As filed with the Securities and Exchange Commission on March 29, 2000
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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, 1999 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: $563,197,491 as of February 29, 2000.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 49,108,569 shares of common
stock ($.00006 par value) as of the start of business on March 1, 2000.
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,
1999 (designated portions only)
Part II - Annual Report to Shareholders For Fiscal Year Ended December 31,
1999 (designated portions only)
Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for
April 25, 2000 (designated portions only)
Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31,
1999 (designated portions only)
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<PAGE>
BOK FINANCIAL CORPORATION
FORM 10-K ANNUAL REPORT
INDEX
ITEM PAGE
PART I
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related 5
Stockholder Matters
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
7A. Quantitative and Qualitative Disclosures About Market Risk 6
8. Financial Statements and Supplementary Data 6
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 6
PART III
10. Directors and Executive Officers of the Registrant 6
11. Executive Compensation 6
12. Security Ownership of Certain Beneficial Owners and Management 7
13. Certain Relationships and Related Transactions 7
PART IV
14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 7 - 12
Signatures 13
<PAGE>
PART I
ITEM 1 - Business
General Development of Business
Developments relating to individual aspects of the business of BOK Financial
Corporation ("BOK Financial") are described below. 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 10-24) in
BOK Financial's 1999 Annual Report to Shareholders. Information regarding BOK
Financial's acquisitions is incorporated by reference to Note 2 of "Notes to
Consolidated Financial Statements" (page 34 - 35) in BOK Financial's 1999 Annual
Report to Shareholders.
Narrative Description of Business
BOK Financial is a bank holding company whose activities are limited by the Bank
Holding Company Act of 1956, as amended ("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
Bank of Oklahoma, N.A. ("BOk"), Bank of Texas, N.A., Bank of Albuquerque N.A.,
and Bank of Arkansas, N.A. Other significant operating subsidiaries include
BOSC, Inc., which is a full-service securities firm with specialized expertise
in public and municipal finance and private placements, and BOK Capital Services
Corporation, which provides leasing and mezzanine financing. Other nonbank
subsidiary operations are not significant. As of December 31, 1999, BOK
Financial and its subsidiaries had 3,101 full-time equivalent employees.
Industry Segments
BOK Financial operates four principal lines of business under its BOk franchise:
corporate banking, consumer banking, mortgage banking and trust services. It
also operates a fifth principal line of business, regional banks, which includes
banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas.
These five principal lines of business combined account for approximately 86% of
total revenue. Discussion of these principal lines of business is incorporated
by reference to Lines of Business in "Management's Assessment of Operations and
Financial Condition " (pages 13 - 15) and Note 17 of "Notes to Consolidated
Financial Statements" (pages 48 - 51) in BOK Financial's 1999 Annual Report to
Shareholders.
Competition
The banking industry in each of our markets is highly competitive. BOK
Financial, through four subsidiary banks, competes with other banks in obtaining
deposits, making loans and providing additional services related to banking.
BOk is the largest banking subsidiary of BOK Financial. It has the largest
market share in Oklahoma and a leading market position in eight of the eleven
Oklahoma counties in which it operates. BOk competes with two super-regional
banks and numerous locally owned banks in both Tulsa and Oklahoma City areas, as
well as several locally owned small community banks in every other community in
which we do business throughout the rest of the state.
BOK Financial competes in the Dallas-Ft. Worth combined metropolitan area, in
the Albuquerque, New Mexico market, and in Fayetteville, Arkansas through
subsidiary banks. Bank of Texas competes against numerous financial
institutions, including some of the largest in the U.S. Bank of Texas's market
share is approximately 2%, including three 1999 Texas bank acquisitions which
will be merged into Bank of Texas in 2000. Bank of Albuquerque has a number four
market share position in the City of Albuquerque behind two super-regional
competitors followed by several locally-owned smaller community banks. Bank of
Arkansas operates as a community bank serving Benton and Washington counties in
Arkansas.
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 regional
banking environment in our markets.
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, Bank of Texas, Bank of
Albuquerque, or Bank of Arkansas.
<PAGE>
BOK Financial
As a bank holding company, BOK Financial is subject to regulation under the BHCA
(as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley
Act) and to supervision by the Board of Governors of the Federal Reserve System
(the "Reserve Board"). Under the BHCA, BOK Financial files 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 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 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 pay-out, nonoperating basis.
A bank holding company 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, 1999, BOK Financial's Leverage, Tier 1 and
Total Capital ratios were 5.92%, 7.27% and 10.72%, respectively.
Bank Subsidiaries
BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas 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.
Bank of Arkansas 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.
Applicable federal statutes and regulations require national banks to meet
certain leverage and risk-based capital requirements. At December 31, 1999, all
of BOK Financial Corporation's leverage and risk-based capital ratios were well
above the required minimum ratios. Additional discussion regarding regulatory
capital is incorporated by reference to Note 15 of "Notes to Consolidated
Financial Statements" (page 46 - 47) in BOK Financial's 1999 Annual Report to
Shareholders.
<PAGE>
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.
Foreign Operations
BOK Financial does not engage in operations in foreign countries, nor does it
lend to foreign governments.
ITEM 2 - Properties
BOK Financial, through BOk, BOk's subsidiaries, Bank of Texas, Bank of
Albuquerque and Bank of Arkansas, owns improved real estate that was carried at
$69 million, net of depreciation and amortization, as of December 31, 1999. BOK
Financial conducts its operations through 69 locations in Oklahoma, 13 locations
in Texas, 15 banking locations in New Mexico, and 3 locations in Arkansas as of
December 31, 1999. 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 39 and 45, respectively) of BOK Financial's 1999 Annual
Report to Shareholders provides further discussion related to properties and is
incorporated herein by reference.
ITEM 3 - Legal Proceedings
The information set forth in Note 13 of "Notes to Consolidated Financial
Statements" (page 45) of BOK Financial's 1999 Annual Report to Shareholders is
incorporated herein by reference.
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,
1999.
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,
1999, common shareholders of record numbered 1,241 with 49,065,937 shares
outstanding.
During 1999, BOK Financial declared a 3% stock dividend in respect of its Common
Stock payable in shares of Common Stock. The dividend was paid on October 18,
1999 to shareholders of record on October 5, 1999.
