10-Q 1 f10q.txt FIRST QTR 10Q As filed with the Securities and Exchange Commission on May 14, 2002 ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2002 Commission File No. 0-19341 BOK FINANCIAL CORPORATION Incorporated in the State of Oklahoma I.R.S. Employer Identification 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 ($.00006 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 51,359,122 shares of common stock ($.00006 par value) as of April 30, 2002. -------------------------------------------------------------------------------- BOK Financial Corporation Form 10-Q Quarter Ended March 31, 2002 Index Part I. Financial Information Management's Discussion and Analysis 2 Report of Management on Consolidated Financial Statements 17 Consolidated Statements of Earnings 18 Consolidated Balance Sheets 20 Consolidated Statements of Changes in Shareholders' Equity 21 Consolidated Statements of Cash Flows 22 Notes to Consolidated Financial Statements 23 Financial Summaries - Unaudited 26 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 29 Signature 29 MANAGEMENT'S ASSESSMENT OF OPERATIONS AND FINANCIAL CONDITION Assessment of Operations Summary of Performance BOK Financial Corporation ("BOK Financial") recorded net income of $32.4 million or $0.56 per diluted common share for the first quarter of 2002 compared to $27.4 million and $0.48 per diluted common share for the first quarter of 2001. The returns on average assets and equity were 1.22% and 15.41% for the quarter ended March 31, 2002 compared to returns on average assets and equity of 1.12% and 15.37% for the same period of 2001. Net interest revenue grew $14.4 million. This increase included a $10.8 million increase due to an increase in average earning assets of $867 million and a $3.3 million dollar increase due to an increase in net interest margin of 27 basis points. Fees and commissions increased $6.5 million over the same period in 2001. Net losses on sales of securities were $7.6 million for the quarter ending March 31, 2002 compared to net gains of $12.6 million in same period of 2001. Operating expenses increased $5.2 million, excluding provision for impairment of mortgage servicing rights. The provision for impairment of mortgage servicing rights decreased $15.0 million due to a recovery of $5.3 million in the first quarter of 2002. The provision for loan loss increased $1.3 million to $8.9 million during the quarter ending March 31, 2002. Net Interest Revenue Net interest revenue on a tax-equivalent basis was $91.7 million for the first quarter of 2002 compared to $77.7 million for the first quarter of 2001. This increase in net interest revenue was primarily due to an increase in earning assets. Average earning assets increased by $867 million, which consisted of increases in average net loans of $408 million and average securities of $480 million. The growth in average earning assets was funded by a $533 million increase in transaction deposits and a $216 million increase in other borrowings, which were mostly FHLB advances. Table 1 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. ------------------------------------------------------------------------------- TABLE 1 - VOLUME/RATE ANALYSIS (In thousands) Three months ended March 31, 2002/2001 ------------------------------------ Change Due To (1) ------------------------ Yield Change Volume /Rate ------------------------------------ Tax-equivalent interest revenue: Securities $ 86 $ 7,061 $ (6,975) Trading securities (196) (61) (135) Loans (32,444) 7,874 (40,318) Funds sold (373) (172) (201) ------------------------------------------------------------------------------- Total (32,927) 14,702 (47,629) ------------------------------------------------------------------------------- Interest expense: Interest bearing transaction deposits (5,320) 2,889 (8,209) Savings deposits (167) 32 (199) Time deposits (18,278) (516) (17,762) Federal funds purchased and repurchase agreements (16,473) (1,196) (15,277) Other borrowings (6,962) 2,332 (9,294) Subordinated debentures 222 393 (171) ------------------------------------------------------------------------------- Total (46,978) 3,934 (50,912) ------------------------------------------------------------------------------- Tax-equivalent net interest revenue 14,051 $ 10,768 $ 3,283 Decrease in tax-equivalent adjustment 379 ------------------------------------------------------------------------------- Net interest revenue $ 14,430 ------------------------------------------------------------------------------- (1) Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis. Net interest margin, the ratio of net interest revenue to average earning assets, increased from 3.54% for the quarter ended March 31, 2001 to 3.81% in the same period 2002. This increase reflected the effect of changes in interest rates on BOK Financial's earning assets and interest-bearing liabilities. BOK Financial's interest-bearing liabilities generally react more quickly in the short term to changes in interest rates than its earning assets, causing the net interest margin to increase during periods of declining interest rates. Interest rate swaps are used to minimize this effect during periods of rising 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. 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 3 basis point decrease in net interest margin for the first quarter of 2002. The strategy contributed $17.8 million to net interest revenue. Net interest margin, excluding this strategy, was 3.84% for the first quarter of 2002. 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 1. Other Operating Revenue Other operating revenue increased $6.6 million or 12%, excluding a $21.4 million decrease in gains from financial instruments. Fees and commissions increased $6.5 million or 12%. Transaction card revenue grew 26% over first quarter 2001 to $12.5 million due to growth in merchant fees, which are directly related to the level of consumer spending and growth in ATM network fees (TransFund). Service charges and fees on deposit accounts grew $2.1 million over same quarter 2001 due to increases 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 revenue grew to $7.1 million for quarter ending March 31, 2002, which was a 39% increase over quarter ending March 31, 2001. -------------------------------------------------------------------------------- TABLE 2 - OTHER OPERATING REVENUE (In thousands) Three Months Ended ------------------------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ------------------------------------------------------------------------------- Brokerage and trading revenue $ 7,092 $ 5,926 $ 4,938 $ 5,858 $ 5,100 Transaction card revenue 12,486 11,489 11,679 11,411 9,902 Trust fees and commissions 10,374 9,740 10,211 10,679 9,937 Service charges and fees on deposit accounts 13,855 13,741 12,961 12,793 11,789 Mortgage banking revenue 10,652 14,923 12,499 11,900 10,833 Leasing revenue 892 915 810 901 1,119 Other revenue 5,042 5,578 4,341 4,947 5,221 -------------------------------------------------------------------------------------------------------------------------- Total fees and commissions 60,393 62,312 57,439 58,489 53,901 -------------------------------------------------------------------------------------------------------------------------- Gain on student loan sales 676 18 11 7 521 Gain (loss) on sales of other assets - - - - - Gain (loss) on sales of securities, net (7,581) (3,770) 19,746 2,030 12,634 Gain (loss) on derivatives, net (536) (3,300) (1,105) (303) 646 -------------------------------------------------------------------------------------------------------------------------- Total other operating revenue $ 52,952 $ 55,260 $ 76,091 $ 60,223 $ 67,702 --------------------------------------------------------------------------------------------------------------------------
Net loss on sale of securities of $7.6 million included $12.3 million net gains from the general securities portfolio and $19.9 million net losses on a securities portfolio that management has designated as an economic hedge against the risk of loss on mortgage servicing rights. Securities gains were realized as part of a program to restructure the securities portfolio in anticipation of higher interest rates in the future. The loss on derivatives of $536 thousand represents fair value adjustments on derivative instruments held at March 31, 2002. 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. Other Operating Expense Other operating expense totaled $83.9 million at March 31, 2002 compared to $93.8 million at March 31, 2001. Excluding the provision for impairment of mortgage servicing rights operating expense was $89.2 million at March 31, 2002 and $84.1 million at March 31, 2001, an increase of 6%. Personnel costs increased $3.4 million or 9% due to an increase in full-time equivalent employees. Mortgage banking costs increased $1.9 million or 30% over the same period 2001 due to an increase in amortization of mortgage servicing rights. During the first quarter of 2002 a recovery of the provision for impairment of mortgage servicing rights of $5.3 million was recognized due to existing market conditions. These market conditions are discussed more thoroughly in the Mortgage Bank Lines of Business discussion. -------------------------------------------------------------------------------- TABLE 3 - OTHER OPERATING EXPENSE (In thousands) Three Months Ended ---------------------------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------------------------------------------------------------------------------- Personnel $ 43,332 $ 42,575 $ 40,491 $ 40,833 $ 39,936 Business promotion 2,878 2,798 2,560 2,428 2,872 Professional fees and services 2,908 4,189 2,983 3,162 3,057 Occupancy & equipment 10,340 10,637 11,017 10,767 10,343 Data processing & communications 10,438 10,486 10,173 9,981 9,373 FDIC and other insurance 439 388 443 443 443 Printing, postage and supplies 3,057 3,132 3,141 3,065 2,991 Net gains and operating expenses on repossessed assets 47 239 1,189 (56) 29 Amortization of intangible assets 2,685 5,014 5,015 5,057 5,027 Mortgage banking costs 8,357 9,512 7,191 7,140 6,418 Provision for impairment of mortgage servicing rights (5,278) (8,861) 15,224 (535) 9,723 Other expense 4,746 4,692 4,164 4,299 3,574 --------------------------------------------------------------------------------------------------------------------- Total $ 83,949 $ 84,801 $ 103,591 $ 86,584 $ 93,786 ---------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets decreased $2.3 million, of which $2.0 million was related to the implementation of Financial Accounting Standards Board ("FASB") Statement No. 142, "Goodwill and Other Intangible Assets" (FAS 142). 