As filed with the Securities and Exchange Commission on November 13, 1997
- --------------------------------------------------------------------------------
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 September 30, 1997
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 ($.00006 Par Value)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 21,260,493 shares of
common stock ($.00006 par value) as of October 31, 1997.
- --------------------------------------------------------------------------------
<PAGE>2
BOK Financial Corporation
Form 10-Q
Quarter Ended September 30, 1997
Index
Part I. Financial Information
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 2
Report of Management on Consolidated
Financial Statements 10
Consolidated Statements of Earnings 11
Consolidated Balance Sheets 12
Consolidated Statements of Changes
in Shareholders' Equity 13
Consolidated Statements of Cash Flows 14
Notes to Consolidated Financial Statements 15
Financial Summaries - Unaudited 17
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 20
Signature 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
BOK Financial Corporation ("BOK Financial") recorded net income of $16.4 million
or $0.67 per fully diluted common share for the third quarter of 1997 compared
to $13.0 million or $0.54 per fully diluted common share for the third quarter
of 1996. Returns on average assets and equity were 1.25% and 16.16%,
respectively, for the third quarter of 1997. This is compared to returns on
average assets and equity of 1.20% and 15.99%, respectively, for the same period
of 1996.
Year to date net income and earnings per fully diluted common share were $47.8
million or $1.95, respectively, for 1997 compared to $39.6 million or $1.64,
respectively, for the same period of 1996. Returns on average assets and equity
were 1.27% and 16.75%, respectively, for 1997 compared to returns on average
assets and equity of 1.24% and 16.77%, respectively, for 1996.
RESULTS OF OPERATIONS
Net interest revenue on a tax-equivalent basis was $42.1 million for the third
quarter of 1997 compared to $34.1 million for the third quarter of 1996, an
increase of $8.0 million or 23.3%. Average earning assets increased by $765
million, including $344 million from the acquisitions of First National Bank of
Park Cities ("Park Cities") and First Texas Bank ("First Texas") in the first
quarter of 1997, while average interest bearing liabilities increased $654
million, including $220 million from acquisitions. Demand deposit accounts and
equity funded the growth in earning assets in excess of interest bearing
liabilities. This improvement in the volume of total earning assets as compared
to interest bearing liabilities contributed $6.5 million to the increase in net
interest revenue. The effect of an increase in the yield on earning assets in
excess of an increase in the cost of interest bearing liabilities contributed
$1.4 million .
<PAGE>3
<TABLE>
======================================================================================================================
TABLE 1 - VOLUME/RATE ANALYSIS
(In thousands)
Three months ended Nine months ended
September 30, 1997/1996 September 30, 1997/1996
---------------------------------------------------------------------------------
Change Due To (1) Change Due To (1)
------------------------ ----------------------------
Yield Yield
Change Volume /Rate Change Volume /Rate
---------------------------------------------------------------------------------
Tax-equivalent interest revenue:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 5,588 $ 5,188 $ 400 $ 18,478 16,290 2,188
Trading securities (20) (9) (11) (73) (56) (17)
Loans 9,890 9,324 566 20,235 20,681 (446)
Funds sold 442 417 25 994 933 61
- ----------------------------------------------------------------------------------------------------------------------
Total 15,900 14,920 980 39,634 37,848 1,786
- ----------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest bearing transaction 879 1,670 (791) 3,968 4,754 (786)
deposits
Savings deposits (13) 40 (53) (97) 72 (169)
Time deposits (268) (190) (78) (1,139) (208) (931)
Other borrowings 6,043 5,546 497 15,251 14,418 833
Subordinated debenture 1,305 1,305 - 1,727 1,727 -
- ----------------------------------------------------------------------------------------------------------------------
Total 7,946 8,371 (425) 19,710 20,763 (1,053)
- ----------------------------------------------------------------------------------------------------------------------
Tax-equivalent net interest $ 7,954 $ 6,549 $ 1,405 $ 19,924 $ 17,085 $ 2,839
revenue
Change in tax-equivalent adjustment (242)
(1,231)
- ----------------------------------------------------------------------------------------------------------------------
Net interest revenue $ 7,712 $ 18,693
======================================================================================================================
(1) Changes attributable to both volume and yield are allocated to both volume and yield/rate on an equal basis.
</TABLE>
Net interest margin, the ratio of net interest revenue to average earning assets
was 3.63% for the third quarter of 1997. This is compared to 3.54% for the same
quarter of 1996 and 3.68% for the second quarter of 1997. Yields on average
earning assets for the third quarter of 1997 were 7.85%, an increase of 6 basis
points over the third quarter of 1996. The increase is due primarily to the
repricing of variable rate loans in response to a 25 basis point increase in the
national prime rate late in the first quarter of 1997, partially offset by
decreased interest rates due to competitive pricing pressure. At the same time,
the cost of interest bearing liabilities for the third quarter of 1997 was
4.91%, a decrease of 3 basis points from the third quarter of 1996 and unchanged
from the second quarter of 1997. BOK Financial has been working to reduce its
overall cost of funds by lowering the rates paid on certain deposit accounts.
These efforts have been successful as shown by the reduction in the rates paid
on deposits and by the limited increase in the total cost of interest bearing
liabilities. However, this strategy has limited the growth in deposits and has
required BOK Financial to increase borrowings to fund asset growth.
Since its inception, BOK Financial has followed a strategy of utilizing its
capital resources by borrowing funds in the capital markets to supplement
deposit growth and invest in securities. This strategy frequently results in a
net interest margin which falls below those normally seen in the commercial
banking industry even though it provides positive net interest revenue. As more
fully discussed in the subsequent Interest Rate Sensitivity and Liquidity
section, management employs various techniques to control, within established
parameters, the interest rate and liquidity risk which results from this
strategy.
Year to date tax equivalent net interest revenue was $121.1 million, a $19.9
million or 19.7% increase over the first nine months of 1996. Average earning
assets increased $669 million while average interest bearing liabilities
increased $569 million. While the yield on earning assets increased by 3 basis
points to 7.84%, the cost of interest bearing liabilities decreased by 4 basis
points to 4.89% due to the previously discussed deposit pricing policy. The
result is an increase in the year to date net interest margin to 3.63% in 1997
from 3.57% in 1996.
