516 Income taxes 26,906 9,298 1,307 5,252 4,447 (2,741) 44,469 - -------------------------------------------------------------------------------------------------------------------------------- Net income $ 42,262 $ 14,602 $ 2,051 $ 8,249 $ 7,856 $ 14,206 $ 89,226 - -------------------------------------------------------------------------------------------------------------------------------- Average assets $2,933,619 $ 2,100,368 $355,887 $ 332,297 $ 1,860,667 $ 30,212 $ 7,613,050 Average equity 330,091 58,824 32,006 33,473 214,226 (126,228) 542,392 Performance measurements: Return on assets 1.44% 0.70% 0.58% 2.48% 0.42% - 1.17% Return on equity 12.80 24.82 6.41 24.64 3.67 - 16.45 Efficiency ratio 40.86 67.01 91.97 71.16 83.04 - 66.00
Reconciliation to Consolidated Financial Statements Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------------------------------------------------- Total reportable segments $216,378 $141,580 $234,135 $7,582,838 Total nonreportable segments 1,210 44,537 35,746 59,505 Unallocated items: Tax-equivalent adjustment 8,380 - - - Funds management 29,141 1,057 8,399 148,259 All others (including eliminations), net (18,985) 1,697 2,236 (177,552) - -------------------------------------------------------------------------------- BOK Financial consolidated $236,124 $188,871 $280,516 $7,613,050 - -------------------------------------------------------------------------------- (1)Excluding financial instruments gains/(losses) (19) Fair Value of Financial Instruments The following table presents the carrying values and estimated fair values of financial instruments as of December 31, 2001 and 2000 (dollars in thousands): Range of Average Estimated Carrying Contractual Repricing Discount Fair Value Yields (in years) Rate Value ------------------------------------------------------------------- 2001: Cash and cash equivalents $ 647,338 $ 647,338 Securities 3,700,989 3,702,504 Loans: Commercial 3,674,750 2.04 - 17.70% 0.42 1.96 - 4.90% 3,693,209 Commercial real estate 1,341,775 2.25 - 13.90 1.39 4.64 - 4.83 1,402,885 Residential mortgage 703,080 3.81 - 13.00 2.04 4.05 - 7.62 701,349 Residential mortgage - held for sale 166,093 - - - 166,093 Consumer 409,680 2.03 - 21.00 2.73 4.26 - 6.98 438,625 - ---------------------------------------------------------------------------------------------------------------------- Total loans 6,295,378 6,402,161 Reserve for loan losses (101,905) - - ---------------------------------------------------------------------------------------------------------------------- Net loans 6,193,473 6,402,161 Derivative instruments with positive fair value 34,131 34,131 Deposits with no stated maturity 4,084,638 - - 4,084,638 Time deposits 2,821,106 1.25 - 7.65 0.64 1.50 - 2.80 2,861,413 Other borrowings 2,822,937 4.17 - 8.51 0.06 1.37 - 3.70 2,824,409 Subordinated debt 186,302 6.03 6.27 5.87 189,775 Derivative instruments with negative fair value 38,517 38,517 - ---------------------------------------------------------------------------------------------------------------------- 2000: Cash and cash equivalents $ 750,729 $ 750,729 Securities 3,037,056 3,037,552 Loans: Commercial 3,248,033 4.50 - 17.63% 0.43 6.20 - 9.15% 3,321,380 Commercial real estate 1,270,494 7.00 - 14.00 1.26 8.89 - 9.08 1,262,690 Residential mortgage 638,044 3.81 - 13.40 1.61 7.41 - 7.58 612,616 Residential mortgage - held for sale 48,901 - - - 48,901 Consumer 312,390 4.00 - 21.00 2.35 8.10 - 14.00 302,230 - ---------------------------------------------------------------------------------------------------------------------- Total loans 5,517,862 5,547,817 Reserve for loan losses (82,655) - - ---------------------------------------------------------------------------------------------------------------------- Net loans 5,435,207 5,547,817 Deposits with no stated maturity 3,372,817 - - - 3,372,817 Time deposits 2,673,188 2.00 - 7.40 0.54 3.55 - 6.49 2,685,773 Other borrowings 2,735,277 5.94 - 9.89 0.14 5.62 - 7.35 2,722,214 Subordinated debt 148,816 7.03 6.27 5.94 165,946 - ----------------------------------------------------------------------------------------------------------------------
The preceding table presents the estimated fair values of financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involved significant judgments by management. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, BOK Financial does not know whether the fair values shown above represent values at which the respective financial instruments could be sold individually or in the aggregate. The following methods and assumptions were used in estimating the fair value of these financial instruments: Cash and Cash Equivalents The book value reported in the consolidated balance sheet for cash and short-term instruments approximates those assets' fair values. Securities The fair values of securities are based on quoted market prices or dealer quotes, when available. If quotes are not available, fair values are based on quoted prices of comparable instruments. Derivatives Fair value is calculated by a third party based on discounted cash flows using a yield curve and current applicable market rates. Loans The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates currently being offered for loans with similar remaining terms to maturity and credit risk, adjusted for the impact of interest rate floors and ceilings. The fair values of classified loans were estimated to approximate their carrying values less loan loss reserves allocated to these loans of $29 million and $26 million at December 31, 2001 and 2000, respectively. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments and hedging transactions. Deposits The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions. Statement of Financial Accounting Standard No. 107, "Disclosures about Fair Value of Financial Instruments," ("FAS 107") defines the estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, to equal the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, FAS 107 prohibits adjusting fair value for the expected benefit of these deposits. Accordingly, the positive effect of such deposits is not included in this table. Other Borrowings and Subordinated Debenture The fair values of these instruments are based upon discounted cash flow analyses using interest rates currently being offered on similar instruments. Off-Balance-Sheet Instruments The fair values of commercial loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of these off-balance-sheet instruments were not significant at December 31, 2001 and 2000. (20) Parent Company Only Financial Statements Summarized financial information for BOK Financial - Parent Company Only follows: Balance Sheets (In Thousands) December 31, -------------------------- 2001 2000 -------------------------- Assets Cash and cash equivalents $ 12,971 $ 9,755 Securities - available for sale 14,355 12,016 Investment in subsidiaries 926,623 777,054 Other assets 2,029 1,972 - -------------------------------------------------------------------------------- Total assets $955,978 $800,797 - -------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Other borrowings $125,095 $ 95,132 Other liabilities 2,400 2,089 - -------------------------------------------------------------------------------- Total liabilities 127,495 97,221 - -------------------------------------------------------------------------------- Preferred stock 25 25 Common stock 3 3 Capital surplus 323,860 278,882 Retained earnings 511,301 431,390 Treasury stock (12,498) (10,044) Accumulated other comprehensive income 5,792 3,320 - -------------------------------------------------------------------------------- Total shareholders' equity 828,483 703,576 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $955,978 $800,797 - -------------------------------------------------------------------------------- Statements of Earnings (In Thousands) 2001 2000 1999 ------------------------------------------- Dividends, interest and fees received from $ 91,960 $ 8,082 $63,556 subsidiaries Other operating revenue 425 637 2,327 - ------------------------------------------------------------------------------------------------- Total revenue 92,385 8,719 65,883 - ------------------------------------------------------------------------------------------------- Interest expense 6,458 7,551 6,225 Personnel expense 2 - 9 Professional fees and services 471 728 600 Other operating expense 265 45 80 - ------------------------------------------------------------------------------------------------- Total expense 7,196 8,324 6,914 - ------------------------------------------------------------------------------------------------- Income before taxes and equity in undistributed income of subsidiaries 85,189 395 58,969 Federal and state income tax credit (3,092) (3,520) (3,243) - ------------------------------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries 88,281 3,915 62,212 Equity in undistributed income of subsidiaries 28,021 96,225 27,014 - ------------------------------------------------------------------------------------------------- Net income $116,302 $100,140 $89,226 - -------------------------------------------------------------------------------------------------
Statements of Cash Flows (In Thousands) 2001 2000 1999 ----------------------------------------- Cash flows from operating activities: Net income $116,302 $100,140 $89,226 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed loss of subsidiaries (28,021) (96,225) (27,014) Tax benefit on exercise of stock options 3,408 1,010 3,138 Decrease in other assets (57) 1,239 1,036 Decrease in other liabilities 166 (44) (1,980) - ------------------------------------------------------------------------------------------------- Net cash provided by operating activities 91,798 6,120 64,406 - ------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from maturities of available for sale - - 9,881 securities Purchases of available for sale securities (1,961) (1,019) - Investment in subsidiaries (119,309) 3,800 (72,293) - ------------------------------------------------------------------------------------------------- Net cash provided (used) by investing activities (121,270) 2,781 (62,412) - ------------------------------------------------------------------------------------------------- Cash flows from financing activities: Increase in other borrowings 124,963 (10,000) 13,228 Paydown of other borrowings (95,000) - - Issuance of preferred, common and treasury stock, net 2,745 999 823 Purchase treasury stock - (2,633) (1,574) Cash dividends (20) (1) (2,744) - ------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities 32,688 (11,635) 9,733 - ------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 3,216 (2,734) 11,727 Cash and cash equivalents at beginning of period 9,755 12,489 762 - ------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 12,971 $ 9,755 $12,489 - ------------------------------------------------------------------------------------------------- Payment of dividends in common stock $ 36,371 $ 1,500 $32,192 - ------------------------------------------------------------------------------------------------- Cash paid for interest $ 6,726 $ 7,741 $ 5,933 - -------------------------------------------------------------------------------------------------
