As filed with the Securities and Exchange Commission on March 27, 1997
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1996 Commission File No. 0-19341
BOK FINANCIAL CORPORATION
Incorporated in the State I.R.S. Employer Identification
of Oklahoma No.73-1373454
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
Registrant's Telephone Number,
Including Area Code (918) 588-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT: (NONE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
COMMON STOCK ($.00006 Par Value)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-X is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $117,691,489 as of February 28, 1997.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 21,161,789 shares of
common stock ($.00006 par value) as of February 28, 1997.
List hereunder the following documents if incorporated by reference and the
part of Form 10-K in which the document is incorporated:
Part I - Annual Report to Shareholders For Fiscal Year Ended December 31,
1996 (designated portions only)
Part II - Annual Report to Shareholders For Fiscal Year Ended December 31,
1996 (designated portions only)
Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for
April 29, 1997 (designated portions only)
Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31,
1996 (designated portions only)
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<PAGE> 1
BOK FINANCIAL CORPORATION
FORM 10-K ANNUAL REPORT
INDEX
ITEM PAGE
PART I
1. Business 2
2. Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 7
6. Selected Financial Data 8
7. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
8. Financial Statements and Supplementary Data 8
9. Changes in and Disagreements with Accountants on Accounting and 8
Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 8
11. Executive Compensation 8
12. Security Ownership of Certain Beneficial Owners and Management 8
13. Certain Relationships and Related Transactions 8
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 9-13
Signatures 14
<PAGE> 2
PART I
ITEM 1 - BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
BOK Financial Corporation ("BOK Financial") was incorporated under the laws of
the State of Oklahoma on October 24, 1990. Active operations as a bank holding
company commenced on June 7, 1991 with the acquisition of the preferred stock
("BOk Preferred Stock") of Bank of Oklahoma, National Association ("BOk") from
the Federal Deposit Insurance Corporation ("FDIC") and the conversion of the BOk
Preferred Stock into 99.99% of the common stock of BOk. BOK Financial is
regulated by the Board of Governors of the Federal Reserve System pursuant to
the Bank Holding Company Act of 1956, as amended ("BHCA").
BOK Financial operates primarily through BOk, BOk's subsidiaries and Citizens
Bank of Northwest Arkansas, National Association ("CBNWA"). The existing and
future activities of BOK Financial and its subsidiaries are limited by the BHCA,
which prohibits a bank holding company from engaging in any business other than
banking, managing or controlling banks, and furnishing and performing certain
bank-related services and activities.
Shares disclosed in the following transactions have not been restated for
subsequent stock dividends.
On June 7, 1991, BOK Financial paid $60.75 million to the FDIC for the BOk
Preferred Stock. To finance this acquisition, BOK Financial issued preferred
stock totaling $15.0 million at $6.00 per share and common stock ("Common
Stock") totaling $46.0 million at $5.75 per share to George B. Kaiser
("Kaiser"), BOK Financial's principal shareholder. Kaiser purchased an
additional $10.0 million of BOK Financial Common Stock at $5.75 per share, and
BOK Financial contributed the $10.0 million to BOk as additional capital. Per
share amounts reflect a 1-for-100 reverse stock split effective December 17,
1991 ("reverse stock split").
Following a bidding process conducted by the Resolution Trust Corporation
("RTC"), BOK Financial, through the mortgage banking subsidiary of BOk,
BancOklahoma Mortgage Corp. ("BOMC"), acquired on June 10, 1991 approximately
$1.0 billion of mortgage servicing rights and certain other assets of Maxim
Mortgage Corporation ("Maxim"). Maxim was formerly a subsidiary of Sooner
Federal Savings and Loan Association, which had failed and had been placed under
the control of the RTC.
Also following a bidding process by the RTC, BOK Financial acquired on August 9,
1991 certain assets and assumed certain liabilities, primarily deposits, of
eight branches of Continental Federal Savings and Loan Association of Oklahoma
City, Oklahoma. BOK Financial assumed deposits of approximately $214.5 million
and paid the RTC a premium of $4.1 million. Kaiser acquired an additional $20.0
million of BOK Financial's Common Stock at $5.75 per share (after effect of the
reverse stock split), and BOK Financial contributed the $20.0 million to BOk to
facilitate the purchase.
On March 27, 1992, CBNWA acquired certain assets and assumed the deposits and
certain obligations of two branches of the failed Home Federal Savings & Loan
Association from the RTC for $1.1 million.
On July 16, 1992, Bank of Oklahoma, N.A., South, an unconsolidated banking
subsidiary, was merged into BOk.
On November 13, 1992, BOK Financial purchased Southwest Trustcorp, Inc. and its
subsidiary, The Trust Company of Oklahoma, Oklahoma City, in exchange for
400,000 shares of Common Stock valued at $4.6 million.
On December 31, 1992, BOK Financial acquired certain assets and assumed $502.9
million of deposits and other liabilities of 19 branches of the Sooner Division
of First Gibraltar Bank, FSB of Irving, Texas for a purchase price of $16.5
million.
On May 7, 1993, BOK Financial issued 343,295 common shares valued at $6.9
million and paid $3.9 million to acquire Sand Springs Bancshares, Inc. and its
subsidiary, Sand Springs State Bank.
Also on May 7, 1993, BOK Financial issued 1,183,691 common shares to acquire
Brookside Bancshares, Inc. and its subsidiary, Brookside State Bank, in a
pooling-of-interests transaction. Financial information of BOK Financial for
1992 and 1991 has been restated to reflect this acquisition.
On October 9, 1993, BOK Financial acquired certain assets and assumed the
deposits and certain obligations of two branches of the failed Heartland Federal
Savings & Loan Association from the FDIC for $5.1 million.
On May 2, 1994, BOK Financial acquired Plaza National Bank, Bartlesville,
Oklahoma for $11.7 million.
On June 13, 1994, BOK Financial acquired Texas Commerce Trust Company - Sherman,
National Association, Sherman, Texas, a national association limited to trust
powers only, for $6.1 million.
<PAGE> 3
On October 7, 1994, BOK Financial acquired Northwest Bank of Enid, Enid,
Oklahoma for $8.2 million.
On November 14, 1994, BOK Financial issued 1,380,017 common shares to acquire
Citizens Holding Company and its subsidiaries, Citizens Bank of Muskogee and
Citizens Bank of Northwest Arkansas, in a pooling-of-interests. Financial
information of BOK Financial for 1993 and 1992 has been restated to reflect this
acquisition.
On February 12, 1997, BOK Financial acquired Park Cities Bancshares, Inc. and
its subsidiary, First National Bank of Park Cities, in Dallas, Texas for $50.0
million.
On March 4, 1997, BOK Financial acquired First TexCorp., Inc. and its
subsidiary, First Texas Bank, in Dallas, Texas for $39.3 million.
Developments relating to individual aspects of the business of BOK Financial are
described under "Narrative Description of Business" and "Services Offered" on
pages 3 and 4 of this report. Additional discussion of BOK Financial's
activities during the current year is incorporated by reference to "Management's
Assessment of Operations and Financial Condition" (pages 6 - 18) in BOK
Financial's 1996 Annual Report to Shareholders. Additional information regarding
BOK Financial's acquisitions is incorporated by reference to Note 2 of "Notes to
Consolidated Financial Statements" (page 28 ) in BOK Financial's 1996 Annual
Report to Shareholders.
NARRATIVE DESCRIPTION OF BUSINESS
BOK Financial is a bank holding company, and as such, its activities are limited
by the BHCA to banking, certain bank-related services and activities, and
managing or controlling banks. BOK Financial's banking and bank-related
activities are primarily performed through BOk and CBNWA; nonbank subsidiary
operations are not significant. As of December 31, 1996, BOK Financial and its
subsidiaries had 2,102 full-time equivalent employees. Following is a
description of the more significant services offered by BOK Financial and the
competitive and regulatory environments in which it operates.
SERVICES OFFERED
COMMERCIAL BANKING SERVICES
BOK Financial, through BOk and CBNWA, provides a wide range of financial
services to commercial and industrial customers, including depository, lending
and other financial services such as cash management, leasing and international
collections. The loan portfolio is comprised primarily of real estate and
commercial loans. The commercial loan portfolio is diversified and distributed
among various commercial and industrial customers, including energy-related,
manufacturing, trade and service industries.
CORRESPONDENT BANKING SERVICES
BOK Financial provides a broad range of financial services to banks, savings and
loans, credit unions and other financial institutions in Oklahoma and
surrounding states. BOK Financial works closely with community financial
institutions, assisting them in satisfying the demands of their customers and
trade areas by engaging in loan participations and providing other financial
services.
CONSUMER BANKING SERVICES
At December 31, 1996, BOk had 65 banking locations, with 45 locations in the
Tulsa and Oklahoma City areas. CBNWA had 4 locations in northwest Arkansas.
Services offered include deposit accounts, installment loans, student loans,
bank card accounts, personal lines of credit, debit cards, an automated 24-hour
telephone loan application service, a 24-hour telephone branch and telephone and
personal computer based bill paying services New services planned for 1997
include interactive video kiosks for consumer lending and other transactions.
The BancOklahoma Investment Center makes available, through representatives in
most BOk branches, a full range of mutual funds, annuities and securities.
TransFund, BOk's network of automated teller machines, consists of 635 locations
across Oklahoma, Arkansas, southwest Missouri, northern Texas and southern
Kansas.
INVESTMENT AND MONEY MARKET ACTIVITIES
BOk provides securities brokerage, and trading services for corporations,
governmental units, individual customers and correspondent banks. Securities
include money market instruments, U.S. Government and municipal bonds, corporate
stocks and bonds, and mutual funds. The public finance department provides
bank-elegible underwriting financial advisory, private placement and
term-financing services for governmental and corporate entities. BOK Financial
recently announced its entrance into merchant banking which will provide a broad
range of financial services outside those traditionally associated with banking,
including financial advisory
<PAGE> 4
services to both public and corporate sectors, leasing and mezzanine financing,
and underwriting of municipal revenue bonds, mortgage backed debt, consumer
receivables, and commercial paper.
MORTGAGE BANKING
BOMC, through its own locations as well as BOk's branch network, offered a full
array of mortgage options from federally sponsored programs to "jumbo loans" on
higher priced houses. BOMC is the largest originator of mortgage loans in
Oklahoma and has a servicing portfolio of approximately $5.9 billion, including
$243 million serviced for BOk. Effective January 1, 1997, these mortgage banking
activities were transferred to BOk.
TRUST AND ASSET MANAGEMENT SERVICES
BOk's trust subsidiaries (BancOklahoma Trust Company ("BOTC") in Oklahoma and
Alliance Trust Company N.A. in Texas) offer a variety of services to both
corporate and individual customers in Oklahoma and Texas. Individual financial
trust services include personal trust management, administration of estates and
management of individual investment and custodial accounts. For corporate
clients, the services include management, administration and recordkeeping of
pension plans, thrift plans, 401(k) plans and master trust plans, including a
state-of-the-art system for employee benefit plan recordkeeping. BOk's trust
division also serves as transfer agent and registrar for corporate securities,
paying agent for municipalities and governmental agencies and indenture trustee
of bond issues. BOTC serves as an investment advisor to the American Performance
Funds, a family of proprietary mutual funds distributed by the Winsbury Company
of Columbus, Ohio. At December 31, 1996, trust subsidiaries were responsible for
approximately $7.5 billion in assets. Effective March 22, 1997, BOTC was merged
into BOk.
FOREIGN OPERATIONS
BOK Financial does not engage in operations in foreign countries, nor does it
lend to foreign governments.
COMPETITION
The banking industry in Oklahoma is highly competitive. BOK Financial competes
with other banks in obtaining deposits, making loans and providing additional
services related to banking. There are approximately 332 banks located in
Oklahoma, of which approximately 38 are located in the Tulsa County and
surrounding metropolitan area and approximately 55 are located in the Oklahoma
County and surrounding metropolitan area. BOK Financial is also in competition
with other businesses engaged in extending credit or accepting deposits, such as
major retail establishments, major brokerage firms, savings and loan
associations, credit unions, finance companies, small loan companies, insurance
companies and loan production offices of major banks located within and outside
Oklahoma.
Limited branch banking as permitted in Oklahoma is increasing competition.
Generally, a bank may establish two new branch offices within the town or city
where the bank is located or in nearby areas not already served by a bank or
branch, and may acquire an unlimited number of existing banks and convert them
and their branches into branch offices. Within its primary markets, BOk has 23
locations in the Tulsa area and 22 locations in the Oklahoma City area, the
state's largest financial markets. Subject to regulatory approval, BOk is
considering various locations for additional facilities. Like BOk, other banks
are taking advantage of the bank branching laws to establish additional
facilities. These additional banking offices are further increasing competition.
Limited branch banking is, on the other hand, permitting banks to compete more
effectively with savings and loan associations, credit unions and other
financial institutions that may establish offices more freely than banks, some
of which are not subject to comparable regulatory restrictions on their
activities.
Oklahoma also permits the acquisition of an unlimited number of wholly-owned
bank subsidiaries so long as aggregate deposits at the time of acquisition in a
multibank holding company do not exceed 12.25% of all deposits in Oklahoma
financial institutions insured by the federal government, exclusive of credit
union deposits. Based on the latest statistical data available (as of June 30,
1996), BOK Financial could acquire additional bank subsidiaries so long as the
aggregate deposits of all Oklahoma subsidiaries do not exceed approximately $4.1
billion. Deposits of BOk were $3.1 billion and $3.2 billion at June 30, and
December 31, 1996, respectively.
Oklahoma also permits out-of-state bank holding companies to acquire banks and
bank holding companies located in the state and, subject to certain limitations,
make additional acquisitions within the state. During the last few years the
Oklahoma banking industry has been consolidated into fewer but larger banks. In
1996, two "super-regional" holding companies announced significant acquisitions
in Oklahoma. The consolidation over the past several years has brought about a
highly competitive environment, in which many customers have access to national
and regional financial institutions for many products and services.
<PAGE> 5
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Riegle-Neal") was signed into law. In summary,
commencing one year after passage, qualifying bank holding companies will be
permitted to acquire banks in any state. As of June 1, 1997, qualifying banks
may be able to engage in interstate branching by merging banks in different
states. States " opt-out" of interstate branching by enacting specific
legislation prior to June 1, 1997, in which case out-of-state banks would
generally not be able to branch into that state, and banks headquartered in that
state would not be permitted to branch into other states. States may also opt
into interstate branching earlier than 1997 with specific legislation. The law
imposes a 10% nationwide deposit cap and a 30% state deposit cap; however, the
states' authority is preserved to impose a lower, nondiscriminatory deposit cap.
Oklahoma elected to "opt-in" to interstate branching effective May 1997 and
established a 12.25% deposit cap. It is anticipated that the total number of
Oklahoma banks may decrease and national and regional bank presence in the state
may increase. Over the near-term, these changes are expected to increase
competition with a greater number of products and services available to Oklahoma
customers. Over the long-term, the number of competitors could decrease,
depending on the extent of consolidations nationwide, but competition could
continue to increase as a result of the remaining institutions needing to be
stronger, more innovative and more aggressive to retain a significant presence
in a consolidated environment.
Additional legislation, judicial and administrative decisions also may affect
the ability of banks to compete with each other as well as with other
businesses. These statutes and decisions may tend to make the operations of
various financial institutions more similar and increase competition among banks
and other financial institutions or limit the ability of banks to compete with
other businesses. Management currently cannot predict whether and, if so, when
any such changes might occur or the impact any such changes would have upon the
income or operations of BOK Financial or its subsidiaries, or upon the Oklahoma
regional banking environment.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both federal
and state law. The following information, to the extent it describes statutory
or regulatory provisions, is qualified in its entirety by reference to the
particular statutory and regulatory provisions. It is not possible to predict
the changes, if any, that may be made to existing banking laws and regulations
or whether such changes, if made, would have a materially adverse effect on the
business and prospects of BOK Financial, BOk and CBNWA.
BOK FINANCIAL
As a bank holding company, BOK Financial is subject to regulation under the BHCA
and to supervision by the Board of Governors of the Federal Reserve System (the
"Reserve Board"). Under the BHCA, BOK Financial is required to file with the
Reserve Board an annual report and such other additional information as the
Reserve Board may require. The Reserve Board may also make examinations of BOK
Financial and its subsidiaries.
The BHCA requires the prior approval of the Reserve Board in any case where a
bank holding company proposes to acquire control of more than five percent of
the voting shares of any bank, unless it already controls a majority of such
voting shares. Additionally, approval must also be obtained before a bank
holding company may acquire all or substantially all of the assets of another
bank or before it may merge or consolidate with another bank holding company.
The BHCA further provides that the Reserve Board shall not approve any such
acquisition, merger or consolidation that will substantially lessen competition,
tend to create a monopoly or be in restraint of trade, unless it finds the
anti-competitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served.
The BHCA presently prohibits the Reserve Board from approving an application
from a bank holding company to acquire shares of a bank located outside the
state in which the operations of the holding company's banking subsidiaries are
principally conducted, unless such an acquisition is specifically authorized by
statute of the state in which the bank whose shares are to be acquired is
located, but Riegle-Neal permits interstate banking as of September 29, 1995, as
discussed above in "Competition".
The BHCA also prohibits a bank holding company, with certain exceptions, from
acquiring more than five percent of the voting shares of any company that is not
a bank and from engaging in any business other than banking or managing or
controlling banks. Under the BHCA, the Reserve Board is authorized to approve
the ownership of shares by a bank holding company in any company whose
activities the Reserve Board has determined to be so closely related to banking
or to managing or controlling banks as to be a proper incident thereto. In
making such determinations, the Reserve Board weighs the Community Reinvestment
Act activities of the bank holding company and the expected benefit to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include operating a mortgage company, finance company, credit card
company
<PAGE> 6
or factoring company; performing certain data processing operations; servicing
loans and other extensions of credit; providing investment and financial advice;
acting as an insurance agent for certain types of credit-related insurance;
owning and operating savings and loan associations; and leasing personal
property on a full-payout, nonoperating basis.
A bank holding and its subsidiaries are further prohibited under the BHCA from
engaging in certain tie-in arrangements in connection with the provision of any
credit, property or services. Thus, a subsidiary of a bank holding company may
not extend credit, lease or sell property, furnish any services or fix or vary
the consideration for these activities on the condition that (1) the customer
obtain or provide some additional credit, property or services from or to the
bank holding company or any subsidiary thereof or (2) the customer may not
obtain some other credit, property or services from a competitor, except to the
extent reasonable conditions are imposed to insure the soundness of credit
extended.
The Federal Deposit Insurance Corporation Improvement Act of 1991 established
five capital rating tiers ranging from "well capitalized" to "critically
undercapitalized". A financial institution is considered to be well capitalized
if its Leverage, Tier 1 and Total Capital ratios are at 5%, 6% and 10%,
respectively. Any institution experiencing significant growth or acquiring other
institutions or branches is expected to maintain capital ratios above the well
capitalized level. At December 31, 1996, BOK Financial's Leverage, Tier 1 and
Total Capital ratios were 7.46%, 10.49% and 11.74%, respectively.
BOK AND CBNWA
BOk and CBNWA are national banking associations and are subject to the National
Banking Act and other federal statutes governing national banks. Under federal
law, the Office of the Comptroller of the Currency ("Comptroller") charters,
regulates and serves as the primary regulator of national banks. In addition,
the Comptroller must approve certain corporate or structural changes, including
an increase or decrease in capitalization, payment of dividends, change of place
of business, establishment of a branch and establishment of an operating
subsidiary. The Comptroller performs its functions through national bank
examiners who provide the Comptroller with information concerning the soundness
of a national bank, the quality of management and directors, and compliance with
applicable laws, rules and regulations. The National Banking Act authorizes the
Comptroller to examine every national bank as often as necessary. Although the
Comptroller has primary supervisory responsibility for national banks, such
banks must also comply with Reserve Board rules and regulations as members of
the Federal Reserve System.
CBNWA is also subject to certain consumer-protection laws incorporated in the
Arkansas Constitution, which, among other restrictions, limit the maximum
interest rate on general loans to five percent above the Federal Reserve
Discount Rate. The rate on consumer loans is five percent above the discount
rate or seventeen percent, whichever is lower.
BOk and CBNWA are insured by the FDIC and are required to pay certain fees and
premiums to the Bank Insurance Fund ("BIF"). The BIF has implemented a
risk-related insurance system for determining premiums to be paid by a bank.
Each bank is placed in one of nine risk categories based on its level of capital
and supervisory rating with the well-capitalized banks with the highest
supervisory rating paying a premium of 0.00% of deposits and the critically
undercapitalized banks paying up to 0.27% of deposits. Also, approximately 21%
of BOK Financial's total deposits at December 31, 1996 were acquired through
Oakar transactions and are insured through the Savings Association Insurance
Fund ("SAIF"). The Deposit Insurance Funds Act of 1996 was enacted on September
30, 1996, which recapitalized the SAIF and implemented a risk-related insurance
system identical to the BIF system discussed above. In addition, the Deposit
Insurance Fund Act of 1996 implemented an additional assessment on BIF and SAIF
deposits, the Financing Corporation ("FICO") Quarterly Payment, which is not
tied to the BIF risk classification. The FICO BIF annual rate is 1.296 basis
points and the FICO SAIF annual rate is 6.48 basis points.
Applicable federal statutes and regulations require national banks to meet
certain leverage and risk-based capital requirements. At December 31, 1996,
BOk's and CBNWA's leverage and risk-based capital ratios were well above the
required minimum ratios.
<PAGE> 7
GOVERNMENTAL POLICIES AND ECONOMIC FACTORS
The operations of BOK Financial and its subsidiaries are affected by legislative
changes and by the policies of various regulatory authorities and, in
particular, the credit policies of the Reserve Board. An important function of
the Reserve Board is to regulate the national supply of bank credit. Among the
instruments of monetary policy used by the Reserve Board to implement its
objectives are: open market operations in U.S. Government securities; changes in
the discount rate on bank borrowings; and changes in reserve requirements on
bank deposits. The effect of such policies in the future on the business and
earnings of BOK Financial and its subsidiaries cannot be predicted with
certainty.
The Oklahoma economy, BOK Financial's primary market, continues to generate job
growth. Certain economic indicators show that employment growth within the state
has now exceeded U.S. employment growth for fifteen consecutive months, although
wage and salary growth in Oklahoma only slightly exceeded the growth rate
observed nationally. With Oklahoma's economy tied more closely with the national
economy than in the past, a downturn in the national economy could have an
adverse impact on BOK Financial's financial position and results of operations.
ITEM 2 - PROPERTIES
BOK Financial, through BOk, BOk's subsidiaries and CBNWA, owns improved real
estate that was carried at $31.0 million, net of depreciation and amortization,
as of December 31, 1996. BOK Financial conducts its operations through a total
of 65 banking and 4 nonbanking locations in Oklahoma, 4 banking locations in
Arkansas and 2 nonbanking locations in Texas as of December 31, 1996. BOk's
facilities are suitable for their respective uses and present needs.
The information set forth in Notes 6 and 13 of "Notes to Consolidated Financial
Statements" (pages 32 and 38, respectively) of BOK Financial's 1996 Annual
Report to Shareholders provides further discussion related to properties and is
incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended December 31,
1996.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
BOK Financial's $.00006 par value common stock is traded over-the-counter and is
reported on the facilities of the National Association of Securities Dealers
Automated Quotation system ("NASDAQ"), with the symbol BOKF. At December 31,
1996, common shareholders of record numbered 1,674 with 21,131,895 shares
outstanding.
During 1996, BOK Financial declared a 3% stock dividend in respect of its Common
Stock payable in shares of Common Stock. The dividend was payable on November
27, 1996 to shareholders of record on November 18, 1996. BOK Financial's
quarterly market information follows:
First Second Third Fourth
--------------- -------------- -------------- ---------------
1996:
Low $19.25 $20.00 $21.25 $23.25
High 23.25 22.75 23.75 28.00
1995:
Low $19.75 $20.25 $21.50 $19.00
High 22.25 22.75 25.25 24.50
<PAGE> 8
The information set forth under the captions "Table 1 - Consolidated Selected
Financial Data" (page 5), "Table 5 - Selected Quarterly Financial Data" (page
11) and Note 15 of "Notes to Consolidated Financial Statements" (page 39) of BOK
Financial's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Table 1 - Consolidated Selected
Financial Data" (page 5) of BOK Financial's 1996 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the captions "Management's Assessment of
Operations and Financial Condition" (pages 6 - 18), "Annual Financial Summary -
Unaudited" (pages 44 - 45) and "Quarterly Financial Summary -Unaudited" (pages
46 - 47) of BOK Financial's 1996 Annual Report to Shareholders is incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary data regarding quarterly results of operations set forth under
the caption "Table 5 Selected Quarterly Financial Data" (page 11) of BOK
Financial's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Election of Directors" and
"Executive Compensation" in BOK Financial's 1997 Annual Proxy Statement for its
Annual Meeting of Shareholders scheduled for April 29, 1997 ("1997 Annual Proxy
Statement") is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in BOK
Financial's 1997 Annual Proxy Statement is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in BOK Financial's
1997 Annual Proxy Statement is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in BOK
Financial's 1997 Annual Proxy Statement is incorporated herein by reference.
The information set forth under Notes 3, 5 and 9 of "Notes to Consolidated
Financial Statements" (pages 29, 31, and 34, respectively) of BOK Financial's
1996 Annual Report to Shareholders is incorporated herein by reference.
<PAGE> 9
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) List of Financial Statements filed.
The following financial statements and reports included in BOK Financial's
Annual Report to Shareholders for the Fiscal Year Ended December 31, 1996 are
incorporated by reference in Parts I and II of this Annual Report on Form 10-K.
Exhibit 13
1996 Annual Report
Description Page Number
- ------------------------------------------ ------------------
Consolidated Selected Financial Data 5
Selected Quarterly Financial Data 11
Report of Management on Financial Statements 19
Report of Independent Auditors 19
Consolidated Statements of Earnings 20
Consolidated Balance Sheets 21
Consolidated Statements of Changes in Shareholders' Equity 22-23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25-43
Annual Financial Summary - Unaudited 44-45
Quarterly Financial Summary - Unaudited 46-47
Appendix A 48
(A)(2) LIST OF FINANCIAL STATEMENT SCHEDULES FILED.
The schedules to the consolidated financial statements required by
Regulation S-X are not required under the related instructions or are
inapplicable and are therefore omitted.
(A)(3) LIST OF EXHIBITS FILED.