<PAGE>4
<TABLE>
==============================================================================================================================
TABLE 2 - OTHER OPERATING REVENUE
(In thousands)
Three Months Ended
------------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brokerage and trading revenue $ 2,522 $ 2,229 $ 2,240 $ 1,964 $ 2,031
TransFund network revenue 3,034 2,939 2,543 2,310 2,236
Securities gains (losses), net 809 (200) 262 (622) -
Trust fees and commissions 6,405 5,851 5,278 5,324 5,317
Service charges and fees
on deposit accounts 7,255 7,112 6,714 6,506 6,027
Mortgage banking revenue 8,416 7,460 6,948 7,206 7,103
Other revenue 5,874 6,020 6,467 4,846 4,514
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 34,315 $ 31,411 $ 30,452 $ 27,534 $ 27,228
==============================================================================================================================
</TABLE>
Other operating revenue increased $7.1 million or 26.0% compared to the same
quarter of 1996. Excluding the effect of securities gains and losses and
acquisitions, other operating revenue increased $5.6 million or 20.5%. TransFund
revenue increased $798 thousand or 35.7% due to an increased number of
transactions and repricing of services. Service charges and deposit fees
increased $762 thousand or 12.6%, excluding the effect of acquisitions, due
primarily to an increased number of transactions processed for commercial
accounts. Trust fees and commissions increased $1.1 million or 20.5% due to an
increase in assets managed. As of September 30, 1997, BOK Trust, a division of
BOk, was responsible for $10.7 billion in assets. Mortgage banking revenue
increased $1.3 million or 18.5% due to a $1.0 million increase in loan servicing
revenue along with a $267 thousand improvement in secondary marketing
activities. Loans serviced by BOK Mortgage, a division of BOk, totaled $6.6
billion at September 30, 1997. Leasing revenue, which is reported in other
revenue, increased to $1.6 million in the second quarter of 1997 compared to
$528 thousand in 1996.
Year to date, other operating revenue increased $18.4 million or 23.7%.
Excluding the effect of securities gains and losses and acquisitions, other
operating revenue increased $13.9 million or 17.4%. The same volume-related
factors which caused the second quarter's increase also contributed to the year
to date increases.
<TABLE>
=========================================================================================================================
TABLE 3 - OTHER OPERATING EXPENSE
(In thousands)
Three Months Ended
----------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personnel $ 22,475 $ 21,148 $ 19,294 $ 18,380 $ 17,759
Business promotion 2,067 2,190 1,950 1,459 1,618
Professional fees/services 1,579 1,571 1,496 1,286 1,458
Net occupancy, equipment
and data processing 8,618 8,250 8,320 8,029 7,799
FDIC and other insurance 374 328 333 89 557
Special deposit insurance assessment - - - - 3,820
Printing, postage and supplies 1,817 1,921 1,825 1,769 1,683
Net gains and operating
expenses on repossessed assets (1,662) (222) (412) (703) (2,706)
Amortization of intangible
assets 2,362 2,398 1,728 1,241 1,238
Mortgage banking costs 5,202 4,412 4,217 4,354 4,089
Other expense 3,888 3,447 2,975 2,411 2,982
- -------------------------------------------------------------------------------------------------------------------------
Total $ 46,720 $ 45,443 $ 41,726 $ 38,315 $ 40,297
=========================================================================================================================
</TABLE>
<PAGE>5
Operating expenses for the third quarter of 1997 increased $6.4 million or 15.9%
compared to the third quarter of 1996. Excluding the effects of acquisitions and
significant or non-recurring items as shown in Table 4, operating expenses
increased $5.3 million or 13.5%. Personnel costs increased $4.7 million ($3.0
million or 17.0% excluding acquisitions) due to increased staffing, normal
compensation increases, and increased incentive compensation. Staffing on a
full-time equivalent ("FTE") basis increased by 143 employees or 7.1% while
average compensation per FTE increased by 6.3%. These changes reflect the
addition of several senior-level positions in both the lending and operations
areas as well as additional support staff. Incentive compensation expense, which
varies directly with changes in revenue, increased $622 thousand to $1.9 million
for the quarter. Mortgage banking expenses increased $1.1 million or 27.2% due
to increased amortization of capitalized servicing rights. Net occupancy,
equipment and data processing expenses increased $262 thousand or 3.4%,
excluding acquisitions. This increase included a $554 thousand increase in data
processing costs due primarily to the higher volume of transactions processed
partially offset by a $731 thousand increase in rental income at BOK Financial's
main offices in Oklahoma City. Additionally, business promotion expenses
increased $449 thousand or 27.8% as BOK Financial continued its efforts to
capitalize on disruptions in banking relationships due to mergers involving its
two largest competitors in Oklahoma. The increase in other expenses includes an
additional $673 thousand of depreciation expense on equipment leased to
customers.
The growth in operating expenses exceeded the growth in tax-equivalent interest
revenue and other operating revenue. The resulting efficiency ratio for the
third quarter of 1997 was 64.0% compared to 63.9% for the third quarter of 1996
and 62.4% for the second quarter of 1997. The increase in the efficiency ratio
for the third quarter of 1997 primarily reflects the initial costs of adding
several business development officers and an increase in mortgage servicing
rights amortization expense.
<TABLE>
==============================================================================================================================
TABLE 4 - OTHER OPERATING EXPENSE, EXCLUDING SIGNIFICANT OR
NONRECURRING ITEMS
(In thousands)
Three Months Ended
------------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total other operating expense $ 46,720 $ 45,443 $ 41,726 $ 38,315 $ 40,297
FDIC Insurance premium
reduction, net of costs - - - - (3,820)
Net gains and operating costs from
repossessed assets 1,662 222 412 703 2,706
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 48,382 $ 45,665 $ 42,138 $ 39,018 $ 39,183
==============================================================================================================================
</TABLE>
Year to date, operating expenses increased $13.2 million or 10.9%. Excluding the
effects of acquisitions and significant or non-recurring items, operating
expenses increased $10.4 million or 8.9% due to the same factors which
contributed to the quarterly increases.
BOK Financial recorded a provision for loan losses of $3.0 million in the third
quarter of 1997 compared to $62 thousand in the third quarter of 1996. The
factors considered by management in determining the provision for loan losses
are discussed subsequently under "Risk Element."
BOK Financial recorded income tax expense of $7.9 million or 32.4% of income
before taxes for the third quarter of 1997 compared to income tax expense of
$5.8 million or 31.0% for the third quarter of 1996.
RISK ELEMENT
The aggregate loan portfolio at September 30, 1997 increased $375 million to
$2.8 billion since December 31, 1996. This included increases of $79 million and
$59 million, respectively, from the acquisitions of First National Bank of Park
Cities and First Texas Bank in the first quarter. Loans increased by $141
million during the third quarter of 1997. The increases during the third quarter
include all major loan groups with commercial loans up $70 million, commercial
real estate loans up $45 million, residential mortgage loans up $7 million and
consumer loans up $18 million. These increases are the result of continued
growth in the Oklahoma economy and new loan business attributed to the
acquisition of BOK Financial's two largest competitors by out-of-state banks.
The growth of the loan portfolio and strategies employed by BOK Financial has
added additional risk as discussed below.