BOK FINANCIAL CORPORATION Annual Financial Summary - Unaudited Consolidated Daily Average Balances, Average Yields and Rates (Dollars in Thousands Except Per Share Data) 2001 ----------------------------------------------- Average Revenue/ Yield/ Balance Expense1 Rate ----------------------------------------------- Assets Taxable securities $2,989,967 $184,464 6.17% Tax-exempt securities 277,309 19,935 7.19 - ---------------------------------------------------------------------------------------------------------- Total securities 3,267,276 204,399 6.26 - ---------------------------------------------------------------------------------------------------------- Trading securities 18,504 1,200 6.49 Funds sold and resell agreements 18,419 829 4.50 Loans(2) 5,989,224 456,250 7.62 Less reserve for loan losses 92,392 - - ---------------------------------------------------------------------------------------------------------- Loans, net of reserve 5,896,832 456,250 7.74 - ---------------------------------------------------------------------------------------------------------- Total earning assets 9,201,031 662,678 7.20 - ---------------------------------------------------------------------------------------------------------- Cash and other assets 1,016,003 - ---------------------------------------------------------------------------------------------------------- Total assets $10,217,034 - ---------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Transaction deposits $ 2,267,032 49,893 2.20% Savings deposits 154,934 2,281 1.47 Time deposits 2,960,170 156,213 5.28 - ---------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 5,382,136 208,387 3.87 - ---------------------------------------------------------------------------------------------------------- Federal funds purchased and repurchase agreements 1,652,467 64,358 3.89 Other borrowed funds 974,907 44,191 4.53 Subordinated debenture 180,211 10,923 6.06 - ---------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 8,189,721 327,859 4.00 - ---------------------------------------------------------------------------------------------------------- Demand deposits 1,102,958 Other liabilities 145,511 Shareholders' equity 778,844 - ---------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $10,217,034 - ---------------------------------------------------------------------------------------------------------- Tax-equivalent Net Interest Revenue 334,819 3.20% Tax-equivalent Net Interest Revenue to Earning Assets 3.64 Less tax-equivalent adjustment 8,045 - ---------------------------------------------------------------------------------------------------------- Net Interest Revenue 326,774 Provision for loan losses 37,610 Other operating revenue 259,640 Other operating expense 368,762 - ---------------------------------------------------------------------------------------------------------- Income before taxes 180,042 Federal and state income tax 63,740 - ---------------------------------------------------------------------------------------------------------- Net Income $116,302 - ---------------------------------------------------------------------------------------------------------- (1) Tax equivalent at the statutory federal and state rates of 38.9% for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. (2) The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income. See Note 1 of Notes to the Consolidated Financial Statements for a description of income recognition policy.
2000 1999 - ---------------------------------------------------------------------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense1 Rate Balance Expense1 Rate - ---------------------------------------------------------------------------------------------- $2,587,183 $167,493 6.47% $2,383,198 $144,901 6.08% 269,731 19,577 7.26 288,094 21,785 7.56 - ---------------------------------------------------------------------------------------------- 2,856,914 187,070 6.55 2,671,292 166,686 6.24 - ---------------------------------------------------------------------------------------------- 15,633 1,450 9.28 37,508 2,291 6.11 46,219 2,962 6.41 43,373 2,219 5.12 4,934,462 455,101 9.22 4,046,920 337,458 8.34 80,447 72,306 - ---------------------------------------------------------------------------------------------- 4,854,015 455,101 9.38 3,974,614 337,458 8.49 - ---------------------------------------------------------------------------------------------- 7,772,781 646,583 8.32 6,726,787 508,654 7.56 - ---------------------------------------------------------------------------------------------- 918,723 886,263 - ---------------------------------------------------------------------------------------------- $8,691,504 $7,613,050 - ---------------------------------------------------------------------------------------------- $1,889,806 55,019 2.91% $1,717,314 46,510 2.71% 151,870 2,703 1.78 161,484 2,971 1.84 2,495,038 150,527 6.03 1,983,829 101,140 5.10 - ---------------------------------------------------------------------------------------------- 4,536,714 208,249 4.59 3,862,627 150,621 3.90 - ---------------------------------------------------------------------------------------------- 1,444,830 91,456 6.33 1,146,917 58,665 5.12 889,919 59,701 6.71 812,098 45,530 5.61 148,728 10,437 7.02 148,509 9,334 6.29 - ---------------------------------------------------------------------------------------------- 7,020,191 369,843 5.27 5,970,151 264,150 4.42 - ---------------------------------------------------------------------------------------------- 980,401 999,311 82,670 101,196 608,242 542,392 - ---------------------------------------------------------------------------------------------- $8,691,504 $7,613,050 - ---------------------------------------------------------------------------------------------- 276,740 3.05% 244,504 3.14% 3.56 3.63 7,853 8,380 - ---------------------------------------------------------------------------------------------- 268,887 236,124 17,204 10,365 198,903 188,452 302,815 280,516 - ---------------------------------------------------------------------------------------------- 147,771 133,695 47,631 44,469 - ---------------------------------------------------------------------------------------------- $100,140 $ 89,226 - ----------------------------------------------------------------------------------------------
BOK FINANCIAL CORPORATION Quarterly Financial Summary - Unaudited Consolidated Daily Average Balances, Average Yields and Rates (Dollars in Thousands Except Per Share Data) Three Months Ended ------------------------------------------------------------------------- December 31, 2001 September 30, 2001 ---------------------------------- ---------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense1 Rate Balance Expense1 Rate ---------------------------------- ---------------------------------- Assets Taxable securities $3,177,731 $45,777 5.72% $2,869,680 $44,705 6.18% Tax-exempt securities 238,634 4,274 7.11 265,608 4,554 6.80 -------------------------------------------------------------------------------------- ---------------------------------- Total securities 3,416,365 50,051 5.81 3,135,288 49,259 6.23 -------------------------------------------------------------------------------------- ---------------------------------- Trading securities 22,508 245 4.32 16,498 223 5.36 Funds sold 14,362 85 2.35 14,229 130 3.62 Loans(2) 6,203,512 99,643 6.37 6,065,512 114,165 7.47 Less reserve for loan losses 99,541 - - 93,884 - - -------------------------------------------------------------------------------------- ---------------------------------- Loans, net of reserve 6,103,971 99,643 6.48 5,971,628 114,165 7.58 -------------------------------------------------------------------------------------- ---------------------------------- Total earning assets 9,557,206 150,024 6.23 9,137,643 163,777 7.11 -------------------------------------------------------------------------------------- ---------------------------------- Cash and other assets 1,008,111 1,007,684 -------------------------------------------------------------------------------------- ---------------------------------- Total assets $10,565,317 $10,145,327 -------------------------------------------------------------------------------------- ---------------------------------- Liabilities and Shareholders' Equity Transaction deposits $ 2,429,978 9,933 1.62% $ 2,278,393 11,917 2.08% Savings deposits 158,040 489 1.23 155,908 575 1.46 Other time deposits 2,839,770 30,744 4.30 3,030,759 38,287 5.01 -------------------------------------------------------------------------------------- ---------------------------------- Total interest-bearing deposits 5,427,788 41,166 3.01 5,465,060 50,779 3.69 -------------------------------------------------------------------------------------- ---------------------------------- Federal funds purchased and repurchase agreements 1,701,655 8,813 2.05 1,440,556 12,976 3.57 Other borrowed funds 1,088,792 8,460 3.08 1,019,123 10,711 4.17 Subordinated debenture 186,409 2,764 5.88 186,631 2,871 6.10 -------------------------------------------------------------------------------------- ---------------------------------- Total interest-bearing liabilities 8,404,644 61,203 2.89 8,111,370 77,337 3.78 -------------------------------------------------------------------------------------- ---------------------------------- Demand deposits 1,150,498 1,093,442 Other liabilities 174,891 143,298 Shareholders' equity 835,284 797,217 -------------------------------------------------------------------------------------- ---------------------------------- Total liabilities and shareholders' equity $10,565,317 $10,145,327 -------------------------------------------------------------------------------------- ---------------------------------- Tax-equivalent Net Interest Revenue 88,821 3.34% 86,440 3.33% Tax-equivalent Net Interest Revenue to Earning Assets 3.69 3.75 Less tax-equivalent adjustment 1,802 