As filed with the Securities and Exchange Commission on May 15, 1998
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1998
Commission File No. 0-19341
BOK FINANCIAL CORPORATION
Incorporated in the State of Oklahoma
I.R.S. Employer Identification No. 73-1373454
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
Registrant's Telephone Number,
Including Area Code (918) 588-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT: (NONE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
COMMON STOCK ($.00006 Par Value)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 21,886,347 shares of
common stock ($.00006 par value) as of April 30, 1998.
- --------------------------------------------------------------------------------
<PAGE>2
BOK Financial Corporation
Form 10-Q
Quarter Ended March 31, 1998
Index
Part I. Financial Information
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 2
Report of Management on Consolidated
Financial Statements 10
Consolidated Statements of Earnings 11
Consolidated Balance Sheets 12
Consolidated Statements of Changes
in Shareholders' Equity 13
Consolidated Statements of Cash Flows 14
Notes to Consolidated Financial Statements 15
Financial Summaries - Unaudited 17
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signature 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
BOK Financial Corporation ("BOK Financial") recorded net income of $16.3 million
or $0.65 per diluted common share for the first quarter of 1998 compared to
$15.3 million or $0.61 per diluted common share for the first quarter of 1997.
Returns on average assets and equity were 1.19% and 14.89%, respectively,
compared to returns on average assets and equity of 1.30% and 16.92%,
respectively, for the first quarter of 1997.
The increase in net income for the first quarter of 1998 was due to increases of
$7.0 million or 19.9% in net interest revenue and $10.3 million or 33.9% in
other operating revenue. These increases were partially offset by increases of
$15.5 million or 37.1% in operating expenses and $1.4 million in provision for
loan losses. Operating expenses for the first quarter of 1998 included a $3.0
million provision for impairment of BOK Financial's mortgage servicing rights
and $2.3 million for the cost of securities contributed to the Bank of Oklahoma
Foundation.
RESULTS OF OPERATIONS
Net interest revenue on a tax-equivalent basis was $44.4 million for the first
quarter of 1998 compared to $37.5 million for the first quarter of 1997, an
increase of $6.9 million or 18.4%. Average earning assets increased by $683
million, including increases in average loans of $408 million and average
securities of $278 million. Interest bearing liabilities increased $541 million,
primarily due to increases in time deposits of $175 million and interest bearing
transaction accounts of $157 million. Demand deposits and shareholders' equity,
which are additional sources of funding asset growth, increased $170 million and
$76 million, respectively. The growth in average earning assets in excess of the
growth in interest bearing liabilities contributed $6.3 million to the increase
in net interest revenue.
<PAGE>3
================================================================================
TABLE 1 - VOLUME/RATE ANALYSIS
(In thousands)
Three months ended
March 31, 1998/1997
-------------------------------------
Change Due To (1)
------------------------
Yield
Change Volume /Rate
-------------------------------------
Tax-equivalent interest revenue:
Securities $ 4,487 $ 4,243 $ 244
Trading securities 105 116 (11)
Loans 9,291 8,736 555
Funds sold (20) (56) 36
- --------------------------------------------------------------------------
Total 13,863 13,039 824
- --------------------------------------------------------------------------
Interest expense:
Interest bearing transaction 930 1,247 (317)
deposits
Savings deposits 38 33 5
Time deposits 2,431 2,394 37
Other borrowings 1,290 851 439
Subordinated debenture 2,271 2,258 13
- --------------------------------------------------------------------------
Total 6,960 6,783 177
- --------------------------------------------------------------------------
Tax-equivalent net interest 6,903 $ 6,256 $ 647
revenue
Change in tax-equivalent adjustment 71
- --------------------------------------------------------------------------
Net interest revenue $ 6,974
- --------------------------------------------------------------------------
(1) Changes attributable to both volume and yield are allocated to both volume
and yield/rate on an equal basis.
Since inception, BOK Financial has completed acquisitions which were accounted
for under the purchase method of accounting. The purchase method results in
recording goodwill and other identifiable intangible assets which are amortized
as noncash charges into operating expense in future years. This is in contrast
to the pooling of interest method of accounting, which is only applicable in
certain limited circumstances. The pooling of interests method does not result
in the recording of goodwill or other intangible assets. Since the amortization
of goodwill and other intangible assets does not result in a current period cash
expense, the economic value to shareholders under either accounting method is
essentially the same. Operating results excluding the impact of these intangible
assets are summarized below:
================================================================================
TABLE 2 - TANGIBLE OPERATING RESULTS
(Dollars in Thousands Except Share Data)
-------------------------------
Three months ended
-------------------------------
March 31, March 31,
1998 1997
--------------- ---------------
Net income $ 16,313 $ 15,347
After-tax impact of amortization
of intangible assets 2,072 1,524
- --------------------------------------------------------------- ---------------
Tangible net income $ 18,385 $ 16,871
- --------------------------------------------------------------- ---------------
Tangible net income per diluted share $ 0.73 $ 0.68
- --------------------------------------------------------------- ---------------
Average tangible shareholders' equity $ 377,114 $ 318,422
Return on tangible shareholders' equity 19.77% 21.49%
- --------------------------------------------------------------- ---------------
Average tangible assets $5,487,243 $4,728,769
Return on tangible assets 1.36% 1.45%
- --------------------------------------------------------------- ---------------
Net interest margin, the ratio of net interest revenue to average earning
assets, was 3.65% for the first quarter of 1998 compared to 3.58% for the first
quarter of 1997. This increase was due primarily to a 12 basis point yield
improvement on loans. Commercial and commercial real estate loans increased to
72% of the total loan portfolio for the first quarter of 1998 compared to 69%
for the first quarter of 1997 while residential mortgage loans decreased to 10%
of total loans from 12% for the same periods. This change in the composition of
the loan portfolio caused the overall yield to increase since commercial and
commercial real estate loans generally have a higher yield than residential
mortgage loans. The increase in yield on average earning assets was partially
offset by a 5 basis point increase in the cost of average interest bearing
liabilities. The composition of interest bearing
<PAGE>4
liabilities shifted toward a greater percentage of borrowed funds in the first
quarter of 1998 compared to the first quarter of 1997. Most notably,
subordinated debt, which had a 6.36% cost of funds represented 3.5% of interest
bearing liabilities for the first quarter of 1998 compared to 0.2% for the same
period of 1997.