On January 26, 1999, BOK Financial declared a two-for-one stock split effected
in the form of a 100% stock dividend for common stockholders on record on
February 8, 1999 and paid on February 22, 1999.
<PAGE>
BOK Financial's quarterly market information follows:
First Second Third Fourth
--------------- -------------- -------------- ---------------
1999:
Low $22.03 $23.75 $18.94 $19.81
High 25.94 25.75 25.50 21.75
1998:
Low $19.50 $22.69 $20.25 $21.30
High 25.38 26.63 24.50 24.03
In February, 1999, BOK Financial announced that its board of directors approved
a continuance of its common stock repurchase program and approved the repurchase
of an additional 400,000 shares, increasing the total authorization to 800,000
shares. The purchases were made from time-to-time in accordance with SEC Rule
10(b)18 transactions. Since the original authorization announced in 1998, BOK
Financial has repurchased 466,540 shares.
The information set forth under the captions "Table 1 - Consolidated Selected
Financial Data" (page 9), "Table 11 - Selected Quarterly Financial Data" (page
17) and Note 15 of "Notes to Consolidated Financial Statements" (page 46) of BOK
Financial's 1999 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 9) of BOK Financial's 1999 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 10 - 24), "Annual Financial Summary -
Unaudited" (pages 56 - 57) and "Quarterly Financial Summary Unaudited" (pages 58
- - 59) of BOK Financial's 1999 Annual Report to Shareholders is incorporated
herein by reference.
ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk
The information set forth under the caption "Market Risk" (pages 22 -24) of BOK
Financial's 1999 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 11 - Selected Quarterly Financial Data" (page 17) of BOK
Financial's 1999 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 2000 Annual Proxy Statement for its
Annual Meeting of Shareholders scheduled for April 25, 2000 ("2000 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 2000 Annual Proxy Statement is incorporated herein by reference.
<PAGE>
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
2000 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 2000 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 36, 38 - 39, and 41, respectively) of BOK
Financial's 1999 Annual Report to Shareholders is incorporated herein by
reference.
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, 1999 are
incorporated by reference in Parts I and II of this Annual Report on Form 10-K.
Exhibit 13
1999 Annual Report
Description Page Number
Consolidated Selected Financial Data 9
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 25
Report of Independent Auditors 25
Consolidated Statements of Earnings 26
Consolidated Balance Sheets 27
Consolidated Statements of Changes in Shareholders' Equity 28-29
Consolidated Statements of Cash Flows 30
Notes to Consolidated Financial Statements 31-55
Annual Financial Summary - Unaudited 56-57
Quarterly Financial Summary - Unaudited 58-59
(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.
<PAGE>
(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.
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
<PAGE>
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.
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 1997 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
333-32649.
10.7.6 BOK Financial Corporation 2000 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
333-93957.
10.7.7 BOK Financial Corporation Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-79836.
10.7.8 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.
10.7.9 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.
<PAGE>
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.
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 Registration 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.
10.24 Purchase and Assumption Agreement between Bank of America
National Trust and Savings Association and BOK Financial
Corporation dated July 27, 1998.
<PAGE>
10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation No. Seven, First Bancshares of Muskogee, Inc., First
National Bank and Trust Company of Muskogee, and Certain
Shareholders of First Bancshares of Muskogee, Inc. dated December
30, 1998.
10.26 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation Number Nine, and Chaparral Bancshares, Inc. dated
February 19, 1999.
10.27 Merger Agreement among BOK Financial Corporation, Park Cities
Bancshares, Inc., Mid-Cities Bancshares, Inc. and Mid-Cities
National Bank dated February 24, 1999.
10.28 Merger Agreement among, BOK Financial Corporation, Park Cities
Bancshares, Inc., PC Interim State Bank, Swiss Avenue State Bank
and Certain Shareholders of Swiss Avenue State Bank dated March
4, 1999.
13.0 Annual Report to Shareholders for the fiscal year ended December
31, 1999. 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 for year ended December 31, 1999.
27.1 Financial Data Schedule for years ended December 31, 1998, and
1997 as applicable for restatement of previous years information
for pooling of interest transaction in 1999.
27.2 Financial Data Schedule for period ending March 31, 1999 as
applicable for restatement of previous years information for
pooling of interest transaction in 1999.
27.3 Financial Data Schedule for periods ending March 31, 1998, June
30, 1998, and September 30, 1998 as applicable for restatement of
previous years information for pooling of interest transaction in
1999.
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.
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.
99.7 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-32649 for BOK Financial Corporation 1997 Stock
Option Plan, Incorporated by reference to Exhibit 99.7 of Form
10-K for the fiscal year ended December 31, 1997.
<PAGE>
99.8 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-93957for BOK Financial Corporation 2000 Stock
Option Plan, Incorporated by reference to Exhibit 99.8 of Form
10-K for the fiscal year ended December 31, 1999.
(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>
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
/s/ George B. Kaiser
DATE: March 29, 2000 BY: --------------------------
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 29, 2000, 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/ Steven E. Nell /s/ John C. Morrow
- ---------------------------------- -------------------------
Steven E. Nell, John C. Morrow
Senior Vice Presiden and Senior Vice President and
Corporate Controller Director of Financial
Accounting and Reporting
DIRECTORS
/s/ W. Wayne Allen /s/ John C. Lopez
- -------------------------------------- -------------------------------------
W. Wayne Allen John C. Lopez
/s/ C. Fred Ball, Jr. /s/ Frank A. McPherson
- -------------------------------------- --------------------------------------
C. Fred Ball, Jr. Frank A. McPherson
- -------------------------------------- --------------------------------------
James E. Barnes Steven E. Moore
/s/ Sharon J. Bell /s/ J. Larry Nichols
- -------------------------------------- --------------------------------------
Sharon J. Bell J. Larry Nichols
/s/ Luke R. Corbett /s/ Ronald J. Norick
- -------------------------------------- --------------------------------------
Luke R. Corbett Ronald J. Norick
/s/ Robert H. Donaldson /s/ Robert L. Parker, Sr.
- -------------------------------------- --------------------------------------
Robert H. Donaldson Robert L. Parker, Sr.