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 has agreed to reconsider this interpretation and tentatively agreed that under certain circumstances, amortization of this goodwill would also be discontinued. Goodwill amortization expense related to branch acquisitions would have decreased by an additional $797 thousand if this interpretation was implemented for the first quarter of 2002. -------------------------------------------------------------------------------- TABLE 4 - OTHER OPERATING EXPENSE, EXCLUDING SIGNIFICANT OR NONRECURRING ITEMS (In thousands) Three Months Ended ------------------------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ------------------------------------------------------------------------------- Total other operating expense $ 83,949 $ 84,801 $ 103,591 $ 86,584 $ 93,786 Net gains and operating costs from repossessed assets (47) (239) (1,189) 56 (29) Provision for impairment of mortgage servicing rights 5,278 8,861 (15,224) 535 (9,723) --------------------------------------------------------------------------------------------------------------------- Total $ 89,180 $ 93,423 $ 87,178 $ 87,175 $ 84,034 ---------------------------------------------------------------------------------------------------------------------
Lines of Business BOK Financial operates four principal lines of business under its Bank of Oklahoma ("BOk") franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth line of business, regional banks, which includes all banking functions for Bank of Albuquerque, N.A., Bank of Arkansas, N.A., and Bank of Texas, N.A. Other lines of business include the TransFund ATM network and BOSC, Inc., a securities broker-dealer. BOK Financial allocates resources and evaluates performance of its lines of business after the allocation of funds, certain indirect expenses, taxes and capital costs. The cost of funds provided from one segment to another is transfer-priced at rates that approximate market for funds with similar duration. Deposit accounts with indeterminate maturities are transfer-priced at a rolling average rate based on expected duration of the accounts. Over the past year, the average transfer-pricing rate for these deposit accounts decreased by approximately 300 basis points. The impact of this significant decline in interest rates shifted net interest revenue from the providers of funds, primarily consumer banking, trust services and regional banks, to funds management. This is reflected in net interest revenue in the funds management department of $18.7 million for the quarter ended March 31, 2002 compared to unallocated net interest expense of $337 thousand for the first quarter of 2001. 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 $11.6 million or 36% to consolidated net income for the first quarter of 2002. This compares to $10.9 million or 40% of consolidated net income for the first quarter of 2001. The decrease in revenue from external sources was due to lower loan yields while the decrease in expenses from internal sources reflected lower funding costs. The provision for loan loss represents net loans charged off or recovered for the Corporate Banking Division. Table 5 Corporate Banking (In thousands) Three months ended March 31, -------------------------------- 2002 2001 ------------- -- ------------- NIR (expense) from external sources $ 38,636 $ 58,344 NIR (expense) from internal sources (12,206) (29,288) ------------- ------------- Total net interest revenue 26,430 29,056 Other operating revenue 8,231 7,227 Operating expense 13,967 14,351 Provision for loan loss 2,214 4,125 Net income 11,574 10,881 Average assets $ 3,930,867 $ 3,854,310 Average equity 444,483 442,870 Return on assets 1.19% 1.14% Return on equity 10.56 9.96 Efficiency ratio 40.30 39.55 Consumer Banking The Consumer Banking Division, which provides a full line of deposit, loan and fee-based services to customers throughout Oklahoma, contributed $1.5 million or 5% to consolidated net income for the first quarter of 2002. This compares to $4.2 million or 15% of consolidated net income for the first quarter of 2001. Revenue from internal sources, primarily funds provided to other business lines, decreased $12.2 million due to lower transfer pricing rates. At the same time, revenue from external sources increased $8.6 million including $7.0 million due to lower interest paid on deposit accounts. Table 6 Consumer Banking (In thousands) Three months ended March 31, ------------------------------- 2002 2001 ------------- -- ------------ NIR (expense) from external sources $ (4,084) $ (12,085) NIR (expense) from internal sources 15,609 27,806 ------------- ------------ Total net interest revenue 11,525 15,721 Other operating revenue 7,874 7,239 Operating expense 15,449 14,903 Net income 1,534 4,173 Average assets $ 2,264,618 $ 2,192,698 Average equity 72,130 69,102 Return on assets 0.27% 0.77% Return on equity 8.63 24.49 Efficiency ratio 79.64 64.91 Mortgage Banking The Mortgage Banking Division incurred a loss of $6.3 million for the first quarter of 2002 compared to income of $1.9 million for the first quarter of 2001. The loss was primarily due to the effects of mortgage servicing rights and related hedging activities. Mortgage banking revenue, which is included in other operating revenue, totaled $10.7 million, a decrease of $181 thousand from the same period of 2001. Mortgage loans originated totaled $245 million for the first quarter of 2002 compared to $211 million in 2001. Revenue from loan production was $3.4 million, including $4.0 million of capitalized servicing rights, for the first quarter of 2002, compared to revenue from loan production of $2.6 million, including $3.1 million of capitalized servicing rights, for the first quarter of 2001. Pre-tax income from loan origination and marketing activities totaled $3.1 million for 2002 compared to $549 thousand for 2001. Approximately 68% of the loans originated during the first quarter of 2002 were in Oklahoma. Mortgage servicing revenue totaled $7.3 million for the first quarter of 2002 compared to $8.3 million for the first quarter of 2001. The decrease in mortgage servicing revenue was due primarily to a lower outstanding principal balance of loans serviced. Amortization of mortgage servicing rights, which is included in operating expenses, increased by $2.6 million to $6.6 million for the first quarter of 2002 due to a higher level of prepayments. The valuation allowance for impairment of mortgage servicing rights totaled $13.2 million at March 31, 2002, down $5.3 million during the quarter. Anticipated prepayments declined compared to the fourth quarter of 2001 as mortgage interest rates rose slightly. Net losses from the sales of securities that had been designated as an economic hedge of the loan servicing portfolio totaled $19.9 million for the first quarter of 2002. These factors combined to show a pre-tax loss on loan servicing activities of $13.6 million for the first quarter of 2002 compared to pre-tax income of $2.3 million for 2001. See the Market Risk section of this report for additional discussion of the prepayment risk of the mortgage servicing portfolio and related hedging strategies. Table 7 Mortgage Banking (In thousands) Three months ended March 31, ------------------------------- 2002 2001 -------------- -- ------------ NIR (expense) from external sources 8,945 $ 7,581 NIR (expense) from internal sources (4,239) (6,530) -------------- ------------ Total net interest revenue 4,706 1,051 Capitalized mortgage servicing rights 4,033 3,085 Other operating revenue 7,675 8,337 Operating expense 12,004 10,959 Provision (recovery) for impairment of mortgage servicing rights (5,278) 9,723 Gains (losses) on sales of securities (19,922) 11,309 Net income (loss) (6,292) 1,879 Average assets 711,053 $ 590,091 Average equity 48,191 37,283 Return on assets (3.59)% 1.29% Return on equity (52.95) 20.44 Efficiency ratio 73.13 87.86 Trust Services Trust Services, which includes institutional, investment and retirement products and services to affluent individuals, businesses, not-for-profit organizations, and governmental agencies, contributed $1.7 million or 5% of consolidated net income for the first quarter 2002. This compared to $2.2 million or 8% of consolidated net income for the first quarter of 2001. At March 31, 2002 trust assets with an aggregate market value of $18.2 billion were subject to various fiduciary arrangements compared to $17.2 billion at March 31, 2001. BOK Financial has sole or joint discretionary authority over $9.6 billion of trust assets at March 31, 2002. Table 8 Trust Services (In thousands) Three months ended March 31, ------------------------------- 2002 2001 -------------- -- ------------ NIR (expense) from external sources $ 473 $ (307) NIR (expense) from internal sources 1,874 3,638 -------------- ------------ Total net interest revenue 2,347 3,331 Other operating revenue 10,360 10,041 Operating expense 9,813 9,761 Net income 1,737 2,206 Average assets $ 499,222 $ 449,005 Average equity 43,955 39,689 Return on assets 1.41% 1.99% Return on equity 16.03 22.54 Efficiency ratio 77.23 73.00 Regional Banks Regional banks include Bank of Texas, Bank of Albuquerque, and Bank of Arkansas. Each of these banks provide a full range of corporate and consumer banking, trust services and retail investments in their respective markets. Small businesses and middle-market corporations are the regional banks' primary customer focus. Regional banks contributed $7.8 million or 24% to consolidated net income for the first quarter 2002. This compared to $8.0 million or 29% of consolidated net income for the first quarter