Since inception, BOK Financial has generally followed a strategy of fully
utilizing its capital resources by borrowing funds in the capital markets to
supplement deposit growth and to invest in securities. 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. Management estimates that for the first quarter of 1998, this strategy
resulted in a 41 basis point decrease in net interest margin. However, this
strategy contributed $2.9 million to net interest revenue. As more fully
discussed in the Market Risk section, management employs various techniques
designed to control, within established parameters, the interest rate and
liquidity risk inherent in this strategy.
Other operating revenue increased $10.3 million or 33.9% compared to the same
quarter of 1997. Total fees and commissions, which are included in other
operating revenue, increased $7.8 million or 26.7%. All categories of fee income
showed increases over the first quarter of 1997. Most notably, mortgage banking
revenue increased $2.4 million due to a $1.5 million increase in mortgage
servicing fees and an $845 thousand increase in secondary marketing income.
Loans serviced by BOK Mortgage, a division of BOk, totaled $7.0 billion at March
31, 1998. Additionally, trust fees and transaction card revenue increased $1.6
million and $1.5 million, respectively. Other operating revenue also included
gains on student loans of $1.4 million for the first quarter of 1998 compared to
$1.1 million for the first quarter of 1997, and a $2.5 million gain on
securities sales in the first quarter of 1998.
<TABLE>
=========================================================================================================================
TABLE 3 - OTHER OPERATING REVENUE
(In thousands)
Three Months Ended
-------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brokerage and trading revenue $ 3,131 $ 2,565 $ 2,522 $ 2,229 $ 2,240
Transaction card revenue 5,540 4,828 5,770 4,742 3,999
Trust fees and commissions 6,884 6,528 6,405 5,851 5,278
Service charges and fees
on deposit accounts 7,638 7,570 7,255 7,112 6,714
Mortgage banking revenue 9,321 9,411 8,416 7,460 6,948
Leasing revenue 1,661 1,522 1,566 1,512 1,261
Other revenue 2,685 3,198 1,546 2,614 2,655
- -------------------------------------------------------------------------------------------------------------------------
Total fees and commissions 36,860 35,622 33,480 31,520 29,095
- -------------------------------------------------------------------------------------------------------------------------
Gain on student loan sales 1,415 99 26 91 1,095
Gain (loss) on securities 2,512 (2,200) 809 (200) 262
- -------------------------------------------------------------------------------------------------------------------------
Total other operating revenue $ 40,787 $ 33,521 $ 34,315 $ 31,411 $ 30,452
==========================================================================================================================
</TABLE>
Other operating expenses for the first quarter of 1998 increased $15.5 million
or 37.1% compared to the first quarter of 1997. Notable large or non-recurring
expenses affected the first quarter of 1998, including business promotion
expenses for the contribution of stock with a cost of $2.3 million (market value
at the time of donation was $5.0 million) to the Bank of Oklahoma Foundation and
a provision of $3.0 million for impairment of mortgage servicing rights due to
falling interest rates. Excluding these items and excluding net OREO gains,
operating expenses increased $9.9 million or 23.4%.
Personnel costs increased $5.5 million due to increased staffing, normal
compensation increases and increased incentive compensation. Staffing on a
full-time equivalent ("FTE") basis increased by 243 employees while average
compensation per FTE increased by 9.8%. These changes reflect the addition of
several senior level positions in both the lending and operations areas as well
as related support staff in the second half of 1997. Incentive compensation,
which varies directly with revenue increased $1.2 million to $2.6 million for
the quarter.
Net occupancy, equipment and data processing expenses increased $894 thousand or
10.7% due primarily to a $796 thousand increase in data processing costs. A
significant portion of BOK Financial's data processing is outsourced to third
party providers. The cost of these services are directly related to the volume
of transactions
<PAGE>5
processed. Mortgage banking costs increased $1.8 million or 42.8% due to
increased amortization of capitalized servicing rights and a greater volume of
loan originations.
<TABLE>
=====================================================================================================================
TABLE 4 - OTHER OPERATING EXPENSE
(In thousands)
Three Months Ended
-----------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personnel $ 24,829 $ 24,811 $ 22,475 $ 21,148 $ 19,294
Business promotion 1,897 2,450 2,067 2,190 1,950
Contribution of stock to BOK
Charitable Foundation 2,257 3,638 - - -
Professional fees/services 1,596 2,123 1,579 1,571 1,496
Net occupancy, equipment
and data processing 9,214 10,426 8,618 8,250 8,320
FDIC and other insurance 310 258 374 328 333
Printing, postage and supplies 2,047 2,220 1,817 1,921 1,825
Net gains and operating
expenses on repossessed assets (55) (1,553) (1,662) (222) (412)
Amortization of intangible
assets 2,302 2,336 2,362 2,398 1,728
Mortgage banking costs 6,023 6,137 5,202 4,412 4,217
Provision for impairment of
mortgage servicing rights 3,000 4,100 - - -
Other expense 3,773 4,331 3,888 3,447 2,975
- ---------------------------------------------------------------------------------------------------------------------
Total $ 57,193 $ 61,277 $ 46,720 $ 45,443 $ 41,726
=====================================================================================================================
</TABLE>
The efficiency ratio, the ratio of other operating expenses, excluding net gains
on real estate sales and the previously discussed large or non-recurring
transactions, to tax-equivalent net interest revenue and other operating
revenue, excluding securities gains and losses was 62.9% for the first quarter
of 1998 compared to 62.3% for the first quarter of 1997.
<TABLE>
=====================================================================================================================
TABLE 5 - OTHER OPERATING EXPENSE, EXCLUDING SIGNIFICANT OR NONRECURRING ITEMS
(In thousands)
Three Months Ended
-------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total other operating expense $ 57,193 $ 61,277 $ 46,720 $ 45,443 $ 41,726
Contribution of stock to BOk
Charitable Foundation (2,257) (3,638) - - -
Provision for impairment of mortgage
servicing rights (3,000) (4,100) - - -
Net gains and operating costs from
repossessed assets 55 1,553 1,662 222 412
- ---------------------------------------------------------------------------------------------------------------------
Total $ 51,991 $ 55,092 $ 48,382 $ 45,665 $ 42,138
=====================================================================================================================
</TABLE>
<PAGE>
RISK ELEMENTS
The aggregate loan portfolio at March 31, 1998 increased $71 million to $2.8
billion during the first quarter of 1998. Commercial and commercial real estate
loans increased $70 million and $24 million, respectively. These included
increases for Bank of Texas, NA of $18 million for commercial loans and $15
million for commercial real estate loans. Consumer loans decreased $49 million
due to the sale of student loans during the quarter.