/s/ James. W. Pielsticker
- -------------------------------------- --------------------------------------
William E. Durrett James W. Pielsticker
/s/ James O. Goodwin
- -------------------------------------- --------------------------------------
James O. Goodwin E.C. Richards
/s/ V. Burns Hargis
- -------------------------------------- --------------------------------------
V. Burns Hargis James A. Robinson
/s/ L. Francis Rooney, III
- -------------------------------------- --------------------------------------
Howard E. Janzen L. Francis Rooney, III
/s/ E. Carey Joullian, IV
- -------------------------------------- --------------------------------------
E. Carey Joullian, IV David J. Tippeconnic
/s/ Robert J. LaFortune /s/ Tom E. Turner
- -------------------------------------- --------------------------------------
Robert J. LaFortune Tom E. Turner
/s/ Philip C. Lauinger, Jr. /s/ Robert L. Zemanek
- -------------------------------------- --------------------------------------
Philip C. Lauinger, Jr. Robert L. Zemanek
BOK FINANCIAL CORPORATION
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Table of Contents
Consolidated Selected Financial Data 9
Management's Assessment of Operations and
Financial Condition 10
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 25
Report of Independent Auditors 25
Consolidated Financial Statements 26
Notes to Consolidated Financial Statements 31
Annual Financial Summary - Unaudited 56
Quarterly Financial Summary - Unaudited 58
Appendix A 66
<PAGE>
Financial Highlights
(Dollars In Thousands Except Share Data)
1999 1998(2)(3) 1997(2)(3)
-------------------------------
For the Years Ended December 31
Net income $ 89,226 $ 79,611 $ 68,155
Earnings per share:
Basic 1.79 1.60 1.36
Diluted 1.60 1.43 1.23
Book value per share $ 11.36 $ 10.76 $ 9.80
Return on average assets 1.17% 1.34% 1.29%
Return on average equity 16.45 16.38 16.78
-------------------------------------------------------------------------------
Tangible operating results (see Table 2):
Tangible net income $ 102,262 $ 88,104 $ 76,154
Tangible net income per diluted share 1.83 1.58 1.37
Tangible return on assets 1.34% 1.48% 1.45%
Tangible return on shareholders' equity 18.85 18.13 18.75
-------------------------------------------------------------------------------
As of December 31
Loans, net of reserves $4,567,255 $3,581,177 $2,801,977
Assets 8,373,997 7,059,507 5,613,233
Deposits 5,263,184 4,607,727 3,924,405
Shareholders' equity 557,164 524,793 451,880
Nonperforming assets(4) 22,943 18,762 25,249
-------------------------------------------------------------------------------
Tier 1 capital ratio 7.27% 7.93% 9.87%
Total capital ratio 10.72 12.02 14.95
Leverage ratio 5.92 6.60 7.06
Average shareholders' equity to average assets 7.12 8.17 7.71
Reserve for loan losses to nonperforming loans 391.65 467.70 270.65
Reserve for loan losses to loans(1) 1.66 1.86 1.95
Net charge offs to average loans .04 .09 .14
===============================================================================
(1) Excludes residential mortgage loans held for sale which are
carried at the lower of aggregate cost or market value.
(2) Restated for pooling of interest in 1999.
(3) Shares and per share data have been restated to reflect the
3% stock dividend paid in October 1999.
(4) Includes nonaccrual loans, renegotiated loans and assets acquired in
satisfaction of loans. Excludes loans past due 90 days or more and still
accruing.
<PAGE> 1
To Our Shareholders,
Customers, Employees and Friends:
BOK Financial Corporation had another landmark year in 1999 - a year of
continued financial progress, broader expansion into new markets, further
penetration into current markets, and continued commitment to the communities
and customers we serve.
We reported growth in earnings for the eighth consecutive year, while
growing our assets by 23 percent from year-end 1998 to year-end 1999.(5) Annual
earnings were $89.2 million, representing a 12 percent increase over the
previous year. Earnings per share were $1.60, compared to $1.43 last year.
Tangible net income per diluted share grew 16 percent to $1.83 per share.(6)
Assets of the company now stand at $8.4 billion, reflecting our position as one
of the region's leading bank holding companies.
Net interest revenue after provision for loan losses was up 28 percent over
1998. Fees and commissions increased 12 percent. The company achieved a return
on average equity of 16.45 percent, while posting a 12 percent gain in earnings
per share.
Our growth across the region in 1999 was bolstered by acquisitions in
high-growth markets. Mid-Cities National Bank in Hurst, Texas, gave us our first
location in Tarrant County, near Fort Worth. Swiss Avenue State Bank gave us
three more key locations in Dallas, each adjacent to a major medical center.
Canyon Creek National Bank positioned us in rapidly growing Richardson and
McKinney. We now have a network of 13 locations from Dallas-Fort Worth,
northward to Sherman. The three new banks have combined assets of $380 million,
bringing our total assets in Texas to $1.2 billion.
Meanwhile, we continued to expand in our home state of Oklahoma. We merged
with First Muskogee Bancshares, making us the clear market leader in eastern
Oklahoma. And we acquired another Kansas City area mortgage firm, First Mortgage
Investment Company. We now have mortgage offices in Lee's Summit, Missouri;
Topeka, Kansas; and Lenexa, Kansas.
<PAGE> 2
In addition to our internal growth, these acquisitions mean our company
continues to evolve from primarily an Oklahoma bank to a regional holding
company with successful banking operations in multiple states. Our Bank of Texas
franchise now represents 14 percent of the company's assets, while Bank of
Albuquerque comprises 11 percent. Bank of Arkansas, while smaller than the other
banks, achieved substantial growth in 1999 as well.
In addition to this geographic diversity, our sources of fee income also
remain diverse. We have historically ranked among the highest in our peer group
in the proportion of non-interest revenue to total revenue, and 1999 was no
exception. Fee-based lines of business comprised 43 percent of total revenue. We
saw growth of 34 percent in transaction card revenue, 21 percent in service
charges and fees on deposits, and 17 percent in trust fees. Overall, fee-based
revenue grew by 12 percent. We expect revenue from fee-based businesses to grow
as we introduce our proven fee-based products to our new customers.
Our strategy for continued growth remains unchanged. We have demonstrated
our ability to compete against nationally prominent banks by offering
sophisticated products and services delivered in a style reflecting our
community bank roots. We know our customers, and seek to provide them with
banking resources tailored to their specific needs.