1,914 -------------------------------------------------------------------------------------- ---------------------------------- Net Interest Revenue 87,019 84,526 Provision for loan losses 10,517 11,023 Other operating revenue 55,260 76,091 Other operating expense 84,801 103,591 -------------------------------------------------------------------------------------- ---------------------------------- Income before taxes 46,961 46,003 Federal and state income tax 16,829 16,216 -------------------------------------------------------------------------------------- ---------------------------------- Net Income $ 30,132 $ 29,787 -------------------------------------------------------------------------------------- ---------------------------------- Earnings Per Average Common Share Equivalent: Net income: Basic $0.58 $0.58 -------------------------------------------------------------------------------------- ---------------------------------- Diluted $0.52 $0.51 -------------------------------------------------------------------------------------- ---------------------------------- (1) Tax equivalent at the statutory federal and state rates of 38.9% for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. (2) The loan averages included loans on which the accrual of interest has been discounted and are stated net of unearned income. See Note 1 of Notes to the Consolidated Financial Statements for a description of income recognition policy.
Three Months Ended - --------------------------------------------------------------------------------------------------------------- June 30, 2001 March 31, 2001 December 31, 2000 - ---------------------------------- ----------------------------------- ----------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense1 Rate Balance Expense1 Rate Balance Expense1 Rate - ---------------------------------- ----------------------------------- ----------------------------------- $3,012,148 $47,080 6.27% $2,910,580 $ 46,902 6.54% $2,654,996 $ 43,345 6.49% 310,517 5,841 7.54 282,656 5,266 7.56 276,478 5,172 7.44 - ---------------------------------- ----------------------------------- ----------------------------------- 3,322,665 52,921 6.39 3,193,236 52,168 6.63 2,931,474 48,517 6.58 - ---------------------------------- ----------------------------------- ----------------------------------- 16,566 332 8.04 18,421 400 8.81 18,458 405 8.73 17,221 191 4.45 28,063 423 6.11 45,310 788 6.92 5,944,358 117,080 7.90 5,737,543 125,362 8.86 5,265,300 125,854 9.51 89,824 86,156 83,246 - ---------------------------------- ----------------------------------- ----------------------------------- 5,854,534 117,080 8.02 5,651,387 125,362 9.00 5,182,054 125,854 9.66 - ---------------------------------- ----------------------------------- ----------------------------------- 9,210,986 170,524 7.43 8,891,107 178,353 8.14 8,177,296 175,564 8.54 - ---------------------------------- ----------------------------------- ----------------------------------- 1,010,404 999,606 955,024 - ---------------------------------- ----------------------------------- ----------------------------------- $10,221,390 $9,890,713 $9,132,320 - ---------------------------------- ----------------------------------- ----------------------------------- $ 2,222,838 12,821 2.31% $2,133,537 15,222 2.89% $1,910,167 15,646 3.26% 154,312 569 1.48 151,392 648 1.74 143,969 673 1.86 3,009,880 42,161 5.62 2,960,828 45,021 6.17 2,671,285 43,237 6.44 - ---------------------------------- ----------------------------------- ----------------------------------- 5,387,030 55,551 4.14 5,245,757 60,891 4.71 4,725,421 59,556 5.01 - ---------------------------------- ----------------------------------- ----------------------------------- 1,767,086 19,181 4.35 1,702,913 23,388 5.57 1,625,497 26,823 6.56% 885,922 11,127 5.04 903,264 13,893 6.24 878,209 15,257 6.91 187,299 2,794 5.98 160,144 2,494 6.32 148,794 2,667 7.13 - ---------------------------------- ----------------------------------- ----------------------------------- 8,227,337 88,653 4.32 8,012,078 100,666 5.10 7,377,921 104,303 5.62 - ---------------------------------- ----------------------------------- ----------------------------------- 1,119,597 1,047,267 1,002,969 116,200 108,514 86,403 758,256 722,854 665,027 - ---------------------------------- ----------------------------------- ----------------------------------- $10,221,390 $9,890,713 $9,132,320 - ---------------------------------- ----------------------------------- ----------------------------------- 81,871 3.11% 77,687 3.04% 71,261 2.92% 3.57 3.54 3.47 2,254 2,075 2,069 - ---------------------------------- ----------------------------------- ----------------------------------- 79,617 75,612 69,192 8,497 7,573 6,000 60,223 68,066 54,924 86,584 93,786 79,318 - ---------------------------------- ----------------------------------- ----------------------------------- 44,759 42,319 38,798 15,778 14,917 13,302 - ---------------------------------- ----------------------------------- ----------------------------------- $28,981 $27,402 $25,496 - ---------------------------------- ----------------------------------- ----------------------------------- $0.56 $0.53 $0.50 - ---------------------------------- ----------------------------------- ----------------------------------- $0.50 ` $0.48 $0.44 - ---------------------------------- ----------------------------------- -----------------------------------