BOK Financial has achieved some geographic diversification through acquisitions
and expansion into Northwest Arkansas, North Texas and New Mexico. However, the
majority of commercial and consumer loans are to
<PAGE>6
businesses and individuals in Oklahoma. This geographic concentration subjects
the loans portfolio to the general economic conditions in Oklahoma. Notable loan
concentrations by the primary industry of the borrowers are presented in Table
6.
<TABLE>
=====================================================================================================================
TABLE 6 - LOANS
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Energy $ 324,052 $ 332,770 $ 333,347 $ 281,801 $ 255,975
Manufacturing 222,385 201,918 185,795 170,052 160,160
Wholesale/retail 250,702 242,156 255,768 265,547 256,154
Agricultural 159,324 151,525 155,052 142,908 129,619
Services 473,684 465,317 416,871 381,452 352,996
Other commercial and industrial 139,516 105,714 168,028 186,065 171,178
Commercial real estate:
Construction and land development 123,412 102,800 79,275 74,595 67,143
Multifamily 95,335 100,422 110,340 115,188 123,118
Other real estate loans 283,329 274,579 258,280 244,944 227,881
Residential mortgage:
Secured by 1-4 family
residential properties 404,481 419,139 414,050 423,123 426,956
Residential mortgages held for 118,777 78,669 103,300 79,438 67,192
sale
Consumer 241,299 290,084 289,892 264,130 261,241
- ---------------------------------------------------------------------------------------------------------------------
Total $ 2,836,296 $ 2,765,093 $ 2,769,998 $ 2,629,243 $ 2,499,613
=====================================================================================================================
</TABLE>
<PAGE>7
BOK Financial monitors loan performance on a portfolio and individual loan
basis. Nonperforming loans are reviewed at least quarterly. 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 March 31, 1998, loans totaling $52 million were assigned to the substandard
risk category and loans totaling $84 million were assigned to the special
mention risk category, compared to $57 million and $68 million, respectively, at
December 31, 1997. The increase in special mention loans is due primarily to one
borrower incurring losses on activities outside of the normal scope of their
operations. Management does not expect to incur any losses on this loan based
upon information currently available.
<TABLE>
=====================================================================================================================
TABLE 7 - NONPERFORMING ASSETS
(In thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonperforming loans:
Nonaccrual loans:
Commercial $ 12,556 $ 12,717 $ 16,103 $ 16,556 $ 13,624
Commercial real estate 2,824 2,960 3,854 3,721 2,910
Residential mortgage 2,243 2,441 2,512 2,641 2,969
Consumer 1,192 649 713 776 751
- ---------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 18,815 18,767 23,182 23,694 20,254
Loans past due (90 days) (1) 18,330 18,178 20,551 17,976 17,838
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming loans (1) 37,145 36,945 43,733 41,670 38,092
- ---------------------------------------------------------------------------------------------------------------------
Other nonperforming assets:
Commercial real estate 2,297 2,395 2,503 2,594 2,710
Other 3,069 2,863 2,684 2,970 3,381
- ---------------------------------------------------------------------------------------------------------------------
Total other nonperforming assets 5,366 5,258 5,187 5,564 6,091
- ---------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 42,511 $ 42,203 $ 48,920 $ 47,234 $ 44,183
=====================================================================================================================
Ratios:
Reserve for loan losses to
nonperforming loans 147.63% 143.73% 119.80% 119.68% 127.37%
Nonperforming loans (1) to
period-end loans (2) 1.37 1.38 1.64 1.63 1.57
- ---------------------------------------------------------------------------------------------------------------------
(1) Includes 1-4 family loans
guaranteed by agencies of
the U.S. government $ 16,006 $ 14,468 $ 16,010 $ 15,538 $ 15,083
(2) Excludes residential mortgage loans held for sale
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The reserve for loans losses, which is available to absorb losses inherent in
the loan portfolio, totaled $55 million at March 31, 1998, compared to $53
million at December 31, 1997. This represents 2.02% and 1.98% of total loans,
excluding loans held for sale, at March 31, 1998 and December 31, 1997,
respectively. Losses on loans held for sale, principally 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 8 presents
statistical information regarding the reserve for loan losses.
<PAGE>8
<TABLE>
===================================================================================================================
TABLE 8 - SUMMARY OF LOAN LOSS EXPERIENCE
(In thousands)
Three Months Ended
---------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 53,101 $ 52,393 $ 49,871 $ 48,517 $ 45,148
Loans charged-off:
Commercial 172 1,852 1,179 288 24
Commercial real estate - 441 194 5 58
Residential mortgage 50 269 91 34 15
Consumer 1,305 1,464 1,051 1,095 1,143
- -------------------------------------------------------------------------------------------------------------------
Total 1,527 4,026 2,515 1,422 1,240
- -------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Commercial 120 611 1,004 547 367
Commercial real estate 161 69 393 341 148
Residential mortgage 82 119 325 53 64
Consumer 432 435 315 335 479
- -------------------------------------------------------------------------------------------------------------------
Total 795 1,234 2,037 1,276 1,058
- -------------------------------------------------------------------------------------------------------------------
Net loans charged-off 732 2,792 478 146 182
(recoveries)
Provision for loan losses 2,470 3,500 3,000 1,500 1,026
Addition due to acquisition - - - - 2,525
- -------------------------------------------------------------------------------------------------------------------
Ending balance $ 54,839 $ 53,101 $ 52,393 $ 49,871 $ 48,517
===================================================================================================================
Reserve to loans outstanding
at period-end(1) 2.02 1.98 1.96 1.96 1.99
Net loan losses (recoveries)
(annualized) to average loans (1) 0.10 0.14 0.07 0.02 0.03
- -------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
</FN>
</TABLE>
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 $2.5 million for the first quarter of 1998 and $1.0 million
for the first quarter of 1997. The increased provision reflected management's
assessment of increased risk of loan losses due primarily to continued growth in
the loan portfolio and in criticized assets, geographic expansion of BOK
Financial's market area to include North Texas and New Mexico, and an
expectation that economic activities will moderate in BOK Financial's primary
market areas.
At March 31, 1998, other assets included $22.8 million of natural gas
compression and other equipment which is being leased to various customers by
entities in which BOK Capital Services Corporation, as subsidiary of BOK
Financial, is a general partner. The terms of these leases are generally shorter
than the estimated useful lives of the equipment. Therefore, as each lease
expires, there is a risk that the remaining net book value of the equipment may
not be recovered based upon market conditions and re-leasing opportunities at
that time.