The Internet is becoming an increasingly vital delivery channel for us. Our
web sites are constantly adding more valuable services for our customers. Last
year alone we added online investing and an improved small-business cash
management system. We also established an online system enabling 401(k)
participants to access their accounts, and started accepting mortgage
applications online. We encourage you as shareholders to visit our web site at
www.bokf.com for current stock quotes, news releases and more.
We will continue to boost our presence in Oklahoma, Texas, New Mexico and
Arkansas by reaching new customers and pinpointing strategic acquisitions. As we
grow, we will maintain our competitive advantage by delivering superior service
to our customers. To help achieve this, we will be moving 700 employees this
year to our new state-of-the-art operations and technology center in Tulsa,
which will improve work flow and accelerate processes while giving us a platform
for continued growth and greater cost efficiencies.
We look forward to future success, as we build on our track record of
excellent financial performance, market leadership, and superior customer and
community service.
As always, we appreciate your support and your business.
George B. Kaiser Stanley A. Lybarger
Chairman of the Board President and
Chief Executive Officer
(5) Based on financial statements issued prior to restatement for pooling of
interests merger with First Muskogee Bancshares, Inc.
(6) All per share data are diluted, and have been restated for the effects of a
3 percent stock dividend paid in October 1999, and the merger with First
Muskogee Bancshares Inc., which was accounted for as a pooling of interests
transaction.
<PAGE> 3
Our proven strategy for growth.
BOK Financial Corporation continued its historical pattern of growth and
progress during 1999. We have been able to achieve this progress by following a
proven strategy that emphasizes four key points.
First, reflecting our community bank roots, we place a great deal of
emphasis on knowing our customers and delivering superior service. Combining
that service commitment with the resources and products of a national bank makes
a winning combination, and that's where we have found our niche - as a bank with
nationally competitive products and community bank service.
Second, we continue to extend our leadership position in our home state of
Oklahoma, ranking No. 1 in commercial banking, consumer banking, trust services,
mortgage lending, and electronic funds transfer. With 69 locations statewide and
counting, we are easily the most visible, most accessible bank in Oklahoma. And
across the board, our staff includes the most experienced bank personnel in the
state - people who know their communities and customers, and understand their
markets.
With such a successful track record in our home state, it makes sense to
duplicate it in our other markets, which is our third objective: to expand our
presence in high-growth markets in contiguous states. Our primary emphasis is to
grow our current markets, leveraging from our platforms in Arkansas, New Mexico
and Texas. Simultaneously, we plan to continue implementing our successful model
for building fee-based growth in acquired banks that have historically relied on
interest revenue as their primary source of income.
Our final objective is to focus on expense control, productivity and
efficiency. In 2000, we're moving our operations functions into the new
Technology Center in Tulsa, enabling us to make vast improvements in processes
and efficiencies. As always, our goal is to maintain service quality and
reliability at a level that provides a clear advantage over our competitors.
If 1999 is any measure, we are successfully executing this four-pronged
strategy. BOK Financial Corporation's assets grew by 23 percent in 1999, from
$6.8 billion(5) to $8.4 billion. Our assets have doubled in the last five years.
Annual earnings were up 12 percent in 1999, marking our eighth consecutive year
of earnings growth.
<PAGE> 4
Our continued expansion throughout the region.
A key ingredient to our recent and future success is our market growth
outside of Oklahoma. Just seven years ago, we were exclusively an Oklahoma bank.
Our expansion has been steady and diverse, while we have also upheld our
standards of quality.
Last year was no exception. Loans outside of Oklahoma nearly doubled, from
$655 million to $1.2 billion. Our growth is coming from non-lending sources as
well, as we introduce our successful fee-based business lines into acquired
banks that have traditionally relied almost exclusively on interest income.
Texas
Our move into the Texas market began with a series of small steps starting
in 1994, when we acquired a trust company in Sherman, Texas. We acquired two
Dallas banks in 1997, and since then, our progress has remained steady.
Last year, we completed three acquisitions in the Dallas-Fort Worth
Metroplex, bringing our total locations in Texas to 13. Texas now represents 14
percent of the company's total assets at $1.2 billion. Bank of Texas in 1999
produced an impressive $260 million increase in loans. Trust assets in Texas
grew by 57 percent, and trust fees increased by 26 percent. Our expansion is
spreading throughout north Texas, and in 1999 we opened our first Texas
supermarket bank, in Sherman. We also opened a mortgage origination office in
Dallas, and will continue developing our services in private banking, consumer
banking, retail investments and trust. We have made tremendous strides in Texas
in the last few years, and have every intention for this pattern of growth to
continue.
New Mexico
Our New Mexico franchise was another story of progress in 1999. At the
close of 1998, Bank of Albuquerque was a newly acquired bank with $500 million
in assets. Since then we have significantly broadened the bank's appeal, growing
from a consumer-oriented bank to one that includes trust, private banking,
mortgage lending, brokerage services and commercial banking.
Bank of Albuquerque has also been attracting the attention of the most
experienced bankers in the market. We recruited talented people with lengthy
records of success in the area, further positioning ourselves to gain momentum
and continue growing. Our strategy of adding top people and products - proven
successful in our other markets - is working at Bank of Albuquerque.
<PAGE> 5
Arkansas
Our Arkansas operation, now in its sixth year, showed its best performance
yet, and its services continue to expand. Our Little Rock-based brokerage unit
continues to thrive, with 27 representatives handling a full range of
institutional investments, and corporate and public finance underwriting. Our
mortgage operation now includes offices in Little Rock, Fayetteville and
Bentonville. We opened a loan production office in Little Rock during 1999, and
also developed several significant relationships in Fort Smith, a sizeable
Arkansas expansion market.
The year also proved to be financially successful for Bank of Arkansas,
with growth in loans and net interest income of 24 and 21 percent, respectively.
Fee-income picked up as well, growing by 20 percent, led by increases in trust
and retail investments.
Oklahoma
While our growth continues in contiguous states, we remain steadfast in our
commitment to our home state. In fact, our Oklahoma business is thriving. In
1999 our Oklahoma lenders produced $534 million of new loans, ending the year at
$3.4 billion. We acquired First National Bank of Muskogee, more than doubling
our size in the Muskogee market and making us the clear market leader in eastern
Oklahoma. We opened four new supermarket locations in Oklahoma, bringing our
total supermarket branches to 28 - including a branch in every Albertsons in the
Tulsa area.