<PAGE>6
<TABLE>
===========================================================================================================================
TABLE 5 - LOANS
(In thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Energy $ 294,045 $ 247,821 $ 230,447 $ 217,056 $ 185,972
Manufacturing 180,839 169,871 163,312 137,529 126,356
Wholesale/retail 207,504 200,358 184,488 166,075 177,351
Agricultural 124,553 125,704 119,055 109,324 95,973
Loans for purchasing or
carrying securities 16,164 18,627 15,437 13,604 14,728
Other commercial and industrial 385,647 376,277 346,785 340,602 341,352
Commercial real estate:
Construction and land development 185,150 130,381 186,982 165,784 140,189
Other real estate loans 581,299 591,080 505,371 509,874 496,356
Residential mortgage:
Secured by 1-4 family
residential property 453,110 469,681 465,432 429,405 434,789
Residential mortgages held for sale 103,300 79,438 67,192 95,332 66,310
Consumer 238,387 220,005 215,112 209,995 240,468
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 2,769,998 $ 2,629,243 $ 2,499,613 $ 2,394,580 $ 2,319,844
===========================================================================================================================
</TABLE>
Although the acquisitions of Park Cities and First Texas enhance the geographic
diversity of the loan portfolio, a substantial portion of the commercial and
consumer loans continues to be concentrated in Oklahoma and Northwest Arkansas.
This concentration subjects the portfolio to the general economic conditions
within BOK Financial's primary market area. Major segments of the commercial
loan portfolio are presented in Table 5. Commercial real estate loans are
secured primarily by properties located in the Tulsa or Oklahoma City
metropolitan areas. During the second quarter of 1997, BOK Financial opened a
loan production office in Albuquerque, New Mexico. This office, which will focus
primarily on residential construction lending, is expected to add diversity to
the loan portfolio.
Nonperforming assets totaled $48.9 million at September 30, 1997 compared to
$47.2 million at June 30, 1997 and $42.2 million at December 31, 1996. The
increase in the third quarter of 1997 was due primarily to a $2.6 million
increase in loans past due over 90 days which are still accruing.
BOK Financial monitors loan performance on a portfolio and individual loan
basis. Nonperforming loans, which include all loans classified as doubtful or
loss, are reviewed at least quarterly, and more frequently in the case of larger
credits. The loan review process involves evaluating the credit worthiness of
customers and their ability, based upon current and anticipated economic
conditions, to meet future principal and interest payments. Loans may be
identified which possess more than the normal amount of risk due to
deterioration in the financial condition of the borrower or the value of the
collateral. Because the borrowers are performing in accordance with the original
terms of the loan agreements and no loss of principal or interest is
anticipated, such loans are not included in the nonperforming assets totals.
These loans are assigned to various risk categories in order to focus
management's attention on the loans with higher risk of loss. At September 30,
1997, loans totaling $106 million were assigned to the special mention category
and loans totaling $64 million were assigned to the substandard risk category.
These are compared to special mention loans of $106 million and substandard
loans of $62 million at June 30, 1997, and to special mention loans of $62
million and substandard loans of $40 million at December 31, 1996.
<PAGE>7
<TABLE>
============================================================================================================================
TABLE 6 - NONPERFORMING ASSETS
(In thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonperforming loans:
Nonaccrual loans:
Commercial $ 10,171 $ 9,591 $ 9,332 $ 9,589 $ 10,844
Commercial real estate 7,944 8,356 5,418 5,306 4,323
Residential mortgage 3,492 3,917 4,138 2,580 3,333
Consumer 1,575 1,830 1,366 1,360 1,114
- ----------------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 23,182 23,694 20,254 18,835 19,614
Loans past due (90 days) (1) 20,551 17,976 17,838 18,816 17,379
- ----------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans (1) 43,733 41,670 38,092 37,651 36,993
- ----------------------------------------------------------------------------------------------------------------------------
Other nonperforming assets:
Commercial real estate 2,503 2,594 2,710 2,586 4,158
Other 2,684 2,970 3,381 1,990 926
- ----------------------------------------------------------------------------------------------------------------------------
Total other nonperforming assets 5,187 5,564 6,091 4,576 5,084
- ----------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 48,920 $ 47,234 $ 44,183 $ 42,227 $ 42,077
============================================================================================================================
Ratios:
Reserve for loan losses to
nonperforming loans 119.80% 119.68% 127.37% 119.91% 121.53%
Nonperforming loans (1) to
period-end loans (2) 1.64 1.63 1.57 1.64 1.64
============================================================================================================================
(1) Includes 1-4 family loans
guaranteed by agencies of
the U.S. government $ 16,010 $ 15,538 $ 15,083 $ 13,932 $ 13,741
(2) Excludes residential mortgage loans held for sale
============================================================================================================================
</TABLE>
The allowance for loan losses, which is available to absorb losses inherent in
the loan portfolio, totaled $52 million at September 30, 1997 compared to $50
million at June 30, 1997 and $45 million at December 31, 1996 or 1.96% of total
loans, excluding loans held for sale. Losses on loans held for sale, principally
fixed-rate residential mortgage loans accumulated for placement in securitized
pools, 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 7 presents statistical information regarding the
reserve for loan losses.
<PAGE>8
<TABLE>
=======================================================================================================================
TABLE 7 - SUMMARY OF LOAN LOSS EXPERIENCE
(In thousands)
Three Months Ended
---------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 49,871 $ 48,517 $ 45,148 $ 44,959 $ 42,807
Loans charged-off:
Commercial 1,211 444 199 224 1,475
Commercial real estate 234 18 1 0 335
Residential mortgage 241 64 89 46 97
Consumer 829 896 951 1,214 663
- -----------------------------------------------------------------------------------------------------------------------
Total 2,515 1,422 1,240 1,484 2,570
- -----------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Commercial 1,004 547 367 821 1,670
Commercial real estate 393 341 148 162 2,747
Residential mortgage 325 53 64 67 21
Consumer 315 335 479 266 222
- -----------------------------------------------------------------------------------------------------------------------
Total 2,037 1,276 1,058 1,316 4,660
- -----------------------------------------------------------------------------------------------------------------------
Net loans charged-off (recoveries) 478 146 182 168 (2,090)
Provision for loan losses 3,000 1,500 1,026 357 62
Addition due to acquisition - - 2,525 - -
- -----------------------------------------------------------------------------------------------------------------------
Ending balance $ 52,393 $ 49,871 $ 48,517 $ 45,148 $ 44,959
=======================================================================================================================
Reserve to loans outstanding
at period-end(1) 1.96 1.96 1.99 1.96 2.00
Net loan losses (recoveries)
(annualized) to average loans (1) 0.07 0.02 0.03 (0.06) 0.39
=======================================================================================================================
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
</TABLE>
The adequacy of the allowance for loan losses is assessed by management based
upon an evaluation of the current risk characteristics of the loan portfolio
including current and anticipated economic conditions, historical experience,
collateral valuation, changes in the composition of the portfolio and other
relevant factors. A provision for loan losses is charged against earnings in
amounts necessary to maintain the adequacy of the allowance for loan losses. The
provision for loan losses totaled $3.0 million for the third quarter of 1997
compared to $1.5 million for the preceding quarter and to $62 thousand for the
third quarter of 1996. The trend toward larger provisions for loan losses
reflects the growth in the loan portfolio, BOK Financial's expansion into new
markets and increases in the levels of criticized assets. Management believes
that the allowance for loan losses is adequate for each period presented based
upon the evaluation criteria and information available at that time. Management
anticipates that the provision may increase in future periods due to the recent
growth in new commercial relationships, which is expected to continue into 1998.
