(12) Stock Compensation Plans

The shareholders and Board of Directors of BOK Financial have approved various stock-based compensation plans. An independent compensation committee of the Board of Directors determines the number of awards granted to the Chief Executive Officer and other senior executives. Stock-based compensation is granted to other officers and employees and is approved by the independent compensation committee upon recommendation of the Chairman of the Board and the Chief Executive Officer.

These awards include stock options subject to vesting requirements and non-vested shares. Generally, one-seventh of the options awarded vest annually and expire 3 years after vesting. Additionally, stock options that vest in two years and expire 45 days after vesting have been awarded. Non-vested shares vest 5 years after the grant date. The holders of these non-vested shares may be required to retain the shares for 3 years after vesting.

The Chief Executive Officer and other senior executives participate in an Executive Incentive Plan ("EIP"). The number of options and non-vested shares may increase or decrease based upon the Company’s growth in earnings per share over a three-year period compared to the median growth in earnings per share for a designated peer group of financial institutions and other individual performance factors.

The following table presents stock options outstanding during 2012, 2011 and 2010 under these plans (in thousands, except for per share data):



	Number		Weighted- Average Exercise Price	Aggregate Intrinsic Value
Options outstanding at December 31, 2009	3,521,763		$44.58	$	10,359
Options awarded	345,945		48.30
Options exercised	(486,280	)	39.29
Options forfeited	(97,443	)	46.89
Options expired	(148,651	)	51.35
Options outstanding at December 31, 2010	3,135,334		$45.62	$	24,405
Options awarded	185,007		55.94
Options exercised	(576,518	)	44.35
Options forfeited	(60,005	)	47.93
Options expired	(62,471	)	54.13
Options outstanding at December 31, 2011	2,621,347		$47.01	$	20,769
Options awarded	67,155		58.76
Options exercised	(708,295	)	45.32
Options forfeited	(22,559	)	50.36
Options expired	(66,862	)	45.97
Options outstanding at December 31, 2012	1,890,786		$48.29	$	11,748
Options vested at:
December 31, 2010	805,781		$45.26	$	6,556
December 31, 2011	825,682		46.72	6,779
December 31, 2012	601,367		47.99	3,890

The following table summarizes information concerning currently outstanding and vested stock options:



Options Outstanding				Options Vested
		Weighted				Weighted
		Average	Weighted		Weighted	Average
Range of		Remaining	Average		Average	Remaining
Exercise	Number	Contractual	Exercise	Number	Exercise	Contractual
Prices	Outstanding	Life (years)	Price	Vested	Price	Life (years)
$30.87	426	0.01	$30.87	426	$30.87	0.01
37.74	25,338	1.00	37.74	25,338	37.74	1.00
45.15 - 47.34	77,569	1.04	47.32	77,569	47.32	1.04
47.05	160,902	2.00	47.05	90,785	47.05	1.03
54.33	297,887	2.50	54.33	144,360	54.33	1.04
48.46	387,385	3.00	48.46	133,184	48.46	1.05
36.65	371,373	3.50	36.65	77,788	36.65	1.04
48.30	208,365	4.00	48.30	13,468	48.30	1.57
55.94	273,792	5.00	55.94	38,449	55.94	2.07
58.76	87,749	6.00	58.76	—	0.00	0.00

The aggregate intrinsic value of options exercised was $8.3 million for 2012, $5.5 million for 2011 and $6.1 million for 2010.

Compensation expense for stock options is generally recognized based on the fair value of options granted over the options’ vesting period.

The fair value of options was determined as of the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:



	2012			2011			2010
Average risk-free interest rate¹	0.93		%	1.87		%	2.36		%
Dividend yield	2.20		%	1.80		%	2.00		%
Volatility factors	0.280			0.268			0.261
Weighted average expected life	4.9 years			4.9 years			4.9 years
Weighted average fair value	$	11.48		$	11.92		$	10.17


¹	Average risk-free interest rate represents U.S. Treasury rates matched to the expected life of the options.

Stock option expense totaled $9.7 million for 2012, $10.0 million for 2011 and $8.3 million for 2010. Compensation cost of stock options granted that may be recognized as compensation expense in future years totaled $3.3 million at December 31, 2012. Subject to adjustments for forfeitures, we expect to recognize compensation expense for current outstanding options of $1.5 million in 2013, $892 thousand in 2014, $498 thousand in 2015, $260 thousand in 2016, $110 thousand in 2017 and $27 thousand thereafter.

The following represents a summary of the non-vested stock awards as of December 31, 2012 (in thousands):



	Shares		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2012	503,738
Granted	197,058		$55.63
Lapsed	(76,192	)	47.32
Forfeited	(31,773	)	50.45
Non-vested at December 31, 2012	592,831

Unrecognized compensation cost of non-vested shares totaled $14.0 million at December 31, 2012. Subject to adjustment for forfeitures, we expect to recognize compensation expense of $4.9 million in 2013, $4.2 million in 2014, $3.0 million in 2015, $1.7 million in 2016 and $158 thousand in 2017.

BOK Financial permits certain executive officers to defer recognition of taxable income from their stock-based compensation. Deferred compensation may also be diversified into investments other than BOK Financial common stock.

Stock-based compensation subject to these deferral plans is recognized as a liability award rather than as an equity award. Compensation expense is based on the fair value of the award recognized over the vesting period. The recorded obligation for liability awards totaled $87 thousand at December 31, 2012 and $1.3 million at December 31, 2011. Compensation cost of liability awards was an expense of $530 thousand in 2012, $760 thousand in 2011 and $1.9 million in 2010.

On April 26, 2011 shareholders approved the BOK Financial Corporation 2011 True-up Plan. The True-Up Plan was intended to address inequality in the EIP which had been approved by shareholders in 2003 as a result of certain peer banks that performed poorly during the most recent economic cycle. Performance goals for the EIP are based on the Company's earnings per share growth compared to peers and business unit performance. As the economy improves and credit losses normalize, peer banks were expected to experience significant comparative earnings per share percentile increases. This "bounce-back" effect would have resulted in the unanticipated result of no annual bonuses in the years 2011, 2012 and 2013 and the forfeiture of long-term incentive awards for 2010 and 2011 in their entirety, despite BOK Financial's strong annual earnings growth through the economic cycle while many peers experienced negative or declining earnings. The True-Up Plan was designed to adjust annual and long-term performance-based incentive compensation for certain senior executives either upward or downward based on the earnings per share performance and compensation of comparable senior executives at peer banks for 2006 through 2013. Compensation expense is determined by ranking BOK Financial's earnings per share to peer banks and then aligning compensation with the peer bank that most closely relates to BOK Financial earnings per share performance. The final amount due under the 2011 True-Up Plan will be determined as of December 31, 2013 and distributed in 2014. Based on the most recent available information, the Company has accrued $40 million for the True-Up Plan liability. In the present economic environment, performance measurement through 2013 may be volatile and could result in future adjustments upward or downward.

During January 2013, BOK Financial awarded the following stock-based compensation:



	Number	Exercise Price	Fair Value / Award
Stock options	81,492	$55.74	$9.67
Non-vested stock	208,770	0.00	55.74

The aggregate compensation cost of these awards totaled approximately $12.4 million. This cost will be recognized over the vesting periods, subject to adjustments for forfeitures. Non-vested shares awarded in January, 2013 cliff vest in 3 years and are subject to a 2 year holding period after vesting. None of the stock-based compensation awards in January 2013 are subject to deferred compensation plans.