Our recent success - throughout the region - has added to the economic
vitality of our home state. Our Oklahoma employment has more than doubled during
the '90s, as our growth into a regional banking firm has made us one of the
leading employers in the state.
Elsewhere
We remain interested in gaining a foothold in new, high-growth markets, and
continue looking for opportunities that meet the criteria of our strategic plan.
In 1999, we acquired a successful mortgage company which expanded our operations
in the Kansas City area and gave us an entry into the Topeka market.
<PAGE> 6
Our diversity of income sources.
A major component of our recent success can be attributed to the diversity
of our sources of income. While we maintain a solid, balanced loan portfolio, we
have also historically ranked among the highest in our peer group in the
proportion of non-interest revenue to total revenue.
Fee-based Lines of Business
In 1999, 43 percent of our revenue came from fee-based businesses despite
our acquisition of new banks with lower fee-income proportion. In all, fee-based
revenues grew by 12 percent last year, and were balanced among several lines of
business.
Eighteen percent of all fee-based income came from our transaction card and
electronic funds transfer network. Transaction card revenue grew by 34 percent
in 1999, and our TransFund unit's Visa Check Card was used to make 30.7 million
purchases, an increase of 35 percent. TransFund is now the 20th largest
electronic funds transfer network in the U.S., with more than 1,000 machines
installed in an eight-state area, providing services to more than 270 financial
institutions and 1.2 million cardholders
Trust revenues made up 19 percent of our fee-based income in 1999. Trust
revenues grew by 17 percent, including a 26 percent increase in Texas alone,
with personal trust in Oklahoma City doubling in the last two years. Overall
trust assets are now $17.2 billion, up from $14.4 billion last year.
Our trust line-up includes our highly successful employee benefits
products, which serve more than 100,000 defined contribution plan participants.
Our self-directed 401(k) option attracted clients from New York to California.
The American Performance Fund, a mutual fund family managed by our trust
investments group, continues to be one of the most successful mutual fund
families in the United States. At year-end 1999, assets for the fund stood at
$1.8 billion - an increase of $264 million from a year before, for a gain of 17
percent. In addition, eight of the nine American Performance funds ranked by
Lipper outperformed their respective peer group for the three-year period ending
December 31, 1999.
Twenty percent of our fee-based revenue in 1999 was generated by our
mortgage division. At year-end, the servicing portfolio stood at $7 billion,
servicing more than 94,000 loans in all 50 states and the District of Columbia.
According to the latest available figures, our mortgage servicing portfolio is
the 39th largest in the United States.
We are the No. 1 mortgage originator in Oklahoma, including the top ranking
in Oklahoma City and Tulsa. Within our own system, Oklahoma comprises 73 percent
of our total mortgage originations, but other states are gaining ground. Kansas
and Arkansas each hold about 10 percent of our total business. And with new
offices in New Mexico and Texas, we're sure to see an even more balanced
distribution in 2000 and beyond.
BOSC Inc., our securities unit, initiated several structural changes in
1999 and is now a full-service, regional brokerage and public finance firm. By
consolidating inter-firm trading functions, expanding securities trading, and
unifying management accounting and reporting systems, BOSC has created a more
efficient, effective way of meeting the needs of public entities, not-for-profit
enterprises, corporations, and individual investors.
<PAGE> 7
Nine percent of all our fee-based revenues in 1999 came from our brokerage
units. Our retail investments group opened over 9,000 new accounts, and
conducted nearly 70,000 transactions totaling $718 million.
On the public finance side, the Oppenheim division is Oklahoma's clear
leader in underwriting and financial advisory services, and its revenues for
1999 were $5.2 million.
Service charges and fees for our nationally competitive cash management
products comprised the fifth source of our diverse fee-based revenue. We will be
introducing a number of new cash management products during 2000, but 1999 was a
successful year in itself. Growth from these services was 21 percent, and these
services made up 22 percent of total fee-based revenues.
Lending
Our loan portfolio is still strong, diverse and growing, with total loans -
excluding acquisitions - up 23 percent. Including acquisitions, loans increased
nearly $1 billion during the year, rising 27 percent.
Our traditional strength has been in lending to small and middle-market
businesses, and we have found this expertise welcomed in our new markets. All
segments of commercial loans grew, showing an overall increase of 34 percent
over year-end 1998.
Our credit quality remains strong. In fact, we had net recoveries from the
commercial loan portfolio in 1999. At year-end our reserve for loan losses stood
at 1.66 percent of total loans.
Our advances in technology and service delivery.
One of the key components to maintaining our competitive advantage has been
to make our products convenient and easy to use, while also improving our
service quality.
Several initiatives have taken place - and more are underway - to achieve
this goal. In 1999, the further expansion of our web sites and other
Internet-based applications allowed us to improve upon our delivery of services
and products. All four of our banks now have their own web sites, which can be
accessed on the Internet by typing the name of the individual bank (for example,
www.bankoftexas.com), or through our corporate site at www.bokf.com.
This delivery channel has been widely accepted by our customers. Online
banking IDs and online consumer loan applications each grew by 400 percent last
year. We started opening online consumer deposit accounts in Oklahoma, and also
began taking mortgage applications online.
Our 24-hour call center, ExpressBank, also continues to be very popular
among customers. Twenty-five percent of all consumer loan applications were
initiated through ExpressBank, which services customers in all four states. In
1999, ExpressBank handled 6 million calls.
<PAGE> 8
We also launched online brokerage for retail clients, offering Internet
delivery of quotes, research, account data and more. The use of such technology
positions our brokerage units to improve efficiency as our sales force and
volumes expand.
On the commercial banking side, several new Internet-based products are
making it easier than ever for our commercial clients to transfer funds, plot
cash flow, and gain access to vital information. Small businesses now have the
Business Express Web, allowing customers to obtain balance information and
initiate transactions over the Internet. A similar product for larger businesses
will be enhanced with Internet capability in 2000, and we will introduce
electronic bill presentment, which allows businesses to present bills to
consumers for review and payment over the Internet. We are also making advances
in image technology. For example, we are implementing an image lockbox service
that will enable our customers to retrieve images of documents from a compact
disc rather than from paper-based records. In turn, they will be able to better
serve their customers' needs.
Likewise, customers of our trust division are reaping great benefits from
advances in technology. Over one-third of our clients' 401(k) participants now
use Internet-based technology to access their accounts. That number is expected
to more than double by mid-2000.