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.0 The Articles of Incorporation of BOK Financial,
incorporated by reference to (i) Amended and Restated
Certificate of Incorporation of BOK Financial filed
with the Oklahoma Secretary of State on May 28, 1991,
filed as Exhibit 3.0 to S-1 Registration Statement No.
33-90450, and (ii) Amendment attached as Exhibit A to
Information Statement and Prospectus Supplement filed
November 20, 1991.
3.1 Bylaws of BOK Financial, incorporated by reference to
Exhibit 3.1 of S-1 Registration Statement No.33-90450.
4.0 The rights of the holders of the Common Stock and
Preferred Stock of BOK Financial are set forth in its
Certificate of Incorporation.
10.0 Purchase and Sale Agreement dated October 25, 1990,
among BOK Financial, Kaiser, and the FDIC, incorporated
by reference to Exhibit 2.0 of S-1 Registration
Statement No. 33-90450.
<PAGE> 10
10.1 Amendment to Purchase and Sale Agreement effective
March 29, 1991, among BOK Financial, Kaiser, and the
FDIC, incorporated by reference to Exhibit 2.2 of S-1
Registration Statement No. 33-90450
10.2 Letter agreement dated April 12, 1991, among BOK
Financial, Kaiser, and the FDIC, incorporated by
reference to Exhibit 2.3 of S-1 Registration Statement
No. 33-90450.
10.3 Second Amendment to Purchase and Sale Agreement
effective April 15, 1991, among BOK Financial, Kaiser,
and the FDIC, incorporated by reference to Exhibit 2.4
of S-1 Registration Statement No. 33-90450.
10.4 Employment agreements.
10.4(a) Employment Agreement between BOk and Stanley A.
Lybarger, incorporated by reference to Exhibit 10.4(a)
of Form 10-K for the fiscal year ended December 31,
1991.
10.5 Director indemnification agreement dated June 30, 1987,
between BOk and Kaiser, incorporated by reference to
Exhibit 10.5 of S-1 Registration Statement No.
33-90450. Substantially similar director
indemnification agreements were executed between BOk
and the following:
Date of Agreement
James E. Barnes June 30, 1987
William H. Bell June 30, 1987
James S. Boese June 30, 1987
Dennis L. Brand June 30, 1987
Chester E. Cadieux June 30, 1987
William B. Cleary June 30, 1987
Glenn A. Cox June 30, 1987
William E. Durrett June 30, 1987
Leonard J. Eaton, Jr. June 30, 1987
William B. Fader December 5, 1990
Gregory J. Flanagan June 30, 1987
Jerry L. Goodman June 30, 1987
David A. Hentschel July 7, 1987
Philip N. Hughes July 8, 1987
Thomas J. Hughes, III June 30, 1987
William G. Kerr June 30, 1987
Philip C. Lauinger, Jr. June 30, 1987
Stanley A. Lybarger December 5, 1990
Patricia McGee Maino June 30, 1987
Robert L. Parker, Sr. June 30, 1987
James A. Robinson June 30, 1987
William P. Sweich June 30, 1987
10.6 Capitalization and Stock Purchase Agreement dated May
20, 1991, between BOK Financial and Kaiser,
incorporated by reference to Exhibit 10.6 of S-1
Registration Statement No. 33-90450.
10.7 BOK Financial Corporation 1991 Special Stock Option
Plan, incorporated by reference to
Exhibit 4.0 of S-8 Registration Statement No. 33-44122.
10.7.1 BOK Financial Corporation 1992 Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 33-55312.
10.7.2 BOK Financial Corporation 1993 Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 33-70102.
10.7.3 BOK Financial Corporation 1994 Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8
Registration Statement No. 33-79834.
<PAGE> 11
10.7.4 BOK Financial Corporation 1994 Stock Option Plan
(Typographical Error Corrected January 16, 1995),
incorporated by reference to Exhibit 10.7.4 of Form
10-K for the fiscal year ended December 31, 1994
10.7.5 BOK Financial Corporation Directors' Stock
Compensation Plan, incorporated by reference to Exhibit
4.0 of S-8 Registration Statement No. 33-79836.
10.7.6 Bank of Oklahoma Thrift Plan (Amended and Restated
Effective as of January 1, 1995), incorporated by
reference to Exhibit 10.7.6 of Form 10-K for the year
ended December 31, 1994.
10.7.7 Trust Agreement for the Bank of Oklahoma Thrift Plan
(December 30, 1994), incorporated by reference to
Exhibit 10.7.7 of Form 10-K for the year ended December
31, 1994.
10.8 Lease Agreement between One Williams Center Co. and
National Bank of Tulsa (predecessor to BOk) dated June
18, 1974, incorporated by reference to Exhibit 10.9 of
S-1 Registration Statement No. 33-90450.
10.9 Lease Agreement between Security Capital Real Estate
Fund and BOk dated January 1, 1988, incorporated by
reference to Exhibit 10.10 of S-1 Registration
Statement No. 33-90450.
10.10 Asset Purchase Agreement (OREO and other assets)
between BOk and Phi-Lea-Em Corporation dated April 30,
1991, incorporated by reference to Exhibit 10.11 of S-1
Registration Statement No. 33-90450.
10.11 Asset Purchase Agreement (Tanker Assets) between BOk
and Green River Exploration Company dated April 30,
1991, incorporated by reference to Exhibit 10.12 of S-1
Registration Statement No. 33-90450.
10.12 Asset Purchase Agreement (Recovery Rights) between BOk
and Kaiser dated April 30, 1991, incorporated by
reference to Exhibit 10.13 of S-1 Registration
Statement No. 33-90450.
10.13 Purchase and Assumption Agreement dated August 7, 1992
among First Gibraltar Bank, FSB, Fourth Financial
Corporation and BOk, as amended, incorporated by
reference to Exhibit 10.14 of Form 10-K for the fiscal
year ended December 31, 1992.
10.13.1 Allocation Agreement dated August 7, 1992 between
BOk and Fourth Financial Corporation, incorporated by
reference to Exhibit 10.14.1 of Form 10-K for the
fiscal year ended December 31, 1992.
10.14 Merger Agreement among BOK Financial, BOKF Merger
Corporation Number Two, Brookside Bancshares, Inc., The
Shareholders of Brookside Bancshares, Inc. and
Brookside State Bank dated December 22, 1992, as
amended, incorporated by reference to Exhibit 10.15 of
Form 10-K for the fiscal year ended December 31, 1992.
10.14.1 Agreement to Merge between BOk and Brookside State
Bank dated January 27, 1993, incorporated by reference
to Exhibit 10.15.1 of Form 10-K for the fiscal year
ended December 31, 1992.
10.15 Merger Agreement among BOK Financial, BOKF Merger
Corporation Number Three, Sand Springs Bancshares,
Inc., The Shareholders of Sand Springs Bancshares, Inc.
and Sand Springs State Bank dated December 22, 1992, as
amended, incorporated by reference to Exhibit 10.16 of
Form 10-K for the fiscal year ended December 31, 1992.
10.15.1 Agreement to Merge between BOk and Sand Springs
State Bank dated January 27, 1993, incorporated by
reference to Exhibit 10.16.1 of Form 10-K for the
fiscal year ended December 31, 1992.
<PAGE> 12
10.16 Partnership Agreement between Kaiser-Francis Oil
Company and BOK Financial dated December 1, 1992,
incorporated by reference to Exhibit 10.16 of Form 10-K
for the fiscal year ended December 31, 1993.
10.16.1 Amendment to Partnership Agreement between
Kaiser-Francis Oil Company and BOK Financial dated May
17, 1993, incorporated by reference to Exhibit 10.16.1
of Form 10-K for the fiscal year ended December 31,
1993.
10.17 Purchase and Assumption Agreement between BOk and
FDIC, Receiver of Heartland Federal Savings and Loan
Association dated October 9, 1993, incorporated by
reference to Exhibit 10.17 of Form 10-K for the fiscal
year ended December 31, 1993.
10.18 Merger Agreement among BOk, Plaza National Bank and
The Shareholders of Plaza National Bank dated December
20, 1993, incorporated by reference to Exhibit 10.18 of
Form 10-K for the fiscal year ended December 31, 1993.
10.18.1 Amendment to Merger Agreement among BOk, Plaza
National Bank and The Shareholders of Plaza National
Bank dated January 14, 1994, incorporated by reference
to Exhibit 10.18.1 of Form 10-K for the fiscal year
ended December 31, 1993.
10.19 Stock Purchase Agreement between Texas Commerce Bank,
National Association and BOk dated March 11, 1994,
incorporated by reference to Exhibit 10.19 of Form 10-K
for the fiscal year ended December 31, 1993.
10.20 Merger Agreement among BOK Financial Corporation, BOKF
Merger Corporation Number Four, Citizens Holding
Company and others dated May 11, 1994, incorporated by
reference to Exhibit 10.20 of Form 10-K for the fiscal
year ended December 31, 1994.
10.21 Stock Purchase and Merger Agreement among Northwest
Bank of Enid, BOk and The Shareholders of Northwest
Bank of Enid effective as of May 16, 1994, incorporated
by reference to Exhibit 10.21 of Form 10-K for the
fiscal year ended December 31, 1994.
10.22 Agreement and Plan of Merger among BOK Financial
Corporation, BOKF Merger Corporation Number Five and
Park Cities Bancshares, Inc. dated October 3, 1996,
incorporated by reference to Exhibit C of S-4
Registratioin Statement No. 333-16337.
10.23 Agreement and Plan of Merger among BOK Financial
Corporation and First TexCorp., Inc. dated December 18,
1996, incorporated by reference to Exhibit 10.24 of S-4
Registration Statement No. 333-16337.
11.0 Statement regarding the computation of per share
earnings.
13.0 Annual Report to Shareholders for the fiscal year ended
December 31, 1996. Such report, except for those
portions thereof which are expressly incorporated by
reference in this filing, is furnished for the
information of the Commission and is not deemed to be
"filed" as part of this Annual Report on Form 10-K.
21.0 Subsidiaries of BOK Financial.
23.0 Consent of independent auditors - Ernst & Young LLP.
27.0 Financial Data Schedule
99.0 Additional Exhibits.
99.1 Undertakings incorporated by reference into S-8
Registration Statement No. 33-44121 for Bank of
Oklahoma Master Thrift Plan and Trust, incorporated by
reference to Exhibit 99.1 of Form 10-K for the fiscal
year ended December 31, 1993.
99.2 Undertakings incorporated by reference into S-8
Registration Statement No. 33-44122 for BOK Financial
Corporation 1991 Special Stock Option Plan,
incorporated by reference to Exhibit 99.2 of Form 10-K
for the fiscal year ended December 31, 1993.
99.3 Undertakings incorporated by reference into S-8
Registration Statement No. 33-55312 for BOK Financial
Corporation 1992 Stock Option Plan, incorporated by
reference to Exhibit 99.3 of Form 10-K for the fiscal
year ended December 31, 1993.
<PAGE> 13
99.4 Undertakings incorporated by reference into S-8
Registration Statement No. 33-70102 for BOK Financial
Corporation 1993 Stock Option Plan, incorporated by
reference to Exhibit 99.4 of Form 10-K for the fiscal
year ended December 31, 1993.
99.5 Undertakings incorporated by reference into S-8
Registration Statement No. 33-79834 for BOK Financial
Corporation 1994 Stock Option Plan, incorporated by
reference to Exhibit 99.5 of Form 10-K for the fiscal
year ended December 31, 1994.
99.6 Undertakings incorporated by reference into S-8
Registration Statement No. 33-79836 for BOK Financial
Corporation Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 99.6 of Form 10-K
for the fiscal year ended December 31, 1994.
(B) Reports on Form 8-K
None.
(C) Exhibits Required by Item 601 of Regulation S-K
The exhibits listed in response to Item 14(A)(3) are filed as part of this
report.
(D) Financial Statement Schedules
None.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BOK FINANCIAL CORPORATION
DATE: March 25, 1997 BY: /s/George B. Kaiser
---------------------
George B. Kaiser,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 25, 1997 , by the following persons on behalf of
the Registrant and in the capacities indicated.
OFFICERS
/s/George B. Kaiser /s/Stanley A. Lybarger
- -------------------------------- ----------------------------
George B. Kaiser, Stanley A. Lybarger,
Chairman of the Board of Directors Director, President and
Chief Executive Officer
/s/James A. White /s/John C. Morrow
- ------------------------------ ----------------------------
James A. White, John C. Morrow
Executive Vice President and Senior Vice President and
Chief Financial Officer/Treasurer Coontroller, Financial Accounting
DIRECTORS
/s/ V. Burns Hargis
- ------------------------------- --------------------------------
W. Wayne Allen V. Burns Hargis
/s/ Keith E. Bailey /s/ E. Carey Joullian, IV
- ------------------------------- --------------------------------
Keith E. Bailey E. Carey Joullian, IV
/s/ Robert J. LaFortune
- ------------------------------- --------------------------------
James E. Barnes Robert J. LaFortune
/s/ Sharon J. Bell
- ------------------------------- --------------------------------
Sharon J. Bell Philip C. Lauinger, Jr.
/s/Glenn A. Cox /s/ David R. Lopez
- -------------------------------- --------------------------------
Glenn A. Cox David R. Lopez
- ------------------------------- --------------------------------
Ralph S. Cunningham Frank A. McPherson
/s/ Nancy J. Davies
- ------------------------------- --------------------------------
Nancy J. Davies Robert L. Parker, Sr.
/s/ Dr. Robert H. Donaldson /s/ James W. Pielsticker
- ------------------------------- --------------------------------
Dr. Robert H. Donaldson James W. Pielsticker
- ------------------------------- --------------------------------
William E. Durrett James A. Robinson
/s/ James O. Goodwin
- ------------------------------- --------------------------------
James O. Goodwin L. Francis Rooney, III
/s/ Robert L. Zemanek
--------------------------------
Robert L. Zemanek
BOK FINANCIAL CORPORATION
EXHIBIT 11
STATEMENT REGARDING THE COMPUTATION OF
PER SHARE EARNINGS
<PAGE>
<TABLE>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER SHARE:
Primary Average Common Share Equivalents:
Common shares 21,111,892 21,091,029 21,120,023
Stock options 122,471 90,312 83,473
- -----------------------------------------------------------------------------------------------
Total primary average common share equivalents 21,234,363 21,181,341 21,203,496
- -----------------------------------------------------------------------------------------------
Income before Preferred Stock dividends $54,127,000 $49,205,000 $45,065,000
Less stock dividends on Series A Preferred Stock 1,500,000 1,500,000 1,500,000
Less cash dividends on Citizens Holding Company -- - 113,000
Preferred Stock
- -----------------------------------------------------------------------------------------------
Net Income $52,627,000 $47,705,000 $43,452,000
- -----------------------------------------------------------------------------------------------
Primary Earnings per Common Share Equivalent:
Net Income $ 2.48 $ 2.25 $ 2.05
- -----------------------------------------------------------------------------------------------
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE:
Fully Diluted Average Common Share Equivalents:
Common shares 21,111,892 21,091,029 21,120,023
Stock options 280,092 97,005 83,731
Series A preferred stock 2,813,773 2,813,773 2,813,773
- -----------------------------------------------------------------------------------------------
Total fully diluted average common share equivalents 24,205,757 24,001,807 24,017,527
- -----------------------------------------------------------------------------------------------
Income before Preferred Stock dividends $54,127,000 $49,205,000 $45,065,000
Less cash dividends on Citizens Holding Company -- - 113,000
Preferred Stock
- -----------------------------------------------------------------------------------------------
Net Income $54,127,000 $49,205,000 $44,952,000
- -----------------------------------------------------------------------------------------------
Fully Diluted Earnings per Common Share Equivalent:
Net Income $ 2.24 $ 2.05 $ 1.88
- -----------------------------------------------------------------------------------------------
</TABLE>
COMMON STOCK
On November 14, 1994, BOK Financial issued 1,380,017 shares of Common Stock
to merge with Citizens Holding Company and its subsidiaries, Citizens Bank of
Muskogee and Citizens Bank of Northwest Arkansas in a pooling-of-interests
transaction. Common shares have been restated to reflect these shares as being
outstanding for all periods presented. During 1996, 1995 and 1994, 3% dividends
payable in shares of BOK Financial common stock were declared and paid. Common
shares have been restated to reflect these shares as being outstanding for all
periods.
STOCK OPTIONS
BOK Financial has various stock option plans whereby each option awarded
grants to the employee the right to purchase shares of Common Stock at the price
set forth under the respective plan. Options awarded under these plans are
subject to vesting requirements. Generally, one-seventh of the options vest
annually and expire three years after vesting. Options were awarded under the
1994 Plan in 1994, 1995, and 1996. Canceled options under the 1994 Plan may be
reawarded. The common share equivalents of the Stock Option Plans were
determined using the treasury stock method, whereby the proceeds from the
exercise of the options would be used to purchase Common Stock at the quarterly
average market price for primary average common share equivalents, and at the
greater of the quarterly average market price or period-end market price for
primary average common share equivalents.
SERIES A PREFERRED STOCK
The preferred stock is convertible, at the option of the holder, into one
share Common Stock for each 89 shares of Series A Preferred Stock. BOK Financial
may elect to convert all or part of the Series A Preferred Stock into Common
Stock if BOK Financial shall fail to meet the published minimum risk-based
capital ratios applicable to BOK Financial for a period of eight consecutive
calendar quarters. During 1996, 1995 and 1994, 69,672 shares, 69,959 shares, and
65,279 shares of Common Stock were issued, respectively, by mutual agreement
with the holders and in lieu of cash, in payment of dividends on the Series A
Preferred Stock. Common shares have been restated to reflect these shares as
being outstanding for all periods. For the 1996, 1995 and 1994 calculations of
primary earnings per share, net income has been reduced by the value of the
Common Stock issued in payment of dividends.
Prior to its merger with BOK Financial, Citizens Holding Company had
nonvoting preferred stock, on which it paid $113 thousand in cash dividends in
1994. These preferred shares were redeemed in full and canceled in conjunction
with Citizens' merger with BOK Financial. For the 1994 calculations of primary
and fully diluted earnings per share, net income has been reduced by the payment
of cash dividends.
BOK FINANCIAL CORPORATION
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Table of Contents
Consolidated Selected Financial Data 5
Management's Assessment of Operations and
Financial Condition 6
Selected Quarterly Financial Data 11
Report of Management on Financial Statements 19
Report of Independent Auditors 19
Consolidated Financial Statements 20
Notes to Consolidated Financial Statements 25
Annual Financial Summary 44
Quarterly Financial Summary 46
Appendix A 48
<PAGE>
BOK FINANCIAL CORPORATION AT A GLANCE
BOK Financial Corp. is a multi-bank holding company with $4.6 billion in
assets, whose bank subsidiaries are Bank of Oklahoma, N.A. and Bank of Arkansas
(Citizens Bank of Northwest Arkansas, N.A.). Acquisitions of two Dallas banks -
First National Bank of Park Cities and First Texas Bank - were consumated in
early 1997.
OTHER OPERATING UNITS
Citizens Mortgage Corp. / BOk Mortgage / BancOklahoma Trust Co. / Alliance
Trust Co., N.A. / TransFund Electronic Funds Transfer Network
PROFILE
More than 65 bank locations in a three-state area, including 22 in Oklahoma
City and 23 in Tulsa / 15 supermarket locations / Approximately 2,100 employees
/ Common Stock traded on NASDAQ under the symbol BOKF / Largest financial
institution in Oklahoma / Founded in 1910 as Exchange National Bank of Tulsa
1 Management Letter
5 Management's Assessment of Operations and Financial Condition
19 Report of Management on Financial Statements
19 Report of Independent Auditors
20 Consolidated Financial Statements
48 Appendix A
49 Shareholder and Corporate Information
FINANCIAL HIGHLIGHTS
(Dollars In Thousands Except Share Data)
1996 1995 1994
--------------------------------------------
FOR THE YEARS ENDED DECEMBER 31
Net income $ 54,127 $ 49,205 $ 45,065
Earnings per share:
Primary 2.48 2.25 2.05
Fully diluted 2.24 2.05 1.88
------------------------------------------------------------------------------
Return on average assets 1.26% 1.22% 1.26%
Return on average equity 16.80 18.07 19.92
AS OF DECEMBER 31
Loans, net of reserves $ 2,349,432 $ 2,156,081 1,805,782
Assets 4,620,700 4,244,118 3,927,276
Deposits 3,256,755 2,937,709 2,629,574
Shareholders' equity 359,966 301,565 236,902
Nonperforming assets 42,227 42,066 31,881
------------------------------------------------------------------------------
Book value per common share $ 16.48 $ 13.83 10.85
Common shares outstanding
(fully diluted) 24,252,033 23,208,982 22,467,186
------------------------------------------------------------------------------
Tier 1 capital ratio 10.49% 9.91% 9.14%
Total capital ratio 11.74 11.17 11.19
Leverage ratio 7.46 6.55 5.64
Shareholders' equity to
total assets 7.79 7.11 6.03
Reserve for loan losses to
nonperforming loans 119.91 99.02 137.76
Reserve for loan losses to
loans(1) 1.96 1.80 2.12
Net charge offs (recoveries)
to average loans (.12) .01 .01
--------------------------------- ------------------------------ -------------
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
<PAGE> 1
TO OUR SHAREHOLDERS, CUSTOMERS, EMPLOYEES AND FRIENDS
Last year continued the pattern of change and consolidation in the
financial services industry which has characterized the past several years. Our
company recorded a very successful year in this environment, both financially
and strategically, and we are pleased to report on this performance and discuss
our goals for the future.
Net income for the year was $54.1 million, or $2.24 per share, an
increase of 10 percent over 1995 earnings, or 9 percent on a per share basis.
Recurring core earnings grew at a materially faster pace. The increase was
derived from an improved net interest margin and very strong growth in other
operating revenue. Loans grew by 11.9 percent, with a total increase of $240
million, and deposits increased in excess of $440 million, the result of our
emphasis on improving our funding sources following several years during which
loan growth had outstripped core funding growth. Our net interest margin
increased 15 basis points, to 3.54 percent, principally due to a reduction in
low margin reinvested borrowings.
(Net Income graph appears here. See Appendix A, graph I)
Growth in other operating revenues was dramatic -- with an overall
increase of 20 percent -- and with every line of business making a significant
contribution to the increase. Mortgage banking, brokerage operations, and our
TransFund electronic funds transfer network each contributed increases in excess
of 25 percent. Operating expenses grew 6.5 percent, excluding non-recurring
charges totaling $7.6 million resulting from Federal legislative action to
recapitalize the Savings Association Insurance Fund and a related decision we
made to eliminate core deposit intangible assets associated with acquired thrift
deposits.
IS THERE A NEW COMPETITIVE LANDSCAPE?
Oklahoma's banking industry saw dramatic shifts during 1996. Our last
two multi-billion dollar competitors announced sales to large out-of-state
banks, leaving BOk as the only locally owned and managed institution of its size
in the state. BOK Financial now has an historic
<PAGE> 2
opportunity to differentiate itself as Oklahoma's leading bank, and as the only
major statewide financial institution with a single minded commitment to
building the Oklahoma economy and employment base. We are confident that BOk,
with its roots and future tied to Oklahoma's, will thrive in an environment in
which our national franchise competitors are hobbled by multi-level
decisionmaking and lack of sensitivity to the needs of local customers.
ABOUT 1996
Commercial banking activity continued at a strong pace. Average
commercial loans increased over 13 percent for the year, ending at a new high of
$1.66 billion. Growth in cash management income was particularly strong,
increasing 14 percent. During the year, we were successful in winning the
business of several major companies against national competition, again
attesting to the quality of our entire package of corporate services.
(Loans graph appears here. See appendix A, graph II).
Our supermarket banking expansion continued, with five new locations
opened in 1996, and with plans to add eight more supermarket branches in 1997.
This expansion will bring us to 23 supermarket locations and a total network of
75 in Oklahoma, Arkansas and Texas -- the clear leader in convenience in our
markets. During 1996, we also introduced personal computer banking and announced
plans to introduce interactive video kiosks for consumer lending and other
transactions. Customer convenience was further augmented by BOk's 24-hour
ExpressBank, our telephone sales and service center which was introduced in
1995. By offering the ultimate in convenience, the ExpressBank grew dramatically
last year, handling more than 1 million calls and generating more than 25
percent of our consumer loan applications.
(Real Estate Loans graph appears here. See appendix A, graph III).
BOk Mortgage, the state's leading mortgage originator, grew 32 percent
in total production -- including a 46 percent growth in retail production -- and
now has a servicing portfolio of $5.9 billion. Wholesale and retail residential
originations have totaled $2.9 billion since 1992.
<PAGE> 3
New production offices in Fayetteville, Bentonville, and Siloam Springs,
Arkansas, were opened. BOk Mortgage also acquired the leading mortgage company
serving Lawton, Oklahoma, and $628 million in servicing rights distributed
across the nation.
TransFund, the state's largest electronic funds transfer network and
ranked among the 25 largest networks nationally, continued its excellent growth
pattern, with operating revenue up 31 percent. Total transaction volume grew by
27 percent, led by the tremendous marketing success of its Visa Check Card
service, which had an increase in transaction volume of 133 percent. TransFund
serves more than 175 financial institutions in Oklahoma with a growing presence
in surrounding states.
BancOklahoma Trust, the state's leading fiduciary organization, in 1996
began marketing a specially designed 401(k) product directed at certain targeted
types of firms with large individual accounts. This product has met with very
encouraging success in its initial stages, including sales in national
competition to major out- of-state law firms. The Trust Company is now
responsible for $7.5 billion in assets, placing it among the top 75 corporate
fiduciaries nationwide.
For the past several years, one of our fastest growing and most
successful businesses has been the sale of investment services. Last year,
revenue from this area increased 31 percent. In addition, BOk ranked 38th
nationally among all banks in long-term mutual fund sales. We have also filed
for approval to open Alliance Securities Corp., which will concentrate on
providing investment banking services to municipalities and/or tax-exempt
entities.
(Operating Revenue graph appears here. See appendix A, graph IV).
Operationally, Alliance Securities will be an integral part of our newly
announced merchant banking unit, which will be responsible for a broad range of
financial services outside those traditionally associated with banking. This
will include financial advisory and underwriting services in both the public and
corporate sectors, leasing and mezzanine financing.
<PAGE> 4
In late 1996, BOK Financial announced the signing of definitive
agreements to acquire the $226 million First National Bank of Park Cities and
the $142 million First Texas Bank, both located in Dallas. Both agreements were
consummated in the first quarter of 1997. Park Cities has distinguished itself
as the premier bank in north Dallas, catering to high income business owners and
professionals. First Texas' greatest strength is its expertise in small
businesses lending. Both organizations are financially sound and extremely
well-managed. Through this combination of skills plus Bank of Oklahoma's
strength in middle-market commercial lending and our pre-existing Alliance Trust
Company, we now are in position to build a strong, competitive banking franchise
in the north Texas market.