BOK Financial Corporation Board of Directors C. Fred Ball, Jr. 3 Chairman & CEO Bank of Texas, N.A. Sharon J. Bell 1 Managing Partner Rogers & Bell Peter C. Boylan, III 1 Co-President & COO Gemstar - TV Guide Int'l. Joseph E. Cappy 1 Chairman, President & CEO Dollar Thrifty Automotive Group Luke R. Corbett Chairman & CEO Kerr-McGee Corporation William E. Durrett Senior Chairman American Fidelity Corp. James O. Goodwin 1 Chief Executive Officer The Oklahoma Eagle Publishing Company, Inc. LLC V. Burns Hargis 1 Vice Chairman BOK Financial Corporation and Bank of Oklahoma, N.A. Eugene A. Harris 2 Executive Vice President BOK Financial Corporation and Bank of Oklahoma, N.A. Howard E. Janzen 1 President & CEO Williams Communications E. Carey Joullian, IV 1 President & CEO Mustang Fuel Corporation George B. Kaiser 1 Chairman BOK Financial Corporation and Bank of Oklahoma, N.A. David L. Kyle 1 Chairman, President & CEO ONEOK, Inc. Robert J. LaFortune Personal Investments Philip C. Lauinger, Jr. Chairman & CEO Lauinger Publishing Co. John C. Lopez 1 Chairman & CEO Lopez Foods, Inc. Stanley A. Lybarger 1,3 President & CEO BOK Financial Corporation and Bank of Oklahoma, N.A. Steven J. Malcolm 1,4 President & CEO Williams Frank A. McPherson Retired Chairman & CEO Kerr-McGee Corporation Steven E. Moore Chairman, President & CEO OGE Energy Corp. J. Larry Nichols Chairman, President & CEO Devon Energy Corporation Robert L. Parker, Sr. Chairman of the Board Parker Drilling Company James A. Robinson Personal Investments L. Francis Rooney, III 1 Chairman and CEO Manhattan Construction Company Scott F. Zarrow 1 President Foreman Investment Capital LLC 1 Director of BOK Financial Corp. and Bank of Oklahoma, N.A. 2 Director of Bank of Oklahoma, N.A. 3 Director of BOK Financial Corp. and Bank of Texas, N.A. 4 Advisory pending election at shareholders meeting April 30 Executive Officers George B. Kaiser Chairman of the Board Stanley A. Lybarger President & Chief Executive Officer V. Burns Hargis Vice Chairman Eugene A. Harris Executive Vice President Chief Credit Officer Steven E. Nell Executive Vice President Chief Financial Officer James L. Huntzinger Senior Vice Presidnet Chief Investment Officer John C. Morrow Senior Vice President Director of Financial Accounting & Reporting Valerie Toalson Senior Vice President Corporate Controller Frederic Dorwart Secretary Bank of Albuquerque, N.A. Gregory K. Symons Chairman & CEO Paul A. Sowards President Bank of Arkansas, N.A. Jeffrey R. Dunn Chairman, President & CEO Bank of Oklahoma, N.A. Steven G. Bradshaw Executive Vice President Consumer Banking Chairman, BOSC, Inc. Paul M. Elvir Executive Vice President Operations & Technology Mark W. Funke President, Oklahoma City H. James Holloman Executive Vice President Trust Division David L. Laughlin President BOK Mortgage W. Jeffrey Pickryl Executive Vice President Commercial Banking Charles D. Williamson Executive Vice President Capital Markets Bank of Texas, N.A. C. Fred Ball, Jr. Chairman & CEO Thomas S. Swiley President Ralph Williams President - Houston Steven D. Poole President Bank of Texas Trust Company Bank of Albuquerque, N.A. Board of Directors Susan Barker-Kalangis, Esq. Partner, Modrall, Sperling, Roehl, Harris and Sisk P.A. Steven G. Bradshaw Executive Vice President Bank of Oklahoma, N.A. Douglas M. Brown President & CEO Tuition Plan, Inc. Rudy A. Davolos Athletic Director University of New Mexico William E. Garcia Sr. Manager, Public Affairs Intel Corporation Robert M. Goodman Vice Chairman Bank of Albuquerque, N.A. Thomas D. Growney President Tom Growney Equipment, Inc. Eugene A. Harris Executive Vice President BOK Financial Corporation and Bank of Oklahoma, N.A. Heather M. Pellerin Senior Vice President Bank of Albuquerque, N.A. W. Jeffrey Pickryl Executive Vice President Bank of Oklahoma, N.A. Michael D. Sivage Chief Executive Officer Sivage-Thomas Homes, Inc. Paul A. Sowards President Bank of Albuquerque, N.A. David L. Sutter Senior Vice President Bank of Oklahoma, N.A. Gregory K. Symons Chairman & CEO Bank of Albuquerque, N.A. Bank of Arkansas, N.A. Board of Directors John W. Anderson Senior Vice President Bank of Oklahoma, N.A. Jeffrey R. Dunn Chairman, President & CEO Bank of Arkansas, N.A. George C. Faucette, Jr. President Coldwell Banker Faucette Real Estate Mark W. Funke President Bank of Oklahoma- Oklahoma City Gerald Jones President Jones Motorcars, Inc. Ronald E. Leffler Senior Vice President Bank of Oklahoma, N.A. Jerry D. Sweetser Sweetser Properties, Inc. Bank of Texas, N.A. Board of Directors C. Thomas Abbott Vice Chairman Bank of Texas, N.A. Charles A. Angel, Jr. Vice Chairman Bank of Texas, N.A. C. Fred Ball, Jr. 2 Chairman & CEO Bank of Texas, N.A. C. Huston Bell President The Vantage Companies Edward O. Boshell, Jr. Columbia General Investments, L.P. R. Neal Bright Managing Partner Bright & Bright, L.L.P. Dudley Chambers Partner, Jackson & Walker, L.L.P. H. Lynn Craft President & CEO Baptist Foundation of Texas Edward F. Doran, Sr. Charles W. Eisemann Investments James J. Ellis Managing Partner Ellis/Roiser Associates R. William Gribble, Jr. President Gribble Oil Company J. T. Hairston, Jr. Investments Douglas D. Hawthorne President & CEO