Our improving efficiencies.
One of our biggest steps in improving efficiency will occur in 2000, as
we begin moving our service operations into a new Technology Center. The first
units will move in June 2000. The center should be fully occupied and
operational by December 2000. This will enable us to make numerous efficiency
improvements to service quality. It will improve our communications capability
by incorporating the latest technologies in the industry, such as bringing fiber
optics to every workstation and improving performance of the network. We'll also
increase capacity and improve back-up capabilities for business resumption.
But above all, the new Technology Center allows us to streamline
workflow, improve control and reduce processing time, while lowering costs. By
configuring the layout to optimize processes, the center allows us the capacity
to expand and grow, as our operations continue growing - a luxury we have not
enjoyed in our present facilities.
Finally, the much-anticipated Y2K came and went without fanfare, thanks
to the efforts of many people in our organization. It was a non-event, but it
didn't happen by accident. Our preparations proved to be successful - every bit
of work, time and money spent was well worth it, and full credit goes to our
staff. Their diligence, persistence and extra work all paid off.
<PAGE> 9
<TABLE>
Table 1 Consolidated Selected Financial Data
(Dollars In Thousands Except Share Data)
December 31,
------------------------------------------------------------------
1999 1998(2)(3) 1997(2)(3) 1996(2)(3) 1995(2)(3)
------------------------------------------------------------------
Selected Financial Data
<S> <C> <C> <C> <C> <C>
For the year:
Interest revenue $ 500,274 $ 402,832 $ 357,074 $ 300,930 $ 284,230
Interest expense 264,150 212,406 194,842 167,610 164,086
Net interest revenue 236,124 190,426 162,232 133,320 120,144
Provision for loan losses 10,365 14,591 9,256 4,419 261
Net income 89,226 79,611 68,155 56,263 50,957
Period-end:
Loans, net of reserve 4,567,255 3,581,177 2,801,977 2,424,337 2,221,489
Assets 8,373,997 7,059,507 5,613,233 4,764,191 4,377,061
Deposits 5,263,184 4,607,727 3,924,405 3,384,874 3,057,506
Subordinated debenture 148,642 146,921 148,356 - -
Shareholders' equity 557,164 524,793 451,880 373,272 312,882
Nonperforming assets(4) 22,943 18,762 25,249 24,584 33,871
Profitability Statistics
Earnings per share (based on average equivalent shares):
Basic $ 1.79 $ 1.60 $ 1.36 $ 1.12 $ 1.01
Diluted 1.60 1.43 1.23 1.02 .92
Percentages (based on daily averages):
Return on average assets 1.17% 1.34% 1.29% 1.27% 1.22%
Return on average shareholders' equity 16.45 16.38 16.78 16.89 17.98
Average shareholders' equity to average assets 7.12 8.17 7.71 7.49 6.79
Common Stock Performance and Existing Shareholder Statistics
Per Share:
Book Value $ 11.36 $ 10.76 $ 9.80 $ 8.38 $ 7.26
Market price: December 31 bid 20.19 23.38 19.40 13.50 9.75
Market range - High bid 25.81 25.56 21.25 13.50 11.75
- Low bid 18.94 18.62 13.44 9.62 9.25
Selected Balance Sheet Statistics
Period-end:
Tier 1 capital ratio (see Note 15) 7.27% 7.93% 9.87% 10.57% 9.99%
Total capital ratio (see Note 15) 10.72 12.02 14.95 11.82 11.24
Leverage ratio (see Note 15) 5.92 6.60 7.06 7.48 6.58
Reserve for loan losses to nonperforming loans 391.65 467.70 270.65 229.95 129.70
Reserve for loan losses to loans(1) 1.66 1.86 1.95 1.93 1.79
Miscellaneous (at December 31)
Number of employees (FTE) 3,101 2,850 2,404 2,179 1,917
Number of banking locations 100 91 76 72 69
Number of TransFund locations 1,020 998 785 638 552
Mortgage loan servicing portfolio $7,028,247 $6,375,239 $6,981,744 $5,948,187 $5,363,175
----------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(2) Restated for pooling of interest in 1999.
(3) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
(4) Includes nonaccrual loans, renegotiated loans and assets acquired in
satisfaction of loans. Excludes loans past due 90 days or more and still
accruing.
</FN>
</TABLE>
<PAGE> 10
MANAGEMENT'S ASSESSMENT OF OPERATIONS AND FINANCIAL CONDITION
BOK Financial Corporation ("BOK Financial") is a bank holding company that
offers full service banking in Oklahoma, Northwest Arkansas, North Texas and New
Mexico. BOK Financial's principal subsidiaries are Bank of Oklahoma, N.A.,
("BOk"), Bank of Texas, N.A., Bank of Albuquerque, N.A., and Bank of Arkansas,
N.A. Other significant operating subsidiaries include BOK Capital Services
Corporation which provides leasing and mezzanine financing and BOSC, Inc., a
broker/dealer and "Section 20" company that engages in retail and institutional
securities sales and municipal underwriting. Our discussion of Bank of Texas
includes Canyon Creek National Bank, Swiss Avenue State Bank and Mid-Cities
National Bank. These banks were acquired during 1999 and were accounted for by
the purchase method of accounting. These banks will be merged into Bank of Texas
during 2000.
Assessment of Operations
SUMMARY OF PERFORMANCE
BOK Financial recorded net income of $89.2 million for 1999 compared to
$79.6 million for 1998. Diluted earnings per common share were $1.60 for 1999
compared to $1.43 for 1998. Prior year's results have been restated to reflect
the merger with First Muskogee Bancshares, Inc. during 1999. This merger was
accounted for as a pooling of interests. Prior period per share data have been
restated to reflect a 3% stock dividend paid in the fourth quarter of 1999.
Returns on average assets and average equity were 1.17% and 16.45%,
respectively, for 1999 compared to 1.34% and 16.38%, respectively, for 1998.
The increase in net income for 1999 was due to increases of $45.7 million
or 24% in net interest revenue, $19.2 million or 12% in fees and commissions and
a $4.2 million reduction in the provision for loan losses. These increases were
partially offset by increases of $46.5 million or 20% in operating expenses and
$7.2 million in income taxes and a $5.8 million decrease in gains on asset
sales.