(Funding Graph appears here. See appendix A, graph V).
Our board of directors, which includes the current or immediate past chief
executive officers of four of the state's five Fortune 500 companies and
prominent entrepreneurs and community leaders from across the state, was further
strengthened during 1996 by the additions of Mr. David R. Lopez, President for
the Oklahoma region of Southwestern Bell Telephone Co., and Mr. James W.
Pielsticker, President and owner of Arrow Trucking. Both additions evidence our
commitment to having the strongest board of directors of any publicly held
company in our state, and are the essential element to the continuation of the
leadership role we see for BOK Financial Corporation. We also accepted the
resignations of two long-time directors, Thomas J. Hughes III and William B.
Cleary, who retired from our board during 1996. We will sincerely miss their
seasoned insight which has contributed so significantly to the progress of our
company.
As always, we appreciate your support and your business.
Sincerely,
/s/ George B. Kaiser /s/Stanley A. Lybarger /s/Wayne D. Stone
Chairman of the Board President and Chief President,
Executive Officer Oklahoma City
<PAGE> 5
<TABLE>
Table 1 Consolidated Selected Financial Data
(Dollars In Thousands Except Share Data) BOK FINANCIAL
-----------------------------------------------------------------
1996 1995 1994 1993(1) 1992(1)
-----------------------------------------------------------------
SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C>
For the year:
Interest revenue $ 290,532 $ 275,441 $ 223,058 $ 181,354 $ 155,745
Interest expense 163,093 160,177 104,055 74,586 67,003
Net interest revenue 127,439 115,264 119,003 106,768 88,742
Provision for loan losses 4,267 231 195 3,376 5,555
Income before cumulative effect of
change in accounting principle 54,127 49,205 45,065 37,902 29,786
Net income 54,127 49,205 45,065 39,472 29,786
Period-end:
Loans, net of reserve 2,349,432 2,156,081 1,805,782 1,641,294 1,445,144
Assets 4,620,700 4,244,118 3,927,276 3,147,041 2,980,331
Deposits 3,256,755 2,937,709 2,629,574 2,610,927 2,588,570
Subordinated debenture - - 23,000 23,000 23,000
Shareholders' equity 359,966 301,565 236,902 213,943 163,636
Nonperforming assets 42,227 42,066 31,881 23,452 37,600
PROFITABILITY STATISTICS
Per share (based on average equivalent shares):
Primary earnings:
Income before cumulative effect of
change in accounting for income
taxes $ 2.48 $ 2.25 $ 2.05 $ 1.74 $ 1.46
Net income 2.48 2.25 2.05 1.82 1.46
Fully diluted earnings:
Income before cumulative effect of
change in accounting for income taxes 2.24 2.05 1.88 1.58 1.28
Net income 2.24 2.05 1.88 1.65 1.28
Percentages (based on daily averages):
Return on average assets3 1.26% 1.22% 1.26% 1.26% 1.28%
Return on average shareholders' equity3 16.80 18.07 19.92 20.07 20.76
Average shareholders' equity to average assets 7.49 6.73 6.32 6.27 6.17
COMMON STOCK PERFORMANCE AND EXISTING SHAREHOLDER STATISTICS
Per Share:
Book value:
Common shareholders' equity $ 16.48 $ 13.83 $ 10.85 $ 9.47 $ 7.16
Market price: December 31 Bid 27.00 19.50 20.00 24.75 21.50
Market range - High bid 27.00 23.50 25.00 25.50 21.50
- Low bid 19.25 18.50 19.00 17.50 8.00
Other statistics:
Common shareholders at December 31 1,674 1,676 1,748 1,924 2,077
SELECTED BALANCE SHEET STATISTICS
Period-end:
Tier 1 capital ratio 10.49% 9.91% 9.14% 9.07% 8.14%
Total capital ratio 11.74 11.17 11.19 11.49 10.73
Leverage ratio 7.46 6.55 5.64 5.76 5.84
Reserve for loan losses to nonperforming loans 119.91 99.02 137.76 233.92 132.76
Reserve for loan losses to loans2 1.96 1.80 2.12 2.50 2.50
MISCELLANEOUS (AT DECEMBER 31)
Number of employees (FTE) 2,102 1,842 1,801 1,741 1,557
Number of banking locations 69 66 63 55 54
Number of TransFund locations 635 549 520 614 495
Mortgage loan servicing portfolio $5,948,187 $5,363,175 $5,080,859 $3,483,993 $2,125,071
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Restated for poolings-of-interests which occurred in 1994 and 1993.
(2) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(3) Excludes the cumulative effect of change in accounting for income taxes in
1993.
</FN>
</TABLE>
<PAGE> 6
Management's Assessment of Operations and Financial Condition
BOK Financial Corporation ("BOK Financial") is a bank holding company which
offers full service banking in Oklahoma and Northwest Arkansas and trust
services in North Texas. BOK Financial's principal subsidiaries are Bank of
Oklahoma, NA ("BOk"), Citizens Bank of Northwest Arkansas, NA ("CBNWA"), and
Alliance Trust Company, NA ("Alliance"). CBNWA will change its name to Bank of
Arkansas on May 1, 1997. During the fourth quarter of 1996, BOK Financial
announced the signing of definitive agreements to acquire the $226 million First
National Bank of Park Cities ("Park Cities") and the $142 million First Texas
Bank ("First Texas"), both located in Dallas, Texas. These acquisitions will
further the development of a niche strategy of serving small-business and
middle-market customers in complement to the trust operation of Alliance and
BOk's existing portfolio of energy loans in Dallas.
ASSESSMENT OF OPERATIONS
SUMMARY OF PERFORMANCE
BOK Financial recorded net income of $54.1 million for 1996 compared to
$49.2 million for 1995. Fully diluted earnings per common share were $2.24 for
1996 and $2.05 for 1995. Returns on average assets and average equity were 1.26%
and 16.80%, respectively, for 1996 compared to 1.22% and 18.07%, respectively,
for 1995.
The increase in net income for 1996 was due to increases of $12.2 million
or 10.6% in net interest revenue and $14.2 million or 15.5% in other operating
revenue. These increases were partially offset by a $16.8 million increase in
operating expense, which included $7.6 million of nonrecurring charges related
to deposits insured by the Savings and Loan Insurance Fund ("SAIF"), and a $4.0
million increase in provision for loan losses.
Net income for the fourth quarter of 1996 was $14.6 million or $.60 per
fully diluted common share, an increase of 15.0% compared to $12.7 million or
$.53 per fully diluted common share for the same period in 1995. The primary
sources of increased quarterly earnings included net interest revenue and other
operating revenue, which increased $2.8 million and $3.6 million, respectively,
partially offset by a $1.5 million increase in operating expenses and a $2.8
million increase in income taxes.
BOK Financial's net income for 1994 was $45.1 million or $1.88 per fully
diluted common share. Returns on average assets and average equity were 1.26%
and 19.92%, respectively.
NET INTEREST REVENUE
Net interest revenue, on a tax-equivalent basis, totaled $135.8 million in
1996 compared to $122.3 million in 1995. This increase in net interest revenue
was due to increases in both net interest margin and average earning assets. The
yield on average earning assets decreased from 7.84% to 7.79% due primarily to
an 18 basis point decrease in the yield on the loan portfolio. However, this
decrease was partially offset by an improvement in the mix of earning assets.
Approximately 57.6% of average earning assets for 1996 were in loans, which
generally have a higher yield than other types of earning assets, compared to
54.8% in 1995. Additionally, average earning assets increased by $231 million
while average interest bearing liabilities increased $163 million. The $68
million difference, which was funded by increases in both capital and demand
deposits, also contributed to the increase in net interest revenue.
Additionally, BOK Financial continued efforts to restructure its funding
sources during 1996. Average interest-bearing deposits increased $398 million,
including increased transaction deposits of $90 million and time deposits of
$325 million. Concurrently, average borrowed funds decreased $235 million. This
shift in the mix of interest-bearing liabilities, combined with slightly lower
interest rates, resulted in a decrease in the cost of interest-bearing
liabilities from 5.11% in 1995 to 4.94% in 1996. In addition, interest rate
swaps, which hedge against interest rate risk on certain long-term certificates
of deposit, reduced interest expense by $1.4 million in 1996 compared to $868
thousand in 1995. The effects of the changes in principal balances and interest
rates on net interest revenue by asset and liability type are presented in Table
2.
<PAGE> 7
Table 2 Volume/Rate Analysis
(In Thousands)
1996/1995 1995/1994
--------------------------- --------------------------
Change Due To(1) Change Due To(1)
----------------- -----------------
Change Volume Yield/Rate Change Volume Yield/Rate
-------- -------- -------- ------ --------- ---------
Tax-equivalent interest revenue:
Securities $ (1,800) $ (408) $(1,392) $ 13,663 $ 9,907 $ 3,756
Trading securities 98 94 4 16 (10) 26
Loans 17,486 21,116 (3,630) 40,637 24,922 15,715
Funds sold 634 734 (100) (1,012) (1,413) 401
- ------------------------------ -------- ------- -------- -------- --------
Total 16,418 21,536 (5,118) 53,304 33,406 19,898
- ------------------------------ -------- ------- -------- -------- --------
Interest expense:
Transaction deposits 3,060 2,995 65 3,214 (1,636) 4,850
Savings deposits (493) (428) (65) (565) (383) (182)
Time deposits 17,760 18,321 (561) 23,949 7,809 16,140
Borrowed funds (17,059) (13,435) (3,624) 30,552 16,842 13,710
Subordinated debenture (352) (352) -- (1,028) (1,038) 10
- ------------------------------ -------- ------- -------- -------- --------
Total 2,916 7,101 (4,185) 56,122 21,594 34,528
- ------------------------------ -------- ------- -------- -------- --------
Tax-equivalent net
interest revenue 13,502 $ 14,435 $ (933) (2,818) $ 11,812 $(14,630)
Change in tax-
equivalent adjustment (1,327) (921)
- ------------------------------- --------
Net interest revenue $ 12,175 $ (3,739)
================================ ========
4th Qtr 1996/4th Qtr 1995
-------------------------------
Change Due To(1)
-------------------
Change Volume Yield/Rate
-------- --------- ----------
Tax-equivalent interest revenue:
Securities $ 2,010 $ 1,959 $ 51
Trading securities -- 1 (1)
Loans 2,576 3,988 (1,412)
Funds sold 68 84 (16)
- ----------------------------------------------- ------- ------- -------
Total 4,654 6,032 (1,378)
- ----------------------------------------------- ------- ------- -------
Interest expense:
Transaction deposits 1,073 1,126 (53)
Savings deposits (59) (63) 4
Time deposits 2,166 2,766 (600)
Borrowed funds (1,750) (1,279) (471)
- ----------------------------------------------- ------- ------- -------
Total 1,430 2,550 (1,120)
- ----------------------------------------------- ------- ------- -------
Tax-equivalent net interest revenue 3,224 $ 3,482 $ (258)
Change in tax-equivalent adjustment (427)
- ----------------------------------------------- -------
Net interest revenue $ 2,797
=======
(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 income to average earning
assets, increased from 3.39% in 1995 to 3.54% in 1996. This increase was due
primarily to the previously discussed improvement in the mix of average earning
assets and interest-bearing liabilities along with the increased funding of
average earning assets with non-interest-bearing funds. 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
invest in securities. Although this strategy frequently results in a net
interest margin which falls below those normally seen in the commercial banking
industry, 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 inherent in this strategy.
During 1996, two super regional banks announced significant acquisitions in
Oklahoma. The financial services environment in Oklahoma was already highly
competitive due to a large number of commercial banks, thrifts, credit unions
and brokerage firms in the market. Additionally, many customers already have
access to national and regional financial institutions for many products and
services. Management does not expect the replacement of existing financial
institutions by these banks to significantly alter the competitive environment.
Tax equivalent net interest revenue for the fourth quarter of 1996 was
$34.5 million compared to $31.2 million for the fourth quarter of 1995. The
increase is due primarily to an overall decrease in the cost of interest-bearing
liabilities. Rates paid on interest-bearing deposits decreased by 9 basis points
to 4.71% for the fourth quarter of 1996. Additionally, the average balance of
borrowed funds decreased $86 million as funding needs were met by increases in
both interest-bearing deposits and noninterest-bearing funds.
Net interest revenue on a tax equivalent basis for 1995 decreased $2.8
million to $122.3 million compared to 1994's total of $125.1 million. This
decrease was due to rising market interest rates which affected BOK Financial's
interest-bearing liabilities more quickly than its earning assets. While the
yield on average earning assets increased by 63 basis points to 7.84% compared
to 7.21% in 1994, the cost of interest-bearing liabilities increased 131 basis
points to 5.11%.
<PAGE> 8
OTHER OPERATING REVENUE
Other operating revenue, which consists primarily of fee income on products
and services, increased $14.2 million or 15.5% compared to 1995. Excluding gains
and losses on securities sales and branch facilities in both years, other
operating income increased $19.4 million or 21.9%. Service fees on deposits
totaled $24.1 million, an increase of $3.0 million or 14.0% compared to 1995
while revenue generated by the TransFund ATM network and bankcards increased
$1.8 million and $1.1 million, respectively. These increases are generally due
to a higher volume of activity in 1996.
Other revenue increased $3.2 million or 20% compared to 1995, $4.7 million
or 31.8% excluding gains and losses on branch sales in both 1996 and 1995. This
increase is due primarily to increased revenue from equipment leasing which
totaled $2.2 million in 1996. The financing of specialty oil field and other
energy-related equipment through operating leasing was developed during 1996 as
a complement to BOK Financial's expertise in energy lending.
Many of BOK Financial's fee generating activities, such as brokerage and
trading activities, trust fees and mortgage servicing revenue, are affected by
changes in interest rates. Significant increases in interest rates may tend to
decrease the volume of trading activities, and may lower the value of trust
assets managed, which is the basis of certain fees, but would tend to decrease
the incidence of mortgage loan prepayments. Similarly, a decrease in economic
activity would decrease ATM, bankcard and other related revenue.
While management expects continued growth in other operating revenue, the
rate of increase achieved for 1996 may not be sustainable due to increased
competition from national and regional financial institutions which have entered
the Oklahoma market and from market saturation. Continued growth may require BOK
Financial to introduce new products or to enter new markets which introduces
additional demands on capital and managerial resources.
Table 3 Other Operating Revenue
(In Thousands) BOK FINANCIAL
-----------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------
Brokerage and trading revenue $ 7,896 $ 6,046 $ 5,517 $ 7,107 $ 3,827
TransFund network revenue 8,795 7,025 6,039 5,811 5,163
Securities gains (losses), net (2,607) 1,174 (1,868) 1,896 136
Trust fees and commissions 21,638 19,363 17,117 16,824 15,007
Service charges and fees on
deposit accounts 24,104 21,152 20,698 20,825 17,704
Mortgage banking revenue 26,234 20,336 15,868 12,564 11,895
Other revenue 19,252 16,050 10,993 11,583 9,511
------ ------ ------ ------ ------
Total $105,312 $91,146 $74,364 $76,610 $63,243
======== ======= ======= ======= =======
Other operating revenue for the fourth quarter of 1996 totaled $27.5
million compared to $24.0 million for the fourth quarter of 1995. All
significant revenue producing activities contributed to this increase, including
$1.3 million from mortgage banking, $809 thousand from deposit fees, and $735
thousand from equipment leasing.
Other operating revenue increased $12.5 million or 16.4%, excluding
securities gains and losses and a $1.2 million gain on the sale of one branch,
in 1995 compared to 1994. This increase was primarily due to growth in mortgage
banking revenue which increased $4.5 million, trust fees and commissions which
increased $2.2 million, and TransFund revenue and bankcard fees which increased
$986 thousand and $708 thousand, respectively.
Other operating revenue includes fees, commissions and certain net
marketing gains and losses from trust and mortgage banking activities. While
trust and mortgage banking activities are integral parts of a commercial bank's
operation, their revenue and expenses are attributable primarily to off-balance
sheet assets. The effects of trust and mortgage banking activities on BOK
Financial's operations are discussed in the following sections.
TRUST
BOK Financial provides a wide range of trust services through BancOklahoma
Trust Company in Oklahoma and Alliance Trust Company, NA in Texas. At December
31, 1996, trust assets with an aggregate market value of approximately $7.5
billion were subject to various fiduciary arrangements, compared to $7.6 billion
at December 31, 1995.
A summary of both direct and internally allocated revenue and expenses from
trust operations are (in thousands):
1996 1995 1994
----------- ----------- -------------
Total revenue $25,682 $22,428 $18,609
Personnel expense 9,603 8,930 7,936
Other expense 8,420 8,563 7,099
----- ----- -----
Total expense 18,023 17,493 15,035
------ ------ ------
Operating profit $ 7,659 $ 4,935 $ 3,574
======== ======== ========
<PAGE> 9
MORTGAGE BANKING
BOK Financial has engaged in mortgage banking activities through
BancOklahoma Mortgage Corp. ("BOMC"). Effective January 1, 1997, these
activities will be transferred to BOk. These activities include the origination,
marketing and servicing of mortgage loans. Notes 1 and 7 to the Consolidated
Financial Statements provide additional information regarding mortgage banking
activities.
Origination and marketing activities resulted in a net gain of $48 thousand
in 1996 compared to a net loss of $1.5 million in 1995. The improvement is due
primarily to a full year's effect of Statement of Financial Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights" ("FAS 122") which was
adopted April 1, 1995 and an increase in the volume of mortgage loans originated
by BOMC. FAS 122 required that the fair value of servicing rights related to
loans originated for sale in the secondary market be capitalized as a separate
asset. Previously, only purchased mortgage servicing rights could be
capitalized. Total mortgage loan production for 1996 increased $173 million to
$706 million compared to $533 million in 1995. This included a $125 million
increase in retail loan production.
Commitments to originate mortgage loans subject BOK Financial to both
credit risk and interest rate risk. Credit risk is managed through underwriting
policies and procedures, and interest rate risk is partially hedged through
forward sales contracts. BOMC generally sells all fixed rate mortgage loans in
the secondary market pursuant to forward sales contracts and all adjustable rate
loans to an affiliate. BOMC currently does not securitize pools of mortgage
loans either for sale or retention.
Consolidated mortgage loan servicing revenue for 1996 was $26.2 million, a
$4.3 million or 19.7% increase over 1995. The increase reflects continued growth
in the mortgage servicing portfolio which increased to $5.9 billion at the end
of 1996 from $5.4 billion at the end of 1995. These amounts include loans
serviced for BOk of $243 million and $253 million for 1996 and 1995,
respectively.
Capitalized mortgage servicing rights, which totaled $61.5 million at
December 31, 1996 and $50.6 million at December 31, 1995, represent the value of
mortgage loans serviced for others carried at the lower of amortized cost or
fair value. Fair value is based on the present value of projected net servicing
revenue over the estimated life of the mortgage loans serviced. This estimated
life and the value of the servicing rights is very sensitive to changes in
interest rates and loan prepayment assumptions. Rising interest rates tend to
decrease loan prepayments and increase the value of mortgage loan servicing
rights while falling interest rates have the opposite effect. Management has
estimated that a 200 basis point decrease in interest rates would cause a $17.8
million decrease in the carrying value of the capitalized mortgage servicing
rights that would be recognized through a charge to pre-tax income under current
accounting principles.
Statement of Financial Accounting Standards No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
("FAS 125") was issued during 1996 and becomes effective on January 1, 1997.
Among other things, FAS 125 extends the requirement that a valuation allowance
be provided for the difference between the amortized historical cost and fair
value of all capitalized servicing rights stratified by predominant risk
characteristics to all capitalized servicing rights. Previously, such
stratification was required only for servicing rights capitalized after the
adoption of FAS 122. The result of this change will be to further increase the
volatility of reported earnings as the fair value of servicing rights react to
changes in interest rates and prepayment assumptions.
A summary of both direct and internally allocated revenue and expenses from
mortgage banking activities are (in thousands):
1996 1995 1994
--------- ---------- ---------
Servicing revenue $25,478 $21,452 $17,473
Origination and secondary
marketing revenue, net 2,725 1,251 863
Other revenue 3,387 2,813 2,369
----- ----- -----
Total revenue 31,590 25,516 20,705
------ ------ ------
Personnel expense 4,416 4,148 3,498
Amortization of mortgage
servicing rights 10,348 8,667 7,468
Other expense 13,357 11,184 8,929(1)
------ ------ -----
Total expense 28,121 23,999 19,895
------ ------ ------
Operating profit $ 3,469 $ 1,517 $ 810
======== ======== =======
(1)Excludes charges of $5.2 million for losses on certain purchased
mortgage loans. See Note 7 for further discussion.
OTHER OPERATING EXPENSE
Other operating expense totaled $159.0 million for 1996 compared to $142.2
million in 1995. Excluding non-recurring charges of $7.6 million to record the
write off of intangible assets related to deposits insured by the Savings and
Loan Insurance Fund ("SAIF") and a special deposit insurance assessment to
recapitalize SAIF, operating expenses for 1996 increased 6.5% compared to 1995.
The transition toward performance based compensation and variable staffing
continued during 1996. Personnel costs increased $4.6 million or 6.9% compared
to 1995. This included an increase in incentive compensation expense of $1.7
million or 37.3% compared to 1995 due to growth in revenue over pre-determined
targets. Additionally, part-time and temporary compensation expense increased
$435 thousand or 11.3%. Employee benefits remained constant as increases in
payroll taxes and cost of the pension and thrift plans were offset by decreases
in the cost of health insurance.
Net occupancy, equipment and data processing expense for 1996 increased
$3.5 million or 12.8% compared to 1995. Data processing expense increased $2.2
million due to a higher volume of transactions processed. A significant portion
of BOK Financial's data processing is performed by service bureaus under
agreements which provide for charges per transaction. Therefore, these costs
will vary in direct relation to the number of transactions.
Additionally, equipment expense increased $750 thousand, primarily due to
depreciation expense. During 1994 through 1996, BOK Financial invested
approximately $12.0 million to upgrade its computer and telecommuni-
<PAGE> 10
cations networks, item processing equipment, lockbox equipment, and other
improvements in technology. An additional $5 million is planned to be invested
in 1997. These investments, which allow BOK Financial to compete effectively by
providing products and services which are valued by our customers, will increase
depreciation expense over the next three to five years.
Mortgage banking costs increased $3.3 million or 26.4% due primarily to a
$1.9 million increase in the amortization of capitalized mortgage servicing
rights. This increase is consistent with the growth in the balance of
capitalized servicing rights. Additionally, expenses related to the origination
and servicing of government guaranteed loans increased $1.6 million due to a
larger volume of transactions.
Table 4 Other Operating Expense
(In Thousands) BOK FINANCIAL
----------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------
Personnel expense $71,945 $ 67,298 $ 63,111 $ 60,891 $ 51,053
Business promotion 6,372 6,039 6,213 5,535 3,584
Professional fees and services 5,406 5,898 4,664 5,385 3,657
Net occupancy, equipment and data
processing expense 30,831 27,324 23,619 25,161 19,248
FDIC and other insurance 1,740 4,406 6,386 6,171 5,313
Special deposit insurance assessment 3,820 - - -` -
Printing, postage and supplies 6,792 6,340 5,415 4,876 4,678
Net gains and operating expenses on
repossessed assets (4,552) (3,098) (4,575) (2,792) (125)
Amortization of intangible assets 5,411 5,992 5,597 4,133 2,840
Write-off of core deposit intangible
assets related to SAIF-insured
deposits 3,821 - - - -
Mortgage banking costs 15,834 12,529 10,764 7,590 6,142
Other expense 11,608 9,478 12,281 8,911 8,892
------ ----- ------ ----- -----
Total $159,028 $142,206 $133,475 $125,861 $105,282
======== ======== ======== ======== ========
Since 1991, BOK Financial acquired deposits insured by the SAIF totaling
approximately $843 million. In conjunction with these acquisitions, core deposit
intangible assets which represent the future earnings potential of these funds,
were recorded. In determining the value of these core deposit intangible assets,
assumptions were made regarding the returns which were expected to be earned
over the costs which would be incurred, including interest expense, processing
costs and deposit insurance premiums. During 1995, the FDIC made a change in
deposit insurance premiums which significantly decreased the value of deposits
insured by SAIF. The premium assessed on deposits insured by the Bank Insurance
Fund ("BIF") was reduced to 3 basis points (.03%) while the premium assessed on
SAIF insured deposits remained at 23 basis points (.23%). Legislation to resolve
this difference had been expected from Congress at December 31, 1995. However,
at the end of the first quarter of 1996, the expected legislation had been
removed from the agenda and the resolution of the differential between rates
assessed on SAIF insured deposits compared to BIF insured deposits was
uncertain. This uncertainty, in addition to heightened competitive pressures
caused the spreads between the actual returns and costs to decrease. These
conditions caused the value of these core deposit intangible assets to be
impaired and a write down of $3.8 million was recognized.
During the third quarter of 1996, legislation to resolve the differential
between rates paid on SAIF insured deposits and BIF insured deposits was again
placed on the Congressional agenda. On September 30, 1996, legislation was
enacted which was designed to recapitalize SAIF and to equalize SAIF and BIF
premium rates. This legislation included a one-time assessment against all SAIF
insured deposits, including approximately $740 million held by BOK Financial.
The amount of this special deposit insurance assessment was $3.8 million.
Following this assessment, management expects future deposit insurance premiums
to decrease by approximately $1.2 million each year.
During the third quarter of 1996, BOK Financial sold two nonaccruing loans
for cash, notes and other consideration. This sale resulted in a recovery of
amounts previously charged off of approximately $2.7 million which was recorded
as an addition to the allowance for loan losses, a gain of approximately $2.0
million which was included in net gains and losses on the sale of repossessed
assets, and a reduction in nonaccruing commercial real estate loans of $3.7
million.
Other operating expenses for the fourth quarter of 1996 totaled $38.3
million compared to $36.9 million for the fourth quarter of 1995. Increases in
mortgage banking and data processing costs were partially offset by a decrease
in deposit insurance premiums and an increase in net gains on the sale of
repossessed assets. Additionally, amortization of intangible assets decreased as
a result of the previously discussed write off of certain core deposit
intangible assets.