At September 30, 1997 other assets included $24.6 million of natural gas
compression and other equipment which is being leased to various customers by
entities in which a subsidiary of BOK Financial is a general partner. The
maintains legal and economic ownershipof the leased equipment. Lease payments
are recorded as income when earned. The equipment is being depreciated over
estimated useful lives. The lease terms are generally much shorter than the
estimated useful lives of the related equipment. As each lease expires, the
remaining net book value of the equipment is evaluated for impairment based upon
current market values, re-leasing opportunities and other relevant factors.
BOK Financial's asset / liability management policy addresses several
complementary goals: assuring adequate liquidity, maintaining an appropriate
balance between interest sensitive assets and liabilities, and maximizing net
interest revenue. The responsibility for attaining these goals rests with the
Asset / Liability Committee which operates under policy guidelines which have
been established by the Board of Directors. These guidelines limit the negative
acceptable variation in net interest revenue and economic value of equity due to
a 200 basis point rate increase or decrease to + / - 10%, establish maximum
levels for short-term assets and funding, and public and brokered deposits, and
establish minimum levels for unpledged assets, among other things. Compliance
with these guidelines is reviewed monthly. At September 30, 1997, BOK Financial
is within all guidelines established under these policies. Management is
reviewing various strategies to fund continued loan growth within these
guidelines, including a reduction of the securities portfolio, increases in
non-public deposits, and issuance of various forms of bank securities.
<PAGE>9
BOk issued $150 million of 10-year subordinated notes, discounted to a cost of
7.2%, during the third quarter of 1997. These notes are unsecured obligations of
BOk and are not insured by the FDIC or any other government agency and are not
guaranteed by BOK Financial. Standard & Poors Rating Service has rated the notes
as BBB; Moody's Investor Service, Baa3; and Thomson Bank Watch, A-. At the same
time, $50 million was paid as dividends to BOK Financial, ultimately used to
repay existing debt, including a $20 million subordinated debenture due to an
affiliate of George B. Kaiser, BOK Financial's principal shareholder. The
remaining proceeds were retained by BOk to fund future growth. BOk entered into
interest rate swaps with a notional amount of $100 million to change the cost of
these notes from fixed to variable. BOk receives a fixed weighted average rate
of 6.77% on these swaps and pays the one month LIBOR. As a result of the
issuance of subordinated debt BOK Financial's Total Capital Ratio increased to
14.08% at September 30, 1997, as compared to 10.75% at June 30, 1997, due to the
inclusion of subordinated debt in total capital in accordance with regulatory
guidelines. As shown in Table 9, BOK Financial's capital ratios exceed the
regulatory definition of well capitalized.
Interest rate sensitivity, the risk associated with changes in interest rates,
is of primary importance within the banking industry. Management has established
strategies and procedures to protect net interest revenue against significant
changes in interest rates. Generally, these strategies are designed to achieve
an acceptable level of net interest revenue based upon management's projections
of future changes in interest rates.
Management simulates the potential effect of changes in interest rates through
computer modeling which incorporates both the current gap position and the
expected magnitude of the repricing of specific types of assets and liabilities.
This modeling is performed assuming expected interest rates over the next twelve
months based on both a "most likely" rate scenario and on two "shock test" rate
scenarios, the first assuming a 200 basis point increase and the second assuming
a 200 basis point decrease over the next twelve months. An independent source is
used to determine the most likely interest rates for the next year.
The estimated impact of changes in interest rates on net interest revenue is not
projected to be significant within the + / - 200 basis point range of
assumptions. However, this modeling indicates that under the 200 basis point
decrease scenario the after-tax value of BOK Financial's capitalized mortgage
servicing rights, net of mortgage loan refinancing income, would decrease by
approximately $21.7 million. While this decrease in value would largely be
offset by an increase in the value of the securities portfolio, current
accounting principles require that the net decreased value of mortgage loan
servicing rights would be charged to earnings while the increased value of
available for sale securities would be credited to shareholders' equity. The
result is an estimated decrease in net income of 30.0%. Additionally, a 200
basis point increase in interest rates would decrease the economic value of
equity by 6.6% due primarily to the decrease in value of the securities
portfolio. This decrease is compared against the applicable policy which limits
the negative impact of a 200 basis point change in interest rates on the
economic value of equity to 10%. These simulations are based on numerous
assumptions regarding the timing and extent of repricing characteristics. Actual
results in such situations would differ significantly.
<TABLE>
============================================================================================================
TABLE 8 - INTEREST RATE SWAPS
(In thousands)
Notional Pay Receive
Amount Rate Rate
---------------------------------------------------------------
Expiration:
<S> <C> <C> <C>
1998 63,000 5.81 - 5.94%(1) 6.64 - 7.96%
1999 22,000 5.75 - 5.94 (1) 6.80 - 7.68
2006 16,500 7.26 5.72 (1)
2007 100,000 5.63 - 5.66 (1) 6.75 - 6.80
2007 10,000 7.48 5.72 (1)
=============================================================================================================
(1) Rates are variable based on LIBOR and reset quarterly or semiannually.
</TABLE>
BOK Financial uses interest rate swaps, a form of off-balance sheet derivative
product, in managing its interest rate sensitivity. These swaps are used to more
closely match the interest paid on certain long-term, fixed rate obligations,
including certificates of deposit and subordinated debt, with earning assets.
Generally, BOK Financial accrues and periodically receives a fixed amount from
the counter parties to these swaps and accrues and periodically makes a variable
payment to the counter-parties. During the third quarter of 1997, income from
these swaps exceeded costs of the swaps by $252 thousand and at September 30,
1997, the net market value appreciation of all swaps was $2.5 million. Credit
risk from these swaps is closely monitored and counter-parties to these
contracts are selected on the basis of their credit worthiness among other
factors.