Net income for the fourth quarter of 1999 was $23.2 million or $0.42 per
diluted common share, an increase of 14% over the same period on 1998. The
primary sources of increased quarterly earnings included net interest revenue,
which increased $14.0 million or 27%, and fees and commissions, which increased
$4.1 million or 10%. These increases were partially offset by a $12.0 million
increase in operating expenses.
Net income for 1997 was $68.2 million or $1.23 per diluted common share.
Returns on average assets and equity were 1.29% and 16.78%, respectively.
TANGIBLE OPERATING RESULTS
Since inception, BOK Financial has completed several acquisitions that were
accounted for under the purchase method of accounting. The purchase method
results in the recording of goodwill and other identifiable intangible assets
that are amortized as noncash charges in future years into operating expense.
The intangible assets that result from the purchase method of accounting are
deducted from shareholders' equity in the determination of regulatory capital.
Thus, tangible net income, net income excluding the after-tax effect of
intangible amortization, represents regulatory capital generated during the
year. While the definition of tangible net income may vary by company, we
believe this definition is appropriate as it measures the per share growth of
regulatory capital, which affects the amounts available for dividends and
acquisitions. Operating results excluding the impact of these intangible assets
are summarized below:
Table 2 Tangible Operating Results
(Dollars in Thousands Except Share Data)
Years ended December 31,
------------------------------------------
1999 1998(1) 1997(1)
------------- ------------- --------------
Net income $ 89,226 $ 79,611 $ 68,155
After-tax impact of amortization
of intangible assets 13,036 8,493 7,999
- ------------------------------------- ------------- ------------- --------------
Tangible net income $ 102,262 $ 88,104 $ 76,154
===================================== ============= ============= ==============
Tangible net income per diluted share $ 1.83 $ 1.58 $ 1.37
===================================== ============= ============= ==============
Tangible return on average shareholders'
equity 18.85% 18.13% 18.75%
===================================== ============= ============= ==============
Tangible return on average assets 1.34% 1.48% 1.45%
===================================== ============= ============= ==============
(1) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
<PAGE> 11
NET INTEREST REVENUE
Net interest revenue, on a tax-equivalent basis, totaled $244.5 million for
1999 compared to $199.9 million for 1998. The increase in net interest revenue
was primarily due to an increase in average earning assets. Average earning
assets increased by $1.4 billion during 1999, including $626 million due to
acquisitions and $821 million due to growth in existing businesses.
Additionally, the mix of earning assets improved during 1999. Average loans,
which generally have higher yields than other types of earning assets, increased
to 60% of earning assets in 1999 compared to 56% in 1998. These volume factors
contributed $111.7 million to the increase in net interest revenue.
Average interest bearing liabilities also increased by $1.5 billion during
1999, including $811 million from borrowed funds and $490 million from deposits
at acquired banks. The increase in average interest bearing liabilities
decreased net interest revenue by $69.4 million.
<TABLE>
Table 3 Volume/Rate Analysis
(In Thousands)
1999/1998 1998/1997
------------------------------------- ------------------------------------
Change Due To(1) Change Due To(1)
------------------------ ------------------------
Change Volume Yield/Rate Change Volume Yield/Rate
------------ ----------- ------------ ----------- ------------ -----------
Tax-equivalent interest revenue:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 25,746 $ 27,741 $ (1,995) $ 12,510 $ 13,881 $ (1,371)
Trading securities 1,245 990 255 759 856 (97)
Loans 72,768 82,821 (10,053) 29,884 35,528 (5,644)
Funds sold and resell agreements (102) 122 (224) (946) (954) 8
- ------------------------------------------ ------------ ----------- ------------ ----------- ------------ -----------
Total 99,657 111,674 (12,017) 42,207 49,311 (7,104)
- ------------------------------------------ ------------ ----------- ------------ ----------- ------------ -----------
Interest expense:
Transaction deposits 9,362 14,438 (5,076) 3,420 4,528 (1,108)
Savings deposits (866) 188 (1,054) 365 372 (7)
Time deposits 4,121 10,323 (6,202) 6,417 8,005 (1,588)
Borrowed funds 39,486 44,438 (4,952) 1,835 3,247 (1,412)
Subordinated debenture (359) 7 (366) 5,527 5,463 64
- ------------------------------------------ ------------ ----------- ------------ ----------- ------------ -----------
Total 51,744 69,394 (17,650) 17,564 21,615 (4,051)
- ------------------------------------------ ------------ ----------- ------------ ----------- ------------ -----------
Tax-equivalent net interest revenue 47,913 $ 42,280 $ 5,633 $ 24,643 $ 27,696 $ (3,053)
=========== ============ ============ ===========
Add change in nonrecurring foregone interest (3,262) 3,262
Less change in tax-equivalent adjustment (1,047) (289)
- ------------------------------------------ ------------ -----------
Net interest revenue $45,698 $ 28,194
========================================== ============ ===========
</TABLE>
4th Qtr 1999/4th Qtr 1998
------------------------------------
Change Due To(1)
------------------------
Change Volume Yield/Rate
----------- ----------- ------------
Tax-equivalent interest revenue:
Securities $ 5,960 $ 5,563 $ 397
Trading securities 158 (27) 185
Loans 26,232 23,940 2,292
Funds sold and resell agreements 132 82 50
- ----------------------------------------- ----------- ----------- ------------
Total 32,482 29,558 2,924
- ----------------------------------------- ----------- ----------- ------------
Interest expense:
Transaction deposits 3,513 4,327 (814)
Savings deposits (229) (2) (227)
Time deposits 6,334 6,435 (101)
Borrowed funds 9,271 7,927 1,344
Subordinated debenture 54 19 35
- ----------------------------------------- ----------- ----------- ------------
Total 18,943 18,706 237
- ----------------------------------------- ----------- ----------- ------------
Tax-equivalent net interest revenue $ 13,539 $ 10,852 $ 2,687
=========== ============
Less change in tax-equivalent adjustment (506)
- ----------------------------------------- -----------
Net interest revenue $ 14,045
========================================= ===========
(1) Changes attributable to both volume and yield/rate are allocated to
both volume and yield/rate on an equal basis.