of 2001. BOK Financial's operations in Texas, New Mexico and Arkansas contributed $5.8 million, $1.6 million, and $455 thousand, respectively, to consolidated net income for the first quarter of 2002. This compared to net income of $5.5 million, $1.9 million, and $640 thousand for the first quarter 2001. Average equity assigned to regional banks included both an amount based on management's assessment of risk and an additional amount based on BOK Financial's investment in these entities. Management measures performance for regional banks based on tangible net income, return on assets and return on equity. Tangible net income is defined as net income excluding the after-tax effect of goodwill and core deposit intangible asset amortization. Table 9 Regional Banks (In thousands) Three months ended March 31, ------------------------------- 2002 2001 -------------- -- ------------ NIR (expense) from external sources $ 35,437 $ 32,242 NIR (expense) from internal sources (6,317) (1,948) -------------- ------------ Total net interest revenue 29,120 30,294 Other operating revenue 5,407 4,569 Operating expense 21,852 21,205 Provision for loan loss 1,116 489 Gains (losses) on sales of securities 827 (551) Net income 7,833 8,006 Tangible net income 9,606 11,849 Average assets $ 3,693,984 $ 3,155,093 Average equity 432,662 376,728 Tangible return on assets 1.05% 1.52% Tangible return on equity 9.00 12.76 Efficiency ratio 63.29 60.82 Assessment of Financial Condition The aggregate loan portfolio at March 31, 2002 totaled $6.2 billion compared to $6.3 billion at December 31, 2001. Total loans increased by $30 million, excluding a $77 million decrease in residential mortgage loans held for sale. Commercial real estate loans increased by $29 million while commercial loans decreased by $20 million. Outstanding loans to the services industry totaled $1.1 billion or 17% of total loans at March 31, 2002. Services included loans of $112 million to the healthcare industry, $177 million to nursing homes and $67 million to the hotel industry. Loans to nursing homes increased $15 million during the quarter. Energy loans represent 16% of the total loan portfolio. This category included loans to oil and gas producers that totaled $779 million, an increase of $11 million during the quarter. Agriculture included $144 million of loans to the cattle industry. Other notable loan concentrations by primary industry of the borrowers are presented in Table 10. -------------------------------------------------------------------------------- TABLE 10 - LOANS (In thousands) March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 --------------------------------------------------------------------------------- Commercial: Energy $ 970,234 $ 987,556 $ 942,381 $ 885,546 $ 881,128 Manufacturing 499,870 467,260 490,839 510,421 507,207 Wholesale/retail 613,612 600,470 585,351 580,421 544,097 Agricultural 156,334 170,861 199,155 202,041 203,345 Services 1,075,852 1,084,480 1,087,329 1,059,779 983,454 Other commercial and industrial 339,355 364,123 313,801 307,062 273,847 Commercial real estate: Construction and land development 329,335 327,455 330,964 313,453 321,578 Multifamily 301,402 291,687 252,093 257,489 294,548 Other real estate loans 739,646 722,633 767,012 712,043 714,640 Residential mortgage: Secured by 1-4 family residential properties 726,228 703,080 753,153 727,579 696,033 Residential mortgages held for 89,439 166,093 94,219 107,627 93,117 sale Consumer 407,909 409,680 402,117 394,583 364,288 --------------------------------------------------------------------------------------------------------------------- Total $ 6,249,216 $ 6,295,378 $ 6,218,414 $ 6,058,044 $ 5,877,282 ---------------------------------------------------------------------------------------------------------------------
Commercial real estate loans totaled $1.4 billion or 22% of total loans at March 31, 2002. Construction and land development loans included $264 million for single-family residential lots and premises. The major components of other commercial real estate loans were office buildings, $266 million and retail facilities, $216 million. Loans secured by office buildings increased $10 million during the quarter while loans secured by retail facilities decreased $4 million. Residential mortgage loans included $300 million of home equity loans, $264 million of mortgage loans held for business relationship purposes, and $162 million of adjustable rate mortgage loans. Consumer loans included $181 million of indirect automobile loans, an increase of $4 million during the quarter. While BOK Financial continues 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 11 reflects the distribution of the major loan categories among BOK Financial's principal market areas. ------------------------------------------------------------------------------- TABLE 11 - LOANS BY PRINCIPAL MARKET AREA (In thousands) March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 --------------------------------------------------------------------------------- Oklahoma: Commercial $ 2,594,237 $ 2,606,977 $ 2,610,357 $ 2,571,565 $ 2,474,355 Commercial real estate 743,728 739,419 741,978 710,098 754,709 Residential mortgage 588,329 642,116 613,565 596,651 541,755 Consumer 312,505 314,060 300,193 285,951 259,345 --------------------------------------------------------------------------------- Total Oklahoma $ 4,238,799 $ 4,302,572 $ 4,266,093 $ 4,164,265 $ 4,030,164 --------------------------------------------------------------------------------- Texas: Commercial $ 771,167 $ 775,788 $ 760,686 $ 722,403 $ 684,648 Commercial real estate 400,350 380,602 378,364 350,881 361,192 Residential mortgage 138,987 136,181 137,482 140,176 144,699 Consumer 83,985 85,347 91,513 98,341 95,502 --------------------------------------------------------------------------------- Total Texas $ 1,394,489 $ 1,377,918 $ 1,368,045 $ 1,311,801 $ 1,286,041 --------------------------------------------------------------------------------- Albuquerque: Commercial $ 222,960 $ 219,257 $ 195,054 $ 201,713 $ 180,822 Commercial real estate 139,044 136,425 146,512 133,159 133,383 Residential mortgage 83,310 85,309 90,864 93,608 97,800 Consumer 9,245 8,200 8,109 7,810 6,678 --------------------------------------------------------------------------------- Total Albuquerque $ 454,559 $ 449,191 $ 440,539 $ 436,290 $ 418,683 --------------------------------------------------------------------------------- Northwest Arkansas: Commercial $ 66,893 $ 72,728 $ 52,759 $ 49,589 $ 53,253 Commercial real estate 87,260 85,329 83,215 88,847 81,482 Residential mortgage 5,042 5,567 5,461 4,771 4,896 Consumer 2,174 2,073 2,302 2,481 2,763 --------------------------------------------------------------------------------- Total Northwest Arkansas $ 161,369 $ 165,697 $ 143,737 $ 145,688 $ 142,394 ---------------------------------------------------------------------------------
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. The fair values of energy derivative contracts included in other assets and other liabilities each totaled $38 million at March 31, 2002. The primary counterparties on asset contracts were Bank of Montreal, $10 million; JP Morgan Chase, $5 million; and Morgan Stanley, $4 million. A deterioration of 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 contract. Summary of Loan Loss Experience The reserve for loan losses, which is available to absorb losses inherent in the loan portfolio, totaled $106 million at March 31, 2002, compared to $102 million at December 31, 2001 and $87 million at March 31, 2001. This represented 1.72%, 1.66% and 1.50% of total loans, excluding loans held for sale, at March 31, 2002, December 31, 2001 and March 31, 2001, respectively. Losses on loans held for sale, principally residential mortgage loans, are charged to earnings through adjustments in carrying value to the lower of cost or market value in accordance with accounting standards applicable to mortgage banking. Table 12 presents statistical information regarding the reserve for loan losses for the past five quarters. ------------------------------------------------------------------------------- TABLE 12 - SUMMARY OF LOAN LOSS EXPERIENCE (In thousands) Three Months Ended -------------------------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 -------------------------------------------------------------------------------- Beginning balance $ 101,905 $ 96,051 $ 90,036 $ 86,535 $ 82,655 Loans charged-off: Commercial 3,525 3,803 4,241 4,514 5,484 Commercial real estate 123 62 - - 9 Residential mortgage 94 102 37 68 101 Consumer 2,514 1,993 1,561 1,575 1,698 ------------------------------------------------------------------------------------------------------------------- Total 6,256 5,960 5,839 6,157 7,292 ------------------------------------------------------------------------------------------------------------------- Recoveries of loans previously charged-off: Commercial 334 196 285 391 279 Commercial real estate 49 139 5 150 359 Residential mortgage 20 25 7 13 12 Consumer 982 937 534 607 649 ------------------------------------------------------------------------------------------------------------------- Total 1,385 1,297 831 1,161 1,299 ------------------------------------------------------------------------------------------------------------------- Net loans charged-off (recoveries) 4,871 4,663 5,008 4,996 5,993 Provision for loan losses 8,866 10,517 11,023 8,497 7,573 Additions due to acquisitions - - - - 2,300 ------------------------------------------------------------------------------------------------------------------- Ending balance $ 105,900 $ 101,905 $ 96,051 $ 90,036 $ 86,535 ------------------------------------------------------------------------------------------------------------------- Reserve to loans outstanding at period-end (1) 1.72% 1.66% 1.57% 1.51% 1.50% Net loan losses (annualized) to average loans (1) 0.32 0.30 0.33 0.34 0.42 ------------------------------------------------------------------------------------------------------------------- (1) Excludes residential mortgage loans held for sale which are carried at the lower of aggregate cost or market value.