Derivative products are not used for speculative purposes.
<PAGE>10
<TABLE>
====================================================================================================================
TABLE 9 - CAPITAL RATIOS
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average shareholders' equity
to average assets 7.76% 7.33% 7.70% 7.72% 7.50%
Risk-based capital:
Tier 1 capital 8.93 9.00 8.96 10.49 10.26
Total capital 14.08 10.75 10.81 11.74 11.52
Leverage 6.53 6.26 6.34 7.46 7.34
</TABLE>
REPORT OF MANAGEMENT ON CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the consolidated financial statements which have
been prepared in accordance with generally accepted accounting principles. 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 1996 Form 10-K to the Securities and Exchange
Commission which contains audited financial statements.
<PAGE>11
<TABLE>
===========================================================================================================
Consolidated Statement of Earnings
(In Thousands Except Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1997 1996 1997 1996
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
Interest Revenue
Loans $ 59,023 $ 49,094 $ 166,222 $ 145,984
Taxable securities 24,354 20,013 72,714 58,323
Tax-exempt securities 4,378 3,412 12,732 9,878
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Total securities 28,732 23,425 85,446 68,201
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Trading securities 53 73 193 267
Funds sold 740 298 2,268 1,274
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Total interest revenue 88,548 72,890 254,129 215,726
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Interest Expense
Deposits 30,382 29,784 90,943 88,211
Other borrowings 17,203 11,160 47,571 32,320
Subordinated debenture 1,305 - 1,727 -
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Total interest expense 48,890 40,944 140,241 120,531
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Net Interest Revenue 39,658 31,946 113,888 95,195
Provision for Loan Losses 3,000 62 5,526 3,910
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Net Interest Revenue After
Provision for Loan Losses 36,658 31,884 108,362 91,285
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Other Operating Revenue
Brokerage and trading revenue 2,522 2,031 6,991 5,932
Transfund network revenue 3,034 2,236 8,516 6,485
Securities gains (losses), net 809 - 871 (1,985)
Trust fees and commissions 6,405 5,317 17,534 16,314
Service charges and fees on deposit 7,255 6,027 21,081 17,598
accts
Mortgage banking revenue, net 8,416 7,103 22,824 19,028
Other revenue 5,874 4,514 18,361 14,406
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Total Other Operating Revenue 34,315 27,228 96,178 77,778
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Other Operating Expense
Personnel 22,475 17,759 62,917 53,565
Business promotion 2,067 1,618 6,207 4,913
Professional fees and services 1,579 1,458 4,646 4,120
Net occupancy, equipment & data
processing 8,618 7,799 25,188 22,802
FDIC and other insurance 374 557 1,035 1,651
Special deposit insurance assessment - 3,820 - 3,820
Printing, postage and supplies 1,817 1,683 5,563 5,023
Net(gains) losses, and operating
expenses of repossessed assets (1,662) (2,706) (2,296) (3,849)
Amortization of intangible assets 2,362 1,238 6,488 4,170
Write-off of core deposit intangible
assets related to SAIF-insured
deposits - - - 3,821
Mortgage banking costs 5,202 4,089 13,831 11,480
Other expense 3,888 2,982 10,310 9,197
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Total Other Operating Expense 46,720 40,297 133,889 120,713
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Income Before Taxes 24,253 18,815 70,651 48,350
Federal and state income tax 7,857 5,840 22,844 8,789
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Net Income $ 16,396 $ 12,975 $ 47,807 $ 39,561
===========================================================================================================
Earnings Per Share:
Net Income
Primary $ .74 $ .59 $ 2.16 $ 1.81
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Fully Diluted $ .67 $ .54 $ 1.95 $ 1.64
- ----------------------------------------- --- ----------- ---- ---------- ---- ------------ --- -----------
Average Shares Used in Computation:
Primary 21,689,801 21,260,640 21,600,810 21,235,423
- ----------------------------------------- --------------- ---------------- --------------- ----------------
Fully Diluted 24,517,983 24,130,499 24,494,937 24,125,379
- ----------------------------------------- --------------- ---------------- --------------- ---- -----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>12
<TABLE>
===========================================================================================================
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
September 30, December 31, September 30,
1997 1996 1996
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 340,735 $ 322,791 $ 313,541
Funds sold 37,850 44,760 31,225
Trading securities 2,555 6,454 4,015
Securities:
Available for sale 1,719,554 1,459,122 1,425,362
Investment (fair value: September 30, 1997 -
$214,980;December 31, 1996 -$199,549;
September 30, 1996 - $199,221 ) 214,703 198,408 200,961
- -----------------------------------------------------------------------------------------------------------
Total securities 1,934,257 1,657,530 1,626,323
- -----------------------------------------------------------------------------------------------------------
Loans 2,769,998 2,394,580 2,319,844
Less reserve for loan losses 52,393 45,148 44,959
- -----------------------------------------------------------------------------------------------------------
Net loans 2,717,605 2,349,432 2,274,885
- -----------------------------------------------------------------------------------------------------------
Premises and equipment, net 63,572 47,479 48,141
Accrued revenue receivable 52,738 46,020 39,384
Excess cost over fair value of net assets acquired
and core deposit premiums (net of accumulated
amortization: September 30, 1997 - $37,246;
December 31, 1996 - $30,758;
September 30, 1996 - $22,764) 70,180 28,276 29,517
Mortgage servicing rights 82,868 61,544 61,377
Real estate and other repossessed assets 5,187 4,576 5,084
Other assets 70,605 51,838 51,671
- -----------------------------------------------------------------------------------------------------------
Total assets $ 5,378,152 $ 4,620,700 $ 4,485,163
===========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits $ 834,272 $ 696,853 $ 724,094
Interest-bearing deposits:
Transaction 1,098,404 954,546 867,171
Savings 106,536 97,019 98,589
Time 1,552,894 1,508,337 1,546,092
- -----------------------------------------------------------------------------------------------------------
Total deposits 3,592,106 3,256,755 3,235,946
- -----------------------------------------------------------------------------------------------------------
Funds purchased and repurchase
agreements 735,868 669,176 573,004
Other borrowings 400,044 277,128 287,604
Accrued interest, taxes and expense 63,336 46,047 39,438
Other liabilities 22,249 11,628 15,987
Subordinated debenture 148,311 - -
- -----------------------------------------------------------------------------------------------------------
Total liabilities 4,961,914 4,260,734 4,151,979
- -----------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock 23 23 23
Common stock ($.00006 par value; 2,500,000,000
shares authorized; shares issued and outstanding
September 30, 1997 - 21,300,941; December 31, 1996
- 21,148,729; September 30, 1996 - 20,488,254) 1 1 1
Capital surplus 179,498 176,093 158,851
Retained earnings 229,574 182,892 185,163
Treasury stock (shares at cost: September 30, 1997 -
58,614; December 31, 1996 - 16,834; September (1,866) (428) (106)
30, 1996 - 4,733)
Unrealized loss on securities available for sale 9,013 1,472 (10,628)
Less notes receivable from exercise of stock options (5) (87) (120)
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 416,238 359,966 333,184
- -----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 5,378,152 $ 4,620,700 $ 4,485,163