Market Risk
Market risk is a broad term related to the risk of economic loss due to adverse
changes in the fair value of a financial instrument. These changes may be the
result of various factors, including interest rates, foreign exchange rates,
commodity prices, or equity prices. Additionally, the financial instruments
subject to market risk can be classified either as held for trading or held for
purposes other than trading.
BOK Financial is subject to market risk primarily through the effect of changes
in interest rates on its portfolio of assets held for purposes other than
trading. The effect of other changes, such as foreign exchange rates, commodity
prices or equity prices, is not material to BOK Financial nor is the effect of
market risk on financial
<PAGE>9
instruments held for trading purposes. The responsibility for managing market
risk 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 increase or decrease in
interest rates 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 March 31, 1998, BOK Financial is within all
guidelines established under these policies.
BOK Financial performs a sensitivity analysis to identify more dynamic interest
rate risk exposures, including embedded option positions, on net interest
revenue, net income and economic value of equity. A simulation model is used
assuming expected interest rates over the next twelve months based upon both a
"most likely" rate scenario and on two "shock test" scenarios, the first
assuming a sustained parallel 200 basis point increase and the second a
sustained parallel 200 basis point decrease in interest rates. An independent
source is used to determine the most likely interest rates for the next year.
BOK Financial's primary interest rate exposures include the Federal Reserve
Bank's discount rate which affects short-term borrowings, the prime lending rate
and the London InterBank Offering Rate ("LIBOR") which are the basis for much of
the variable-rate loan pricing and the 30-year mortgage rate which directly
affects the prepayment speeds for mortgage-backed securities and mortgage
servicing rights. Derivative financial instruments and other financial
instruments used for purposes other than trading are included in this
simulation. In addition, sensitivity of fee income to market interest rate
levels, such as those related to cash management services and mortgage
servicing, are included. The model incorporates management's assumptions
regarding the level of interest rate or balance changes on indeterminable
maturity deposits (demand deposits, interest-bearing transaction accounts and
savings accounts) for a given level of market rate changes. The assumptions have
been developed through a combination of historical analysis and future expected
pricing behavior. Interest rate swaps on all products are included to the extent
that they are effective in the 12-month simulation period. Additionally, changes
in prepayment behavior of mortgage-backed securities, residential mortgage loans
and mortgage servicing in each rate environment are captured using industry
estimates of prepayment speeds for various coupon segments of the portfolio.
Finally, the impact of planned growth and new business activities is factored
into the simulation model. At March 31, 1998, this modeling indicated interest
rate sensitivity as follows (dollars in thousands):
200 bp 200 bp Most
increase decrease Likely
Anticipated impact over the
next twelve months compared
to a constant interest rate
scenario
Net interest revenue $ 2,491 $ ( 3,130) $ ( 736)
1.3% (1.6%) (0.4%)
Net income $ 5,075 $ (26,987) $ (410)
6.7% (35.6%) (0.5%)
Economic value of equity $ ( 9,092) $ ( 7,780) $ 4,717
(1.3%) (1.0%) 0.7%
The estimated changes in interest rates on net interest revenue or economic
value of equity is not projected to be significant within the +/- 200 basis
point range of assumptions. However, this modeling indicated that under the 200
basis point decrease scenario, the after-tax value of BOK Financial's
capitalized mortgage loan servicing rights would decrease by $25.1 million.
While this decrease in value would largely be offset by an increase in the value
of the securities portfolio, current accounting principles require that the
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 a projected decrease in net income of $27.0
million or 35.6% compared to projected net income assuming no changes in
interest rates.
The simulation is based on numerous assumptions regarding the effect of changes
in interest rates on the timing and extent of repricing characteristics, future
cash flows and customer behavior. These assumptions are inherently uncertain
and, as a result, the model cannot precisely estimate net interest revenue, net
income or economic value of equity or precisely predict the impact of higher or
lower interest rates on net interest revenue, net income or economic value of
equity. Actual results will differ from simulated results due to
<PAGE>10
timing, magnitude and frequency of interest rate changes and changes in market
conditions and management strategies, among other factors.
Subsequent to March 31, 1998, BOK Financial implemented a program which uses
futures contracts and call and put options (collectively "derivative
instruments") to hedge against the risk of loss on capitalized mortgage
servicing rights. The intent of this program is to reduce, through market value
increases on the derivative instruments, the estimated pre-tax risk of loss
assuming a 50 basis point decrease in interest rates from approximately $15
million to approximately $5 million. While this program is expected to reduce
the risk of loss on capitalized mortgage servicing rights in a falling interest
rate environment, it limits the increase in market value of the capitalized
mortgage servicing rights in a rising rate environment. Management estimates
that a 50 basis point increase in interest rates would result a $9.4 million
decrease in the market value of the derivative instruments compared to a $7.9
million increase in the fair value of the capitalized mortgage servicing rights.
================================================================================
TABLE 9 - INTEREST RATE SWAPS
(In thousands)
Notional Pay Receive
Amount Rate Rate
----------------------------------------------------------
Expiration:
1998 63,000 5.63 - 5.94% (1) 6.64 - 7.96%
1999 22,000 5.63 - 5.94 (1) 6.80 - 7.68
2006 16,500 7.26 5.65 (1)
2007 100,000 5.69 (1) 6.75 - 6.80
2007 10,000 7.47 5.69 (1)
- --------------------------------------------------------------------------------
(1) Rates are variable based on LIBOR and reset monthly, quarterly or
semiannually.
BOK Financial uses interest rate swaps, an of off-balance sheet derivative
product, in managing its interest rate sensitivity. These products are generally
used to more closely match interest paid on certain long-term certificates of
deposit and subordinated debt with earning assets. BOK Financial accrues and
periodically receives a fixed amount from the counterparties to these swaps and
accrues and periodically makes a variable payment to the counterparties. During
the first quarter of 1998, income from these swaps exceeded the cost of the
swaps by $533 thousand. 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.
- --------------------------------------------------------------------------------
TABLE 10 - CAPITAL RATIOS
March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
--------------------------------------------------
Average shareholders' equity
to average assets 8.00% 8.13% 7.76% 7.33% 7.70%
Risk-based capital:
Tier 1 capital 9.47 9.49 8.93 9.00 8.96
Total capital 14.47 14.69 14.08 10.75 10.81
Leverage 6.81 6.81 6.53 6.26 6.34
REPORT OF MANAGEMENT ON CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the consolidated financial statements which have
been prepared in accordance with generally accepted accounting principles. In
management's opinion, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial condition, results of operations and
cash flows of BOK Financial and its subsidiaries at the dates and for the
periods presented.