The efficiency ratio, the ratio of other operating expenses, excluding net
gains on real estate sales and SAIF-related charges, to tax-equivalent net
interest revenue and other operating revenue, excluding securities gains and
losses, decreased to 64.0% during 1996 compared to 68.5% in 1995. This
improvement is due to growth in both net interest revenue and operating revenue
along with limitations on the growth of operating expenses.
Operating expenses for 1995 increased $12.5 million or 9.4% compared to
1994, excluding gains on the sale of repossessed assets and a $5.2 million loss
on certain purchased mortgage loans in 1994. The increases are primarily due to
higher personnel costs caused by additional staffing in support of expanded
products and services, higher data processing costs due to increased volume of
transactions, and higher mortgage banking costs, also due to increased volume of
loans originated and serviced.
<PAGE> 11
INCOME TAXES
Income tax expense was $15.3 million, $14.8 million, and $14.6 million for
1996, 1995, and 1994, respectively, representing 22%, 23%, and 25%, respectively
of book taxable income. Tax expense currently payable totaled $19.0 million in
1996 compared to $17.0 million in 1995 and $13.7 million in 1994. The
acquisition of BOk by BOK Financial in 1991 resulted in a change in ownership
which, under tax regulations, significantly limited the utilization of certain
tax benefits during a five year period from the acquisition date. Because of
these limitations and uncertainties regarding the timing of when these tax
benefits would be available and BOK Financial's ability to generate future
taxable income, a valuation allowance had been recorded. This valuation
allowance was periodically evaluated and adjusted based upon assessments of
these limitations and uncertainties. In the second quarter of 1996, the five
year limitation period expired. Accordingly, the remaining valuation allowance
has been eliminated. Income tax expense for 1997 is expected to be approximately
31% of pre-tax book income, consistent with amounts recorded during 1996,
excluding the valuation allowance reversal. See Note 10 to the Consolidated
Financial Statements for a detailed discussion. BOk and BOK Financial are
currently under audit by the Internal Revenue Service for 1992 and 1993,
respectively. The ultimate outcome of this audit cannot be determined with any
certainty at this time. However, management expects no material adverse impact
on the financial statements.
Table 5 Selected Quarterly Financial Data
(In Thousands Except Per Share Data)
FOURTH THIRD SECOND FIRST
--------- ---------- ---------- ----------
1996
------------------------------------------
Interest revenue $74,806 $72,890 $72,220 $70,616
Interest expense 42,562 40,944 39,773 39,814
------ ------ ------ ------
Net interest revenue 32,244 31,946 32,447 30,802
Provision for loan losses 357 62 2,937 911
----- ------ ----- ------
Net interest revenue after
provision for loan losses 31,887 31,884 29,510 29,891
Other operating revenue 28,156 27,228 25,933 26,602
Securities gains (losses), net (622) - (1,967) (18)
Other operating expense 38,315 40,297 42,774 37,642
------ ------ ------ ------
Income before taxes 21,106 18,815 10,702 18,833
Income tax expense (benefit) 6,540 5,840 (2,889) 5,838
----- ----- ------ -----
Net income $14,566 $12,975 $13,591 $12,995
======= ======= ======= =======
Earnings Per Share:
Primary $ .66 $ .59 $ .62 $ .60
======= ======= ======= =======
Fully Diluted .60 .54 .57 .54
=== === === ===
Average Shares:
Primary 21,370 21,217 21,188 21,170
====== ====== ====== ======
Fully Diluted 24,219 24,087 24,023 24,001
====== ====== ====== ======
1995
----------------------------------------
Interest revenue $70,579 $69,686 $69,228 $65,948
Interest expense 41,132 40,631 40,869 37,545
------ ------ ------ ------
Net interest revenue 29,447 29,055 28,359 28,403
Provision for loan losses 176 15 40 -
------ ------ ------ -------
Net interest revenue after
provision for loan losses 29,271 29,040 28,319 28,403
Other operating revenue 23,951 22,237 21,631 22,153
Securities gains, net - 948 226 -
Other operating expense 36,852 35,682 34,567 35,105
------ ------ ------ ------
Income before taxes 16,370 16,543 15,609 15,451
Income taxes 3,707 4,050 3,527 3,484
------ ------ ------ ------
Net income $12,663 $12,493 $12,082 $11,967
======= ======= ======= =======
Earnings Per Share:
Primary $ .58 $ .57 $ .55 $ .55
======== ======== ======== ========
Fully Diluted .53 .52 .50 .50
=== === === ===
Average Shares:
Primary 21,192 21,210 21,175 21,157
====== ====== ====== ======
Fully Diluted 24,006 24,024 23,996 23,972
====== ====== ====== ======
<PAGE> 12
ASSESSMENT OF FINANCIAL CONDITION
SECURITIES PORTFOLIO
Securities are identified as either investment or available for sale based
upon various factors, including asset/liability management strategies, liquidity
and profitability objectives, and regulatory requirements. Investment securities
are carried at cost, adjusted for amortization of premiums or accretion of
discounts. Amortization or accretion of mortgage-backed securities is
periodically adjusted for estimated prepayments. Available for sale securities
are those which may be sold prior to maturity based upon asset/liability
management decisions. Securities identified as available for sale are carried at
fair value. Unrealized gains or losses, less applicable deferred taxes, are
recorded in Shareholders' Equity.
During 1996, BOK Financial increased its holdings of marketable equity
securities by $72.5 million based on historical cost. Approximately $41.5
million of this increase was from purchases of government agency preferred stock
which offers attractive yields with little market value risk. Additionally, BOK
Financial increased the cost basis of its holdings in the common stock of
another bank by $12.8 million. The fair value of this stock has appreciated by
$6.8 million due to a pending acquisition of the bank.
Table 6 presents the book values and fair values of BOK Financial's
securities portfolio at December 31, 1996, 1995 and 1994. Additional information
regarding the securities portfolio is presented in Note 4 to the Consolidated
Financial Statements.
<TABLE>
Table 6 Securities
(In Thousands)
DECEMBER 31,
1996 1995 1994
---------------------- ---------------------- ------------------
BOOK FAIR Book Fair Book Fair
VALUE VALUE Value Value Value Value
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment:
U.S. Treasury $ 1,000 $ 992 $ 716 $ 721 $ 1,224 $ 1,211
Municipal and other tax-exempt 134,150 134,705 95,907 97,628 244,411 231,338
Mortgage-backed securities:
U.S. agencies 62,282 62,876 78,832 79,777 694,086 637,586
Other - - - - 9,825 9,625
------ ------ ------ ------ ------ ------
Total mortgage-backed securities 62,282 62,876 78,832 79,777 703,911 647,211
------ ------ ------ ------ ------- -------
Other debt securities 976 976 3,666 3,660 7,781 7,451
Equity securities and
mutual funds - - - - - -
-------- -------- -------- -------- -------- --------
Total $198,408 $199,549 $179,121 $181,786 $957,327 $887,211
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
AMORTIZED FAIR Amortized Fair Amortized Fair
COST VALUE Cost Value Cost Value
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S. Treasury $200,505 $ 201,091 $ 221,201 $ 222,478 $261,544 $255,347
Municipal and other tax-exempt 160,813 161,358 165,709 166,855 - -
Mortgage-backed securities:
U.S. agencies 985,219 979,117 941,020 934,433 374,078 352,169
Other 3,288 3,961 8,154 8,011 - -
------- ------- ------- ------- -------- -------
Total mortgage-backed securities 988,507 983,078 949,174 942,444 374,078 352,169
------- ------- ------- ------- ------- -------
Other debt securities 178 178 250 98 - -
Equity securities and
mutual funds 106,655 113,417 34,145 34,786 22,726 22,726
------- ------- ------ ------ ------ ------
Total $1,456,658 $1,459,122 $1,370,479 $1,366,661 $658,348 $630,242
========== ========== ========== ========== ======== ========
</TABLE>
LOANS
During 1996, loans increased $200 million or 9.1%, continuing an upward
trend in loan volumes which began in 1991. This increase was the result of
continued strength in the Oklahoma economy and taking advantage of disruptions
in banking relationships caused by high-profile bank mergers. Commercial loans
increased $123 million or 14.3% and commercial real estate loans increased $77
million or 12.9%.
The composition of the loan portfolio shifted toward commercial and
commercial real estate loans during 1996. Commercial loans totaled $984 million
or 41% of the portfolio, compared to 39% in 1995. This included energy loans of
$217 million or 9.1% of the total loan portfolio. Commercial real estate loans
totaled $676 million or 28% at December 31, 1996.
Substantially all of the commercial and consumer loans, and approximately
77% of the residential mortgage loans (excluding loans held for sale) are to
businesses and individuals in Oklahoma or Northwest Arkansas. This geographic
concentration subjects the loan portfolio to the general economic conditions
within this area. Notable segments within the commercial loan portfolio are
presented in Table 7. Commercial real estate loans are secured primarily by
properties located in the Tulsa or Oklahoma City, Oklahoma metropolitan areas.
The major components of these properties are multifamily residences, $146.2
million; office buildings, $82.3 million; hotels, $70.6 million; retail
facilities, $60.8 million; and medical/nursing facilities, $70.3 million.
<PAGE> 13
Table 7 Loans
(In Thousands)
------------------------------------------------------
DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Commercial:
Energy $ 217,056 $ 159,887 $ 162,767 $ 161,273 $ 137,619
Manufacturing 137,529 136,701 106,104 99,464 89,015
Wholesale/retail 166,075 143,941 95,021 81,207 88,537
Agriculture 109,324 86,733 82,527 69,315 61,186
Loans for purchasing or
carrying securities 13,604 7,963 9,718 13,249 27,975
Other commercial and
industrial 340,602 325,839 289,929 268,028 276,672
Commercial real estate:
Construction and land
development 165,784 148,217 106,692 93,310 81,022
Other real estate loans 509,874 450,385 363,600 293,122 292,768
Residential mortgage:
Secured by 1-4 family
residential properties 429,405 436,816 373,389 254,505 213,201
Residential mortgages
held for sale 95,332 72,412 40,909 189,786 78,970
Consumer 209,995 225,474 213,397 155,296 133,279
------- ------- ------- ------- -------
Total $2,394,580 $2,194,368 $1,844,053 $1,678,555 $1,480,244
========== ========== ========== ========== ==========
BOK Financial monitors loan performance on a portfolio and individual loan
basis. Nonperforming loans are reviewed at least quarterly and are discussed
subsequently under the caption "Nonperforming Assets." 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 December 31, 1996, loans totaling $40 million were assigned to the
substandard risk category and loans totaling $62 million were assigned to the
special mention category, compared to $42 million and $40 million, respectively,
at December 31, 1995.
Table 8 Loan Maturity and Interest Rate
Sensitivity on December 31, 1996
(In Thousands)
---------------------------------------
Remaining Maturities of Selected Loans
---------------------------------------
Total Within 1-5 After
1 Year Years 5 Years
-----------------------------------------
Loan maturity:
Commercial $ 984,190 $517,648 $405,180 $ 61,362
Commercial real estate 675,658 127,768 427,538 120,352
------- ------- ------- -------
Total $1,659,848 $645,416 $832,718 $181,714
========== ======== ======== ========
Interest rate sensitivity for selected loans with:
Predetermined interest rates $ 331,204 $ 67,525 $191,137 $ 72,542
Floating or adjustable
interest rates 1,328,644 577,891 641,581 109,172
--------- ------- ------- -------
Total $1,659,848 $645,416 $832,718 $181,714
========== ======== ======== ========
<PAGE> 14
SUMMARY OF LOAN LOSS EXPERIENCE
The reserve for loan losses, which is available to absorb losses inherent
in the loan portfolio, totaled $45 million at December 31, 1996, compared to $38
million at December 31, 1995. This represents 1.96% and 1.80% of total loans,
excluding loans held for sale, at December 31, 1996 and 1995, respectively.
Losses on loans held for sale, principally 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 9 presents
statistical information regarding the reserve for loan losses for the past five
years.
Table 9 Summary of Loan Loss Experience
(Dollars In Thousands)
BOK Financial
-------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------
Beginning balance $38,287 $38,271 $37,261 $35,100 $38,351
Loans charged-off:
Commercial 2,318 753 1,112 4,089 6,174
Commercial real estate 523 171 227 1,195 4,223
Residential mortgage 237 190 553 548 495
Consumer 3,432 2,874 1,345 690 639
----- ----- ----- --- ---
Total 6,510 3,988 3,237 6,522 11,531
----- ----- ----- ----- ------
Recoveries of loans previously charged-off:
Commercial 3,747 1,579 1,366 2,204 616
Commercial real estate 4,113 987 972 828 823
Residential mortgage 262 373 157 151 175
Consumer 982 834 602 482 447
--- --- --- --- ---
Total 9,104 3,773 3,097 3,665 2,061
----- ----- ----- ----- -----
Net loans charged-off (2,594) 215 140 2,857 9,470
Provision for loan losses 4,267 231 195 3,376 5,555
Additions due to acquisitions - - 955 1,642 664
------ ------ ------ ------ ------
Ending balance $45,148 $38,287 $38,271 $37,261 $35,100
======= ======= ======= ======= =======
Reserve to loans outstanding
at year-end(1) 1.96% 1.80% 2.12% 2.50% 2.50%
Net loan losses to average loan (.12) .01 .01 .18 .71
Provision for loan losses to
average loans .19 .01 .01 .22 .41
Recoveries to gross charge-offs 139.85% 94.61% 95.68% 56.19% 17.87%
Reserve as a multiple of net
charge-offs (17.40)x 178.08x 273.36x 13.04x 3.71x
- --------------------------------------------------------------------------------
PROBLEM LOANS
- --------------------------------------------------------------------------------
Loans past due (90 days) $18,816 $ 9,379 $ 7,667 $ 5,482 $ 1,379
Nonaccrual 18,835 29,288 20,114 9,124 23,611
Renegotiated - - - 1,323 1,448
- --------------------------------------------------------------------------------
Total $37,651 $38,667 $27,781 $15,929 $26,438
- --------------------------------------------------------------------------------
Foregone interest on
nonaccrual loans $ 2,975 $ 2,928 $ 1,392 $ 1,238 $ 2,163
- --------------------------------------------------------------------------------
(1) Excludes residential mortgage loans held for sale which are carried at
the lower of aggregate cost or market value.
The adequacy of the reserve for loan losses is assessed by management based
upon an evaluation of the current risk characteristics of the loan portfolio
including current 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 reserve for loan losses. These
provisions totaled $4.3 million for 1996 and $0.2 million for 1995 and 1994. The
increased provision for 1996 reflected management's assessment of increased risk
of loss due primarily to continued growth in the loan portfolio, moderation of
economic activity in BOK Financial's primary market areas, and drought
conditions which prevailed over much of Oklahoma during the first half of 1996.
Additionally, the allowance increased by $2.6 million due to recoveries of
amounts previously charged off in excess of current year loan charge offs. It is
expected that continued growth in the loan portfolio will require 1997's
provision for loan losses to be comparable to 1996.
Table 10 presents management's allocation of the year-end reserve for loan
losses for the past five years. The changes in the various allocations reflect
the changing composition of the loan portfolio and the changing economic
environment in BOK Financial's market area. In addition to reserves allocated to
specific loans or categories of loans, reserves are maintained for other
relevant factors such as national and local economic conditions and the nature
and volume of the loan portfolio.
<PAGE> 15
<TABLE>
Table 10 Loan Loss Reserve Allocation
(Dollars in Thousands)
December 31,
1996 1995 1994 1993 1992
------------------- ------------------- -------------------- ------------------- -------------------
% of % of % of % of % of
Reserve Loans(1) Reserve Loans(1) Reserve Loans(1) Reserve Loans(1) Reserve Loans(1)
---------- -------- ---------- -------- ---------- --------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Category:
Commercial $25,191 42.80 $25,646 40.58 $23,633 41.38 $20,344 46.52 $19,784 48.60
Commercial real estate 3,907 29.39 3,774 28.21 2,524 26.08 2,755 25.96 5,876 26.68
Residential mortgage 1,651 18.68 638 20.59 556 20.71 620 17.09 352 15.21
Consumer 5,174 9.13 2,556 10.62 3,436 11.83 1,795 10.43 892 9.51
Nonspecific allocation 9,225 - 5,673 - 8,122 - 11,747 - 8,196 -
------ ----- ----- ----- ------ ------ ------ ------ ------ ------
Total $45,148 100.00 $38,287 100.00 $38,271 100.00 $37,261 100.00 $35,100 100.00
======= ===== ======= ===== ======= ====== ======= ====== ======= ======
<FN>
(1) Excludes residential mortgage loans held for sale which are carried at the lower of aggregate cost or market value.
</FN>
</TABLE>
NONPERFORMING ASSETS
Nonperforming assets totaled $42 million at December 31, 1996 and 1995.
Although total nonperforming assets remained unchanged, nonaccruing loans
decreased $10.5 million while loans past due 90 days or more increased $9.4
million. The decrease in nonaccruing commercial real estate loans was due
primarily to the previously discussed sale of two nonaccruing loans and the
decrease in nonaccruing commercial loans was due primarily to payments received.
Information regarding nonperforming assets is presented in Table 11.
Nonperforming loans include nonaccrual loans, loans 90 days or more past due and
renegotiated loans. Loans 90 days or more past due at December 31, 1996 included
$13.9 million of residential mortgage loans guaranteed by agencies of the U.S.
Government. These loans were purchased from various investors to minimize
operating costs. The allowance for loan losses as a percent of nonperforming
assets increased to 120% at December 31, 1996 compared to 99% at December 31,
1995 due to the increase in allowance for loan losses previously discussed. See
Note 5 to the Consolidated Financial Statements for additional information.
Table 11 Nonperforming Assets
(Dollars in Thousands)
DECEMBER 31,
------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------
Nonperforming loans
Nonaccrual loans:
Commercial $ 9,589 $14,646 $11,238 $ 2,383 $10,677
Commercial real estate 5,306 10,621 5,273 4,854 10,209
Residential mortgage 2,580 2,794 2,916 1,788 2,391
Consumer 1,360 1,227 687 99 334
----- ----- ----- ----- ------
Total nonaccrual loans 18,835 29,288 20,114 9,124 23,611
Loans past due (90 days)(1) 18,816 9,379 7,667 5,482 1,379
Renegotiated loans - - - 1,323 1,448
------ ------ ------ ----- -----
Total nonperforming loans 37,651 38,667 27,781 15,929 26,438
------ ------ ------ ------ ------
Other nonperforming assets:
Commercial real estate 2,586 3,023 3,245 5,915 8,086
Other 1,990 376 855 1,608 3,076
----- ----- ----- ----- -----
Total other nonperforming assets 4,576 3,399 4,100 7,523 11,162
----- ----- ----- ----- ------
Total nonperforming assets $42,227 $42,066 $31,881 $23,452 $37,600
======= ======= ======= ======= =======
Ratios:
Reserve for loan losses to
nonperforming loans 119.91% 99.02% 137.76% 233.92% 132.76%
Nonperforming loans to
period-end loans(2) 1.64 1.82 1.54 1.07 1.89
- --------------------------------------------------------------------------------
(1) Includes residential mortgages
guaranteed by agencies of the
U.S. Government. $13,932 $ 6,754 $ 6,549 $ 3,546 $ -
(2) Excludes residential mortgage
loans held for sale.
- --------------------------------------------------------------------------------
<PAGE> 16
DEPOSITS
Average deposits for 1996 increased $444 million or 16.6% compared to 1995.
This includes increases of $46 million in average demand deposit accounts and
$398 million in average interest-bearing deposit accounts. As shown in Table 12,
average core deposits increased $182 million and were $2.3 billion or 73.2% of
average deposits. Average estimated uninsured deposits increased $172 million
and were $565 million or 18.1% of average deposits. Average estimated uninsured
deposits included approximately $147 million of brokered deposits. Uninsured
deposits as used in this presentation is based on a simple analysis of account
balances and does not reflect combined ownership and other account stylings that
would determine insurance based on FDIC regulations. These changes, along with
the increase in public funds reflect steps taken by management to reduce BOK
Financial's reliance on borrowed funds and to increase deposits as a source of
funding.
Table 12 Deposit Analysis
(In Thousands)
Average Balances
--------------------------
1996 1995
------------- ------------
Core deposits $2,287,298 $2,105,266
Public funds 273,312 184,000
Uninsured deposits 565,170 392,627
--------- ----------
Total $3,125,780 $2,681,893
========== ==========
BOK Financial competes for deposits by offering a broad range of products
and services to its customers. While this includes offering interest rates and
fees which are competitive with other financial institutions, the primary means
of competing for deposits is convenience and service to the customers. BOk
extended its ability to exceed its competition by offering 24-hour telephone
banking through ExpressBank and by adding 5 branches with extended hours in
local supermarkets. BOK Financial plans to open 8 new supermarket branches in
1997 to further enhance customer convenience.
Table 13 Maturity of Domestic CDs
and Public Funds in Amounts
of $100,000 or More
(In Thousands)
December 31,
-------------------------
1996 1995
------------ ------------
Months to maturity:
3 or less $ 66,872 $171,763
Over 3 through 6 195,339 210,495
Over 6 through 12 140,777 56,397
Over 12 157,000 47,531
------- ------
Total $559,988 $486,186
======== ========
BORROWINGS
Average borrowings for 1996 decreased $229 million compared to 1995 and
represented 18.5% of total funding sources, down from 25.3% for 1995. The
decrease in borrowings was offset by growth in average deposits and capital. See
Note 9 to the Consolidated Financial Statements for additional information.
CAPITAL
Equity capital of BOK Financial averaged $322 million and $272 million for
1996 and 1995, respectively. The $50 million increase resulted from 1996
earnings and a decrease in unrealized losses on available for sale securities.
Management has identified capital and funding needs which total $84 million
for current commitments, including the acquisitions of Park Cities and First
Texas, and an additional $40 million in capital and funding needs for
anticipated growth through 1997. Resources available to meet the current
commitments include existing lines of credit with commercial banks which total
$50 million and an agreement with its principal shareholder to issue $20 million
Tier 2 qualifying debt. The remainder of the commitment will be funded by
dividends from BOK Financial's bank subsidiaries. Management is negotiating
additional lines of credit up to a total of $80 million and a $30 million
increase in Tier 2 qualifying debt. If all capital and funding resources are
successfully obtained and fully drawn, BOK Financial will incur approximately $8
million to $10 million of additional interest expense per year. Dividends from
BOK Financial's subsidiary banks will be the primary source of repayment. The
timing and extent of future growth plans will be reevaluated based upon the
availability of these resources. See Note 15 to the Consolidated Financial
Statements for additional information.
<PAGE> 17
INTEREST RATE SENSITIVITY AND LIQUIDITY
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 borrowings, short-term assets, and public and brokered
deposits, and establish minimum levels for unpledged assets, among other things.
Compliance with these guidelines is reviewed monthly. At December 31, 1996, BOK
Financial is within all guidelines established under these policies.
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. Table 14 presents the interest
rate sensitivity of earning assets and interest bearing liabilities at December
31, 1996. This table indicates that changes in interest rates would affect
interest-bearing liabilities much more quickly than earning assets based upon
their contractual repricing. However, assets and liabilities with similar
contractual repricing characteristics may not reprice at the same time or to the
same degree.
Most notably, interest-bearing transaction and savings deposits, which are
shown as repricing in 1 - 30 days, do not reprice according to their contractual
terms. Historical trends indicate that the repricing of these deposits extend
across all repricing periods through five years. As a result, the interest rate
sensitivity gap analysis is not the best indicator of the impact of changes in
interest rates on net interest revenue. Additionally, the maturity of certain
securities and loans is based on prepayment assumptions which change based on
changes in interest rates.
<TABLE>
Table 14 Interest Rate Sensitivity Analysis at
December 31, 1996
(In Thousands)
1-30 31-90 91-365 1-5 OVER
DAYS DAYS DAYS YEARS 5 YEARS TOTAL
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Securities $ 80,170 $ 13,835 $ 162,302 $1,120,151 $281,072 $1,657,530
Trading securities 6,454 - - - - 6,454
Loans, net 1,532,674 65,897 278,932 348,039 123,890 2,349,432
Funds sold and resell agreements 44,760 - - - - 44,760
--------- ------ ------- --------- ------- ---------
Total earning assets 1,664,058 79,732 441,234 1,468,190 404,962 4,058,176
--------- ------ ------- --------- ------- ---------
Interest-bearing liabilities:
Transaction deposits 954,546 - - - - 954,546
Savings deposits 97,019 - - - - 97,019
Time deposits 292,716 258,184 496,139 460,831 467 1,508,337
Funds purchased and resale agreements 400,198 268,978 - - - 669,176
Other borrowings 171,780 2,670 - 53,808 48,870 277,128
------- ----- ------- ------- ------ -------
Total interest-bearing liabilities 1,916,259 529,832 496,139 514,639 49,337 3,506,206
--------- ------- ------- ------- ------ ---------
Asset-liability gap (252,201) (450,100) (54,905) 953,551 355,625 551,970
Interest rate swaps (receive fixed) - (13,500) (55,000) 85,000 (16,500) -
-------- ------- ------- ------ ------- -------
Interest rate sensitivity gap (252,201) (463,600) (109,905) 1,038,551 339,125 551,970
-------- -------- -------- --------- ------- -------
Cumulative interest rate sensitivity gap $ (252,201) $(715,801) $(825,706) $ 212,845 $551,970 $ -
=========== ========= ========= =========== ======== ========
</TABLE>
<PAGE> 18
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. At December 31, 1996, this modeling indicated interest rate
sensitivity as follows:
200 bp 200 bp Most
increase decrease Likely
---------- ----------- ---------
Anticipated impact in next twelve months compared to 1996 actual results:
Net interest revenue 1.0% (1.2)% 0.6%
Net income 1.4 (11.9) 0.9
Economic value of equity (7.7) 2.5 (1.7)
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 $6.6 million. While this decrease in value would largely offset an
increase in the value of the securities portfolio, current accounting principles
require that the net decreased value of mortgage loan servicing rights be
charged to earnings while the increased value of available for sale securities
be credited to shareholders' equity. The result is an estimated decrease in net
income of 11.9%. Additionally, a 200 basis point increase in interest rates
would decrease the economic value of equity by 7.7% 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 may differ significantly.
BOK Financial uses interest rate swaps, a form of off-balance sheet
derivative product, in managing its interest rate sensitivity. These swaps are
primarily used to more closely match the interest paid on certain long-term,
fixed rate certificates of deposit with earning assets. Swaps allow BOK
Financial to offer these deposits to its customers without altering the desired
repricing characteristics. 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 counterparties. During 1996, income
from these swaps exceeded costs of the swaps by $1.4 million. Credit risk from
these swaps is closely monitored and counterparties to these contracts are
selected on the basis of their credit worthiness among other factors. Derivative
products are not used for speculative purposes. See Note 14 to the Consolidated
Financial Statements for additional information.