===========================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>13
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In Thousands)
Preferred Stock Common Stock Capital Retained Treasury Stock Unrealized Notes
Shares Amount Shares Amount Surplus Earnings Shares Amount Gain(Loss) Receivable Total
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances atDecember
31, 1995 250,102 $ 23 20,416 $ 1 $157,395 $ 146,727 - $ - $ (2,427) $ (154) $ 301,565
Net income - - - - - 39,561 - - - - 39,561
Issuance of common stock
to Thrift Plan - - - - - - - - - - -
Exercise of stock
options - - 15 - 203 - 5 (106) - - 97
Payments on stock
option notes receivable - - - - - - - - - 34 34
Preferred dividends
paid in shares
of common stoc - - 51 - 1,125 (1,125) - - - - -
Director retainer
shares - - 6 - 128 - - - - - 128
Change in unrealizednet
gain(loss)on securities
available for sale - - - - - - - - (8,201) - (8,201)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1996 250,102 $ 23 20,488 $ 1 $158,851 $185,163 5 $ (106) $ 10,628) $ (120) $ 333,184
====================================================================================================================================
Balances at December
31, 1996 250,102 $ 23 21,149 $ 1 $176,093 $182,892 17 $ (428) $ 1,472 $ (87) $359,966
Net income - - - - - 47,807 - - - - 47,807
Issuance of common
stock to Thrift Plan - - 11 - 418 - - - - - 418
Exercise of stock
options - - 90 - 1,681 - 42 (1,438) - - 243
Payments on stock option
notes receivable - - - - - - - - - 82 82
Preferred dividends paid in
shares of common stock - - 45 - 1,125 (1,125) - - - - -
Director retainer shares - - 6 - 181 - - - - - 181
Change in unrealized net
gain(loss)on securities
available for sale - - - - - - - - 7,541 - 7,541
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at September
30, 1997 205,102 $ 23 21,301 $ 1 $179,498 $229,574 59 $(1,866) $ 9,013 $ (5) $416,238
====================================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>14
<TABLE>
====================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands Except Share Data)
Nine Months Ended
September 30,
--------------------------------------
1997 1996
--------------------------------------
<S> <C> <C>
Cash Flow From Operating Activities:
Net income $ 47,807 $ 39,561
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and repossessed real estate losses 5,526 3,910
Depreciation and amortization 22,915 16,914
Valuation adjustment of intangible assets - 3,821
Net amortization of security discounts and premiums 2,471 1,992
Net gain on sale of assets (6,373) (3,948)
Mortgage loans originated for resale (629,515) (535,934)
Proceeds from sale of mortgage loans held for resale 623,733 542,552
Increase in trading securities 3,899 3,762
(Increase) decrease in accrued revenue receivable (1,101) 1,737
(Decrease) in other assets (6,237) (13,986)
Increase in accrued interest, taxes and expense 11,434 7,167
Increase in other liabilities 3,404 5,340
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 77,963 72,888
- ----------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities:
Proceeds from maturities of investment securities 19,719 20,953
Proceeds from maturities of available for sale securities 175,812 190,850
Purchases of investment securities (36,038) (43,040)
Purchases of available for sale securities (895,237) (571,179)
Proceeds from sales of available for sale securities 623,003 304,391
Loans originated or acquired net or principal collected (233,098) (155,597)
Proceeds from sales of assets 9,943 31,795
Purchases of assets (58,107) (29,331)
Cash and cash equivalents of branches & subsidiaries
acquired and sold, net (1,240) (200)
- ----------------------------------------------------------------------------------------------------
Net cash used by investing activities (395,243) (251,358)
- ----------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net increase in demand deposits, transaction
deposits, money market deposits, and savings accounts 53,321 152,789
Net increase (decrease) in certificates of deposit (63,560) 145,447
Net increase (decrease) in other borrowings 189,318 (87,198)
Issuance of subordinated debenture 168,311 -
Payment on subordinated debenture (20,000) -
Issuance of preferred, common and treasury stock, net 842 225
Payments on stock option notes receivable 82 34
- ----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 328,314 211,297
- ----------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 11,034 32,827
Cash and cash equivalents at beginning of period 367,551 311,939
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 378,585 $ 344,766
====================================================================================================
Cash paid for interest $ 136,631 $ 121,873
- ----------------------------------------------------------------------------------------------------
Cash paid for taxes $ 14,988 $ 5,394
- ----------------------------------------------------------------------------------------------------
Net loans transferred to repossessed real estate
and other assets $ 1,702 $ 3,206
- ----------------------------------------------------------------------------------------------------
Payment of preferred stock dividends in common stock $ 1,125 $ 1,125
- ----------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accounting and reporting policies of BOK Financial Corporation conform to
generally accepted accounting principles and to 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. (formerly Citizens Bank of
Northwest Arkansas, N.A.), First National Bank of Park Cities, and First Texas
Bank. Certain prior period balances have been reclassified to conform with the
current period presentation.
(2) MORTGAGE BANKING ACTIVITIES
At September 30, 1997, BOk owned the rights to service 89,292 mortgage loans
with outstanding principal balances of $6.6 billion, including $208 million
serviced for BOk. The weighted average interest rate and remaining term was
7.71% and 282 months, respectively.
Activity in capitalized mortgage servicing rights and related valuation
allowance during the nine months ending September 30, 1997 is as follows:
<TABLE>
Capitalized Mortgage Servicing Rights
------------------------------------------------------------------------------------
Valuation
Purchased Originated Total Allowance Net
------------------ ------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 $ 57,256 $ 5,188 $ 62,444 $ (900) $ 61,544
Additions 21,330 3,379 24,709 - 24,709
Amortization expense (3,097) (288) (3,385) - (3,385)
- -------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1997 $ 75,489 $ 8,279 $ 83,768 $ (900) $ 82,868
===================================================================================================================
Estimated fair value of mortgage
servicing rights (1) $ 106,622 $ 14,655 $ 121,277 $ - $ 121,277
===================================================================================================================
(1) Excludes approximately $16.0 million of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
</TABLE>
(3) DISPOSAL OF AVAILABLE FOR SALE SECURITIES
Sales of available for sale securities for the nine months ending September 30,
1997 resulted in gains and losses as follows (in thousands):
Proceeds $ 623,003
Gross realized gains 2,025
Gross realized losses 1,154
Related federal and state
income tax expense (benefit) 279
<PAGE>16
(4) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, BOKF will be required to change the method currently used to
compute earnings per share and to restate for all periods presented. This new
standard requires the disclosure of basic earnings per share and diluted
earnings per share in place of primary and fully diluted earnings per share. The
pro forma results of applying FAS 128 to the third quarter of 1997 are basic
earnings per share of $0.75 and diluted earnings per share of $0.67, and for the
nine month period ending September 30, 1997 are basic earnings per share of
$2.20 and diluted earnings per share of $1.97.