The financial information included in this interim report has been prepared by
management without audit by independent public accountants and should be read in
conjunction with BOK Financial's 1997 Form 10-K to the Securities and Exchange
Commission which contains audited financial statements.
<PAGE>11
================================================================================
Consolidated Statement of Earnings
(In Thousands Except Share Data)
Three Months Ended
March 31,
-----------------------
1998 1997
------------ ----------
Interest Revenue
Loans $ 60,737 $ 51,355
Taxable securities 27,235 22,567
Tax-exempt securities 3,918 4,119
- -------------------------------------------------------- ------------ ----------
Total securities 31,153 26,686
- -------------------------------------------------------- ------------ ----------
Trading securities 163 58
Funds sold 691 711
- -------------------------------------------------------- ------------ ----------
Total interest revenue 92,744 78,810
- -------------------------------------------------------- ------------ ----------
Interest Expense
Deposits 33,383 29,984
Other borrowings 14,958 13,668
Subordinated debenture 2,367 96
- -------------------------------------------------------- ------------ ----------
Total interest expense 50,708 43,748
- -------------------------------------------------------- ------------ ----------
Net Interest Revenue 42,036 35,062
Provision for Loan Losses 2,470 1,026
- -------------------------------------------------------- ------------ ----------
Net Interest Revenue After
Provision for Loan Losses 39,566 34,036
- -------------------------------------------------------- ------------ ----------
Other Operating Revenue
Brokerage and trading revenue 3,131 2,240
Transaction card revenue 5,540 3,999
Trust fees and commissions 6,884 5,278
Service charges and fees on deposit accounts 7,638 6,714
Mortgage banking revenue, net 9,321 6,948
Leasing revenue 1,661 1,261
Other revenue 2,685 2,655
- -------------------------------------------------------- ------------ ----------
Total Fees and Commissions 36,860 29,095
- -------------------------------------------------------- ------------ ----------
Gain on sale of student loans 1,415 1,095
Gain on securities 2,512 262
- -------------------------------------------------------- ------------ ----------
Total Other Operating Revenue 40,787 30,452
- -------------------------------------------------------- ------------ ----------
Other Operating Expense
Personnel 24,829 19,294
Business promotion 1,897 1,950
Contribution of stock to Bank of Oklahoma Foundation 2,257 -
Professional fees and services 1,596 1,496
Net occupancy, equipment & data processing 9,214 8,320
FDIC and other insurance 310 333
Printing, postage and supplies 2,047 1,825
Net gains and operating expenses
of repossessed assets (55) (412)
Amortization of intangible assets 2,302 1,728
Mortgage banking costs 6,023 4,217
Provision for impairment of mortgage
servicing rights 3,000 -
Other expense 3,773 2,975
- -------------------------------------------------------- ------------ ----------
Total Other Operating Expense 57,193 41,726
- -------------------------------------------------------- ------------ ----------
Income Before Taxes 23,160 22,762
Federal and state income tax 6,847 7,415
- -------------------------------------------------------- ------------ ----------
Net Income $ 16,313 $ 15,347
- -------------------------------------------------------- ------------ ----------
Earnings Per Share:
Net Income
Basic $ .73 $ .69
- -------------------------------------------------------- ------------ ----------
Diluted $ .65 $ .61
- -------------------------------------------------------- ------------ ----------
Average Shares Used in Computation:
Basic 21,922,372 21,850,055
- --------------------------------------------------------------------------------
Diluted 25,177,435 24,958,334
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>12
<TABLE>
====================================================================================================================
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
March 31, December 31, March 31,
1998 1997 1997
---------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 410,369 $ 371,321 $ 342,913
Funds sold 5,450 18,005 76,387
Trading securities 19,027 4,999 3,887
Securities:
Available for sale 1,873,390 1,749,411 1,787,637
Investment (fair value: March 31, 1998 - $222,545;
December 31, 1997 -$214,125;
March 31, 1997 - $202,325 ) 221,825 213,111 202,750
- --------------------------------------------------------------------------------------------------------
Total securities 2,095,215 1,962,522 1,990,387
- --------------------------------------------------------------------------------------------------------
Loans 2,836,296 2,765,093 2,499,613
Less reserve for loan losses 54,839 53,101 48,517
- --------------------------------------------------------------------------------------------------------
Net loans 2,781,457 2,711,992 2,451,096
- --------------------------------------------------------------------------------------------------------
Premises and equipment, net 58,109 65,478 62,039
Accrued revenue receivable 53,019 50,754 49,566
Excess cost over fair value of net assets acquired
and core deposit premiums (net of accumulated
amortization: March 31, 1998 - $41,884;
December 31, 1997 - $39,582;
March 31, 1997 - $22,991) 65,494 67,796 74,926
Mortgage servicing rights 80,274 83,890 67,005
Real estate and other repossessed assets 5,366 5,258 6,091
Other assets 58,887 57,627 60,215
- --------------------------------------------------------------------------------------------------------
Total assets $ 5,632,667 $ 5,399,642 $ 5,184,512
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits $ 978,490 $ 881,029 $ 822,984
Interest-bearing deposits:
Transaction 1,159,160 1,124,288 1,046,562
Savings 113,172 106,900 112,292
Time 1,768,552 1,615,862 1,616,860
- --------------------------------------------------------------------------------------------------------
Total deposits 4,019,374 3,728,079 3,598,698
- --------------------------------------------------------------------------------------------------------
Funds purchased and repurchase
agreements 614,534 631,815 802,990
Other borrowings 345,602 394,087 325,530
Subordinated debenture 148,388 148,356 20,000
Accrued interest, taxes and expense 41,217 39,998 50,332
Other liabilities 14,917 21,830 15,786
- --------------------------------------------------------------------------------------------------------
Total liabilities 5,184,032 4,964,165 4,813,336
- --------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock 23 23 23
Common stock ($.00006 par value; 2,500,000,000
shares authorized; shares issued and outstanding
March 31, 1998 - 22,010,110; December 31, 1997
- 21,975,747; March 31, 1997 - 21,193,453) 1 1 1
Capital surplus 209,750 208,327 176,982
Retained earnings 234,567 218,629 197,864
Treasury stock (shares at cost: March 31,1998 -
111,409; December 31, 1997 - 66,377; March 31, 1997- (4,410) (2,190) (844)
30,512)