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 statistical migration analysis and nonspecific reserves that are based on 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. All significant criticized loans are reviewed quarterly. Specific reserves for impairment are determined through evaluation of future cash flow and collateral value in accordance with generally accepted accounting principles and regulatory standards. At March 31, 2002, specific impairment reserves totaled $2.9 million on total impaired loans of $38 million. The adequacy of the general loan loss reserve 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 more recent periods. This model assigns a general allowance to commercial loans and leases, excluding loans that have a specific impairment reserve, residential mortgage loans and consumer loans. A nonspecific reserve 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 March 31, 2002, the range of potential losses for the more significant factors were: General economic conditions - $4.3 million to $5.3 million Concentration of large loans - $1.3 million to $2.5 million Loan portfolio growth - $1.5 million to $3.1 million Evaluation of the loan loss reserve requires a significant level of assumptions by management including estimation of future cash flows, collateral values, relevance of historic loss trends to the loan portfolio and assessment of current economic conditions on the borrowers' ability to repay. The required loan loss reserve could be materially affected by changes in these assumptions. The loan loss reserve is adequate to absorb losses inherent in the loan portfolio based upon current conditions and information available to management. However, actual losses may differ significantly due to changing conditions or information that is currently not available. Nonperforming Assets Information regarding nonperforming assets, which totaled $50 million at March 31, 2002, $51 million at December 31, 2001 and $58 million at March 31, 2001 is presented in Table 13. Nonperforming assets included nonaccrual and renegotiated loans and excluded loans 90 days or more past due but still accruing interest. Newly identified nonaccruing loans totaled $4.1 million during the first quarter of 2002. Total nonaccuring loans decreased by $2.0 million from cash payments received and $1.5 million from losses charged against the loan loss reserve. ------------------------------------------------------------------------------- TABLE 13 - NONPERFORMING ASSETS (In thousands) March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------------------------------------------------------------------- Nonperforming assets: Nonperforming loans: Nonaccrual loans: Commercial $ 33,784 $ 35,075 $ 39,377 $ 41,752 $ 46,956 Commercial real estate 3,360 3,856 4,338 2,899 680 Residential mortgage 4,182 4,140 4,060 3,362 2,255 Consumer 555 469 333 217 218 --------------------------------------------------------------------------------------------------------------------- Total nonaccrual loans 41,881 43,540 48,108 48,230 50,109 Renegotiated loans - 27 618 85 86 --------------------------------------------------------------------------------------------------------------------- Total nonperforming loans 41,881 43,567 48,726 48,315 50,195 Other nonperforming assets 7,655 7,141 6,522 7,305 7,492 --------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $ 49,536 $ 50,708 $ 55,248 $ 55,620 $ 57,687 --------------------------------------------------------------------------------------------------------------------- Ratios: Reserve for loan losses to nonperforming loans 252.86% 233.90% 197.12% 186.35% 172.40% Nonperforming loans to period-end loans (2) 0.68 0.71 0.80 0.82 0.87 --------------------------------------------------------------------------------------------------------------------- Loans past due (90 days) (1) $ 13,023 $ 8,108 $ 16,143 $ 10,040 $ 14,750 --------------------------------------------------------------------------------------------------------------------- (1) Includes residential mortgages guaranteed by agencies of the U.S. Government $ 6,314 $ 6,222 $ 6,200 $ 6,649 $ 7,277 Excludes residential mortgages guaranteed by agencies of the U.S. Government in foreclosure. 4,044 4,396 4,925 5,509 5,276 (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. These loans are not included in nonperforming assets 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. However, known information causes management to have concerns as to the borrower's ability to comply with the current repayment terms. Potential problem loans totaled $60 million at March 31, 2002 compared to $50 million at December 31, 2001 and $40 million at March 31, 2001. At March 31, 2002, the composition of potential problem loans by primary industry categories included energy, $18 million; healthcare, $11 million; and telecommunications, $10 million. Capital Shareholders' equity totaled $855 million at March 31, 2002 compared to $828 million at December 31, 2001. The increase in equity was due primarily to net income of $32 million, offset by a decrease in unrealized gains on securities of $8 million. On April 30, 2002, BOK Financial announced a 3% stock dividend payable on or about May 29, 2002. Earnings per share have not been restated for this dividend, see Note 5. BOK Financial and its subsidiary banks are subject to various capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and additional discretionary actions by regulators that could have a material effect on operations. These capital requirements include quantitative measures of assets, liabilities and certain off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulatory agencies about components, risk weightings and other factors. Management has developed and the Board of Directors has approved an internal capital policy that is more restrictive than the regulatory capital standards. At March 31, 2002, BOK Financial and each of its subsidiary banks exceeded the regulatory definition of well capitalized. -------------------------------------------------------------------------------- TABLE 14 - CAPITAL RATIOS March 31, Dec. 31, Sept. 31, June 30, March 31, 2002 2001 2001 2001 2001 ---------------------------------------------------- Average shareholders' equity to average assets 7.93% 7.91% 7.86% 7.42% 7.31% Risk-based capital: Tier 1 capital 8.49 8.08 7.83 7.59 7.39 Total capital 11.99 11.56 11.35 11.02 10.89 Leverage 6.63 6.38 6.27 5.85 5.73 Market Risk Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its assets held for trading and held for purposes other than trading. The effects of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. Responsibility for managing market risk rests with the Asset / Liability Committee that operates under policy guidelines established by the Board of Directors. The acceptable negative variation in net interest revenue, net income or economic value of equity due to a 200 basis point increase or decrease in interest rates is generally limited by these guidelines to +/- 10%. These guidelines also set maximum levels for short-term borrowings, short-term assets, public funds, and brokered deposits, and establish minimum levels for unpledged assets, among other things. Compliance with these guidelines is reviewed monthly. Interest Rate Risk - Other than Trading BOK Financial 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, first assuming a sustained parallel 200 basis point increase and second assuming a sustained parallel 100 basis point decrease in interest rates. Management historically evaluated interest rate sensitivity for a sustained 200 basis point decrease in rates. However, these results are not meaningful in the current low-rate environment. An independent source is used to determine the most likely interest rate scenario. Table 15 - INTEREST RATE SENSITIVITY (Dollars in Thousands) Decrease -------------------------- --------------------------- ------------------------ 200 bp Increase 100 bp 200 bp Most Likely -------------------------- --------------------------- ------------------------ 2002 2001 2002 2001 2002 2001 ------------- ------------ ------------ -------------- ------------ ----------- Anticipated impact over the next twelve months: Net interest revenue $ 10,235 $ 592 $ (5,921) $(3.181) $ 6,292 $(860) 2.9% 0.2% (1.7)% (0.9)% 1.8% (0.3)% ------------------------------- --------------- ------------ --- ----------- -------------- -- ----------- ----------- Net income $6,397 $ 370 $(3,700) $(1,988) $ 3,933 $(537) 4.9% 0.3% (2.9)% (1.7)% 3.0% (0.4)% ------------------------------- --------------- ------------ --- ----------- -------------- -- ----------- ----------- Economic value of equity $ 53,607 $(36,867) $ (73,385) $ (42,356) $ 55,282 $ 27,832 4.3% (2.9)% (6.3)% (3.3)% 4.4% 2.2% ------------------------------- --------------- ------------ --- ----------- -------------- -- ----------- -----------