The best measure of liquidity is the ability to obtain funds to meet cash
requirements. Liquidity is achieved through maturities of earning assets,
securities available for sale and loans held for sale. On the liability side,
liquidity depends on the availability of deposits and short-term borrowings in
both the local and national markets for the subsidiary banks.
Cash provided by operations in 1996 totaled $56 million, or $77 million
excluding the effect of changes in mortgage loans held for sale. This compares
to cash provided by operations of $23 million, or $56 million excluding the
increase in mortgage loans held for sale, in 1995.
Investing activities used $318 million, primarily for net loan funding of
$201 million and a net increase in securities of $111 million. Financing
activities provided $318 million due to growth in transactional deposit accounts
of $211 million and certificates of deposit of $108 million.
<PAGE> 19
REPORT OF MANAGEMENT ON 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 consolidated financial statements present fairly
the financial conditions, results of operations and cash flows of BOK Financial
and its subsidiaries at the dates and for the periods indicated.
BOK Financial and its subsidiaries maintain a system of internal accounting
controls designed to provide reasonable assurance that transactions are executed
in accordance with management's general or specific authorization, and are
recorded as necessary to maintain accountability for assets and to permit
preparation of financial statements in accordance with generally accepted
accounting principles. This system includes written policies and procedures, a
corporate code of conduct, an internal audit program and standards for the
hiring and training of qualified personnel.
The Board of Directors of BOK Financial maintains an Audit Committee
consisting of outside directors that meet periodically with management and BOK
Financial's internal and independent auditors. The Committee considers the audit
and nonaudit services to be performed by the independent auditors, makes
arrangements for the internal and independent audits and recommends BOK
Financial's selection of independent auditors. The Committee also reviews the
results of the internal and independent audits, considers and approves certain
of BOK Financial's accounting principles and practices, and reviews various
shareholder reports and other reports and filings.
Ernst & Young LLP, certified public accountants, have been engaged to audit
the consolidated financial statements of BOK Financial and its subsidiaries.
Their audit is conducted in accordance with generally accepted auditing
standards and their report on BOK Financial's consolidated financial statements
is set forth below.
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of BOK
Financial Corporation and subsidiaries at December 31, 1996 and 1995, and the
related consolidated statements of earnings, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements of BOK Financial
Corporation and subsidiaries referred to above present fairly, in all material
respects, the consolidated financial position of BOK Financial Corporation at
December 31, 1996 and 1995, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
As described in Note 1 in 1995, BOK Financial Corporation changed its
method of accounting for mortgage servicing rights.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
January 27, 1997
<PAGE> 20
BOK FINANCIAL CORPORATION
Consolidated Statements of Earnings
(In Thousands Except Share Data)
1996 1995 1994
------------------------------------
INTEREST REVENUE
Loans $196,309 $179,052 $138,415
Taxable securities 77,588 83,076 73,157
Tax-exempt securities 14,665 12,075 9,252
------ ------ -----
Total securities 92,253 95,151 82,409
------ ------ ------
Trading securities 340 242 226
Funds sold and resell agreements 1,630 996 2,008
------- ------- -------
Total interest revenue 290,532 275,441 223,058
------- ------- -------
INTEREST EXPENSE
Deposits 118,066 97,739 71,141
Borrowed funds 45,027 62,086 31,534
Subordinated debenture - 352 1,380
------- ------- -------
Total interest expense 163,093 160,177 104,055
------- ------- -------
NET INTEREST REVENUE 127,439 115,264 119,003
PROVISION FOR LOAN LOSSES 4,267 231 195
------- ------ -------
NET INTEREST REVENUE AFTER PROVISION
FOR LOAN LOSSES 123,172 115,033 118,808
------- ------- -------
OTHER OPERATING REVENUE
Brokerage and trading revenue 7,896 6,046 5,517
TransFund network revenue 8,795 7,025 6,039
Securities gains (losses), net (2,607) 1,174 (1,868)
Trust fees and commissions 21,638 19,363 17,117
Service charges and fees on deposit accounts 24,104 21,152 20,698
Mortgage banking revenue 26,234 20,336 15,868
Other revenue 19,252 16,050 10,993
------ ------ ------
Total other operating revenue 105,312 91,146 74,364
------- ------ ------
OTHER OPERATING EXPENSE
Personnel expense 71,945 67,298 63,111
Business promotion 6,372 6,039 6,213
Professional fees and services 5,406 5,898 4,664
Net occupancy, equipment and data
processing expense 30,831 27,324 23,619
FDIC and other insurance 1,740 4,406 6,386
Special deposit insurance assessment 3,820 - -
Printing, postage and supplies 6,792 6,340 5,415
Net gains and operating expenses on
repossessed assets (4,552) (3,098) (4,575)
Amortization on intangible assets 5,411 5,992 5,597
Write-off of core deposit intangible assets
related to SAIF-insured 3,821 - -
deposits
Mortgage banking costs 15,834 12,529 10,764
Other expense 11,608 9,478 12,281
------ ----- ------
Total other operating expense 159,028 142,206 133,475
------- ------- -------
INCOME BEFORE TAXES 69,456 63,973 59,697
Federal and state income tax 15,329 14,768 14,632
------ ------ ------
NET INCOME $ 54,127 $ 49,205 $ 45,065
========= ========= =========
EARNINGS PER SHARE:
Primary:
Net Income $ 2.48 $ 2.25 $ 2.05
- -------------------------------------------------------------------------------
Fully Diluted:
Net Income $ 2.24 $ 2.05 $ 1.88
- -------------------------------------------------------------------------------
AVERAGE SHARES USED IN COMPUTATION:
Primary 21,234,363 21,181,341 21,203,496
Fully Diluted 24,205,757 24,001,807 24,017,527
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE> 21
Consolidated Balance Sheets
(In Thousands Except Share Data)
December 31,
--------------------------
1996 1995
------------- ------------
ASSETS
Cash and due from banks $ 322,791 $ 303,499
Funds sold and resell agreements 44,760 8,440
Trading securities 6,454 7,777
Securities:
Available for sale 1,459,122 1,366,661
Investment (fair value: 1996-$199,549;
1995-$181,786) 198,408 179,121
-------- --------
Total securities 1,657,530 1,545,782
--------- ---------
Loans 2,394,580 2,194,368
Less reserve for loan losses 45,148 38,287
--------- ---------
Net loans 2,349,432 2,156,081
--------- ---------
Premises and equipment, net 47,479 47,673
Accrued revenue receivable 46,020 41,121
Excess cost over fair value of net assets acquired
and core deposit premium (net of accumulated
amortization: 1996-$30,758; 1995-$21,526) 28,276 37,134
Mortgage servicing rights 61,544 50,634
Real estate and other repossessed assets 4,576 3,399
Other assets 51,838 42,578
--------- ---------
Total assets $4,620,700 $4,244,118
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits $ 696,853 $ 651,134
Interest-bearing deposits:
Transaction 954,546 781,205
Savings 97,019 104,726
Time 1,508,337 1,400,644
--------- ---------
Total deposits 3,256,755 2,937,709
--------- ---------
Funds purchased and repurchase agreements 669,176 697,497
Other borrowings 277,128 250,309
Accrued interest, taxes and expense 46,047 47,307
Other liabilities 11,628 9,731
--------- ---------
Total liabilities 4,260,734 3,942,553
--------- ---------
Shareholders' equity:
Preferred stock 23 23
Common stock ($.00006 par value; 2,500,000,000
shares authorized; issued:
1996-21,148,729; 1995-20,415,504) 1 1
Capital surplus 176,093 157,395
Retained earnings 182,892 146,727
Treasury stock (shares at cost:
December 31, 1996-16,834) (428) -
Unrealized net gain (loss) on securities
available for sale 1,472 (2,427)
Notes receivable from exercise of stock options (87) (154)
------- -------
Total shareholders' equity 359,966 301,565
------- -------
Total liabilities and shareholders' equity $4,620,700 $4,244,118
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE> 22
BOK FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In Thousands)
------------------------------------
Preferred Stock Common Stock
------------------------------------
Shares Amount Shares Amount
------------------------------------
December 31, 1993 250,065 $1,305 19,471 $ 1
Net income - - - -
Issuance of common stock - - 7 -
Issuance of common stock to Thrift Plan - - 17 -
Exercise of stock options - - 10 -
Payments on stock options notes receivable - - - -
Cash dividends paid on preferred stock - - - -
Dividends paid in shares of common stock:
Preferred stock - - 65 -
Common stock - - 535 -
Payment to dissenting shareholders - - (71) -
Cancellation of treasury stock - - (299) -
Repurchase of preferred stock (65) (1,292) - -
Sale of treasury stock - - - -
Unrealized net loss on securities
available for sale - - - -
-------------------------------
December 31, 1994 250,000 13 19,735 1
Net income - - - -
Director retainer shares - - 8 -
Issuance of common stock to Thrift Plan - - 3 -
Exercise of stock options - - 6 -
Payments on stock options notes receivable - - - -
Issuance of preferred stock 102 10 - -
Dividends paid in shares of common stock:
Preferred stock - - 70 -
Common stock - - 594 -
Unrealized net gain on securities
available for sale - - - -
-------------------------------
December 31, 1995 250,102 23 20,416 1
Net income - - - -
Director retainer shares - - 8 -
Exercise of stock options - - 41 -
Payments on stock options notes receivable - - - -
Cash dividends paid on preferred stock - - - -
Dividends paid in shares of common stock:
Preferred stock - - 69 -
Common stock - - 615 -
Unrealized net gain on securities
available for sale - - - -
-------------------------------
December 31, 1996 250,102 $ 23 21,149 $ 1
===============================
(1) Notes receivable from exercise of stock options.
See accompanying notes to consolidated financial statements.
<PAGE> 23
Consolidated Statements of Changes in Shareholders' Equity, (Continued)
(In Thousands)
- --------------------------------------------------------------------------
Treasury Stock
Capital Retained ---------------- Unrealized Notes
Surplus Earnings Shares Amount Gain (Loss) Receivable(1) Total
- ---------- ---------------------------------------------------------------
$131,528 $ 80,704 309 $(1,730) $ 2,471 $(336) $213,943
- 45,065 - - - - 45,065
95 - - - - - 95
381 - - - - (42) 339
167 - - - - - 167
- - - - - 93 93
- (113) - - - - (113)
1,500 (1,500) - - - - -
12,264 (12,278) - - - - (14)
(1,707) - - - - - (1,707)
(1,510) - (299) 1,510 - - -
- - - - - - (1,292)
- - (10) 220 - - 220
- - - - (19,894) - (19,894)
- ---------- ---------------------------------------------------------------
142,718 111,878 - - (17,423) (285) 236,902
- 49,205 - - - - 49,205
157 - - - - - 157
70 - - - - - 70
104 - - - - - 104
- - - - - 131 131
- - - - - - 10
1,500 (1,500) - - - - -
12,846 (12,856) - - - - (10)
- - - - 14,996 - 14,996
- --------------------------------------------------------------------------
157,395 146,727 - - (2,427) (154) 301,565
- 54,127 - - - - 54,127
173 - - - - - 173
569 - 17 (419) - - 150
- - - - - 67 67
- (3) - - - - (3)
1,500 (1,500) - - - - -
16,456 (16,459) - (9) - - (12)
- - - - 3,899 - 3,899
- --------------------------------------------------------------------------
$176,093 $182,892 17 $ (428) $ 1,472 $ (87) $359,966
==========================================================================
<PAGE> 24
BOK FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
1996 1995 1994
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 54,127 $ 49,205 $ 45,065
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash Thrift Plan contribution - - 257
Provisions for loan and repossessed
real estate losses 4,281 231 195
Depreciation and amortization 23,693 19,612 16,931
Write-off of core deposit intangible assets 3,821 - -
Net amortization of securities
discounts and premiums 2,935 1,929 6,848
Net gain on sale of assets (2,803) (4,742) (626)
Mortgage loans originated for resale (714,447) (519,392) (514,635)
Proceeds from sale of mortgage loans
held for resale 693,012 486,347 661,146
(Increase) decrease in trading securities 1,323 (5,242) 235
(Increase) decrease in accrued revenue
receivable (4,899) 277 (8,895)
(Increase) decrease in other assets (2,499) 701 (13,875)
Increase (decrease) in accrued interest,
taxes and expense (3,644) (8,176) 20,534
Increase (decrease) in other liabilities 1,033 2,275 (7,249)
------ ------ -------
Net cash provided by operating activities 55,933 23,025 205,931
------ ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for
sale securities 484,436 134,109 82,088
Proceeds from maturities of investment
securities 25,284 17,242 167,082
Proceeds from maturities of available
for sale securities 226,162 193,855 155,351
Purchases of investment securities (44,890) (29,566) (606,682)
Purchases of available for sale securities (801,999) (250,320) (436,644)
Loans originated or acquired net of
principal collected (201,139) (357,736) (275,366)
Proceeds from sales of assets 30,547 43,426 49,052
Purchases of assets (36,441) (32,900) (29,158)
Cash and cash equivalents of subsidiaries
& branches acquired and sold, net (200) (19,371) (12,014)
------- ------- -------
Net cash used by investing activities (318,240) (301,261) (906,291)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits,
transaction deposits, and savings accounts 211,353 12,042 (86,295)
Net increase (decrease)in certificates of deposit 107,693 318,100 (22,540)
Net increase (decrease) in other borrowings (1,502) (26,528) 733,450
Repayment of subordinated debenture - (23,000) -
Issuance of preferred, common and
treasury stock, net 311 331 520
Repurchase of preferred stock - - (1,292)
Payments to dissenting shareholders - - (1,707)
Dividends on preferred stock (3) - (113)
Payments on notes receivable 67 131 93
------- ------- -------
Net cash provided by financing activities 317,919 281,076 622,116
------- ------- -------
Net increase (decrease) in cash and
cash equivalents 55,612 2,840 (78,244)
Cash and cash equivalents at beginning of period 311,939 309,099 387,343
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $367,551 $311,939 $309,099
======== ======== ========
CASH PAID FOR INTEREST $163,777 $157,398 $ 98,677
=============================
CASH PAID FOR TAXES 21,375 10,954 9,609
=============================
NET LOANS TRANSFERRED TO REPOSSESSED REAL ESTATE 2,043 2,159 942
=============================
PAYMENT OF DIVIDENDS IN COMMON STOCK 17,956 14,346 13,764
=============================
See accompanying notes to consolidated financial statements.
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Consolidated Financial Statements of BOK Financial Corporation ("BOK
Financial") have been prepared in conformity with generally accepted accounting
principles, including general practices of the banking industry. The
consolidated financial statements include the accounts of BOK Financial and its
subsidiaries, principally Bank of Oklahoma, N.A. and its subsidiaries ("BOk")
and Citizens Bank of Northwest Arkansas, N.A. Certain prior year amounts have
been reclassified to conform to current year classifications.
NATURE OF OPERATIONS
BOK Financial, through its subsidiaries, provides a wide range of financial
services to commercial and industrial customers, other financial institutions
and consumers throughout Oklahoma, Northwest Arkansas and North Texas. These
services include depository and cash management; lending and lease financing;
mortgage banking; securities brokerage, trading and underwriting; and personal
and corporate trust.
USE OF ESTIMATES
Preparation of BOK Financial's financial statements requires management to
make estimates of future economic activities, including interest rates, loan
collectibility and prepayments and cash flows from customer accounts. These
estimates are based upon current conditions and information available to
management. Actual results may differ significantly from these estimates.
ACQUISITIONS
Assets and liabilities acquired by purchase are recorded at fair values on
the acquisition dates. Intangible assets are amortized using straight-line and
accelerated methods over the estimated benefit periods. These periods range from
7 to 25 years for goodwill and 7 to 10 years for core deposit intangibles. The
net book values of intangible assets are evaluated for impairment when economic
conditions indicate an impairment may exist. The Consolidated Statements of
Earnings include the results of purchases from the dates of acquisition. The
financial statements of companies acquired in pooling-of-interests transactions
are combined with the Consolidated Financial Statements of BOK Financial at
historical cost as if the mergers occurred at the beginning of the earliest
period presented.
CASH EQUIVALENTS
Due from banks, funds sold (generally federal funds sold for one-day
periods) and resell agreements (which generally mature within one to 30 days)
are considered cash equivalents.
SECURITIES
Securities are identified as trading, investment (held to maturity) or
available for sale at the time of purchase based upon the intent of management,
liquidity and capital requirements, regulatory limitations and other relevant
factors. Trading securities, which are acquired for profit through resale, are
carried at market value with unrealized gains and losses included in current
period earnings. Investment securities are carried at amortized cost.
Amortization is computed by methods which approximate level yield and is
adjusted for changes in prepayment estimates. Securities identified as available
for sale are carried at fair value with unrealized gains and losses included in
shareholders' equity, net of deferred income taxes. Realized gains and losses on
sales of securities are based upon the adjusted cost of the specific security
sold.
LOANS
Loans are either secured or unsecured based on the type of loan and the
financial condition of the borrower. Repayment is generally expected from cash
flow or proceeds from the sale of selected assets of the borrower; however, BOK
Financial is exposed to risk of loss on loans due to the borrower's
difficulties, which may arise from any number of factors including problems
within the respective industry or local economic conditions. Access to
collateral, in the event of borrower default, is reasonably assured through
adherence to applicable lending laws and through sound lending standards and
credit review procedures.
Interest is accrued at the applicable interest rate on the principal amount
outstanding. Loans are placed on nonaccrual status when, in the opinion of
management, full collection of principal or interest is uncertain, generally
when the collection of principal or interest is 90 days or more past due.
Interest previously accrued but not collected is charged against interest income
when the loan is placed on nonaccrual status. BOK Financial adopted Financial
Accounting Standards Board Statement No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," in 1995. Payments on
nonaccrual loans are applied to principal or reported as interest income,
according to management's judgment as to the collectibility of principal.
Loan origination and commitment fees, and direct loan origination costs
when significant, are deferred and amortized as an adjustment to yield over the
life of the loan or over the commitment period, as applicable.
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value, including estimated losses on unfunded commitments and gains or
losses on related forward sales contracts.
<PAGE> 26
RESERVE FOR LOAN LOSSES
The reserve for loan losses is maintained at a level that, in the opinion
of management, is adequate to absorb losses inherent in the loan portfolio. The
adequacy of the reserve for loan losses is determined by management based upon
evaluation of the individual credits in the loan portfolio, historical credit
losses, anticipated economic conditions in BOK Financial's primary market areas
and other relevant factors. Beginning in 1994, BOK Financial adopted Financial
Accounting Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" ("FAS 114"). The allowance for credit losses related to
loans that are identified for evaluation in accordance with FAS 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Loans are
considered to be impaired when it becomes probable that BOK Financial will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. This is substantially the same criteria used to determine when a loan
should be placed on nonaccrual status. The amount of impairment determined in
accordance with FAS 114 did not differ materially from amounts previously
provided. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant change.
In accordance with the provisions of FAS 114, management has excluded small
balance, homogeneous loans from the impairment evaluation specified in FAS 114.
Such loans include 1-4 family mortgage loans, consumer loans, and commercial
loans with committed amounts less than $1 million. The adequacy of the allowance
for loan losses applicable to these loans is evaluated in accordance with
standards established by the banking regulatory authorities and adopted as
policy by BOK Financial.
A provision for loan losses is charged against earnings in amounts
necessary to maintain an adequate reserve for loan losses. Loans are charged off
when the loan balance or a portion of the loan balance is no longer covered by
the paying capacity of the borrower based on an evaluation of available cash
resources and collateral value. Loans are evaluated quarterly and charge offs
are taken in the quarter in which the loss is identified. Additionally, all
unsecured or under-secured loans which are past due by 180 days or more are
charged off within 30 days. Recoveries of loans previously charged off are added
to the reserve.
REAL ESTATE AND OTHER REPOSSESSED ASSETS
Real estate and other repossessed assets are assets acquired in partial or
total forgiveness of debt. These assets are carried at the lower of cost, fair
value at date of foreclosure or current fair value less estimated selling costs.
Income generated by these assets is recognized as received, and operating
expenses are recognized as incurred.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the assets or, for leasehold
improvements, over the shorter of the estimated useful lives or remaining lease
terms.
MORTGAGE SERVICING RIGHTS
BOK Financial adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("FAS 122"), during 1995. FAS 122
requires, among other things, that capitalized mortgage servicing rights be
carried at the lower of cost less accumulated amortization or fair value.
Amortization is determined in proportion to the projected cash flows over the
estimated lives of the servicing portfolios. The actual cash flows are dependent
upon the prepayment of the mortgage loans and may differ significantly from the
estimates.
Fair value is determined by discounting the estimated cash flows of
servicing revenue, less projected servicing costs, using a risk-adjusted spread
over U.S. Treasury rates, which is the assumed market rate for these
instruments. Prepayment assumptions are based on industry consensus provided by
independent reporting sources. Changes in current interest rates may
significantly affect these assumptions by changing loan refinancing activity.
Fair value for each servicing portfolio acquired prior to the adoption of FAS
122 is based upon a single weighted average interest rate and remaining life for
that portfolio. Fair value for each servicing portfolio acquired and for
servicing rights originated since the adoption of FAS 122 is based upon an
interest rate stratification for each portfolio. Separate prepayment assumptions
are then used to project net cash flows by interest rate strata within each
portfolio. A valuation allowance is provided when the amortized cost of each
portfolio or each interest rate strata exceeds the calculated fair value.
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,"
("FAS 125") was issued during 1996 and becomes effective on January 1, 1997.
Among other things, FAS 125 extends the requirement that a valuation allowance
be provided for the difference between the amortized historical cost and fair
value of all capitalized servicing rights stratified by predominant risk
characteristics to all capitalized servicing rights. Previously, such
stratification was required only for servicing rights capitalized after the
adoption of FAS 122. The result of this change will be to further increase the
volatility of earnings as the fair value of servicing rights react to changes in
interest rates and prepayment assumptions.
<PAGE> 27
FAS 122 also requires that originated mortgage servicing rights be
recognized when either mortgage loans are originated pursuant to an existing
plan for sale or, if no such plan exists, when the mortgage loans are sold.
Substantially all fixed rate mortgage loans originated by BOK Financial are sold
under existing commitments. The fair value of the originated servicing rights is
determined at closing based upon current market rates.
INTEREST RATE SWAPS AND FORWARD COMMITMENTS
BOk uses interest rate swaps and forward sales contracts as part of its
interest rate risk management strategy. Interest rate swaps are used to modify
the interest expense of certain long-term, fixed rate certificates of deposit.
Amounts payable to or receivable from the counterparties are reported in
interest expense using the accrual method. In the event of the early redemption
of hedged certificates of deposit, any realized or unrealized gain or loss from
the swaps would be recognized in income coincident with the redemption.
Forward sales contracts are used to hedge existing and anticipated loans in
conjunction with mortgage banking activities. The fair value of these
instruments is included in determining the adjustment of the loan held for sale
portfolio to the lower of cost or market. Gains or losses on closed contracts
are recognized when the underlying assets are disposed.
The cost of terminating these contracts prior to their expiration dates is
expensed when incurred.
FEDERAL AND STATE INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying values of assets and liabilities and their respective tax bases.
Deferred tax assets are reduced by a valuation allowance based upon management's
assessment of limitations on the use of certain deferred tax assets pursuant to
income tax regulations, estimates of future taxable income, and the amount of
previously paid taxes.
EMPLOYEE BENEFIT PLANS
BOK Financial sponsors various plans, including a defined benefit pension
plan ("Pension Plan"), a qualified profit sharing plan ("Thrift Plan"), employee
health care plans and a post-retirement health care plan. Employer contributions
to the Thrift Plan, which match employee contributions subject to percentage and
years of service limits, are expensed when incurred. Pension Plan costs, which
are based upon actuarial computations of current costs, are expensed annually.
Unrecognized prior service cost and net gains or losses are amortized on a
straight-line basis over the estimated remaining lives of the participants. BOK
Financial recognizes the expense of health care benefits on the accrual method.
Employer contributions to the Pension Plan and various health care plans are in
accordance with Federal income tax regulations.
EXECUTIVE BENEFIT PLANS
BOK Financial accounts for its stock option plans under the provisions of
APB 25, "Accounting for Stock Issued to Employees," and is also subject to
certain disclosures as required under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," in Note 12.
FIDUCIARY SERVICES
Fees and commissions on approximately $7.5 billion of assets managed by BOK
Financial under various fiduciary arrangements are recognized on the accrual
method.
EARNINGS PER SHARE
Primary earnings per share are computed by dividing net income less the
value of preferred stock dividends (including dividends paid in common shares)
by the weighted average number of common shares and common share equivalents
outstanding. The effect of stock options issued by BOK Financial, which are
considered common share equivalents, on the average number of common shares
outstanding is determined by the treasury stock method.
Fully diluted earnings per share includes the maximum dilutive effect of
the conversion of preferred stock at a ratio of one common share per 89
preferred shares.
The average number of shares outstanding has been restated for the effects
of the poolings-of-interests and stock dividends.
<PAGE> 28
(2) ACQUISITIONS
Since 1991, BOK Financial acquired deposits insured by the Savings and Loan
Insurance Fund ("SAIF") totaling approximately $843 million. In conjunction with
these acquisitions, core deposit intangible assets which represent the future
earnings potential of these funds, were recorded. In determining the value of
these core deposit intangible assets, assumptions were made regarding the
returns which were expected to be earned over the costs which would be incurred,
including interest expense, processing costs and deposit insurance premiums.
During 1995, the FDIC made a change in deposit insurance premiums which
significantly decreased the value of deposits insured by SAIF. The premium
assessed on deposits insured by the Bank Insurance Fund ("BIF") was reduced to
three basis points (.03%) while the premium assessed on SAIF insured deposits
remained at 23 basis points (.23%). Legislation to resolve this difference had
been expected from Congress at December 31, 1995. However, at the end of the
first quarter of 1996, the expected legislation had been removed from the agenda
and the resolution of the differential between rates assessed on SAIF insured
deposits compared to BIF insured deposits was uncertain. This uncertainty, in
addition to heightened competitive pressures caused the spreads between the
actual returns and costs to decrease. These conditions caused the value of these
core deposit intangible assets to be impaired and a write down of $3.8 million
was recognized.