Unrealized gain (loss) on securities available for sale 8,708 10,691 (2,845)
Less notes receivable from exercise of stock options (4) (4) (5)
- --------------------------------------------------------------------------------------------------------
Total shareholders' equity 448,635 435,477 371,176
- --------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 5,632,667 $ 5,399,642 $ 5,184,512
- --------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>13
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY
(In Thousands)
Accumulated
Preferred Stock Common Stock Other Capital Retained Treasury Stock Notes
--------------------------------------Comprehensive --------------------
Shares Amount Shares Amount Income Surplus Earnings Shares Amount Receivable Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1996 250,000 $ 23 21,149 $ 1 $ 1,472 $176,093 $ 182,892 17 $ (428) $ (87) $ 359,966
Comprehensive Income:
Net income - - - - - - 15,347 - - - 15,347
Other comprehensive income,
net of tax:
Unrealized gains(losses)
on securities available
for sale (1) - - - - (4,317) - - - - - (4,317)
-------
Comprehensive income 11,030
-------
Exercise of stock
options - - 25 - - 469 - 14 (416) - 53
Payments on stock option
notes receivable - - - - - - - - - 82 82
Preferred dividends paid
in shares of
common stock - - 17 - - 375 (375) - - - -
Director retainer
shares - - 2 - - 45 - - - - 45
- --------------------------------------------------------------------------------------------------------------------------------
Balance at March
31, 1997 250,000 $ 23 21,193 $ 1 $ (2,845) $176,982 $197,864 31 $ (844) $ (5) $ 371,176
================================================================================================================================
Balances at December
31, 1997 250,000 $ 23 21,976 $ 1 $ 10,691 $208,327 $218,629 66 $(2,190) $ (4) $ 435,477
Comprehensive Income:
Net income - - - - - 16,313 - - - 16,313
Other comprehensive income,
net of tax:
Unrealized gains(losses)
on securities available
for sale (1) - - - - (1,983) - - - - - (1,983)
-------
Comprehensive income 14,330
-------
Plan Exercise of
stock options - - 23 - - 973 - 8 (346) - 627
Payments on stock option
notes receivable - - - - - - - - - - -
Preferred dividends
paid in shares of
common stock - - 9 - - 375 (375) - - - -
Director retainer
shares - - 2 - - 75 - - - - 75
Treasury stock
purchase - - - - - - - 37 (1,874) - (1,874)
- --------------------------------------------------------------------------------------------------------------------------------
Balances at March
31, 1998 250,000 $ 23 22,010 $ 1 $ 8,708 $209,750 $234,567 111 $(4,410) $ (4) $ 448,635
================================================================================================================================
<FN>
March 31, 1998 March 31, 1997
-----------------------------------
(1) Reclassification adjustments:
Unrealized gain(loss) on available
for sale securities $ (214) $ (4,140)
Less: reclassification adjustment
for gains realized included in
net income, net of tax 1,769 177
----------------------------------
Net unrealized losses on securities $ (1,983) $ (4,317)
===================================
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>14
================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands Except Share Data)
Three Months Ended
March 31,
---------------------
1998 1997
---------------------
Cash Flow From Operating Activities:
Net income $ 16,313 $ 15,347
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan and repossessed real estate losses 2,470 1,026
Depreciation and amortization 9,193 6,577
Valuation adjustment of intangible assets 3,000 -
Net amortization of security discounts and premiums 364 790
Contribution of stock to Bank of Oklahoma Foundation 2,257 -
Net gain on sale of assets (5,590) (2,339)
Mortgage loans originated for resale (221,621) (180,488)
Proceeds from sale of mortgage loans held for resale 183,078 209,336
(Increase) decrease in trading securities (14,028) 2,567
(Increase) decrease in accrued revenue receivable (2,264) 2,071
Increase in other assets (1,142) (4,312)
Increase in accrued interest, taxes and expense 1,401 5,568
Decrease in other liabilities (2,302) (304)
- --------------------------------------------------------------------------------
Net cash provided (used) by operating activities (28,871) 55,839
- --------------------------------------------------------------------------------
Cash Flow From Investing Activities:
Proceeds from maturities of investment securities 7,364 4,822
Proceeds from maturities of available for sale securities 97,875 59,084
Purchases of investment securities (16,894) (9,187)
Purchases of available for sale securities (690,995) (317,023)
Proceeds from sales of available for sale securities 466,935 75,508
Loans originated or acquired net or principal collected (85,115) 2,748
Proceeds from disposition of assets 63,737 2,978
Purchases of assets (11,900) 20,239)
Cash and cash equivalents of branches & subsidiaries
acquired and sold, net - (1,240)
- --------------------------------------------------------------------------------
Net cash used by investing activities (168,993) (202,549)
- --------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits, transaction
deposits, money market deposits, and savings accounts 138,605 (4,053)
Net increase in certificates of deposit 152,690 406
Net increase (decrease) in other borrowings (65,766) 181,926
Issuance of subordinated debenture - 20,000
Purchase of treasury stock (1,874) -
Issuance of preferred, common and treasury stock, net 702 98
Payments on stock option notes receivable - 82
- --------------------------------------------------------------------------------
Net cash provided by financing activities 224,357 198,459
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 26,493 51,749
Cash and cash equivalents at beginning of period 389,326 367,551
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 415,819 $419,300
- --------------------------------------------------------------------------------
Cash paid for interest $ 49,503 $ 42,118
- --------------------------------------------------------------------------------
Cash paid for taxes $ 353 $ 385
- --------------------------------------------------------------------------------
Net loans transferred to repossessed real estate
and other assets $ 701 $ 694
- --------------------------------------------------------------------------------
Payment of preferred stock dividends in common stock $ 375 $ 375
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
<PAGE>15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of BOK Financial Corporation conform to
generally accepted accounting principles and to generally accepted practices
within the banking industry. The Consolidated Financial Statements of BOK
Financial include the accounts of BOK Financial and its subsidiaries, primarily
Bank of Oklahoma, N.A. ("BOk"), Bank of Arkansas N.A., and Bank of Texas, N.A..
Certain prior period balances have been reclassified to conform with the current
period presentation.