Texas Health Resources Jerry Lastelick Attorney Lastelick, Anderson and Arneson Stanley A. Lybarger 2 President & CEO BOK Financial Corp. Michael A. McBee Owner McBee Operating Co. Steven Nell1 Chief Financial Officer BOK Financial Corp. Thomas S. Swiley President Bank of Texas, N.A. Mrs. Jere W. Thompson Community Leader Tom E. Turner 2 Retired Chairman Bank of Texas, N.A. John C. Vogt Investments Ralph Williams President Bank of Texas, N.A. - Houston 1 Park Cities Bancshares, Inc. only 2 Park Cities Bancshares, Inc./ Bank of Texas, N.A. Major Customer Service Offices Business Banking Centers Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8444 Dallas 2650 Royal Lane (972) 443-2809 Fayetteville 3500 N. College (479) 973-2660 Houston 5320 Bellaire Blvd. (713) 578-3400 Oklahoma City 9520 N. May (405) 936-3700 7701 S. Western (405) 616-7500 Richardson 333 W. Campbell Rd. (214) 575-1972 Sherman 307 W. Washington (903) 891-8106 Tulsa 3237 S. Peoria (918) 746-7400 Consumer Banking Albuquerque 4700 Montgomery, NE, Suite 100 (505) 855-7230 Oklahoma City 2601 N. Meridian (405) 272-2000 Richardson 333 W. Campbell Rd. (214) 575-1987 Tulsa Bank of Oklahoma Tower One Williams Center, 16th Fl. (918) 588-6000 Corporate Banking Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8444 Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8880 Fayetteville 3500 N. College (479) 973-2660 Houston 2 Houston Center (713) 289-5844 Oklahoma City 201 Robert S. Kerr (405) 272-2000 Tulsa One Williams Center, 8th Fl. (918) 588-6127 BOSC, Inc. - ----------- (800) 364-1818 Institutional Investments Dallas 7600 W. Northwest Hwy. (214) 706-0382 Houston 2 Houston Center (713) 289-5847 Little Rock 2200 N. Rodney Parham Rd., Suite 215 (800) 817-2580 Oklahoma City 201 Robert S. Kerr, 4th Fl. (405) 272-2000 Tulsa One Williams Center, 9th Fl. (918) 588-6555 Investment Centers Albuquerque 2500 Louisiana Blvd., NE, Suite 100 (505) 837-4122 3901 Southern Blvd. (505) 837-4122 Dallas 7600 W. Northwest Hwy. (214) 706-0382 Fayetteville 3500 N. College (800) 817-2580 Oklahoma City 9520 N. May (405) 936-3900 Tulsa 3045 S. Harvard (918) 746-5614 Public Finance Oppenheim, a division of BOSC, Inc. Albuquerque 2500 Louisiana Blvd., NE, Suite 208 (505) 837-4241 Little Rock 2200 N. Rodney Parham Rd., Suite 221 (501) 227-3200 Oklahoma City 201 Robert S. Kerr (405) 272-2383 Corporate Finance Dallas 5956 Sherry Lane, 7th Fl. (214) 346-3902 Private Financial Services Albuquerque 2500 Louisiana Blvd., NE, Suite 208 (505) 837-4272 Dallas 7600 W. Northwest Hwy. (214) 706-0373 8255 Walnut Hill Lane (214) 378-0103 Houston 8 Greenway Plaza, Suite 220 (832) 681-5202 Oklahoma City 9520 N. May, 2nd Fl. (405) 936-3900 201 Robert S. Kerr (405) 272-2232 Tulsa 3237 S. Peoria (918) 746-7487 320 S. Boston (918) 588-6214 2021 S. Lewis, Suite 200 (918) 748-7257 6036 S. Yale (918) 493-5210 Oklahoma Community Banking Bartlesville 422 S. Dewey (918) 335-5300 Enid 2308 N. Van Buren (580) 548-8500 Eufaula 219 S. Main (918) 689-2567 Grove 201 S. Main (918) 787-2700 McAlester One E. Choctaw (918) 426-1100 Muskogee 215 S. State (918) 686-5900 Sand Springs 401 E. Broadway (918) 241-8000 Trust Services Bank of Oklahoma Trust Division Oklahoma City 9520 N. May, 2nd Floor (405) 936-3900 Tulsa One Williams Center, 10th Floor (918) 588-6437 Southwest Trust Company Oklahoma City 9520 N. May, 2nd Floor (405) 936-3970 Bank of Texas Trust Division Dallas 7600 West Northwest Hwy. (214) 706-0351 5956 Sherry Lane, Suite 1100 (214) 987-8852 Houston 8 Greenway Plaza, Suite 220 (832) 681-5202 Sherman 2009 Independence Dr. (903) 813-5100 Bank of Albuquerque Trust Division Albuquerque 2500 Louisiana Blvd., NE, Suite 208 (505) 837-4133 Bank of Arkansas Trust Division Fayetteville 3500 N. College (479) 973-2656 Mortgage Services Arkansas Bentonville 1706 S.E. Walton Blvd., Suite C (479) 271-6800 Fayetteville 3500 N. College (479) 973-2600 Kansas Lenexa 15230 W. 87th St. Parkway (913) 307-1600 Missouri Lee's Summit 987 N.E. Rice Rd. (816) 246-7000 New Mexico Albuquerque 2500 Louisiana Blvd., NE, Suite 220 (505) 837-4111 Oklahoma Edmond 1515 S. Broadway (405) 272-2307 Enid 2308 N. Van Buren (580) 548-8528 Lawton 2602 W. Gore Blvd. (580) 250-0070 Muskogee 215 S. State (918) 686-5959 Norman 3550 W. Main (405) 366-3618 Oklahoma City 5015 N. Pennsylvania (405) 879-8700 7701 S. Western (405) 879-8700 Owasso 413 E. 2nd Ave. (918) 588-8650 Tulsa Copper Oaks 7060 S. Yale, Suite 100 (918) 488-7140 Pine & Lewis 1604 N. Lewis (918) 588-8608 Texas Bellaire 5320 Bellaire Blvd. (713) 578-3438 Dallas 6209 Hillcrest Ave. (214) 525-5052 Houston 8546 Highway 6 North (281) 656-3800 Operating Subsidiaries Bank of Albuquerque, N.A. Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8469 Bank of Arkansas, N.A. Fayetteville 3500 N. College (479) 973-2660 Bank of Oklahoma, N.A. Oklahoma City Bank of Oklahoma Plaza 201 Robert S. Kerr (405) 272-2000 Tulsa Bank of Oklahoma Tower One Williams Center (918) 588-6000 Bank of Texas, N.A. Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8880 Houston 5320 Bellaire Blvd. Bellaire, Texas (713) 578-3400 Leasing Services BOKF Equipment Finance, Inc. Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8864 Shareholder Information Corporate Headquarters Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 (918) 588-6000 Independent Auditors Ernst & Young LLP 3900 One Williams Center Tulsa, Oklahoma 74172 (918) 560-3600 Legal Counsel Frederic Dorwart Lawyers Old City Hall 124 E. Fourth St. Tulsa, Oklahoma 74103-5010 (918) 583-9922 Common Shares: Traded NASDAQ National Market NASDAQ Symbol: BOKF Number of common shareholders of record at December 31, 2001: 1,077 Market Makers: CIBC World Markets Corp. Herzog, Heine, Geduld, Inc. Howe Barnes Investments Keefe Bruyette & Woods Knight Securities LP Salomon Smith Barney Schwab Capital Markets Sherwood Securities Southwest Securities, Inc. Spear, Leeds & Kellogg Stephens, Inc. Transfer Agent and Registrar The Bank of New York (800) 524-4458 Address Shareholder Inquiries to: Shareholder Relations Department-11E P.O. Box 11258 Church Street Station New York, NY 10286 E-Mail Address: Shareowner-svcs@email.bony.com Send Certificates for Transfer and Address Changes to: Receive and Deliver Department - 11W P.O. Box 11002 Church Street Station New York, NY 10286 Copies of BOK Financial Corporation's Annual Report to Shareholders, Quarterly Reports and Form 10-K to the Securities and Exchange Commission are available without charge upon written request. Analysts, shareholders and other investors seeking financial information about BOK Financial Corporation are invited to contact James F. Ulrich, Senior Vice President, Investor Relations, (918) 588-6752. Information about BOK Financial is also readily available at our website: www.bokf.com Bank of Albuquerque, N.A. www.bankofalbuquerque.com Bank of Arkansas, N.A. www.bankofarkansas.com Bank of Oklahoma, N.A. www.bok.com Bank of Texas, N.A. www.bankoftexas.com BOK Financial Corporation Appendix A Description Amount CAGR* Assets $11,130,388 18% - ----------------------- ----------- ----- Loans 6,295,378 19% - ----------------------- ----------- ----- Deposits 6,905,744 14% - ----------------------- ----------- ----- Fee Based Revenue 232,141 17% - ----------------------- ----------- ----- Net Income 116,302 25% * CAGR-Compounded annual growth rate from 1991 to 2001. BOK FINANCIAL CORPORATION EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Banking Subsidiaries Bank of Albuquerque, National Association (1) Bank of Arkansas, National Association (1) Bank of Oklahoma, National Association (1) Bank of Texas, National Association (1) Other subsidiaries of BOK Financial Corporation BOK Capital Services Corporation BOK Plaza Holding Corporation BOSC, Inc. CNBT Bancshares, Inc. CNBT Bancshares (Delaware), Inc. First of Muskogee Insurance Corporation Park Cities Bancshares, Inc. (3) Park Cities Corporation (6) Subsidiaries of Bank of Oklahoma, N.A. Affiliated BancServices, Inc. Affiliated Financial Holding Company Affiliated Financial Insurance Agency, Inc. Affiliated Financial Life Insurance Company (2) BancOklahoma Agri-Service Corporation BancOklahoma Mortgage Corporation BOK Auto Receivable Corporation BOK Delaware, Inc. (4) BOK Equipment Finance, Inc. BOK Real Estate Trust (3) BOSC Agency, Inc. (Oklahoma) BOSC Agency, Inc. (New Mexico) (5) BOSC Agency, Inc. (Texas) (3) CVV Management, Inc. CVV Partnership, an Oklahoma General Partnership Cottonwood Valley Ventures, Inc. Investment Concepts, Inc. Pacesetter Leasing Company Southwest Trust Company Subsidiaries of Bank of Texas, N.A. Bank of Texas Trust Company, National Association (1) All Subsidiaries listed above were incorporated in Oklahoma, except as noted. (1) Chartered by the United States Government (2) Incorporated in Arizona (3) Incorporated in Texas (4) Incorporated in Delaware (5) Incorporated in New Mexico (6) Incorporated in Nevada BOK FINANCIAL CORPORATION Exhibit 23.0 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference of our report dated January 23, 2002, with respect to the consolidated financial statements of BOK Financial Corporation incorporated by reference in the annual report (Form 10-K) for the year ended December 31, 2001, in the following registration statements: o Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust Agreement. o Registration Statement (Form S-8, No. 33-44122) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1991 Special Stock Option Plan. o Registration Statement (Form S-8, No. 33-55312) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1992 Stock Option Plan. o Registration Statement (Form S-8, No. 33-70102) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1993 Stock Option Plan. o Registration Statement (Form S-8, No. 33-79834) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1994 Stock Option Plan. o Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer Prospectus of the BOK Financial Corporation Directors' Stock Compensation Plan. o Registration Statement (Form S-8, No. 333-32649) pertaining to the Reoffer Prospectus of BOK Financial Corporation 1997 Stock Option Plan. o Registration Statement (Form S-8, No. 333-93957) pertaining to the Reoffer Prospectus of BOK Financial Corporation 2000 Stock Option Plan. o Registration Statement (Form S-8, No. 333-40280 ) pertaining to the Reoffer Prospectus of the BOK Financial Corporation Thrift Plan for Hourly Employees. o Registration Statement (Form S-8, No. 333-62578) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 2001 Stock Option Plan. /s/ Ernst & Young LLP Tulsa, Oklahoma March 27, 2002 -----END PRIVACY-ENHANCED MESSAGE-----