(5) SHAREHOLDERS' EQUITY
On October 28, 1997, 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 November 26, 1997 to shareholders of record on November 17, 1997.
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 November 26, 1997, earnings per share will be restated as follows:
Fully Diluted Earnings Per Share:
As Reported Restated
1996: ------------- -----------
1st Quarter $ .54 $ .52
2nd Quarter .56 .55
3rd Quarter .54 .52
4th Quarter .60 .58
Year Ended December 31 2.23 2.17
1997: 1st Quarter $ .63 $ .61
2nd Quarter .66 .64
3rd Quarter .67 .65
Nine Months Ended September 30 1.95 1.89
(6) CONTINGENT LIABILITIES
In the ordinary course of business, BOK Financial and its subsidiaries are
subject to legal actions and complaints. Management believes, based upon the
opinion of counsel, that the actions and liability or loss, if any, resulting
from the final outcomes of the proceedings, will not be material in the
aggregate.
BOk has been sued in the United States District Court for the Northern District
of Oklahoma by the holder of a mortgage serviced by BOk Mortgage. The plaintiff
alleges that BOk required the mortgagor to maintain an escrow balance in excess
of the amount permitted by the mortgage. The plaintiff seeks to have the action
certified as a class action. The action was conditionally transferred to the
Multi-District Litigation docket, but the Multi-District Litigation Panel
returned the action to the Northern District of Oklahoma. The plaintiff alleges
breach of contract, breach of fiduciary duty, and violation of the Racketeer
Influenced and Corrupt Organizations Act and seeks treble damages. No discovery
has been conducted in the action and amount in controversy is unknown.
Management has been advised by counsel that, based upon the limited
investigation done to date, BOk has valid defenses to the plaintiffs' claims.
<PAGE>17
<TABLE>
==============================================================================================================================
NINE MONTH FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands Except Share Data)
For Nine months ended
--------------------------------------------------------------------------------------
September 30, 1997 September 30, 1996
------------------------------------------- --------------------------------------
Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable securities $ 1,559,891 $ 72,714 6.23% $ 1,287,248 $ 58,323 6.05%
Tax-exempt securities(1) 348,264 19,766 7.59 280,937 15,679 7.45
- ------------------------------------------------------------------------------------------------------------------------------
Total securities 1,908,155 92,480 6.48 1,568,185 74,002 6.30
- ------------------------------------------------------------------------------------------------------------------------------
Trading securities 4,307 193 5.99 5,507 267 6.48
Funds sold 52,556 2,268 5.77 30,540 1,274 5.57
Loans(1)(2) 2,542,871 166,360 8.75 2,226,103 146,124 8.77
Less reserve for loan losses 49,049 40,938
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 2,493,822 166,359 8.92 2,185,165 146,124 8.93
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 4,458,840 261,301 7.84 3,789,397 221,667 7.81
- ------------------------------------------------------------------------------------------------------------------------------
Cash and other assets 566,612 465,002
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 5,025,452 $ 4,254,399
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity
Transaction deposits $ 1,029,834 24,625 3.20 $ 834,032 20,657 3.31
Savings deposits 107,015 1,771 2.21 102,838 1,868 2.43
Other time deposits 1,558,068 64,547 5.54 1,562,335 65,686 5.62
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,694,917 90,943 4.51 2,499,205 88,211 4.71
- ------------------------------------------------------------------------------------------------------------------------------
Other borrowings 1,101,228 47,571 5.78 763,561 32,320 5.65
Subordinated debenture 36,102 1,727 6.40 - - -
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing 3,832,247 140,241 4.89 3,262,766 120,531 4.93
liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Demand deposits 742,409 616,914
Other liabilities 69,210 59,562
Shareholders' equity 381,586 315,157
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' $ 5,025,452 $ 4,254,399
equity
=============================================================================================================================
Tax-Equivalent Net Interest Revenue(1) 121,060 2.95 101,136 2.88
Tax-Equivalent Net Interest Revenue (1)
To Earning Assets 3.63 3.57
Less tax-equivalent adjustment(1) 7,172 5,941
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue 113,888 95,195
Provision for loan losses 5,526 3,910
Other operating revenue 96,178 77,778
Other operating expense 133,889 120,713
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 70,651 48,350
Federal and state income tax 22,844 8,789
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 47,807 $ 39,561
==============================================================================================================================
Earnings Per Share:
Net Income
Primary $ 2.16 $ 1.81
- ------------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 1.95 $ 1.64
- ------------------------------------------------------------------------------------------------------------------------------
(1) Tax equivalent at the statutory federal and state rates for the periods
presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
</TABLE>
<PAGE>18
<TABLE>
==============================================================================================================================
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands Except Share Data)
For Three months ended
--------------------------------------------------------------------------------------
September 30, 1997 June 30, 1997
------------------------------------------- --------------------------------------
Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable securities $ 1,560,418 $ 24,354 6.19% $ 1,634,264 $ 25,793 6.33%
Tax-exempt securities(1) 360,461 6,764 7.44 344,558 6,572 7.65
- ------------------------------------------------------------------------------------------------------------------------------
Total securities 1,920,879 31,118 6.43 1,978,822 32,365 6.56
- ------------------------------------------------------------------------------------------------------------------------------
Trading securities 3,583 53 5.87 5,552 83 6.00
Funds sold 49,645 740 5.91 57,072 817 5.74
Loans(2) 2,676,237 59,063 8.76 2,535,264 55,850 8.84
Less reserve for loan losses 51,165 49,164
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 2,625,072 59,063 8.93 2,486,100 55,850 9.01
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 4,599,179 90,974 7.85 4,527,546 89,115 7.89
- ------------------------------------------------------------------------------------------------------------------------------
Cash and other assets 590,260 576,578
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 5,189,439 $ 5,104,124
==============================================================================================================================
Liabilities And Shareholders' Equity
Transaction deposits $ 1,067,895 8,290 3.08 $ 1,032,622 8,348 3.24
Savings deposits 108,104 603 2.21 109,349 604 2.22
Other time deposits 1,533,191 21,489 5.56 1,576,211 21,625 5.50
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,709,190 30,382 4.45 2,718,182 30,577 4.51
- ------------------------------------------------------------------------------------------------------------------------------
Other borrowings 1,159,005 17,203 5.89 1,151,971 16,700 5.81
Subordinated debenture 81,395 1,305 6.36 20,000 326 6.45
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 3,949,590 48,890 4.91 3,890,153 47,603 4.91
- ------------------------------------------------------------------------------------------------------------------------------
Demand deposits 761,578 776,405
Other liabilities 75,732 63,664
Shareholders' equity 402,539 373,902
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 5,189,439 $ 5,104,124
==============================================================================================================================
Tax-Equivalent Net Interest Revenue (1) 42,084 2.94 41,512 2.98
Tax-Equivalent Net Interest Revenue (1)
To Earning Assets 3.63 3.68
Less tax-equivalent adjustment (1) 2,426 2,344
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue 39,658 39,168
Provision for loan losses 3,000 1,500
Other operating revenue 34,315 31,411
Other operating expense 46,720 45,443
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 24,253 23,636
Federal and state income tax 7,857 7,572
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 16,396 $ 16,064
==============================================================================================================================
Earnings Per Share:
Net Income
Primary $ 0.74 $ 0.73
- ------------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 0.67 $ 0.66
- ------------------------------------------------------------------------------------------------------------------------------
(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.