BOK Financial's primary interest rate exposures included the Federal Reserve Bank's discount rate, which affects short-term borrowings, and the prime lending rate and the London Interbank Offering Rate, which are the basis for much of the variable-rate loan pricing. Additionally, mortgage rates directly affect the prepayment speeds for mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. The sensitivity of fee income to interest rates, such as fees related to cash management services and mortgage servicing, is also included. The model incorporates assumptions regarding the effects of changes in interest rates and account balances on indeterminable maturity deposits based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model. The effects of changes in interest rates on the value of mortgage servicing rights are excluded from Table 15 due to the extreme volatility over such a large rate range. The effects of interest rate changes on the value of mortgage servicing rights and securities identified as economic hedges are shown in Table 16. BOK Financial has market 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. 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. Fair value is determined by using projected prepayment speeds and assumed servicing costs, earnings on escrow deposits, ancillary income and discount rates. Management uses independent sources for many of these assumptions. However, actual fair values may differ significantly from computed fair values due to assumption changes or modeling error. 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 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 the fair value 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. During the first quarter of 2002, BOK Financial changed the source of prepayment assumptions used to value its mortgage servicing rights to increase the correlation between changes in value of the mortgage servicing rights and change in value of the securities. Previously, industry consensus prepayment speeds were used to project future cash flows. This information source was not updated frequently enough to reflect current market conditions on a daily basis. A model that is generally accepted by the financial markets was adopted as the new source of prepayment assumptions. This model is updated daily for changes in market conditions. Management believes that the model adopted in the first quarter will result in more timely and accurate valuations of the mortgage servicing rights. At March 31, 2002, securities with a fair value of $372 million and an unrealized loss of $7.5 million were held for the hedge program. This unrealized loss, net of income taxes, is included in shareholders' equity as part of other comprehensive income. The interest rate sensitivity of the mortgage servicing rights and securities held as a hedge is modeled over a range of +/- 50 basis points. At March 31, 2002, the pre-tax results of this modeling on reported earnings were: TABLE 16 - Interest Rate Sensitivity - Mortgage Servicing (Dollars in Thousands) 50 bp increase 50 bp decrease Anticipated change in: Mortgage servicing rights $ 13,627 $(17,245) Hedging securities (16,700) 11,168 (1) ----------------- ---------------- Net $(3,073) $ (6,077) ----------------- ---------------- (1) Anticipated increase in value of hedging instruments totals $18.5 million, which would reduce the existing unrealized loss before any gains could be realized. The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest revenue, net income or economic value of equity or precisely predict the impact of higher or lower interest rates on net interest revenue, net income or economic value of equity. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, market conditions and management strategies, among other factors. BOK Financial uses interest rate swaps, a 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 deposits with earning assets. Credit risk from these swaps is closely monitored and counterparties to these contracts are factors. Derivative products are not used for speculative purposes. ------------------------------------------------------------------------------- TABLE 17 - INTEREST RATE SWAPS Notional Pay Receive Positive Negative Amount Rate Rate Fair Value Fair Value ----------------------------------------------------------------------------------------------------- Expiration: 2002 $10,000 2.03 (1) 6.88 $ 13 $ - 2004 147,210 1.88(1) - 4.22 1.88(1) - 7.36 3,884 - 2006 420,420 2.03(1) - 5.65 1.88(1) - 5.47 - (8,259) 2007 10,000 7.48 2.03(1) - (101) 2009 5,656 1.88(1) - 4.75 1.88(1) - 4.75 - - 2011 49,059 5.21 - 5.51 1.88(1) - (531) --------------------------------------------------------------------------------------------------------------------- $ 3,897 $ (8,891) ----------------------------------- (1) Rates are variable based on LIBOR and reset monthly, quarterly or semiannually.
Trading Activities BOK Financial enters into trading activities both as an intermediary for customers and for its own account. As an intermediary, BOK Financial will take positions in securities, generally mortgage-backed securities, government agency securities, and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations and financial institutions. BOK Financial will also take trading positions in U.S. Treasury securities, mortgage-backed securities, municipal bonds and financial futures for its own account. These positions are taken with the objective of generating trading profits. Both of these activities involve interest rate risk. A variety of methods are used to manage the interest rate risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs. The Risk Management Department monitors trading activity daily and reports to senior management and the Risk Oversight and Audit Committee of the BOK Financial Board of Directors any exceptions to trading position limits and risk management policy 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 / covariance matrix of interest rate changes. It represents an amount of market loss that is likely to be exceeded only one out of every 100 two-week periods. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the nominal aggregate trading positions to $100 million and the VAR to $6.5 million. At March 31, 2002, the nominal aggregate trading positions was $14 million and the VAR was $227 thousand. The greatest value at risk during the first quarter of 2002 was $587 thousand. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry, and the economy in general. Words such as "anticipates", "believes", "estimates", "expects", "forecasts", "plans", "projects", variations of such words, and similar expressions are intended to identify such forward-looking statements. Management judgments relating to, and discussion of the provision and reserve for loan losses involve judgments as to future 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 which BOK Financial has not independently verified. These statements are not guarantees of future performance and involve 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 with 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 CONSOLIDATED 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 accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial condition, results of operations and cash flows of BOK Financial and its subsidiaries at the dates and for the periods presented. The financial information included in this interim report has been prepared by management without audit by independent public accountants and should be read in conjunction with BOK Financial's 2001 Form 10-K filed with the Securities and Exchange Commission which contains audited financial statements. --------------------------------------------- ---- ----------- --- ------------- Consolidated Statement of Earnings (In Thousands Except Share Data) Three Months Ended March 31, ----------------------------- 2002 2001 ----------- --- ------------- Interest Revenue Loans $ 92,755 $ 125,104 Taxable securities 48,155 46,904 Tax-exempt securities 2,601 3,506 --------------------------------------------- ---- ----------- --- ------------- Total securities 50,756 50,410 --------------------------------------------- ---- ----------- --- ------------- Trading securities 170 341 Funds sold 49 423 --------------------------------------------- ---- ----------- --- ------------- Total interest revenue 143,730 176,278 --------------------------------------------- ---- ----------- --- ------------- Interest Expense Deposits 37,126 60,891 Other borrowings 13,846 37,334 Subordinated debenture 2,716 2,441 --------------------------------------------- ---- ----------- --- ------------- Total interest expense 53,688 100,666 --------------------------------------------- ---- ----------- --- ------------- Net Interest Revenue 90,042 75,612 Provision for Loan Losses 8,866 7,573 --------------------------------------------- ---- ----------- --- ------------- Net Interest Revenue After Provision for Loan Losses 81,176 68,039 --------------------------------------------- ---- ----------- --- ------------- Other Operating Revenue Brokerage and trading revenue 7,092 5,100 Transaction card revenue 12,486 9,902 Trust fees and commissions 10,374 9,937 Service charges and fees on deposit accounts 13,855 11,789 Mortgage banking revenue, net 10,652 10,833 Leasing revenue 892 1,119 Other revenue 5,042 5,221 --------------------------------------------- ---- ----------- --- ------------- Total fees and commissions revenue 60,393 53,901 --------------------------------------------- ---- ----------- --- ------------- Gain on sale of student loans 676 521 Gain (loss) on sales of securities, net (7,581) 12,634 Gain (loss) on derivatives (536) 646 --------------------------------------------- ---- ----------- --- ------------- Total other operating revenue 52,952 67,702 --------------------------------------------- ---- ----------- --- ------------- Other Operating Expense Personnel 43,332 39,936 Business promotion 2,878 2,872 Professional fees and services 2,908 3,057 Occupancy & equipment 10,340 10,343 Data processing & communications 10,438 9,373 FDIC and other insurance 439 443 Printing, postage and supplies 3,057 2,991 Net gains and operating expenses on repossessed assets 47 29 Amortization of intangible assets 2,685 5,027 Mortgage banking costs 8,357 6,418 Provision (recovery) for impairment