In March 1997, BOK Financial paid $39.3 million to acquire First TexCorp,
Inc. and its subsidiary, First Texas Bank, in Dallas, Texas. Total consolidated
assets and net assets of First TexCorp, Inc. were $141.9 million and $19.7
million, respectively, at December 31, 1996. The acquisition will be accounted
for as a purchase.
In February 1997, BOK Financial paid $39.0 million and issued notes
totaling $11.0 million to acquire Park Cities Bancshares, Inc. and its
subsidiary, First National Bank of Park Cities, in Dallas, Texas. Total
consolidated assets and net assets of Park Cities Bancshares, Inc. were $225.9
million and $19.1 million, respectively, at December 31, 1996. The acquisition
will be accounted for as a purchase.
On November 14, 1994, BOK Financial issued 1,380,017 common shares to merge
with Citizens Holding Company and its subsidiaries, Citizens Bank of Muskogee
and Citizens Bank of Northwest Arkansas, in a pooling-of-interests.
BOk paid $11.7 million, on May 2, 1994, to acquire Plaza National Bank,
Bartlesville, Oklahoma; paid $6.1 million, on June 13, 1994, for Texas Commerce
Trust Company-Sherman National Association, a national association limited to
trust powers only; and paid $8.2 million, on October 7, 1994, to acquire
Northwest Bank of Enid, Enid, Oklahoma.
The allocation of the purchase prices to the assets acquired and
liabilities assumed in the preceding acquisitions are as follows (in thousands):
Aggregate
Acquisitions
-------------
1994
-------------
Cash and cash equivalents $ 14,019
Securities 40,508
Loans:
Commercial 27,674
Commercial real estate 16,300
Residential mortgage 17,160
Consumer 18,484
Allowance for loan losses (955)
------
Total loans 78,663
------
Premises and equipment 2,027
Core deposit premiums 839
Other assets 2,780
-------
Total assets acquired 138,836
-------
Deposits:
Noninterest bearing 18,098
Interest bearing 109,384
-------
Total deposits 127,482
-------
Borrowed funds 327
Other liabilities 545
-------
Total liabilities assumed 128,354
-------
Net assets acquired (10,482)
Purchase price 26,033
------
Goodwill $ 15,551
======
<PAGE> 29
(3) SALE OF ASSETS TO RELATED PARTY
During April 1991, BOk sold to BOK Financial's principal shareholder,
George B. Kaiser ("Kaiser"), and related business entities certain loans,
repossessed real estate and the rights to future recoveries on certain
charge-offs. Recoveries collected by BOk and paid to Kaiser were $3.3 million,
$1.4 million and $2.4 million for 1996, 1995 and 1994, respectively.
(4) SECURITIES
INVESTMENT SECURITIES
The book and fair values of investment securities are as follows (in
thousands):
<TABLE>
December 31,
----------------------------------------------------------------------------------------------
1996 1995
---------------------------------------------- -----------------------------------------------
Book Fair Gross Unrealized Book Fair Gross Unrealized
----------------------- ------------------------
Value Value Gain Loss Value Value Gain Loss
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 1,000 $ 992 $ 2 $ (10) $ 716 $ 721 $ 5 $ -
Municipal and other tax exempt 134,150 134,705 1,571 (1,016) 95,907 97,628 2,099 (378)
Mortgage-backed U.S. Agency
Securities 62,282 62,876 832 (238) 78,832 79,777 1,089 (144)
Other debt securities 976 976 - - 3,666 3,660 3 (9)
------- ------- ----- ------ ------- ------- ----- ----
Total $198,408 $199,549 $2,405 $(1,264) $179,121 $181,786 $3,196 $(531)
======== ======== ====== ======= ======== ======== ====== =====
</TABLE>
The book and fair values of investment securities at December 31,
1996, by contractual maturity, are as shown in the following table
(dollars in thousands):
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity
------------------------------------------------------------
U.S. Treasuries:
Book value $ 250 $ 750 $ - $ - $ 1,000 1.59
Fair value 251 741 - - 992
Nominal yield 6.63% 5.12% 5.49%
Municipal and other tax exempt:
Book value 8,698 75,560 44,292 5,600 134,150 4.93
Fair value 8,670 75,528 44,613 5,894 134,705
Nominal yield(1) 7.38% 7.07% 7.63% 9.54% 7.38%
Other debt securities:
Book value 376 - 600 - 976 4.17
Fair value 376 - 600 - 976
Nominal yield(1) 4.13% 6.31% 5.47%
-----------------------------------------------------------
Total fixed maturity securities:
Book value $9,324 $76,310 $44,892 $5,600 $136,126
Fair value 9,297 76,269 45,213 5,894 136,673
Nominal yield 7.23% 7.05% 7.61% 9.54% 7.35%
---------------------------------------
Mortgage-backed securities:
Book value 62,282 -2
Fair value 62,876
Nominal yield(3) 7.24%
---------
Total investment securities:
Book value $198,408
Fair value 199,549
Nominal yield 7.31%
---------
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 3.3 years
based upon current prepayment assumptions.
(3) The nominal yield on mortgage-backed securities is based upon prepayment
assumptions at the purchase date. Actual yields earned may differ
significantly based upon actual prepayments.
<PAGE> 30
AVAILABLE FOR SALE SECURITIES
The amortized cost and fair value of available for sale securities are as
follows (in thousands):
<TABLE>
December 31,
-----------------------------------------------------------------------------------------------
1996 1995
---------------------------------------------- ------------------------------------------------
Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized
---------------------- -----------------------
Cost Value Gain Loss Cost Value Gain Loss
---------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 200,505 $ 201,091 $ 1,218 $ (632) $ 221,201 $ 222,478 $ 1,552 $ (275)
Municipal and other tax exempt 160,813 161,358 2,047 (1,502) 165,709 166,855 2,532 (1,386)
Mortgage-backed securities:
U. S. agencies 985,219 979,117 3,552 (9,654) 941,020 934,433 3,842 (10,429)
Other 3,288 3,961 687 (14) 8,154 8,011 1 (144)
------- ------- ----- ------ -------- ------- ----- -------
Total mortgage-backed securities 988,507 983,078 4,239 (9,668) 949,174 942,444 3,843 (10,573)
------- ------- ----- ------ ------- ------- ----- --------
Other debt securities 178 178 - - 250 98 2 (154)
Equity securities and mutual funds 106,655 113,417 6,762 - 34,145 34,786 641 -
--------- ---------- ------- -------- ---------- ---------- ------ ---------
Total $1,456,658 $1,459,122 $14,266 $(11,802) $1,370,479 $1,366,661 $8,570 $(12,388)
========== ========== ======= ======== ========== ========== ====== =========
</TABLE>
The amortized cost and fair values of available for sale securities at
December 31, 1996, by contractual maturity, are as shown in the following table
(dollars in thousands):
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity
-----------------------------------------------------
U.S. Treasuries:
Amortized cost $17,624 $182,881 $ - $ - $ 200,505 1.81
Fair value 17,704 183,387 - - 201,091
Nominal yield 6.32% 5.91% - - 5.95%
Municipal and other tax exempt:
Amortized cost 5,631 82,838 60,662 11,682 160,813 5.17
Fair value 5,520 82,423 61,083 12,332 161,358
Nominal yield(1) 5.69% 6.98% 7.80% 9.41% 7.45%
Other debt securities:
Amortized cost 178 - - - 178 .92
Fair value 178 - - - 178
Nominal yield - - - - -
----------------------------------------------------
Total fixed maturity securities:
Amortized cost $23,433 $265,719 $60,662 $11,682 $ 361,496
Fair value 23,402 265,810 61,083 12,332 362,627
Nominal yield 6.12% 6.25% 7.80% 9.41% 6.61%
------------------------------------
Mortgage-backed securities:
Amortized cost 988,507 -2
Fair value 983,078
Nominal yield4 6.14%
-----------
Equity securities and mutual funds:
Amortized cost 106,655 -3
Fair value 113,417
Nominal yield 4.29%
-----------
Total available for sale securities:
Amortized cost $1,456,658
Fair value 1,459,122
Nominal yield 6.12%
-----------
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 3.2 years
based upon current prepayment assumptions.
(3) Primarily common and preferred stock of U.S. Government agencies with no
stated maturity.
(4) The nominal yield on mortgage-backed securities is based upon prepayment
assumptions at the purchase date. Actual yields earned may differ
significantly based upon actual prepayments.
<PAGE> 31
Sales of available for sale securities resulted in gains and losses as
follows (in thousands):
1996 1995 1994
--------- --------- --------
Proceeds $484,436 $134,109 $82,088
Gross realized gains 328 1,246 159
Gross realized losses 2,935 72 2,027
Related federal and state
income tax expense (574) 270 (467)
(benefit)
Effective December 20, 1995, BOK Financial adopted the provisions of a
Financial Accounting Standards Board special report on Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities", which affects the securities portfolio.
This report permitted a one-time opportunity to sell or transfer securities
from the investment category to the available for sale or trading categories
without tainting the remaining portfolio. BOK Financial
transferred-mortgage-backed and municipal securities with a total amortized cost
of $788.5 million and a net unrealized loss of $4.0 million from the investment
category to available for sale in response to the more restrictive
interpretation of FAS 115 included in this special report.
Effective November 14, 1994, certain securities obtained through the
acquisition of Citizens Holding Company were transferred from the held to
maturity portfolio to available for sale. The transfer served to structure the
acquired portfolio in accordance with BOK Financial's existing investment
strategy. The securities transferred had a total amortized cost of $6.7 million
and a net unrealized loss of $184 thousand as of the date of transfer.
Securities with amortized costs of $1.0 billion and $986.5 million at
December 31, 1996 and 1995, respectively, were pledged to secure securities
repurchase agreements, public and trust funds on deposit and for other purposes
as required by law.
(5) LOANS
Significant components of the loan portfolio are as follows (in thousands):
<TABLE>
December 31,
-----------------------------------------------------------------------------------------------
1996 1995
------------------------------------------------ ----------------------------------------------
Fixed Variable Non- Fixed Variable Non-
Rate Rate accrual Total Rate Rate accrual Total
------------------------------------------------ ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 75,806 $ 898,795 $ 9,589 $ 984,190 $ 81,250 $ 765,168 $14,646 $ 861,064
Commercial real estate 250,270 420,082 5,306 675,658 215,750 372,231 10,621 598,602
Residential mortgage 153,058 273,767 2,580 429,405 149,783 284,239 2,794 436,816
Residential mortgage - held for 95,332 - - 95,332 72,412 - - 72,412
sale
Consumer 173,925 34,710 1,360 209,995 180,489 43,758 1,227 225,474
------- ------ ----- ------- ------- ------ ----- -------
Total $748,391 $1,627,354 $18,835 $ 2,394,580 $699,684 $1,465,396 $29,288 $ 2,194,368
======== ========== ======= ========== ======== ========== ======= ===========
Foregone interest on nonaccrual loans $ 2,975 $ 2,928
=========== ===========
</TABLE>
Substantially all of the commercial and consumer loan portfolios and
approximately 77% of the residential mortgage loan portfolio (excluding loans
held for sale) are loans to businesses and individuals in Oklahoma or Northwest
Arkansas. This geographic concentration subjects the loan portfolio to the
general economic conditions within this area.
Within the commercial loan classification, loans to energy-related
businesses total $217.1 million, or 9% of total loans. Other notable segments
include wholesale/retail, $166.1 million; manufacturing, $137.5 million; and
agriculture, $109.3 million.
Commercial real estate loans are primarily secured by properties located in
the Tulsa or Oklahoma City, Oklahoma metropolitan areas. The major components of
these properties are multifamily residences, $146.2 million; retail facilities,
$60.8 million; office buildings, $82.3 million; hotels, $70.6 million; and
medical/nursing facilities, $70.3 million.
<PAGE> 32
Included in loans at December 31 are loans to executive officers, directors
or principal shareholders of BOK Financial, as defined in Regulation S-X of the
Securities and Exchange Commission. Such loans have been made on substantially
the same terms as those prevailing at the time for loans to other customers in
comparable transactions. Information relating to loans to executive officers,
directors or principal shareholders is summarized as follows (in thousands):
1996 1995
------------ ------------
Beginning balance $45,404 $28,385
Advances 10,968 21,185
Payments (1,925) (3,458)
Adjustments (971) (708)
-------- --------
Ending balance $53,476 $45,404
======= =======
Adjustments are primarily due to certain individuals being included for the
first time or no longer being included as an executive officer or director of
BOK Financial.
The activity in the reserve for loan losses is summarized as follows (in
thousands):
1996 1995 1994
--------- --------- --------
Beginning balance $38,287 $38,271 $37,261
Provision for loan losses 4,267 231 195
Loans charged off (6,510) (3,988) (3,237)
Recoveries 9,104 3,773 3,097
Addition due to acquisitions - - 955
------- ------- -------
Ending balance $45,148 $38,287 $38,271
======= ======= =======
At December 31, 1996 and 1995, respectively, the recorded investment in
loans that are considered to be impaired under FAS 114 was $17.4 million and
$28.1 million (all of which were on a nonaccrual basis). Included in this amount
at December 31, 1996, is $2.3 million of impaired loans for which the related
allowance for credit losses is $1.2 million and $15.1 million that did not have
a related allowance for credit losses. At December 31, 1995, this amount
included $12.5 million of impaired loans for which the related allowance for
credit loss was $4.8 million and $15.6 million that did not have a related
allowance for credit losses. The average recorded investments in impaired loans
during the years ended December 31, 1996 and 1995 were approximately $22.3
million and $22.2 million, respectively. Interest income recognized on impaired
loans during 1996 and 1995 was not significant.
(6) PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows (in
thousands):
DECEMBER 31,
-------------------------
1996 1995
------------ ------------
Land $ 7,812 $ 8,543
Buildings and improvements 30,792 28,083
Furniture and equipment 32,080 27,352
------ ------
Subtotal 70,684 63,978
------ ------
Less accumulated depreciation and
amortization 23,205 16,305
------ ------
Total $47,479 $47,673
======= =======
Depreciation and amortization of premises and equipment were $6.9 million,
$5.6 million and $4.2 million for the years ended December 31, 1996, 1995 and
1994, respectively.
(7) MORTGAGE BANKING ACTIVITIES
BOK Financial has engaged in mortgage-banking activities through its
subsidiary, BancOklahoma Mortgage Corp. ("BOMC"). Effective January 1, 1997,
these mortgage banking activities were transferred to BOk. Residential mortgage
loans held for sale totaled $95.3 million and $72.4 million and outstanding
mortgage loan commitments totaled $148.2 million and $125.4 million,
respectively, at December 31, 1996 and 1995. Mortgage loan commitments are
generally outstanding for 60 to 90 days and are subject to both credit and
interest rate risk. Credit risk is managed through underwriting policies and
procedures, including collateral requirements, which are generally accepted by
the secondary loan markets. Exposure to interest rate fluctuations is partially
hedged through the use of mortgage-backed securities forward sales contracts.
These contracts set the price for loans which will be delivered in the next 60
to 90 days. At December 31, 1996, forward sales contracts totaled $168.1
million. Mortgage loans held for sale are carried at the lower of aggregate cost
or market value, including estimated losses on unfunded commitments and gains or
losses on forward sales contracts. At December 31, 1996, BOMC owned the rights
to service 83,418 mortgage loans with outstanding principal balances of $5.9
billion, including $243 million serviced for BOk, and held related funds for
investors and borrowers of $77.2 million. The weighted average interest rate and
remaining term was 7.70% and 281 months, respectively. Mortgage loans sold with
recourse totaled $9.4 million at December 31, 1996. At December 31, 1995, BOMC
owned the rights to service mortgage loans with outstanding principal balances
of $5.4 billion and held related funds for investors and borrowers of $76.6
million.
<PAGE> 33
Activity in capitalized mortgage servicing rights and related valuation
allowance during 1996 and 1995 are as follows:
Capitalized Mortgage Servicing Rights
------------------------------------- Valuation
Purchased Originated Total Allowance Net
-----------------------------------------------
Balance at January 1, 1995 $46,681 $ - $46,681 $ - $46,681
Additions 10,387 1,783 12,170 - 12,170
Amortization expense (7,536) (142) (7,678) - (7,678)
Provision for impairment - - - (539) (539)
------- ------ ------ ----- -------
Balance at December 31, 1995 49,532 1,641 51,173 (539) 50,634
ADDITIONS 16,874 3,984 20,858 - 20,858
AMORTIZATION EXPENSE (9,150) (437) (9,587) - (9,587)
PROVISION FOR IMPAIRMENT - - - (361) (361)
------ ------ ------ ----- -------
BALANCE AT DECEMBER 31, 1996 $57,256 $5,188 $62,444 $(900) $61,544
======= ====== ======= ===== =======
ESTIMATED FAIR VALUE OF MORTGAGE
SERVICING RIGHTS AT:
DECEMBER 31, 1995(1) $66,528 $1,954 $68,482 $ - $68,482
DECEMBER 31, 1996(1) $75,660 $8,576 $84,236 $ - $84,236
======= ====== ======= ====== =======
(1) Excludes approximately $18 million and $18.9 million,
respectively, of loan servicing rights on mortgage loans
originated prior to the adoption of FAS 122.
- --------------------------------------------------------------------------------
Fair value is determined by discounting the projected net cash flows.
Significant assumptions are:
Discount rate - Risk adjusted spread over U.S. Treasury rates for similar
remaining terms, ranging from 10.71% to 10.95%.
Prepayment rate - Industry consensus prepayment estimates ranging from 6.8%
to 16.4% from an independent reporting source based upon interest
rate, original term and loan type.
Loan servicing costs - $50 per conventional loan and $60 per government
insured loan.
During the first quarter of 1994, management discovered that Lenders
Mortgage Services, Inc. ("Lenders"), an originator of loans from which BOMC
purchased mortgage loans, had not paid off existing mortgages on certain
refinancing loans purchased by BOMC, primarily in 1994. Involuntary proceedings
were commenced against Lenders under Chapter 7 of the U.S. Bankruptcy Code and a
Trustee was appointed. Lenders will not be able to perform under the repurchase
provision of the loan purchase agreement. Management is pursuing recoveries from
various parties; however, any such recoveries are uncertain at this time. Pretax
charges of $5.2 million were recognized in 1994 based upon management's
evaluation of information currently available.
(8) DEPOSITS
Interest expense on deposits is summarized as follows (in thousands):
1996 1995 1994
----------------------------------
Transaction deposits $ 28,336 $25,276 $22,062
Savings 2,464 2,957 3,522
Time:
Certificates of
deposits under 44,531 38,552 27,603
$100,000
Certificates of
deposits $100,000 31,728 20,265 10,471
and over
Other time deposits 11,007 10,689 7,483
------ ------ -----
Total time 87,266 69,506 45,557
------ ------ ------
Total $118,066 $97,739 $71,141
======== ======= =======
The aggregate amounts of time deposits in denominations of $100,000 or more
at December 31, 1996 and 1995 were $560.0 million and $486.2 million,
respectively.
Time deposits expected to mature in less than one year are $1,047.0
million, in one to five years are $460.8 million, and in over five years are $.5
million.
Interest expense on time deposits during 1996 and 1995 was reduced by net
income from interest rate swaps of $1.4 million and $.9 million, respectively.
<PAGE> 34
(9) OTHER BORROWINGS
Information relating to other borrowings is summarized as follows (dollars
in thousands):
Daily average Rate at Maximum out-
Period-End ---------------- end of standing at
Balance Balance Rate year any month-end
------------------------------------------------
1996:
FUNDS PURCHASED AND
REPURCHASE AGREEMENTS $669,176 $ 558,940 5.49% 5.91% $ 669,176
OTHER 277,128 235,775 6.08 6.00 354,712
- ----------------------------------------------------
TOTAL $946,304 $ 794,715 5.67 5.94 946,304
- -------------------------------------------------------------------------------
1995:
Funds purchased and
repurchase agreements $697,497 $ 894,322 6.03% 5.75% $1,052,369
Other 250,309 129,458 6.27 6.03 250,309
- ----------------------------------------------------
Total $947,806 $1,023,780 6.06 5.82 1,135,168
- -------------------------------------------------------------------------------
1994:
Funds purchased and
repurchase agreements $743,248 $ 605,640 4.46% 5.87% $ 779,789
Other 231,086 98,555 4.61 6.39 237,665
- ----------------------------------------------------
Total $974,334 $ 704,195 4.48 5.99 974,334
================================================================================
Other borrowings at December 31, 1996 included $252.7 million in
uncollateralized advances from the Federal Home Loan Bank. These advances are
used for funding and consist of term funds bearing interest from 5.42% - 7.80%.
Of these term funds, $150 million mature within 90 days, $23.2 million mature in
1998, $8.2 million mature in 2000, $22.5 million mature in 2001 and $14.6
million mature in 2002, $1.8 million mature in 2005, $32.1 million mature in
2006 and $.4 million mature in 2011.
BOK Financial had lines of credit available from commercial banks at
December 31, 1996 of $50 million, with zero outstanding, which bear interest
based on LIBOR and are unsecured. Interest is paid monthly with principal due no
later than May 1997.
Funds purchased generally mature within one to 90 days from the transaction
date. At December 31, 1996, securities sold under agreement to repurchase
totaled $446.7 million with related accrued interest payable of $1.4 million.
Additional information relating to repurchase agreements at December 31, 1996 is
as follows (dollars in thousands):
Carrying Market Repurchase Average
Security Sold/Maturity Value Value Liability(1) Rate
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Overnight $ 15,816 $ 16,041 $ 8,073 5.24%
U.S. Agency Securities:
Overnight 116,288 115,221 108,385 5.14
Term of up to 30 days 1,226 1,211 1,177 4.75
Term of 30 to 90 days 352,798 349,507 330,456 5.44
------- ------- -------
Total Agency Securities 470,312 465,939 440,018 5.36
------- ------- -------
Total $486,128 $481,980 $448,091 5.36
======== ======== ========
(1) BOK Financial maintains control over the securities underlying
overnight repurchase agreements and generally transfers
control over securities underlying longer term dealer
repurchase agreements to the respective counterparty.
On April 3, 1995, BOK Financial repaid the $23 million subordinated
debenture issued on December 31, 1992 to Kaiser. The subordinated debenture was
scheduled to mature on April 1, 1999 and to bear an interest rate of nine
percent after March 31, 1995.
<PAGE> 35
(10) FEDERAL AND STATE INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 31,
1996 1995
----------------------------
Deferred tax liabilities:
Pension contributions in excess
of book expense $ 3,000 $ 2,400
Securities valuation adjustments 3,700 -
Mortgage servicing 4,900 2,400
Tax installment sale 1,100 -
Other 1,800 1,500
----- -----
Total deferred tax liabilities 14,500 6,300
------ -----
Deferred tax assets:
Loan loss reserve 17,500 15,000
Valuation adjustments 13,900 13,800
Book expense in excess of tax 4,000 3,900
Other 4,400 3,500
----- -----
Total deferred tax assets 39,800 36,200
Valuation allowance for deferred
tax assets - 7,700
------ ------
Net deferred tax assets 39,800 28,500
------ ------
Deferred tax assets in excess of
deferred tax liabilities $25,300 $22,200
======= =======
The acquisition of BOk by BOK Financial on June 7, 1991 resulted in a
change of ownership, which significantly limited the utilization of built-in and
net operating loss carryforwards. Consequently, and due to the expiration
periods and the timing of the anticipated reversal of built-in losses, a
valuation allowance had been recorded. The factors used by management to
determine the amount of valuation allowance included limitations on the use of
certain deferred tax assets pursuant to income tax regulations, estimates of
future taxable income, the amount of previously paid income taxes, and to a
lesser extent, tax strategies. Due to the expiration in 1996 of the five-year
period during which the utilization of currently recognized built-in losses was
limited and the full utilization of all recognized built-in loss carryforwards
for income tax purposes as of December 31, 1996, the valuation allowance has
been eliminated. BOk and BOK Financial are currently under an audit by the
Internal Revenue Service for 1992 and 1993, respectively. The ultimate outcome
of this audit cannot be determined with any certainty at this time. However,
management expects no material adverse impact on the financial statements.
The significant components of the provision for income taxes attributable
to continuing operations for BOK Financial are shown below (in thousands):
1996 1995 1994
-------------------------------
Current:
Federal $16,623 $14,707 $11,367
State 2,399 2,273 2,332
----- ----- -----
Total current 19,022 16,980 13,699
------ ------ ------
Deferred:
Federal (3,380) (1,871) 789
State (313) (341) 144
---- ---- ---
Total deferred (3,693) (2,212) 933
------ ------ ---
Total income tax $15,329 $14,768 $14,632
======= ======= =======
The significant components of the deferred provision for income taxes
attributable to continuing operations for BOK Financial are shown below (in
thousands):
1996 1995 1994
---------------------------
Deferred tax expense (benefit)
excluding components listed
below $ 2,507 $ 2,753 $ 4,640
Change in valuation allowance (6,200) (6,065) (5,345)
Built in loss carryforward utilized - 1,100 1,638
----- ----- -----
Total deferred provision $(3,693) $(2,212) $ 933
======= ======= =======
The reconciliations of income attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense are as
follows (dollars in thousands):
1996 1995 1994
----------------------------------
Amount:
Federal statutory tax $24,310 $22,391 $20,894
Tax exempt revenue (3,958) (3,747) (2,948)
Effect of state income
taxes, net of federal 2,086 1,932 2,145
benefit
Loss carryforward,
benefit recognized - (1,100) (1,638)
Utilization of tax (1,488) (1,000) (1,422)
credits
Portion of reduction
in valuation
allowance impacting (6,200) (4,965) (3,707)
tax expense
Other, net 579 1,257 1,308
--- ----- -----
Total $15,329 $14,768 $14,632
======= ======= =======
Percent of pretax income:
Federal statutory rate 35% 35% 35%
Tax-exempt revenue (6) (6) (5)
Effect of state income
taxes, net of federal 3 3 4
benefit
Loss carryforward,
benefit recognized - (2) (3)
Utilization of tax (2) (2) (2)
credits
Portion of reduction
in valuation
allowance impacting (9) (8) (6)
tax expense
Other, net 1 3 2
--- --- ---
Total 22% 23% 25%
=== === ===
<PAGE> 36
(11) EMPLOYEE BENEFITS
BOK Financial sponsors a defined benefit Pension Plan for all employees who
satisfy certain age and service requirements. The following tables present the
Pension Plan's funded status and amounts recognized for the period indicated
(dollars in thousands):
DECEMBER 31,
1996 1995
--------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of 1996-$8,653; 1995-$7,970 $ (11,331) $(10,142)
-------- --------
Projected benefit obligation for service
rendered to date (11,331) (10,142)
Plan assets at fair value 13,261 11,554
------ ------
Plan assets in excess of projected
benefit obligation 1,930 1,412
Unrecognized prior service cost 920 979
Unrecognized net loss 2,698 3,669
----- -----
Accrued pension asset $ 5,548 $ 6,060
========= =========
Discount rate 7.50% 7.00%
==== ====
Compensation increase rate 5.25% 5.25%
==== ====
1996 1995 1994
----------------------------------------
Net pension cost included the following expense (income):
Service cost $ 1,803 $1,333 $1,144
Interest cost 678 582 402
Deferred gain (loss) on assets 585 584 (678)
Actual (return) loss on plan assets (1,757) (1,506) 86
Other, net 203 135 10
------- ------ ------
Net periodic pension cost $ 1,512 $1,128 $ 964
======= ====== ======
Expected return on assets 10.00% 9.50% 9.00%
===== ==== ====
Assets of the Pension Plan consist primarily of shares in cash management
funds, common stock and bond funds, and guaranteed investment contract funds.