</TABLE>
<PAGE>19
<TABLE>
======================================================================================================================
For Three months ended
- ----------------------------------------------------------------------------------------------------------------------
March 30, 1997 December 31, 1996 September 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
Average Revenue/ Yield Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate Balance Expense(1) /Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,484,137 $ 22,861 6.25% $ 1,326,104 $ 20,042 6.01% $ 1,281,588 $ 19,610 6.09%
339,542 6,135 7.33 330,195 6,129 7.38 315,844 5,920 7.46
- ----------------------------------------------------------------------------------------------------------------------
1,823,679 28,996 6.45 1,656,299 26,171 6.29 1,597,432 25,530 6.36
- ----------------------------------------------------------------------------------------------------------------------
3,790 58 6.21 3,870 72 7.40 4,116 73 7.06
50,967 711 5.66 24,949 356 5.68 21,040 298 5.63
2,414,234 51,446 8.64 2,329,981 50,414 8.61 2,254,863 49,173 8.68
46,771 - - 45,455 - -- 43,510 - -
- ----------------------------------------------------------------------------------------------------------------------
2,367,463 51,446 8.81 2,284,526 50,414 8.78 2,211,353 49,173 8.85
- ----------------------------------------------------------------------------------------------------------------------
4,245,899 81,211 7.76 3,969,644 77,013 7.72 3,833,941 75,074 7.79
- ----------------------------------------------------------------------------------------------------------------------
532,386 475,824 469,575
- ----------------------------------------------------------------------------------------------------------------------
$ 4,778,285 $ 4,445,468 $ 4,303,516
======================================================================================================================
$ 988,110 7,987 3.28 $ 891,053 7,678 3.43 $ 864,904 7,411 3.41
103,542 564 2.21 96,609 595 2.45 101,328 616 2.42
1,565,153 21,433 5.55 1,533,447 21,582 5.60 1,548,832 21,757 5.59
- ----------------------------------------------------------------------------------------------------------------------
2,656,805 29,984 4.58 2,521,109 29,855 4.71 2,515,064 29,784 4.71
- ----------------------------------------------------------------------------------------------------------------------
990,944 13,668 5.59 887,502 12,707 5.70 780,037 11,160 5.69
6,000 96 6.40 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------
3,653,749 43,748 4.86 3,408,611 42,562 4.97 3,295,101 40,944 4.94
- ----------------------------------------------------------------------------------------------------------------------
688,440 633,441 631,981
68,159 60,023 53,609
367,937 343,393 322,825
- ----------------------------------------------------------------------------------------------------------------------
$ 4,778,285 $ 4,445,468 $ 4,303,516
======================================================================================================================
37,463 2.90 34,451 2.75 34,130 2.85
3.58 3.45 3.54
2,401 2,207 2,184
- ----------------------------------------------------------------------------------------------------------------------
35,062 32,244 31,946
1,026 357 62
30,452 27,534 27,228
41,726 38,315 40,297
- ----------------------------------------------------------------------------------------------------------------------
22,762 21,106 18,815
7,415 6,540 5,840
- ----------------------------------------------------------------------------------------------------------------------
$ 15,347 $ 14,566 $ 12,975
======================================================================================================================
$ 0.70 $ 0.66 $ 0.59
- ----------------------------------------------------------------------------------------------------------------------
$ 0.63 $ 0.60 $ 0.54
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>20
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
No. 27 Financial Data Schedule filed herewith electronically.
(B) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
September 30, 1997.
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: November 13, 1997 /s/ James A. White
------------------ -------------------
James A. White
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the BOK
Financial Corporation's 10-Q for the period ended September 30, 1997 and is
qualified in its entiriety by reference to such financial statements.
</LEGEND>
<CIK> 0000875357
<NAME> BOK FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 340,635
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 37,850
<TRADING-ASSETS> 2,555
<INVESTMENTS-HELD-FOR-SALE> 1,719,554
<INVESTMENTS-CARRYING> 214,703
<INVESTMENTS-MARKET> 214,980
<LOANS> 2,769,998
<ALLOWANCE> 52,393
<TOTAL-ASSETS> 5,378,152
<DEPOSITS> 3,592,106
<SHORT-TERM> 1,133,515
<LIABILITIES-OTHER> 85,585
<LONG-TERM> 150,708
0
23
<COMMON> 1
<OTHER-SE> 416,214
<TOTAL-LIABILITIES-AND-EQUITY> 5,378,152
<INTEREST-LOAN> 166,222
<INTEREST-INVEST> 85,446
<INTEREST-OTHER> 2,461
<INTEREST-TOTAL> 254,129
<INTEREST-DEPOSIT> 90,943
<INTEREST-EXPENSE> 140,241
<INTEREST-INCOME-NET> 113,888
<LOAN-LOSSES> 5,526
<SECURITIES-GAINS> 871
<EXPENSE-OTHER> 133,889
<INCOME-PRETAX> 70,651
<INCOME-PRE-EXTRAORDINARY> 70,651
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,807
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 1.95
<YIELD-ACTUAL> 3.63
<LOANS-NON> 23,182
<LOANS-PAST> 20,551
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 64,049
<ALLOWANCE-OPEN> 45,148
<CHARGE-OFFS> 5,177
<RECOVERIES> 4,371
<ALLOWANCE-CLOSE> 52,393
<ALLOWANCE-DOMESTIC> 52,393
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