of mortgage servicing rights (5,278) 9,723 Other expense 4,746 3,574 --------------------------------------------- ---- ----------- --- ------------- Total other operating expense 83,949 93,786 --------------------------------------------- ---- ----------- --- ------------- Income Before Taxes 50,179 41,955 Federal and state income tax 17,763 14,789 --------------------------------------------- ---- ----------- --- ------------- Income before cumulative effect of a change in accounting principle, net of tax 32,416 27,166 Transition adjustment of adoption of FAS 133 - 236 --------------------------------------------- ---- ----------- --- ------------- Net Income $ 32,416 $ 27,402 --------------------------------------------- ---- ----------- --- ------------- Earnings Per Share: Basic: Before cumulative effect of change in accounting principle $ 0.62 0.53 Transition adjustment of adoption of FAS 133 - - -------------------------------------------- --- ------------- --- ------------- Net Income $ 0.62 0.53 -------------------------------------------- --- ------------- --- ------------- Diluted: Before cumulative effect of change in accounting principle $ 0.56 0.48 Transition adjustment of adoption of FAS 133 - - -------------------------------------------- --- ------------- --- ------------- Net Income $ 0.56 $ 0.48 -------------------------------------------- --- ------------- --- ------------- -------------------------------------------- --- ------------- --- ------------- Average Shares Used in Computation: Basic 51,282,896 50,840,937 -------------------------------------------- ----------------- ----------------- Diluted 58,325,636 57,638,841 -------------------------------------------- ----------------- ----------------- ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data) March 31, December 31, March 31, 2002 2001 2001 -------------------------------------------------- ASSETS Cash and due from banks $ 394,407 $ 643,938 $ 484,380 Funds sold 6,300 3,400 7,150 Trading securities 22,433 10,327 12,449 Securities: Available for sale 2,787,635 2,815,070 2,205,836 Available for sale securities pledged to creditors 687,356 634,479 748,522 Investment (fair value: March 31, 2002 - $228,315; December 31, 2001 -$242,628; March 31, 2001 - $213,114) 227,058 241,113 211,971 -------------------------------------------------------------------------------------------------------------------- Total securities 3,702,049 3,690,662 3,166,329 -------------------------------------------------------------------------------------------------------------------- Loans 6,249,216 6,295,378 5,877,282 Less reserve for loan losses (105,900) (101,905) (86,535) -------------------------------------------------------------------------------------------------------------------- Net loans 6,143,316 6,193,473 5,790,747 -------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 139,644 141,425 143,001 Accrued revenue receivable 69,375 68,728 76,019 Intangible assets, net 148,891 152,076 166,735 Mortgage servicing rights, net 102,319 98,796 100,526 Real estate and other repossessed assets 7,655 7,141 7,492 Bankers' acceptances 2,906 4,179 10,111 Other assets 117,649 116,243 80,686 -------------------------------------------------------------------------------------------------------------------- Total assets $ 10,856,944 $ 11,130,388 $ 10,045,625 -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand deposits $ 1,126,324 $ 1,366,690 $ 1,173,363 Interest-bearing deposits: Transaction 2,725,740 2,559,714 2,180,943 Savings 166,776 158,234 156,362 Time 2,998,119 2,821,106 3,059,109 -------------------------------------------------------------------------------------------------------------------- Total deposits 7,017,050 6,905,744 6,569,777 -------------------------------------------------------------------------------------------------------------------- Funds purchased and repurchase agreements 1,280,399 1,601,989 1,532,320 Other borrowings 1,120,769 1,220,948 887,205 Subordinated debentures 186,081 186,302 188,890 Accrued interest, taxes and expense 62,551 67,014 78,869 Amount due on unsettled security transactions 241,500 231,660 - Bankers' acceptances 2,906 4,179 10,111 Other liabilities 91,115 84,069 30,179 -------------------------------------------------------------------------------------------------------------------- Total liabilities 10,002,280 10,301,905 9,297,351 -------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 25 25 25 Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding March 31, 2002 - 51,918,270; December 31, 2001 - 51,737,154; March 31, 2001 - 49,462,016) 3 3 3 Capital surplus 327,008 323,860 280,301 Retained earnings 543,342 511,301 458,417 Treasury stock (shares at cost: March 31, 2002 - 576,681; December 31, 2001 - 541,240; March 31, 2001 - 512,147) (13,664) (12,498) (10,684) Accumulated other comprehensive income (loss) (2,050) 5,792 20,212 -------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 854,664 828,483 748,274 -------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 10,856,944 $ 11,130,388 $ 10,045,625 -------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
-------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands) Accumulated Preferred Stock Common Stock Other Treasury Stock ----------------------------------- Comprehensive Capital Retained ---------------- Shares Amount Shares Amount Income(loss) Surplus Earnings Shares Amount Total ---------------------------------------------------------------------------------------------------- Balances at December 31, 2000 250,000 $ 25 49,706 $ 3 $ 3,320 $278,882 $431,390 488 $(10,044) $703,576 Comprehensive income: Net income - - - - - - 27,402 - - 27,402 Other Comprehensive income, net of tax: Unrealized gains(loss) on securities available for sale (1) - - - - 16,892 - - - - 16,892 ----------- Comprehensive income 44,294 ----------- Exercise of stock options - - 143 - - 1,422 - 49 (1,094) 328 Preferred dividends paid In shares of common stock - - - - - (11) (375) (21) 386 - Preferred stock dividend - - - - - - - - - - Director retainer shares - - - - - 8 - (4) 68 76 Treasury stock purchase - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2001 250,000 $ 25 49,849 $ 3 $ 20,212 $280,301 $458,417 512 $(10,684) $ 748,274 --------------------------------------------------------------------------------------------------------------------------- Balances at December 31, 2001 250,000 $ 25 51,737 $ 3 $ 5,792 $323,860 $511,301 541 $(12,498) $828,483 Comprehensive income: Net income - - - - - - 32,416 - - 32,416 Other Comprehensive income, net of tax: Unrealized gains(loss) on securities available for sale (1) - - - - (7,842) - - - - (7,842) ----------- Comprehensive income 24,574 ----------- Exercise of stock options - - 171 - - 2,706 - 35 (1,166) 1,540 Director retainer shares - - (2) - - 67 - - - 67 Dividends paid in shares of common stock: Common stock - - - - - - - - - - Preferred stock - - 12 - - 375 (375) - - - --------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2002 250,000 $ 25 51,918 $ 3 $ (2,050)$327,008 $543,342 576 $(13,664) $854,664 --------------------------------------------------------------------------------------------------------------------------- (1) March 31, 2002 March 31, 2001 -------------- -------------- Other comprehensive income: Unrealized (gains) losses on available for sale securities (21,056) 41,453 Tax (expense) benefit on unrealized gains (losses) on available for sale securities 8,317 (16,374) Reclassification adjustment for (gains) losses realized included in net income 7,581 (12,634) Reclassification adjustment for tax expense (benefit) on realized (gains) (2,684) 4,447 losses ----------------------------------- Net unrealized gains (losses) on securities (7,842) 16,892 -----------------------------------
------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 31, -------------------------------------- 2002 2001 -------------------------------------- Cash Flow From Operating Activities: Net income $ 32,416 $ 27,402 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 8,866 7,573 Provision (recovery) for mortgage servicing rights (5,278) 9,723 Transition adjustment of adoption of FAS 133 - (236) Unrealized (gains) losses from derivatives 536 (646) Depreciation and amortization 14,982 15,183 Net amortization of financial instrument discounts and premiums 1,755 (1,994) Net gain on sale of assets 2,546 (17,173) Mortgage loans originated for resale (207,640) (187,637) Proceeds from sale of mortgage loans held for resale 334,877 146,343 Change in trading securities (12,106) 27,416 Change in accrued revenue receivable (647) (1,038) Change in other assets 12,545 13,491 Change in accrued interest, taxes and expense (4,463) 881 Change in other liabilities 7,308 (6,393) -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 185,697 32,895 -------------------------------------------------------------------------------------------------------------------- Cash Flow From Investing Activities: Proceeds from maturities of investment securities 13,994 24,220 Proceeds from maturities of available for sale securities 285,446 473,109 Purchases of investment securities - (2,874) Purchases of available for sale securities (2,783,650) (1,579,728) Proceeds from sales of available for sale securities 2,450,262 1,186,163 Loans originated or acquired net of principal collected (135,689) (180,564) Proceeds from disposition of assets 54,262 51,908 Purchases of assets (8,231) (20,197) Cash and cash equivalents of branches & subsidiaries acquired and sold, net - (73,475) -------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (123,606) (121,438) -------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Net change in demand deposits, transaction deposits, money market deposits, and savings accounts (65,798) (227,936) Net change in certificates of deposit 177,238 383,628 Net change in other borrowings (421,769) (356,752) Issuance of subordinated debenture - 30,000 Issuance of preferred, common and treasury stock, net 1,607 404 -------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities (308,722) (170,656) -------------------------------------------------------------------------------------------------------------------- Net change in cash and cash equivalents (246,631) (259,199) Cash and cash equivalents at beginning of period 647,338 750,729 -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 400,707 $ 491,530 -------------------------------------------------------------------------------------------------------------------- Cash paid for interest $ 57,575 $ 95,568 -------------------------------------------------------------------------------------------------------------------- Cash paid for taxes $ 3,858 $ 2,389 -------------------------------------------------------------------------------------------------------------------- Net loans transferred to repossessed real estate and other assets $ 1,248 $ 3,899 -------------------------------------------------------------------------------------------------------------------- Payment of dividends in common stock $ 375 $ 375 -------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ACCOUNTING POLICIES Basis of Presentation The accounting and reporting policies of BOK Financial Corporation ("BOK Financial") conform to accounting principles generally accepted in the United States and generally accepted practices within the banking industry. The Consolidated Financial Statements of BOK Financial include the accounts of BOK Financial and its subsidiaries, primarily Bank of Oklahoma, N.A. ("BOk"), Bank of Arkansas N.A., Bank of Texas, N.A., Bank of Albuquerque, N.A., and BOSC, Inc. Certain prior period balances have been reclassified to conform with the current period presentation. (2) MORTGAGE BANKING ACTIVITIES At March 31, 2002, BOk owned the rights to service 85,977 mortgage loans with outstanding principal balances of $6.4 billion, including $225 million serviced for BOk. The weighted average interest rate and remaining term was 7.26% and 266 months, respectively. Activity in capitalized mortgage servicing rights and related valuation allowance during the three months ending March 31, 2002 is as follows (in thousands): Capitalized Mortgage Servicing Rights ----------------------------------------------------------------------------------------- Valuation Hedging Purchased Originated Total Allowance (Gain)/Loss Net ---------------- ------------ --------------- -------------- ---------------- ----------- Balance at December 31, 2001 $ 55,056 $ 53,611 $ 108,667 $ (18,451) $ 8,580 $ 98,796 Additions 614 4,222 4,836 - - 4,836 Amortization expense (3,899) (2,336) (6,235) - (356) (6,591) Provision for impairment - - - 5,278 - 5,278 ------------------------------- --- ---------- -- ---------- -- ---------- -- -------------- -- ---------- -- ----------- Balance at March 31, 2002 $ 51,771 $ 55,497 $ 107,268 $ (13,173) $ 8,224 $ 102,319 ------------------------------- --- ---------- -- ---------- -- ---------- -- -------------- -- ---------- -- ----------- Estimated fair value of mortgage servicing rights (1) $ 51,575 $ 52,193 $ 103,768 - - $ 103,768 ------------------------------- --- ---------- -- ---------- -- ---------- -- -------------- -- ---------- -- ----------- (1) Excludes approximately $5.0 million of loan servicing rights on mortgage loans originated prior to the adoption of FAS 122.
Stratification of the mortgage loan servicing portfolio, outstanding principal of loans serviced, and related hedging information by interest rate at March 31, 2002 follows (in thousands): Greater than < 6.50% 6.50% - 7.49% 7.50% - 8.49% 8.50% Total ---------------- --------------- ---------------- ----------- ------------- Cost less accumulated amortization $ 18,685 $ 62,621 $ 23,972 $ 1,990 $ 107,268 Deferred hedge losses - 7,294 930 - 8,224 ------------------------------------------ ---------------- --------------- ---------------- ----------- ------------- Adjusted cost $ 18,685 $ 69,915 $ 24,902 $ 1,990 $ 115,492 ------------------------------------------ ---------------- --------------- ---------------- ----------- ------------- Fair value $ 18,638 $ 62,824 $ 19,669 $ 2,637 $ 103,768 ------------------------------------------ ---------------- --------------- ---------------- ----------- ------------- Impairment $ 633 $ 7,245 $ 5,216 $ 79 $ 13,173 ------------------------------------------ ---------------- --------------- ---------------- ----------- ------------- Outstanding principal of loans serviced $ 933,100 $ 3,688,900 $ 1,305,600 $ 175,100 $ 6,102,700 (1) ------------------------------------------ ---------------- --------------- ---------------- ----------- ------------- (1) Excludes outstanding principal of $306.0 million for loans serviced for which there is no capitalized mortgage servicing rights.
(3) DISPOSAL OF AVAILABLE FOR SALE SECURITIES Sales of available for sale securities resulted in gains and losses as follows (in thousands): Three Months Ended March 31, ---------------------------------- 2002 2001 -------------- --------------- Proceeds $ 2,450,262 $ 1,186,163 Gross realized gains 14,457 15,109 Gross realized losses 22,038 2,475 Related federal and state income tax expense (benefit) (2,684) 4,447 (4) EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per share (dollars in thousands except share data): Three Months Ended --------------------------- March 31, March 31, 2002 2001 --------------------------- Numerator: Net income $ 32,416 $ 27,402 Preferred stock dividends (375) (375) -------------------------------------------------------------------------------- Numerator for basic earnings per share - income available to common stockholders 32,041 27,027 -------------------------------------------------------------------------------- Effect of dilutive securities: Preferred stock dividends 375 375 -------------------------------------------------------------------------------- Numerator for diluted earnings per share - income available to common stockholders after assumed conversion $ 32,416 $ 27,402 -------------------------------------------------------------------------------- Denominator: Denominator for basic earnings per share- weighted average shares 51,282,896 50,840,937 Effect of dilutive securities: Employee stock options (1) 708,894 464,058 Convertible preferred stock 6,333,846 6,333,846 -------------------------------------------------------------------------------- Dilutive potential common shares 7,042,740 6,797,904 -------------------------------------------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 58,325,636 57,638,841 -------------------------------------------------------------------------------- Basic earnings per share $ 0.62 $ 0.53 -------------------------------------------------------------------------------- Diluted earnings per share $ 0.56 $ 0.48 ------------------------------------------------------------------------------- (1) Current market price was greater than exercise price on all employee stock options (5) SHAREHOLDER'S EQUITY On April 30, 2002, the Board of Directors of BOK Financial declared a 3% stock dividend payable in shares of BOK Financial common stock. The dividend is payable on May 29, 2002 to shareholders of record on May 13, 2002. Generally accepted accounting principles require earnings per share information to be retroactively restated to reflect the new capital structure upon consummation of a stock dividend. Accordingly, for all financial statements issued after May 29, 2002, earnings per share will be restated as follows: Fully Diluted Earnings Per Share: As Reported Restated 2001: 1st Quarter $ 0.48 $ 0.46 2nd Quarter 0.50 0.49 3rd Quarter 0.51 0.50 4th Quarter 0.52 0.50 Year Ended December 31 2.01 1.95 2002: 1st Quarter $ 0.56 $ 0.54 (6) REPORTABLE SEGMENTS Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2002 is as follows (in thousands): Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------- -- ------------- --- -------------- -- -------------- Total reportable lines of business $ 74,128 $ 43,580 $ 67,807 $ 11,099,744 Total non-reportable lines of business 157 17,078 13,440 34,560 Unallocated items: Tax-equivalent adjustment 1,696 - - - Funds management 18,686 329 2,150 498,703 Eliminations and all others, net (4,625) 82 552 (883,029) -------------- -- ------------- --- -------------- -- -------------- BOK Financial consolidated $ 90,042 $ 61,069 $ 83,949 $ 10,749,978 ============== == ============= === ============== == ============== (1) Excludes securities gains/losses.
Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2001 is as follows (in thousands): Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------- -- ------------- --- -------------- -- -------------- Total reportable lines of business $ 79,453 $ 40,498 $ 80,902 $ 10,174,544 Total non-reportable lines of business 236 13,972 10,136 31,629 Unallocated items: Tax-equivalent adjustment 2,075 - - - Funds management (337) (228) 1,508 158,212 Eliminations and all others, net (5,815) 180 1,240 (473,672) -------------- -- ------------- --- -------------- -- -------------- BOK Financial consolidated $ 75,612 $ 54,422 $ 93,786 $ 9,890,713 ============== == ============= === ============== == ============== (1) Excludes securities gains/losses.