Benefits are based on the employee's age and length of service.
Employee contributions to the Thrift Plan, a defined contribution plan, are
matched by BOK Financial up to four percent of base compensation, based upon
years of service. Participants may direct the investment of their accounts in a
variety of options, including BOK Financial Common Stock. Employer contributions
vest over five years. Expenses incurred by BOK Financial for the Thrift Plan
totaled $1.2 million, $1.5 million and $1.2 million for 1996, 1995 and 1994,
respectively.
BOK Financial sponsors a defined benefit post-retirement employee medical
plan which pays 50 percent of annual medical insurance premiums for retirees who
meet certain age and service requirements. Assets consist primarily of shares in
a cash management fund. Liability for the post-retirement plan is limited to
current retirees and certain employees currently age 60 or older.
The following tables present the plan's funded status and amounts
recognized for the periods indicated (dollars in thousands):
1996 1995
--------------------------------
Accumulated post-retirement
benefit obligation $(2,840) $(2,696)
Fair value of plan assets 665 693
------ -------
Fund status (2,175) (2,003)
Unrecognized transition (232) (264)
asset
Unrecognized net loss 418 173
----- ------
Accrued post-retirement benefit $(1,989) $(2,094)
======= =======
Discount rate 7.50% 7.00%
=========================
Medical inflation rate 9.00% 10.00%
to 5.00% to 5.00%
=========================
1996 1995
-----------------
Net post-retirement benefits cost includes:
Service cost $ 13 $ 14
Interest cost 177 166
Actual return on plan assets (15) (26)
Deferred gain (loss) on assets (48) 6
Amortization of unrecognized
transition obligation (32) (32)
--- ---
Net post-retirement benefits cost $ 95 $128
===== ====
Expected return on assets 10.00% 9.50%
A 1% increase in the assumed medical inflation rate would increase the
accumulated post-retirement benefit obligation by approximately $182 thousand
and would increase post-retirement benefit cost by $15 thousand.
Under various performance incentive plans, participating employees may be
granted awards based on defined formulas or other criteria. Earnings were
charged $7.5 million in 1996, $5.3 million in 1995, and $5.0 million in 1994,
for such awards.
<PAGE> 37
(12) EXECUTIVE BENEFIT PLANS
The Board of Directors of BOK Financial has approved various stock option
plans. The number of options awarded and the employees to receive the options
are determined by the Chairman of the Board and the President, subject to
approval of the Board of Directors or a committee thereof.
Options awarded under these plans are subject to vesting requirements.
Generally, one-seventh of the options awarded vest annually and expire three
years after vesting. Under the 1994 Plan, 277,000 options were awarded in 1994,
241,202 options were awarded in 1995 and 247,317 options were awarded in 1996.
Cancelled options under the 1994 Plan may be reawarded.
The following table presents options outstanding at December 31, 1996 under
these plans:
1994 Plan 1993 Plan 1992 Plan
-------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Number Price(1) Number Price Number Price
-------------------------------------------------------
Options outstanding at
December 31, 1995 502,109 $19.96 226,634 $21.37 206,752 $13.33
Options awarded 247,317 23.83 - - - -
Options exercised (626) 19.80 (1,735) 21.37 (39,031) 13.33
Options forfeited (30,537) 20.05 (12,979) 21.37 (7,463) 13.33
Options expired - - - - (193) 13.33
------- ----- ------- ----- ------- -----
Options outstanding at
December 31, 1996 718,263 $21.29 211,920 $21.37 160,065 $13.33
======= ====== ======= ====== ======= ======
Options vested at
December 31, 1996 101,760 19.91 89,460 21.37 71,885 13.33
======= ===== ====== ===== ====== =====
(1) Exercise price for options outstanding under the 1994 plan as of December
31, 1996 was $19.80 - $23.83. The weighted-average remaining contractual
life of those options is 5.9 years.
- --------------------------------------------------------------------------------
Under APB 25 no compensation expense is recognized at the date of grant
since the exercise price of BOK Financial's employee stock option equals the
market price of the underlying stock on the date of grant.
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires
disclosure of pro forma information regarding net income and earnings per share
as if BOK Financial accounted for employee stock options granted subsequent to
December 31, 1994 under the fair value method of the Statement.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: average risk-free interest rates of
6.04% and 6.10%; a dividend yield of zero; volatility factors of the expected
market price of BOK Financial's common stock of .190; and a weighted-average
expected life of the options of eight years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because BOK Financial's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The following
table represents the required pro forma disclosures for options granted
subsequent to December 31, 1994:
1996(1) 1995(1)
----------- -----------
Pro forma net income $53,748 $49,196
Pro forma earnings per share:
Primary $2.46 $2.25
Fully diluted 2.22 2.05
(1) Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
2003.
<PAGE> 38
(13) COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, BOK Financial and its subsidiaries are
subject to legal actions and complaints. Management believes, based upon the
opinion of counsel, that the actions and liability or loss, if any, resulting
from the final outcomes of the proceedings, will not be material in the
aggregate.
BOk is obligated under a long-term lease for its bank premises located in
downtown Tulsa. The lease term, which began November 1, 1976, is for fifty-seven
years with options to terminate at the end of the thirty-seventh and
forty-seventh years. Annual base rent is $3.1 million. BOk subleases portions of
its space for annual rents of $392 thousand each year through 2000. Net rent
expense on this lease was $2.7 million in 1996, $2.6 million in 1995 and $2.1
million in 1994. Total rent expense for BOK Financial was $6.9 million in 1996,
$6.7 million in 1995 and $6.0 million in 1994.
At December 31, 1996, the future minimum lease payments for equipment and
premises under operating leases were as follows: $6.8 million in 1997, $6.7
million in 1998, $6.6 million in 1999, $6.5 million in 2000, $6.2 million in
2001 and a total of $106.9 million thereafter.
BOk and The Williams Companies, Inc. guaranteed 30 percent and 70 percent,
respectively, of the $18.7 million debt, which matures May 15, 2007, and
operating deficit of two parking facilities operated by the Tulsa Parking
Authority. Total expense related to this guarantee was zero in 1996, $100
thousand in 1995 and zero in 1994.
The Federal Reserve Bank requires member banks to maintain certain minimum
average cash balances. These balances were approximately $70.8 million for 1996
and $86.0 million for 1995.
(14) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
BOK Financial is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to manage interest rate risk. Those financial instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized
in BOK Financial's Consolidated Balance Sheets. Exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
notional amount of those instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. At December 31, 1996, outstanding commitments
totaled $899.8 million. Since some of the commitments are expected to expire
before being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. BOK Financial uses the same credit policies
in making commitments as it does loans. The amount of collateral obtained, if
deemed necessary, is based on management's credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. Since the credit risk involved
in issuing standby letters of credit is essentially the same as that involved in
extending loan commitments, BOK Financial uses the same credit policies in
evaluating the creditworthiness of the customer. Additionally, BOK Financial
uses the same evaluation process in obtaining collateral on standby letters of
credit as it does for loan commitments. At December 31, 1996, outstanding
standby letters of credit totaled $91.7 million.
Commercial letters of credit are used to facilitate customer trade
transactions with the drafts being drawn when the underlying transaction is
consummated. At December 31, 1996, outstanding commercial letters of credit
totaled $4.5 million.
BOK Financial uses interest rate swaps, a form of off-balance-sheet
derivative product, in managing its interest rate risk. These swaps are used
primarily to more closely match the interest paid on certain long-term, fixed
rate certificates of deposit with earning assets. BOK Financial agrees with
other parties to exchange, at specified intervals, the difference between
fixed-rate and floating-rate interest amounts calculated by reference to an
agreed-upon notional amount. At December 31, 1996, the notional amount of BOK
Financial's interest rate swaps totaled $101.5 million with related credit
exposure, represented by the fair value of the contracts, of $1.6 million.
During 1996 and 1995, income from the swaps exceeded costs by $1.4 million and
$.9 million, respectively, which reduced interest expense on deposits. Scheduled
repricing periods for the swaps are as follows (in thousands):
31-90 91-365 Over
days days 1 year Total
--------------------------------------------
Pay floating $(30,000) $(55,000) $ - $(85,000)
Receive fixed - - 85,000 85,000
Pay fixed - - (16,500) (16,500)
Receive floating 16,500 - - 16,500
------ ------- ------- --------
Total $(13,500) $(55,000) $ 68,500 $ -
======== ======== ======= ========
Swap contracts with notional amounts of $63 million, $22 million and $16.5
million expire in 1998, 1999 and 2006, respectively. The expiration dates of the
swap contracts are designed to match the estimated maturity dates of the hedged
certificates of deposit.
BOK Financial utilized securities forward sales contracts associated with
its mortgage banking activities as described in Note 7.
<PAGE> 39
(15) SHAREHOLDERS' EQUITY
PREFERRED STOCK
One billion shares of preferred stock with a par value of $0.00005 per
share are authorized. A single series of 250,000,000 shares designated as Series
A Preferred Stock ("Series A Preferred Stock") is currently issued and
outstanding. The Series A Preferred Stock has no voting rights except as
otherwise provided by Oklahoma corporate law and may be converted into one share
of Common Stock for each 89 shares of Series A Preferred Stock at the option of
the holder. Dividends are cumulative at an annual rate of ten percent of the
$0.06 per share liquidation preference value when declared and are payable in
cash. Aggregate liquidation preference is $15.0 million. During 1996, 1995 and
1994, 69,672 shares, 69,959 shares and 65,279 shares, respectively, of BOK
Financial common stock were issued in payment of dividends on the Series A
Preferred Stock in lieu of cash by mutual agreement of BOK Financial and the
holders of the Series A Preferred Stock. Kaiser owns substantially all Series A
Preferred Stock. These shares were valued at $1.5 million in 1996, 1995 and
1994, based on average market price, as defined, for a 65 business day period
preceding declaration.
During 1995, 102 nonvoting units in an entity owned by BOk were issued to
various officers of BOk. These units are eligible for an annual, cumulative
distribution of $8 per unit and have a preferred value upon liquidation of $100
per unit.
COMMON STOCK
Common stock consists of 2.5 billion authorized shares, $0.00006 par value
Holders of common shares are entitled to one vote per share at the election of
the Board of Directors and on any question arising at any shareholders' meeting
and to receive dividends when and as declared. No common stock dividends can be
paid unless all accrued dividends on the Series A Preferred Stock have been
paid. The present policy of BOK Financial is to retain earnings for capital and
future growth, and management has no current plans to recommend payment of cash
dividends on common stock. Additionally, regulations restrict the ability of
national banks and bank holding companies to pay dividends.
During 1996, 1995 and 1994, 3% dividends payable in shares of BOK Financial
common stock were declared and paid. The shares issued were valued at $16.5
million, $12.8 million and $12.3 million, respectively, based on the average
closing bid/ask prices on the day preceding declaration.
SUBSIDIARY BANKS
The amounts of dividends which BOK Financial's subsidiary banks can declare
and the amounts of loans the subsidiary banks can extend to affiliates are
limited by various federal and state banking regulations. Generally, dividends
declared during a calendar year are limited to net profits, as defined, for the
year plus retained profits for the preceding two years. The amounts of dividends
are further restricted by minimum capital requirements. Pursuant to the most
restrictive of the regulations at December 31, 1996, BOK Financial's subsidiary
banks could declare dividends up to $21 million without prior regulatory
approval. The subsidiary banks declared and paid dividends of $31 million in
1996, and none in 1995 or 1994.
Loans to a single affiliate may not exceed 10.0 percent and loans to all
affiliates may not exceed 20.0 percent of unimpaired capital and surplus, as
defined. Additionally, loans to affiliates must be fully secured. As of December
31, 1996 and 1995, these loans totaled $12.4 million and $4.6 million,
respectively. Total loan commitments to affiliates at December 31, 1996 were
$22.7 million.
REGULATORY CAPITAL
Financial institutions are considered to be "well capitalized" pursuant to
the Federal Deposit Insurance Corporation Improvement Act of 1991 if their
Leverage, Tier 1 and Total Capital ratios are at least 5%, 6% and 10%,
respectively. As shown in Table 13, BOK Financial's capital ratios exceed the
regulatory definition of well capitalized. The capital ratios for BOk and CBNWA
are substantially the same as BOK Financial's ratios.
As defined by regulations, Tier 1 capital consists primarily of common
stockholders' equity less certain intangible assets. Total capital consists
primarily of Tier 1 capital plus preferred stock, subordinated debt and reserves
for loan losses, subject to certain limitations.
December 31,
-------------------------------------
1996 1995 1994 1993 1992
------- ------ ------- ------- ------
Average shareholders'
equity to average 7.49% 6.73% 6.32% 6.27% 6.17%
assets
Risk-based capital:
Tier 1 capital 10.49 9.91 9.14 9.07 8.14
Total capital 11.74 11.17 11.19 11.49 10.73
Leverage 7.46 6.55 5.64 5.76 5.84
-----------------------------------------------------------
<PAGE> 40
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying values and estimated fair values of
financial instruments as of December 31, 1996 and 1995 (dollars in thousands):
Range of Average Estimated
Carrying Contractual Repricing Discount Fair
Value Yields (in years) Rate Value
---------------------------------------------------
1996:
Cash and cash equivalents $ 367,551 - - - $ 367,551
Securities 1,663,984 - - - 1,665,125
Loans:
Commercial 984,190 4.28-15.21% 0.5 7.28-9.15% 975,940
Commercial real estate 675,658 6.34-13.43 1.0 8.90-9.75 669,268
Residential mortgage 429,405 3.81-14.87 1.8 7.78-7.86 428,372
Residential mortgage -
held for sale 95,332 - - - 95,332
Consumer 209,995 5.00-18.15 1.7 7.64-13.25 211,121
- --------------------------------------------------------------------------------
Total loans 2,394,580 2,380,033
Reserve for loan losses (45,148) -
- --------------------------------------------------------------------------------
Net loans 2,349,432 2,380,033
Deposits with no stated
maturity 1,748,418 - - - 1,748,418
Time deposits 1,508,337 2.03-9.85 0.7 5.25-6.14 1,509,380
Other borrowings 946,304 3.77 9.28 0.5 5.00-8.25 946,279
- --------------------------------------------------------------------------------
1995:
Cash and cash equivalents $ 311,939 - - - $ 311,939
Securities 1,553,559 - - - 1,556,224
Loans:
Commercial 861,064 4.50-16.22% 0.5 7.29-9.40% 849,460
Commercial real estate 598,602 6.08-14.70 1.3 9.35-10.07 588,175
Residential mortgage 436,816 3.75-14.87 1.6 7.24-7.40 439,304
Residential mortgage -
held for sale 72,412 - - - 72,412
Consumer 225,474 5.00-18.90 1.7 7.8-13.50 224,861
- --------------------------------------------------------------------------------
Total loans 2,194,368 2,174,212
Reserve for loan losses (38,287) -
- --------------------------------------------------------------------------------
Net loans 2,156,081 2,174,212
Deposits with no stated
maturity 1,537,065 - - - 1,537,065
Time deposits 1,400,644 2.62-10.00 0.7 4.93-5.73 1,405,765
Other borrowings 947,806 2.41-10.65 0.2 5.25-8.50 949,184
- --------------------------------------------------------------------------------
<PAGE> 41
The following methods and assumptions were used in estimating the fair
value of these financial instruments:
CASH AND CASH EQUIVALENTS
The book value reported in the consolidated balance sheet for cash and
short-term instruments approximates those assets' fair values.
SECURITIES
The fair values of securities are based on quoted market prices or dealer
quotes, when available. If quotes are not available, fair values are based on
quoted prices of comparable instruments
LOANS
The fair value of loans, excluding loans held for sale, are based on
discounted cash flow analyses using interest rates currently being offered for
loans with similar remaining terms to maturity and credit risk, adjusted for the
impact of interest rate floors and ceilings. The fair values of classified loans
were estimated to approximate their carrying values less loan loss reserves
allocated to these loans of $9.9 million and $12.7 million at December 31, 1996
and 1995, respectively.
The fair values of residential mortgage loans held for sale are based upon
quoted market prices of such loans sold in securitization transactions,
including related unfunded loan commitments and hedging transactions.
DEPOSITS
The fair values of time deposits are based on discounted cash flow analyses
using interest rates currently being offered on similar transactions. FAS 107
defines the estimated fair value of deposits with no stated maturity, which
includes demand deposits, transaction deposits, money market deposits and
savings accounts, to equal the amount payable on demand. Although market
premiums paid reflect an additional value for these low cost deposits, FAS 107
prohibits adjusting fair value for the expected benefit of these deposits.
Accordingly, the positive effect of such deposits is not included in this table.
OTHER BORROWINGS AND SUBORDINATED DEBENTURE
The fair values of these instruments are based upon discounted cash flow
analyses using interest rates currently being offered on similar instruments.
OFF-BALANCE-SHEET INSTRUMENTS
The fair values of commercial loan commitments and letters of credit are
based on fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements. The fair values of interest rate
swaps are based on pricing models using current assumptions to arrive at
replacement cost. The fair values of these off-balance-sheet instruments were
not significant at December 31, 1996 and 1995. Residential mortgage loan
commitments are included in determining the fair value of the mortgage loans
held for sale.
<PAGE> 42
(17) PARENT COMPANY ONLY FINANCIAL STATEMENTS
Summarized financial information for BOK Financial-Parent Company Only
follows:
BALANCE SHEETS
(IN THOUSANDS) DECEMBER 31,
-------------------------------
1996 1995
-------------------------------
ASSETS
Cash and cash equivalents $ 461 $ 212
Securities - available for sale 33,155 4,208
Investment in subsidiaries 328,511 302,199
Other assets 1,591 1,761
-------- -------
Total assets $ 363,718 $ 308,380
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ - $ 2,500
Other liabilities 3,752 4,315
----- -----
Total liabilities 3,752 6,815
----- -----
Preferred stock 23 23
Common stock 1 1
Capital surplus 176,093 157,395
Retained earnings 182,892 146,727
Treasury stock (428) -
Unrealized net gain (loss) on securities
available for sale 1,472 (2,427)
Notes receivable (87) (154)
------- -------
Total shareholders' equity 359,966 301,565
------- -------
Total liabilities and shareholders' equity $ 363,718 $ 308,380
========== ==========
STATEMENTS OF EARNINGS
(IN THOUSANDS)
1996 1995 1994
--------------------------------
Dividends, interest and fees received
from subsidiaries $31,202 $ 1,460 $ 458
Other operating revenue 532 1,241 73
------- ----- ---
Total revenue 31,734 2,701 531
------ ----- ---
Interest expense 819 273 4
Personal expense 7 407 350
Professional fees and services 177 212 373
Other operating expense 236 250 477
--- --- ---
Total expense 1,239 1,142 1,204
----- ----- -----
Income (loss) before taxes and equity in
undistributed income of subsidiaries 30,495 1,559 (673)
Federal and state income tax expense (credit) (4,116) 1,043 (103)
------ ----- ----
Income (loss) before equity in undistributed
income of subsidiaries 34,611 516 (570)
Equity in undistributed income of subsidiaries 19,516 48,689 45,635
------ ------ ------
Net income $54,127 $49,205 $45,065
======= ======= =======
<PAGE> 43
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
1996 1995 1994
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $54,127 $49,205 $45,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (19,516) (48,689) (45,635)
Noncash compensation expense - - 257
Gain on sale of available for sale securities - (1,213) -
Change in other assets 170 (144) 1,537
Change in other liabilities (3,552) 1,403 2,460
------ ----- -----
Net cash provided by operating activities 31,229 562 3,684
------ --- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale - 13,287 -
securities
Purchases of available for sale securities (22,826) (15,641) -
Investment in subsidiaries (6,029) (3,155) (3,000)
------ ------ ------
Net cash used in investing activities (28,855) (5,509) (3,000)
------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (2,500) 2,000 500
Issuance of preferred, common and treasury
stock, net 311 331 520
Payments to dissenting shareholders - - (1,707)
Repurchase of preferred stock - - (1,292)
Dividends on preferred stock (3) - (113)
Payments on notes receivable 67 131 93
-- --- --
Net cash provided (used) by financing activities (2,125) 2,462 (1,999)
------ ----- ------
Net increase (decrease) in cash and cash equivalents 249 (2,485) (1,315)
Cash and cash equivalents at beginning of period 212 2,697 4,012
--- ----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 461 $ 212 $ 2,697
======= ======= =======
PAYMENT OF DIVIDENDS IN COMMON STOCK $17,956 $14,346 $13,764
======= ======= =======
- --------------------------------------------------------------------------------
<PAGE> 44
BOK FINANCIAL CORPORATION
ANNUAL FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data) 1996
-----------------------------------
AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE(1) RATE
-----------------------------------
ASSETS
Taxable securities $1,285,333 $ 77,588 6.04%
Tax-exempt securities 305,000 22,801 7.48
- --------------------------------------------------------------------------------
Total securities 1,590,333 100,389 6.31
- --------------------------------------------------------------------------------
Trading securities 5,096 340 6.67
Funds sold and resell agreements 29,134 1,630 5.59
Loans(2) 2,252,216 196,538 8.73
Less reserve for loan losses 42,074 - -
- --------------------------------------------------------------------------------
Loans, net of reserve 2,210,142 196,538 8.89
- --------------------------------------------------------------------------------
Total earning assets 3,834,705 298,897 7.79
- --------------------------------------------------------------------------------
Cash and other assets 467,722
- --------------------------------------------------------------------------------
Total assets $4,302,427
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Transaction deposits $ 848,365 28,336 3.34
Savings deposits 101,273 2,464 2.43
Time deposits 1,555,073 87,266 5.61
- --------------------------------------------------------------------------------
Total interest-bearing deposits 2,504,711 118,066 4.71
- --------------------------------------------------------------------------------
Other borrowings 794,715 45,027 5.67
Subordinated debenture - - -
- --------------------------------------------------------------------------------
Total interest-bearing liabilities 3,299,426 163,093 4.94
- --------------------------------------------------------------------------------
Demand deposits 621,069
Other liabilities 59,678
Shareholders' equity 322,254
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $4,302,427
- --------------------------------------------------------------------------------
TAX-EQUIVALENT NET INTEREST REVENUE 135,804 2.85
TAX-EQUIVALENT NET INTEREST REVENUE
TO EARNING ASSETS 3.54
Tax-equivalent adjustment(1) 8,365
- --------------------------------------------------------------------------------
NET INTEREST REVENUE 127,439
Provision for loan losses 4,267
Other operating revenue 105,312
Other operating expense 159,028
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 69,456
Federal and state income tax 15,329
- --------------------------------------------------------------------------------
NET INCOME $ 54,127
- --------------------------------------------------------------------------------
EARNINGS PER AVERAGE COMMON SHARE EQUIVALENT:
Net Income
Primary $ 2.48
- --------------------------------------------------------------------------------
Fully diluted 2.24
- --------------------------------------------------------------------------------
(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.