Hedging of Mortgage Servicing Rights
BOK Financial enters into futures contracts and call and put options on futures
contracts to hedge against the risk of loss on mortgage servicing rights due to
accelerated loan prepayments during periods of falling interest rates. Contracts
on underlying securities which are expected to have a duration similar to that
of the mortgage servicing portfolio, such as 10-year U.S. Treasury notes, are
used for these hedges. The combination of contracts selected is based upon an
analysis of the expected range of market value changes over a probable range of
interest rates to achieve a high degree of correlation between changes in the
fair value of the mortgage servicing rights and changes in the market value of
the contracts. These contracts are designated as hedges on the trade date.
Transaction fees are charged to expense as mortgage banking costs when incurred.
Premiums paid or received on option contracts are deferred and amortized against
mortgage banking costs over the life of the options. Both unrealized and
realized gains and losses on futures contracts and option contracts are deferred
as part of the capitalized mortgage servicing rights. These deferred gains and
losses are amortized over the life of the loan servicing portfolio. These
unamortized deferred gains and losses are included with the cost of the
servicing rights when determining whether an allowance for impairment of the
servicing rights is required. Changes in the fair value of the contracts and
changes in the market value of the mortgage servicing rights are reviewed at
least monthly to determine whether a high degree of correlation exists on a
statistically valid basis. If correlation criteria are not met, the contracts
are no longer accounted for as a hedge. In such circumstances, any remaining
unamortized deferred gains or losses are recognized in current income.
(2) MORTGAGE BANKING ACTIVITIES
At March 31, 1998, BOk owned the rights to service 92,319 mortgage loans with
outstanding principal balances of $7.0 billion, including $189 million serviced
for BOk. The weighted average interest rate and remaining term was 7.67% and 284
months, respectively.
Activity in capitalized mortgage servicing rights and related valuation
allowance during the three months ending March 31, 1998 is as follows:
<TABLE>
Capitalized Mortgage Servicing Rights
-------------------------------------------------------------------
Valuation
Purchased Originated Total Allowance Net
---------------- ----------- ------------- ------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 78,961 $ 9,929 $ 88,890 $ (5,000) $ 83,890
Additions 622 2,734 3,356 - 3,356
Amortization expense (3,495) (477) (3,972) - (3,972)
Provision for impairment - - - (3,000) (3,000)
Impairment charge-off (2,296) - (2,296) 2,296 -
- ---------------------------------------------------------------------------------------------------
Balance at
March 31, 1998 $ 73,792 $ 12,186 $ 85,978 $ (5,704) $ 80,274
===================================================================================================
Estimated fair value of Mortgage
servicing rights (1) $ 74,515 $ 14,905 $ 89,420 $ 89,420
===================================================================================================
<FN>
(1) Excludes approximately $15.2 million of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
</FN>
</TABLE>
<PAGE>16
(3) DISPOSAL OF AVAILABLE FOR SALE SECURITIES
Sales of available for sale securities for the three months ending March 31,
1998 resulted in gains and losses as follows (in thousands):
Proceeds $ 466,935
Gross realized gains 3,157
Gross realized losses 645
Related federal and state
income tax expense 743
(4) EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per
share (dollars in thousands except share data):
<TABLE>
Three Months Ended
--------------------------------------
March 31, 1998 March 31, 1997
--------------------------------------
<S> <C> <C>
Numerator:
Net income $ 16,313 $ 15,347
Preferred stock dividends (375) (375)
- ----------------------------------------------------------------------------------------------------------
Numerator for basic earnings per share - income
available to common stockholders 15,938 14,972
- ----------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Preferred stock dividends 375 375
- ----------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share - income available
to common stockholders after assumed conversion $ 16,313 $ 15,347
==========================================================================================================
Denominator:
Denominator for basic earnings per share -weighted average shares 21,922,372 21,850,055
Effect of dilutive securities:
Employee stock options 356,877 210,093
Convertible preferred stock 2,898,186 2,898,186
- ----------------------------------------------------------------------------------------------------------
Dilutive potential common shares 3,255,063 3,108,279
- ----------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 25,177,435 24,958,334
==========================================================================================================
Basic earnings per share $0.73 $0.69
==========================================================================================================
Diluted earnings per share $0.65 $0.61
==========================================================================================================
</TABLE>
(5) COMPREHENSIVE INCOME
As of January 1, 1998, BOK Financial adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on available for sale
securities be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of Statement
130. The components of comprehensive income are disclosed in the Consolidated
Statement of Changes in Shareholders' Equity.
(6) CONTINGENT LIABILITIES
In the ordinary course of business, BOK Financial and its subsidiaries are
subject to legal actions and complaints. Management believes, based upon the
opinion of counsel, that the actions and liability or loss, if any, resulting
from the final outcomes of the proceedings, will not be material in the
aggregate.
<PAGE>16
<TABLE>
==============================================================================================================================
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(In Thousands Except Share Data)
For Three months ended
--------------------------------------------------------------------------------------
March 31, 1998 December 31, 1997
------------------------------------------- --------------------------------------
Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable securities $ 1,772,971 $ 27,235 6.19% $ 1,562,455 $ 24,408 6.20%
Tax-exempt securities(1) 328,735 6,248 7.44 331,793 6,666 7.97
- ------------------------------------------------------------------------------------------------------------------------------
Total securities 2,101,706 33,483 6.43 1,894,238 31,074 6.51
- ------------------------------------------------------------------------------------------------------------------------------
Trading securities 11,774 163 5.87 6,203 93 5.95
Funds sold 47,050 691 5.91 53,964 724 5.32
Loans(2) 2,822,147 60,737 8.76 2,764,436 60,924 8.74
Less reserve for loan losses 54,164 - - 53,180 - -
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 2,767,983 60,737 8.93 2,711,256 60,924 8.92
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 4,928,513 95,074 7.85 4,665,661 92,815 7.89
- ------------------------------------------------------------------------------------------------------------------------------
Cash and other assets 625,863 618,039
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 5,554,376 $ 5,283,700
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity
Transaction deposits $ 1,145,221 8,917 3.08 $ 1,102,144 8,466 3.05
Savings deposits 109,560 602 2.21 106,207 596 2.23
Other time deposits 1,739,816 23,864 5.56 1,582,538 22,037 5.52
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,994,597 33,383 4.45 2,790,889 31,099 4.42
- ------------------------------------------------------------------------------------------------------------------------------
Other borrowings 1,051,724 14,958 5.89 1,050,545 15,169 5.73
Subordinated debenture 148,374 2,367 6.36 148,334 2,439 6.52
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,194,695 50,708 4.91 3,989,768 48,707 4.84
- ------------------------------------------------------------------------------------------------------------------------------
Demand deposits 858,340 783,508
Other liabilities 57,095 80,763
Shareholders' equity 444,246 429,661
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' Equity $ 5,554,376 $ 5,283,700
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Equivalent Net Interest Revenue (1) 44,366 2.94 44,108 3.05
Tax-Equivalent Net Interest Revenue (1)
To Earning Assets 3.65 3.75
Less tax-equivalent adjustment (1) 2,330 2,396
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue 42,036 41,712
Provision for loan losses 2,470 3,500
Other operating revenue 40,787 33,521
Other operating expense 57,193 61,277
- ------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 23,160 10,456
Federal and state income tax 6,847 (6,362)
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 16,313 $ 16,818
- ------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Net Income
Primary $ 0.73 $ 0.75
- ------------------------------------------------------------------------------------------------------------------------------
Fully Diluted $ 0.65 $ 0.67
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Tax equivalent at the statutory federal and state rates for the periods
presented. The taxable equivalent adjustments shown are forcomparative
purposes.