(7) 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. ------------------------------------------------------------------------------- QUARTERLY FINANCIAL SUMMARY - UNAUDITED Consolidated Daily Average Balances, Average Yields and Rates (In Thousands Except Share Data) For Three months ended ------------------------------------------------------------------------------------- March 31, 2002 December 31, 2001 ------------------------------------------ ------------------------------------- Average Revenue/ Yield Average Revenue/ Yield Balance Expense(1) /Rate Balance Expense(1) /Rate ------------------------------------------------------------------------------------- Assets Taxable securities $ 3,442,504 $ 48,153 5.67% $ 3,177,731 $ 45,777 5.72% Tax-exempt securities 230,755 4,101 7.21 238,634 4,274 7.11 ------------------------------------------------------------------------------------------------------------------------------ Total securities 3,673,259 52,254 5.77 3,416,365 50,051 5.81 ------------------------------------------------------------------------------------------------------------------------------ Trading securities 14,971 204 5.53 22,508 245 4.32 Funds sold 10,656 50 1.90 14,362 85 2.35 Loans(2) 6,164,060 92,918 6.11 6,203,512 99,643 6.37 Less reserve for loan losses 105,166 99,541 - - ------------------------------------------------------------------------------------------------------------------------------ Loans, net of reserve 6,058,894 92,918 6.22 6,103,971 99,643 6.48 ------------------------------------------------------------------------------------------------------------------------------ Total earning assets 9,757,780 145,426 6.04 9,557,206 150,024 6.23 ------------------------------------------------------------------------------------------------------------------------------ Cash and other assets 992,198 1,008,111 ------------------------------------------------------------------------------------------------------------------------------ Total assets $ 10,749,978 $ 10,565,317 ------------------------------------------------------------------------------------------------------------------------------ Liabilities And Shareholders' Equity Transaction deposits $ 2,666,154 9,902 1.51% $ 2,429,978 9,933 1.62% Savings deposits 160,082 481 1.22 158,040 489 1.23 Other time deposits 2,918,473 26,743 3.72 2,839,770 30,744 4.30 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 5,744,709 37,126 2.62 5,427,788 41,166 3.01 ------------------------------------------------------------------------------------------------------------------------------ Federal funds purchased and repurchase agreements 1,571,063 6,915 1.79 1,701,655 8,813 2.05 Other borrowings 1,119,466 6,931 2.51 1,088,792 8,460 3.08 Subordinated debenture 186,189 2,716 5.92 186,409 2,764 5.88 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 8,621,427 53,688 2.53 8,404,644 61,203 2.89 ------------------------------------------------------------------------------------------------------------------------------ Demand deposits 1,112,571 1,150,498 Other liabilities 163,103 174,891 Shareholders' equity 852,877 835,284 ------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' $ 10,749,978 $ 10,565,317 Equity ------------------------------------------------------------------------------------------------------------------------------ Tax-Equivalent Net Interest Revenue (1) (3) 91,738 3.52% 88,821 3.34% Tax-Equivalent Net Interest Revenue (1) (3) 3.81 3.69 To Earning Assets Less tax-equivalent adjustment 1,696 1,802 ------------------------------------------------------------------------------------------------------------------------------ Net Interest Revenue 90,042 87,019 Provision for loan losses 8,866 10,517 Other operating revenue (3) 52,952 55,260 Other operating expense 83,949 84,801 ------------------------------------------------------------------------------------------------------------------------------ Income Before Taxes 50,179 46,961 Federal and state income tax (3) 17,763 16,829 ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 32,416 $ 30,132 ------------------------------------------------------------------------------------------------------------------------------ Earnings Per Share: Net Income Basic $ 0.62 $ 0.58 ------------------------------------------------------------------------------------------------------------------------------ Diluted $ 0.56 $ 0.52 ------------------------------------------------------------------------------------------------------------------------------ (1) Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. (2) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income. (3) Includes cumulative effect of transition adjustment in adopting FAS 133 in first quarter 2001.
------------------------------------------------------------------------------------------------------------------------- For Three months ended ------------------------------------------------------------------------------------------------------------------------- September 30, 2001 June 30, 2001 March 31, 2001 ------------------------------------------------------------------------------------------------------------------------- Average Revenue/ Yield Average Revenue/ Yield Average Revenue/ Yield Balance Expense(1) /Rate Balance Expense(1) /Rate Balance Expense(1) /Rate ------------------------------------------------------------------------------------------------------------------------- $ 2,869,680 $ 44,705 6.18% $ 3,012,148 $ 47,080 6.27% $ 2,910,580 $ 46,902 6.54% 265,608 4,554 6.80 310,517 5,841 7.54 282,656 5,266 7.56 ------------------------------------------------------------------------------------------------------------------------- 3,135,288 49,259 6.23 3,322,665 52,921 6.39 3,193,236 52,168 6.63 ------------------------------------------------------------------------------------------------------------------------- 16,498 223 5.36 16,566 332 8.04 18,421 400 8.81 14,229 130 3.62 17,221 191 4.45 28,063 423 6.11 6,065,512 114,165 7.47 5,944,358 117,080 7.90 5,737,543 125,362 8.86 93,884 - - 89,824 - - 86,156 - - ------------------------------------------------------------------------------------------------------------------------- 5,971,628 114,165 7.58 5,854,534 117,080 8.02 5,651,387 125,362 9.00 ------------------------------------------------------------------------------------------------------------------------- 9,137,643 163,777 7.11 9,210,986 170,524 7.43 8,891,107 178,353 8.14 ------------------------------------------------------------------------------------------------------------------------- 1,007,684 1,010,404 999,606 ------------------------------------------------------------------------------------------------------------------------- $ 10,145,327 $ 10,221,390 $ 9,890,713 ------------------------------------------------------------------------------------------------------------------------- $ 2,278,393 11,917 2.08% $ 2,222,838 12,821 2.31% $ 2,133,537 15,222 2.89% 155,908 575 1.46 154,312 569 1.48 151,392 648 1.74 3,030,759 38,287 5.01 3,009,880 42,161 5.62 2,960,828 45,021 6.17 ------------------------------------------------------------------------------------------------------------------------- 5,465,060 50,779 3.69 5,387,030 55,551 4.14 5,245,757 60,891 4.71 ------------------------------------------------------------------------------------------------------------------------- 1,440,556 12,976 3.57 1,767,086 19,181 4.35 1,702,913 23,388 5.57 1,019,123 10,711 4.17 885,922 11,127 5.04 903,264 13,893 6.24 186,631 2,871 6.10 187,299 2,794 5.98 160,144 2,494 6.32 ------------------------------------------------------------------------------------------------------------------------- 8,111,370 77,337 3.78 8,227,337 88,653 4.32 8,012,078 100,666 5.10 ------------------------------------------------------------------------------------------------------------------------- 1,093,442 1,119,597 1,047,267 143,298 116,200 108,514 797,217 758,256 722,854 ------------------------------------------------------------------------------------------------------------------------- $ 10,145,327 $ 10,221,390 $ 9,890,713 ------------------------------------------------------------------------------------------------------------------------- 86,440 3.33% 81,871 3.11% 77,687 3.04% 3.75 3.57 3.54 1,914 2,254 2,075 ------------------------------------------------------------------------------------------------------------------------- 84,526 79,617 75,612 11,023 8,497 7,573 76,091 60,223 68,066 103,591 86,584 93,786 ------------------------------------------------------------------------------------------------------------------------- 46,003 44,759 42,319 16,216 15,778 14,917 ------------------------------------------------------------------------------------------------------------------------- $ 29,787 $ 28,981 $ 27,402 ------------------------------------------------------------------------------------------------------------------------- $ 0.58 $ 0.56 $ 0.53 ------------------------------------------------------------------------------------------------------------------------- $ 0.51 $ 0.50 $ 0.48 -------------------------------------------------------------------------------------------------------------------------
PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (A) Exhibits: None (B) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended March 31, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOK FINANCIAL CORPORATION ------------------------- (Registrant) Date: May 14, 2002 /s/ Steven E. Nell ------------ ------------------ Steven E. Nell Executive Vice President and Chief Financial Officer /s/ John C. Morrow ------------------ John C. Morrow Senior Vice President and Director of Financial Accounting & Reporting