<PAGE> 45
1995 1994
- --------------------------------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense1 Rate Balance Expense1 Rate
- ---------------------------------------- --------------------------------------
$1,354,949 $ 83,076 6.13% $1,249,791 $ 73,157 5.85%
253,969 19,113 7.53 200,099 15,369 7.68
- --------------------------------------------------------------------------------
1,608,918 102,189 6.35 1,449,890 88,526 6.11
- --------------------------------------------------------------------------------
3,672 242 6.59 3,836 226 5.89
16,509 996 6.03 42,897 2,008 4.68
2,012,574 179,052 8.90 1,718,508 138,415 8.05
38,318 37,997
- --------------------------------------------------------------------------------
1,974,256 179,052 9.07 1,680,511 138,415 8.24
- --------------------------------------------------------------------------------
3,603,355 282,479 7.84 3,177,134 229,175 7.21
- --------------------------------------------------------------------------------
442,834 403,239
- --------------------------------------------------------------------------------
$4,046,189 $3,580,373
- --------------------------------------------------------------------------------
$ 758,594 25,276 3.33 $ 807,421 22,062 2.73
118,664 2,957 2.49 133,609 3,522 2.64
1,229,769 69,506 5.65 1,072,011 45,557 4.25
- --------------------------------------------------------------------------------
2,107,027 97,739 4.64 2,013,041 71,141 3.53
- --------------------------------------------------------------------------------
1,023,780 62,086 6.06 704,195 31,534 4.48
5,797 352 6.07 23,000 1,380 6.00
- --------------------------------------------------------------------------------
3,136,604 160,177 5.11 2,740,236 104,055 3.80
- --------------------------------------------------------------------------------
574,865 541,144
62,361 72,792
272,359 226,201
- --------------------------------------------------------------------------------
$4,046,189 $3,580,373
- --------------------------------------------------------------------------------
122,302 2.73 125,120 3.41
3.39 3.94
7,038 6,117
- --------------------------------------------------------------------------------
115,264 119,003
231 195
91,146 74,364
142,206 133,475
- --------------------------------------------------------------------------------
63,973 59,697
14,768 14,632
- --------------------------------------------------------------------------------
$ 49,205 $ 45,065
- --------------------------------------------------------------------------------
$ 2.25 $ 2.05
- --------------------------------------------------------------------------------
2.05 1.88
- --------------------------------------------------------------------------------
<PAGE>46
BOK FINANCIAL CORPORATION
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data)
Three Months Ended
------------------------------------------------------
December 31, 1996 September 30, 1996
------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense1 Rate Balance Expense(1) Rate
ASSETS
Taxable securities $1,326,104 $20,042 6.01% $1,281,588 $19,610 6.09
Tax-exempt securities 330,195 6,129 7.38 315,844 5,920 7.46
- --------------------------------------------------------------------------------
Total securities 1,656,299 26,171 6.29 1,597,432 25,530 6.36
- --------------------------------------------------------------------------------
Trading securities 3,870 72 7.40 4,116 73 7.06
Funds sold and resell
agreements 24,949 356 5.68 21,040 298 5.63
Loans2 2,329,981 50,414 8.61 2,254,863 49,173 8.68
Less reserve for
loan losses 45,455 - - 43,510 - -
- --------------------------------------------------------------------------------
Loans, net of reserve 2,284,526 50,414 8.78 2,211,353 49,173 8.85
- --------------------------------------------------------------------------------
Total earning assets 3,969,644 77,013 7.72 3,833,941 75,074 7.79
- --------------------------------------------------------------------------------
Cash and other assets 475,824 469,575
- --------------------------------------------------------------------------------
Total assets $4,445,468 $4,303,516
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Transaction deposits $ 891,053 7,678 3.43 $ 864,904 7,411 3.41
Savings deposits 96,609 595 2.45 101,328 616 2.42
Time deposits 1,533,447 21,582 5.60 1,548,832 21,757 5.59
- --------------------------------------------------------------------------------
Total interest-bearing
deposits 2,521,109 29,855 4.71 2,515,064 29,784 4.71
- --------------------------------------------------------------------------------
Other borrowings 887,502 12,707 5.70 780,037 11,160 5.69
Subordinated debenture - - - - - -
- --------------------------------------------------------------------------------
Total interest-bearing
liabilities 3,408,611 42,562 4.97 3,295,101 40,944 4.94
- --------------------------------------------------------------------------------
Demand deposits 633,441 631,981
Other liabilities 60,023 53,609
Shareholders' equity 343,393 322,825
- --------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $4,445,468 $4,303,516
- --------------------------------------------------------------------------------
TAX-EQUIVALENT NET INTEREST REVENUE 34,451 2.75 34,130 2.85
TAX-EQUIVALENT NET INTEREST REVENUE
TO EARNING ASSETS 3.45 3.54
Tax-equivalent adjustment(1) 2,207 2,184
- --------------------------------------------------------------------------------
NET INTEREST REVENUE 32,244 31,946
Provision for loan losses 357 62
Other operating revenue 27,534 27,228
Other operating expense 38,315 40,297
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 21,106 18,815
Federal and state
income tax (benefit) 6,540 5,840
- --------------------------------------------------------------------------------
NET INCOME $14,566 $12,975
- --------------------------------------------------------------------------------
EARNINGS PER AVERAGE COMMON SHARE EQUIVALENT:
NET INCOME
Primary $ .66 $ .59
- --------------------------------------------------------------------------------
Fully diluted .60 .54
- --------------------------------------------------------------------------------
(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.
<PAGE> 47
Three Months Ended
- --------------------------------------------------------------------------------
June 30, 1996 March 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense1 Rate
- --------------------------------------------------------------------------------
$1,258,382 $18,841 6.02% $1,274,853 $19,095 6.02% $1,285,158 $19,337 5.97%
304,450 5,720 7.56 269,115 5,032 7.52 256,599 4,824 7.46
- --------------------------------------------------------------------------------
1,562,832 24,561 6.32 1,543,968 24,127 6.28 1,541,757 24,161 6.22
- --------------------------------------------------------------------------------
6,416 100 6.27 6,005 95 6.36 3,787 72 7.54
43,274 574 5.33 27,409 402 5.90 19,197 288 5.95
2,233,711 49,085 8.84 2,189,423 47,866 8.79 2,145,558 47,838 8.85
40,311 - - 38,966 - - 38,378 - -
- --------------------------------------------------------------------------------
2,193,400 49,085 9.00 2,150,457 47,866 8.95 2,107,180 47,838 9.01
- --------------------------------------------------------------------------------
3,805,922 74,320 7.85 3,727,839 72,490 7.82 3,671,921 72,359 7.82
- --------------------------------------------------------------------------------
468,001 457,381 454,182
- --------------------------------------------------------------------------------
$4,273,923 $4,185,220 $4,126,103
- --------------------------------------------------------------------------------
$ 832,127 6,860 3.32 $ 804,723 6,387 3.19 $ 759,920 6,605 3.45
103,274 624 2.43 103,931 629 2.43 106,633 654 2.43
1,605,179 22,122 5.54 1,533,143 21,805 5.72 1,338,106 19,416 5.76
- --------------------------------------------------------------------------------
2,540,580 29,606 4.69 2,441,797 28,821 4.75 2,204,659 26,675 4.80
- --------------------------------------------------------------------------------
732,122 10,167 5.59 778,343 10,993 5.68 973,914 14,457 5.89
- - - - - - - - -
- --------------------------------------------------------------------------------
3,272,702 39,773 4.89 3,220,140 39,814 4.97 3,178,573 41,132 5.13
- --------------------------------------------------------------------------------
629,973 588,624 584,748
58,979 66,165 65,665
312,269 310,291 297,117
- --------------------------------------------------------------------------------
$4,273,923 $4,185,220 $4,126,103
- --------------------------------------------------------------------------------
34,547 2.96 32,676 2.85 31,227 2.69
3.65 3.53 3.37
2,100 1,874 1,780
- --------------------------------------------------------------------------------
32,447 30,802 29,447
2,937 911 176
23,966 26,584 23,951
42,774 37,642 36,852
- --------------------------------------------------------------------------------
10,702 18,833 16,370
(2,889) 5,838 3,707
- --------------------------------------------------------------------------------
$13,591 $12,995 $12,663
- --------------------------------------------------------------------------------
$ .62 $ .60 $ .58
- --------------------------------------------------------------------------------
.57 .54 .53
- --------------------------------------------------------------------------------
<PAGE> 48
BOK FINANCIAL CORPORATION
1996 ANNUAL REPORT
APPENDIX A
================================================================================
Net Income
Graph I
For Year Ended December 31, 1996
(Dollars in Thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net Income $54,127 $49,205 $45,065 $39,472 $29,786
================================================================================
Loans
Graph II
December 31, 1996
(Dollars in Thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Commercial $ 984,190 $ $ 746,066 $ 692,536 $681,004
861,064
Real Estate 1,200,395 1,107,830 884,590 830,723 665,961
Consumer 209,995 225,474 213,397 155,296 133,279
================================================================================
Real Estate Loans
Graph III
December 31, 1996
(Dollars in Thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Commercial Real Estate $ 509,874 $ 450,385 $ 363,600 $ 293,122 $ 292,768
Single Family Residential
429,405 436,816 373,389 254,505 213,201
Construction & Land
Development 165,784 148,217 106,692 93,310 81,022
Loans Held for Sale 95,332 72,412 40,909 189,786 78,970
================================================================================
Operating Revenue
Graph IV
For Year Ended December 31, 1996
(Dollars in Thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Deposit Fees and
Service Charges $ 24,104 $21,152 $20,698 $20,825 $17,704
Trust Fees and Service
Charges 21,638 19,363 17,117 16,824 15,007
Mortgage Banking Revenue
26,236 20,336 15,868 12,564 11,895
Other 33,334 30,295 20,681 26,397 18,637
================================================================================
Funding
Graph V
December 31, 1996
(Dollars in Thousands)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Deposits $3,256,755 $2,937,709 $2,629,574 $2,610,627 $2,054,172
Borrowed Funds 946,304 947,806 974,334 240,557 157,992
Capital &
Subordinated Debt 359,966 301,565 259,902 236,943 185,331
================================================================================
<PAGE>49
SHAREHOLDER INFORMATION
BOK Financial is a bank holding company providing financial and related
services to individuals and businesses. It is primarily engaged in commercial
and consumer banking through its two banking subsidiaries. In conducting their
businesses, the banks receive deposits, make loans, provide trust, investment
and corporate services, operate the TransFund interchange of automated teller
machines and generally engage in all aspects of commercial and consumer banking.
Corporate Headquarters Transfer Agent and Registrar
Bank of Oklahoma Tower The Bank of New York
P.O. Box 2300 (800) 524-4458
Tulsa, Oklahoma 74192
(918)588-6000 Address Shareholders Inquiries to:
Shareholder Relations Department-11E
Independent Auditors P.O. Box 11258
Ernst & Young LLP Church Street Station
Bank of Oklahoma Tower New York, NY 10286
Tulsa, Oklahoma 74172
(918) 560-3600 E-Mail Address:
[email protected]
Legal Counsel
Frederick Dorwart Lawyers
Old City Hall Send Certificates for Transfer and
124 E. Fourth St. Address Changes to:
Tulsa, Oklahoma 74103-5010 Receive and Deliver Department - 11W
(918) 583-9922 P.O. Box 11002
Church Street Station
Common Shares: New York, NY 10286
Traded Over the Counter,
NASDAQ Symbol: BOKF
Market Makers:
Herzog, Heine, Geduld, Inc.
Smith Barney
Southwest Securities, Inc.
Copies of BOK Financial Corporation's Annual Report to Shareholders,
Quarterly Reports and Form 10-K to the Securities and Exchange Commission are
available without charge upon written request. Analysts, shareholders and other
investors seeking financial information about BOK Financial Corporation are
invited to contact James A. White, Executive Vice President & Chief Financial
Officer, (918) 588-6752. News media and others seeking general information
should contact Becky J. Frank, Vice President, Public Relations manager, (918)
588-6831.
<PAGE>50
DIRECTORS
<TABLE>
<CAPTION>
BOK Financial Corporation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Wayne Allen Dr. Robert H. Donaldson David R. Lopez
Chairman and CEO Trustees Professor of Political President - Oklahoma
Phillips Petroleum Co. University of Tulsa Southwestern Bell Telephone Co.
Keith E. Bailey William E. Durrett Stanley A. Lybarger
Chairman, President and CEO Chairman, President and CEO President and CEO
The Williams Companies American Fidelity Corp. Bank of Oklahoma, N.A.
James E. Barnes James O. Goodwin Frank A. McPherson
Chairman and CEO, MAPCO Inc. CEO Retired Chairman and CEO
The Oklahoma Eagle Publishing Co. Kerr-McGee Oil Corporation
Sharon J. Bell V. Burns Hargis Robert L. Parker, Sr.
Managing Partner, Rogers and Bell Attorney, McAfee & Taft Chairman, Parker Drilling Company
Larry W. Brummett E. Carey Joullian, IV James W. Pielsticker
Chairman, President and CEO, President, Mustang Fuel President
ONEOK Inc. Corporation Arrow Trucking Co.
Glenn A. Cox George B. Kaiser James A. Robinson
Retired President and COO Chairman of the Board Personal Investments
Phillips Petroleum Company Bank of Oklahoma, N.A.
Ralph S. Cunningham Robert J. LaFortune L. Francis Rooney, III
President and CEO, Citgo Petroleum Personal Investments Chairman
Manhattan Construction Company
Nancy J. Davies Philip C. Lauinger, Jr. Robert L. Zemanek
Community Leader Chairman President, CSW Transmission and
Lauinger Publishing Company Distribution Support
Central and South West Co.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Bank of Oklahoma, N.A.
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Wayne Allen James O. Goodwin Stanley A. Lybarger
Chairman and CEO CEO President and CEO
Phillips Petroleum Co. The Oklahoma Eagle Publishing Co. Bank of Oklahoma, N.A.
Keith E. Bailey D. Joseph Graham Frank A. McPherson
Chairman, President and CEO Vice President and CFO Retired Chairman and CEO
The Williams Companies Kaiser-Francis Oil Co. Kerr-McGee Oil Corporation
Larry W. Brummett V. Burns Hargis James W. Pielsticker
Chairman, President and CEO Attorney, McAfee & Taft President
ONEOK Inc. Arrow Trucking Co.
Glenn A. Cox Eugene A. Harris L. Francis Rooney, III
Retired President and COO Executive Vice President Chairman and CEO
Phillips Petroleum Company Bank of Oklahoma, N.A. Manhattan Construction Company
Ralph S. Cunningham E. Carey Joullian, IV James A. White
President and CEO, Citgo Petroleum President, Mustang Fuel Corporation Executive Vice President and CFO
Bank of Oklahoma, N.A.
Nancy J. Davies George B. Kaiser Robert L. Zemanek
Community Leader Chairman of the Board President, CSW Transmission and
Bank of Oklahoma, N.A. Distribution Support
Central and South West Co.
Dr. Robert H. Donaldson David R. Lopez
Trustees Professor of President - Oklahoma
Political Science Southwestern Bell Telephone Co.
University of Tulsa
</TABLE>
<PAGE> 51
OPERATING SUBSIDIARIES
Bank of Oklahoma, N.A. Bank of Arkansas
- ------------------------------------------------ --------------------
Tulsa Oklahoma City Main Bank
- ---------------------- ---------------------- -----------------
Bank of Oklahoma Tower Bank of Oklahoma Plaza 3500 N. College,
One Williams Center Robinson at Robert. S. Kerr Fayetteville
(918) 588-6000 (405) 272-2000 (501) 521-8000
<TABLE>
<CAPTION>
Subsidiaries of Bank of Oklahoma, N.A.
- ----------------------------------------------------------------------------------------------------------------------
BANK OF OKLAHOMA ,TRUST DIVISION BOK MORTGAGE
- -------------------------------- ------------
<S> <C> <C> <C>
Tulsa Oklahoma City Tulsa Oklahoma City
- ----- ------------- ----- -------------
Bank of Oklahoma Tower 6307 Waterford Blvd. Copper Oaks 5015 N.
One Williams Center, 10th Floor (405) 879-8100 7060 S. Yale, Suite 100 Pennsylvania
(918) 588-6437 (918) 488-7140 (405) 879-8700
ALLIANCE TRUST COMPANY Bank of Oklahoma Plaza Pine and Lewis Lawton
2009 Independence Dr. 201 Robert S. Kerr, 4th 1604 N. Lewis 2602 W. Gore Blvd.
Sherman, Texas Floor (918) 588-8608 (405)250-0070
(903) 813-5100 (405) 272-2459
5956 Sherry Lane, Suite 1800 SOUTHWEST TRUST COMPANY Owasso
Dallas, Texas 6307 Waterford Blvd. ------
(214) 987-8800 Oklahoma City 413 E. 2nd Ave.
(405) 879-8100 (918) 588-8650
BOSC, INC
3045 S. Harvard
Tulsa
(918) 746-5720
</TABLE>
Major Customer Service Offices
- --------------------------------------------------------------------------------
BUSINESS BANKING CENTERS
- -----------------------------------------------------------
Tulsa Oklahoma City
- ------ -------------
Brookside Banking Center Northwest Banking Center
3237 S. Peoria 3535 N. W. 58th, 2nd Floor
(918) 746-7400 (405) 951-5400
COMMERCIAL
Metropolitan, National, Energy & Real Estate offices
- --------------------------------------------------------------
Tulsa Oklahoma City
- ----- -------------
Bank of Oklahoma Tower Bank of Oklahoma Plaza
One Williams Center Robinson at Robert. S. Kerr
(918) 588-6000 (405) 272-2000
CONSUMER BANKING
- --------------------------------------------------------------
Tulsa Oklahoma City
- ----- -------------
Bank of Oklahoma Tower Bank of Oklahoma Plaza
One Williams Center Robinson at Robert. S. Kerr
(918) 588-6010 (405) 272-2548
BANCOKLAHOMA INVESTMENT CENTER
- ---------------------------------------------------------------
Tulsa
- ----- Investment Center Financial
Ranch Acres Consultants are located in all
3045 S. Harvard, Suite 101 Consumer, Community and
(918) 746-5770 Private Financial Services
locations statewide.
PRIVATE FINANCIAL SERVICES
- --------------------------------------------------------------
Tulsa Oklahoma City
- ----- -------------
Midtown at Lewis Center Northwest Banking Center
2021 S. Lewis, Suite 200 3535 N. W. 58th
(918) 748-7283 (405) 951-5434
Downtown at Waterford
320 Boston Center 6307 Waterford Blvd., St. 100
320 S. Boston (405) 879-8100
(918) 588-6214
Enid
----
Brookside Business Center 2308 N. Van Buren
3237 S. Peoria (405) 548-8523
(918) 746-7400
61st & Yale
(918) 493-5203
Bartlesville
- ------------
3815 S.E. Frank Phillips Blvd.
(918) 335-5349
<PAGE> 52
<TABLE>
<CAPTION>
BANK OF OKLAHOMA, N.A. LOCATIONS
Oklahoma City Area Locations Tulsa Area Locations
- --------------------------------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C>
Oklahoma City Plaza Village Tulsa Downtown Brookside
201 Robert S. Kerr 9300 N. Pennsylvania Banking Center 3237 S. Peoria
One Williams Center
Downtown Express Bank Windsor Hills Downtown Autobank City Plaza
4th & Robinson 2601 N. Meridian 2nd & Denver 5330 E. 31st
BOk in Albertson's, Del City 320 Boston Center Lewis Center
104th & Western 4324 S. E. 44th 320 S. Boston 2021 S. Lewis
BOk in Albertson's, Edmond, Broadway 31st & Garnett Pine & Lewis
122nd & Rockwell 1515 S. Broadway
BOk in Albertson's, BOk in Albertson's, 61st & Yale Ranch Acres
Britton & May 15th & Post, Midwest City 3045 S. Harvard
71st & Sheridan
BOk in Albertson's, Midwest City 101st & Sheridan Southroads
MacArthur and NW Expressway 1500 S. Midwest Blvd. 4901 E. 41st
Candlewood Midwest City, Air Depot BOk in Albertson's, Southwest Tulsa
6517 N.W. Expressway 1201 S. Air Depot Blvd. 51st & Harvard 4544 S. 33rd W. Ave.
Northwest Banking Center BOk in Albertson's, I-35 & BOk in Albertson's, Bixby
3535 N. W. 58th Robinson, Norman 51st & Memorial 11709 S. Memorial
Penn Tower Norman-Midtown BOk in Albertson's, Broken Arrow, Albertson's,
50 Penn Place 707 W. Main 71st & Garnett 101st & Elm
Quail Creek Norman-West BOk in Albertson's, Broken Arrow,
11300 N. May Ave 3550 W. Main 81st & Yale 81st & Aspen
South OKC Yukon BOk in Albertson's, Sand Springs
7701 S. Western 1100 S. Garth Brooks Blvd. 101st & Memorial 401 E. Broadway
</TABLE>
<TABLE>
<CAPTION>
Community Locations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bartlesville Enid Grove
------------ ---- ----- Muskogee, Eastside
Main Bank Northwest 201 S. Main 2520 Chandler Rd.
3815 S. E. Frank Phillips Blvd. 2308 N. Van Buren
Downtown BOk in Homeland BOk in Wal-Mart Muskogee, Westside
5th & Keeler 3828 W. Owen K. Garriott 2115 S. Main 300 N. 32nd St.
Washington Park Mall Eufaula McAlester Newkirk
132 Washington Park Mall ------- --------- -------
219 S. Main One E. Choctaw 110 S. Main
BOk in Wal-Mart
4000 Green Country Road Muskogee Ponca City
-------- ----------
Downtown 2005 N. 14th St.
325 W. Broadway
</TABLE>
BANK OF ARKANSAS LOCATIONS
- --------------------------------------------------------------------------------
Fayetteville - Main Bank Fayetteville - Downtown
- ------------------------ -----------------------
3500 N. College 11 N. College
Rogers Springdale
- ------ ----------
2000 W. Walnut Opening May 1997
<PAGE>53
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George B. Kaiser* Mark W. Funke Community Banking BOk Mortgage
Chairman of the Board Executive Vice President ----------------- -----------------
Chief Operating Officer John W. Anderson David L. Laughlin
Stanley A. Lybarger* Oklahoma City President, Bartlesville President
President,
Chief Executive Officer Eugene A. Harris Mary H. Williams BancOklahoma Trust Company
Executive Vice President President, Grove --------------------------
Commercial Banking H. James Holloman
Wayne D. Stone* David P. Jones President
President, Bank of Oklahoma President, Muskogee
Oklahoma City Regional Office John J. Maintz*
Senior Vice President
James E. White* Credit Administration J. Blake Moffatt
Executive Vice President President, Sand Springs
Chief Financial Officer H. James Holloman Alliance Trust Company, N.A.
Executive Vice President ----------------------------
Frederic Dorwart* Trust Division J. Michael Stuart James R. Dickson
Secretary President, Enid President
Norman W. Smith Dallas, Texas
Executive Vice President -------------------
Lowell E. Faulkenberry* Consumer Banking John J. Rownak, Jr. Philip S. McKinzie
Senior Vice President President and Chief Executive Vice President
Risk Management Gregory K. Symons Executive Officer Sherman, Texas
Executive Vice President Bank of Arkansas **
John C. Morrow* Services
Senior Vice President
Controller, Financial Charles D. Williamson
Accounting Executive Vice President
Capital Markets
</TABLE>
<TABLE>
<CAPTION>
Senior Vice Presidents
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee C. Allen, Jr. James A. Dietz Ronald E. Leffler Joe L. Rodanski
Asset/Liability Credit Administration Consumer Banking Trust Division
Barry L. Bell Jeffery R. Dunn Vane T. Lucas John J. Rownak, Jr.
BOk Mortgage Bank of Arkansas Consumer Support Bank of Arkansas
Steven G. Bradshaw Wade Edmundson James S. Marshall Joann G. Schaub
Private Financial Services Commercial Marketing BOk Mortgage Trust Division
Michael L. Bristle Barbara L. Eikner Marc C. Maun* David A. Sharpe
Bank Operations Bank Operations Acquisitions Electronic Banking
Ben R. Byers Ellen D. Fleming Charles E. Murray II Carl L. Shortt, Jr.
Private Financial Services Trust Division Private Financial Services Trust Division
Robert W. Carroll Douglas S. Fuller Paul D. Mesmer James F. Ulrich
Legal Commercial Banking Center Special Assets Human Resources
William J. Clune Marshall K. Grant Steven E. Nell Nancy E. Utter
Agriculture BOk Mortgage Management Accounting Credit Administration
Charles E. Cotter Scott B. Grauer Stephen R. Pattison William J. Weigel, Jr.
Merchant Banking Investment Center Corporate Banking Trust Division
Terry L. Croll Lawrence B. Halka Patrick E. Piper H. Matt Wilson
Treasury Services Trust Division Consumer Banking Commercial Banking
Brett A. Dean Richard C. Haugland David A. Ralston
Institutional INvestments Muskogee Commercial Real Estate
James R. Dickson James L. Huntzinger John M. Robinson
Trust Division Trust Division Commercial Banking Center
<CAPTION>
*BOK Financial and Bank of Oklahoma, N.A. officers **wholly-owned subsidiary of BOK Financial
</TABLE>
<PAGE>
BANK OF OKLAHOMA N.A.
---------------------
Bank of Oklahoma Tower
P.O. Box 2300, Tulsa, OK 74192
(918) 588-6000
Bank of Oklahoma Plaza
P.O. Box 24128, Oklahoma City, OK 73124
(405) 272-2000
BANK OF ARKANSAS
----------------
(Citizens Bank of Northwest Arkansas, N.A.,
name change effective May 1, 1997)
P.O. Box 1407, Fayetteville, AR 72703
(501) 973-2660
FIRST NATIONAL BANK OF PARK CITIES
----------------------------------
6215 Hillcrest Avenue, Dallas, TX 75205
(214)522-5858
6701 Preston Road, Dallas, TX 75205
(214) 522-3700
FIRST TEXAS BANK
----------------
Dallas, 2650 Royal Lane at Denton, Dallas, TX 75229
(972) 243-2400
Valley Bank, 9400 MacArthur Blvd., Irving, TX 75063
(972) 556-0666
(C)1997 BOK Financial Corporation
BOK FINANCIAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Banking Subsidiaries
Bank of Oklahoma, National Association
Citizens Bank of Northwest Arkansas, National Association
Other subsidiaries of BOK Financial Corporation
BOKF Merger Corporation Number Three
BOKF Merger Corporation Number Four
BOKF Merger Corporation Number Five
Brookside Bancshares, Inc.
BOK Capital Services Corp.
KCI Leasing Partners I, an Oklahoma Limited Partnership
KCI Leasing Partners II, an Oklahoma Limited Partnership
Sabre 1996 Partnership, an Oklahoma Limited Partnership
Subsidiaries of
Bank of Oklahoma, N.A. and Citizens Bank of Northwest Arkansas, N.A.
Affiliated BancServices, Inc.
Affiliated Financial Holding Company
Affiliated Financial Insurance Agency, Inc.
Affiliated Financial Life Insurance Company
Alliance Trust Company, National Association
Banco Leasing Company
BancOklahoma Agri-Service Corp.
BancOklahoma Mortgage Corp.
BOSC, Inc.
BancOklahoma Trust Company.
BOK Delaware, Inc.
BOK DPC Asset Holding Company
BOK Real Estate Trust
BOK Second DPC Asset Holding Company
FGBSA Securities Brokerage (Oklahoma), Inc.
Investment Concepts, Inc.
Pacesetter Leasing Company
Southwest Trust Company
Steven L. Smith Corp.
115 E. Fifth Corp.
All subsidiaries are incorporated in Oklahoma, with the exception of Bank
of Oklahoma, National Association, which is chartered by the United States of
America; Affiliated Financial Life Insurance Company, which is incorporated in
Arizona; Alliance Trust Company and FGBSA Securities Brokerage (Oklahoma), Inc.,
which are incorporated in Texas; Brookside Bancshares, BOK Delaware, Inc. and
BOK Real Estate Trust, which are incorporated in Delaware; and Citizens Bank of
Northwest Arkansas, N.A., which is incorporated in Arkansas.
BOK FINANCIAL CORPORATION
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated January 27,
1997, with respect to the consolidated financial statements of BOK Financial
Corporation and subsidiaries incorporated by reference in the annual report
(Form 10-K) for the year ended December 31, 1996, in the following registration
statements:
Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer
Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust
Agreement.
Registration Statement (Form S-8, No. 33-44122) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1991 Special Stock Option
Plan.
Registration Statement (Form S-8, No. 33-55312) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1992 Stock Option Plan.
Registration Statement (Form S-8, No. 33-70102) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1993 Stock Option Plan.
Registration Statement (Form S-8, No. 33-79834) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1994 Stock Option Plan.
Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation Directors' Stock
Compensation Plan.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the BOK
Financial Corporation's 10-K for the period ended December 31, 1996 and is
qualified in its entirety by reference to such financial statments.
</LEGEND>
<MULTIPLIER> 1,000
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0
23
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</TABLE>