(2) The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
</FN>
</TABLE>
<PAGE>18
<TABLE>
======================================================================================================================
For Three months ended
- ----------------------------------------------------------------------------------------------------------------------
September 30, 1997 June 30, 1997 March 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
Average Revenue/ Yield Average Revenue/ Yield Average Revenue/ Yield
Balance Expense(1) /Rate Balance Expense(1) /Rate Balance Expense(1) /Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,560,418 $ 24,354 6.19% $ 1,634,264 $ 25,793 6.33% $ 1,484,137 $ 22,861 6.25%
360,461 6,764 7.44 344,558 6,572 7.65 339,542 6,135 7.33
- ----------------------------------------------------------------------------------------------------------------------
1,920,879 31,118 6.43 1,978,822 32,365 6.56 1,823,679 28,996 6.45
- ----------------------------------------------------------------------------------------------------------------------
3,583 53 5.87 5,552 83 6.00 3,790 58 6.21
49,645 740 5.91 57,072 817 5.74 50,967 711 5.66
2,676,237 59,063 8.76 2,535,264 55,850 8.84 2,414,234 51,446 8.64
51,165 - 49,164 - 46,771 - -
- -
- ----------------------------------------------------------------------------------------------------------------------
2,625,072 59,063 8.93 2,486,100 55,850 9.01 2,367,463 51,446 8.81
- ----------------------------------------------------------------------------------------------------------------------
4,599,179 90,974 7.85 4,527,546 89,115 7.89 4,245,899 81,211 7.76
- ----------------------------------------------------------------------------------------------------------------------
590,260 576,578 532,386
- ----------------------------------------------------------------------------------------------------------------------
$ 5,189,439 $ 5,104,124 $ 4,778,285
- ----------------------------------------------------------------------------------------------------------------------
$ 1,067,895 8,290 3.08 $ 1,032,622 8,348 3.24 $ 988,110 7,987 3.28
108,104 603 2.21 109,349 604 2.22 103,542 564 2.21
1,533,191 21,489 5.56 1,576,211 21,625 5.50 1,565,153 21,433 5.55
- ----------------------------------------------------------------------------------------------------------------------
2,709,190 30,382 4.45 2,718,182 30,577 4.51 2,656,805 29,984 4.58
- ----------------------------------------------------------------------------------------------------------------------
1,159,005 17,203 5.89 1,151,971 16,700 5.81 990,944 13,668 5.59
81,395 1,305 6.36 20,000 326 6.45 6,000 96 6.40
- ----------------------------------------------------------------------------------------------------------------------
3,949,590 48,890 4.91 3,890,153 47,603 4.91 3,653,749 43,748 4.86
- ----------------------------------------------------------------------------------------------------------------------
761,578 776,405 688,440
75,732 63,664 68,159
402,539 373,902 367,937
- ----------------------------------------------------------------------------------------------------------------------
$ 5,189,439 $ 5,104,124 $ 4,778,285
- ----------------------------------------------------------------------------------------------------------------------
42,084 2.94 41,512 2.98 37,463 2.90
3.63 3.68 3.58
2,426 2,344 2,401
- ----------------------------------------------------------------------------------------------------------------------
39,658 39,168 35,062
3,000 1,500 1,026
34,315 31,411 30,452
46,720 45,443 41,726
- ----------------------------------------------------------------------------------------------------------------------
24,253 23,636 22,762
7,857 7,572 7,415
- ----------------------------------------------------------------------------------------------------------------------
$ 16,396 $ 16,064 $ 15,347
- ----------------------------------------------------------------------------------------------------------------------
$ 0.73 $ 0.72 $ 0.69
- ----------------------------------------------------------------------------------------------------------------------
$ 0.65 $ 0.64 $ 0.61
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>19
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
No. 27 Financial Data Schedule filed herewith electronically.
(B) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOK FINANCIAL CORPORATION
---------------------------
(Registrant)
Date: May 14, 1998 /s/ James A. White
---------------------- ----------------------------
James A. White
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from BOK
Finanacial Corporation's 10-Q for the period ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 410,369
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,450
<TRADING-ASSETS> 19,027
<INVESTMENTS-HELD-FOR-SALE> 1,873,390
<INVESTMENTS-CARRYING> 221,825
<INVESTMENTS-MARKET> 222,545
<LOANS> 2,836,296
<ALLOWANCE> 54,839
<TOTAL-ASSETS> 5,632,667
<DEPOSITS> 4,019,374
<SHORT-TERM> 959,320
<LIABILITIES-OTHER> 56,134
<LONG-TERM> 149,204
0
23
<COMMON> 1
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<INTEREST-LOAN> 60,737
<INTEREST-INVEST> 31,153
<INTEREST-OTHER> 854
<INTEREST-TOTAL> 92,744
<INTEREST-DEPOSIT> 33,383
<INTEREST-EXPENSE> 50,708
<INTEREST-INCOME-NET> 42,036
<LOAN-LOSSES> 2,470
<SECURITIES-GAINS> 2,512
<EXPENSE-OTHER> 57,193
<INCOME-PRETAX> 23,160
<INCOME-PRE-EXTRAORDINARY> 16,313
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,313
<EPS-PRIMARY> .73
<EPS-DILUTED> .65
<YIELD-ACTUAL> 3.65
<LOANS-NON> 18,815
<LOANS-PAST> 18,330
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 51,647
<ALLOWANCE-OPEN> 53,101
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<ALLOWANCE-CLOSE> 54,839
<ALLOWANCE-DOMESTIC> 54,839
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