<PAGE> 12
Net interest margin, the ratio of net interest revenue to average earning
assets, decreased from 3.72% in 1998 to 3.63% in 1999. This decrease was due
primarily to the effect of competitive pricing on loans in BOK Financial's
primary markets. Since inception in 1990, BOK Financial has followed a strategy
of fully utilizing its capital resources by borrowing funds in the capital
markets to supplement deposit growth and to invest in securities. Although this
strategy frequently results in a net interest margin that falls below those
normally seen in the commercial banking industry, it provides positive net
interest revenue. Management estimates that for 1999, this strategy resulted in
a 59 basis point decrease in net interest margin. However, this strategy
contributed $13.2 million to net interest revenue for the year. As more fully
discussed in the subsequent Market Risk Section, management employs various
techniques to control, within established parameters, the interest rate and
liquidity risk inherent in this strategy.
The financial service environment in BOK Financial's primary markets is
highly competitive due to a large number of commercial banks, thrifts, credit
unions and brokerage firms. Additionally, many customers already had access to
national and regional financial institutions for many products and services.
Management expects that BOK Financial will continue to be able to successfully
compete with these financial institutions by delivering the products and
services traditionally associated with a large bank with the responsiveness of a
smaller, community bank.
Tax-equivalent net interest revenue for the fourth quarter of 1999 was
$67.0 million compared to $53.4 million for the fourth quarter of 1998. This
increase was due to the growth in average earning assets, which increased $1.5
billion or 26%. Net interest margin decreased 2 basis points to 3.70%.
Net interest revenue, on a tax-equivalent basis, totaled $199.9 million for
1998 compared to $171.9 million in 1997. 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 7.85% in 1997 to 7.75% in 1998 as
both securities and loans showed yield decreases. At the same time, the cost of
interest-bearing liabilities decreased from 4.87% to 4.77%. Average earning
assets increased $610 million, including $392 million increase from net loan
fundings, and $228 million from net securities purchases. Over the same period,
average interest-bearing liabilities increased $448 million, including a $307
million increase in deposit accounts that generally have a lower cost of funds
rate.
Other Operating Revenue
<TABLE>
Table 4 Other Operating Revenue
(In Thousands)
Years ended December 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Brokerage and trading revenue $ 16,233 $ 15,301 $ 9,556 $ 7,896 $ 6,046
Transaction card revenue 32,648 24,426 19,339 14,298 11,045
Trust fees and commissions 35,127 29,956 24,072 21,652 19,377
Service charges and fees on deposit accounts 41,067 33,920 30,181 25,363 22,181
Mortgage banking revenue 36,986 41,733 32,235 26,234 20,336
Leasing revenue 3,725 7,111 5,861 2,236 586
Other revenue 17,589 11,688 10,330 11,201 9,750
- -------------------------------------------- ------------ ----------- ----------- ----------- -----------
Total fees and commissions 183,375 164,135 131,574 108,880 89,321
- -------------------------------------------- ------------ ----------- ----------- ----------- -----------
Gain on student loan sale 600 1,548 1,311 1,069 762
Gain (loss) on branch sales - - - (325) 1,170
Gain on loan securitization 270 - - - -
Gain on sale of other assets 4,626 - - - -
Gain (loss) on securities (419) 9,337 (1,329) (2,604) 1,173
- -------------------------------------------- ------------ ----------- ----------- ----------- -----------
Total other operating revenue $ 188,452 $ 175,020 $ 131,556 $ 107,020 $ 92,426
============================================ ============ =========== =========== =========== ===========
</TABLE>
Other operating revenue increased $13.4 million or 8% compared to 1998. Fees
and commissions, which are included in other operating revenue, increased $19.2
million or 12% while net gains on sales of securities and other assets decreased
$5.8 million. The increase in fees and commissions included deposit fees of $4.9
million, transaction card fees of $1.5 million and other fees of $599 thousand
from acquired banks. Fees and commissions excluding the acquired fees increased
7%. Fees and commissions contributed 43% of BOK Financial's total revenue for
1999 compared to 45% in 1998. The decrease in the contribution of fees and
commissions to total revenue was due to the large increase in net interest
revenue relative to the growth in fees and commissions and decreases in mortgage
banking revenue and leasing revenue. Service fees on deposits totaled $41.1
million, an increase of 21% over 1998. Revenue generated by card-based
transactions such as the TransFund ATM network, bankcards, and related merchant
deposits increased by 34% to $32.6 million. These increases are generally due to
a higher volume of transactions processed in 1999. Other revenue included $5.2
million of private placement and underwriting fees related to BOSC's activities
in 1999 compared to $819 thousand in 1998. During 1999, BOK Financial sold its
interest in four leasing partnerships for a gain of $3.6 million which caused a
decrease in leasing revenue for the year. The decrease in leasing revenue was
substantially offset by a reduction in depreciation expense on the leased
equipment and the opportunity to reinvest the $29 million sales proceeds.
<PAGE> 13
Many of BOK Financial's fee generating activities, such as brokerage and
trading activities, trust fees, and mortgage servicing revenue, are indirectly
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 related revenue.
While management expects continued growth in other operating revenue, the
future rate of increase could be affected by increased competition from national
and regional financial institutions and from market saturation. Continued growth
may require BOK Financial to introduce new products or to enter new markets.
This growth introduces additional demands on capital and managerial resources.
Other operating revenue for the fourth quarter of 1999 totaled $46.7
million compared to $45.4 million for the fourth quarter of 1998. The fourth
quarter of 1998 included securities gains of $3.0 million compared to $80
thousand in the fourth quarter of 1999. Changes in the components of other
revenue during the fourth quarter were consistent with the year to date changes.
Transaction card revenue and deposit service fees increased by $2.4 million and
$1.1 million, respectively, while mortgage banking revenue decreased by $1.9
million. Leasing revenue decrease by $1.4 million due to the sale of BOK
Financial's interests in several leasing partnerships during the second quarter
of 1999.
Other operating revenue for 1998 increased $43.5 million or 33% compared to
1997. Approximately $10.7 million of this increase was due to the net change in
gains on securities sold. All areas contributed to this increase in other
revenue, including mortgage banking revenue which increased $9.5 million, trust
fees which increased $5.9 million and brokerage and trading revenue which
increased $5.7 million.
LINES OF BUSINESS
BOK Financial operates four principal lines of business under its Bank of
Oklahoma franchise: corporate banking, consumer banking, mortgage banking and
trust services. It also operates a fifth principal line of business, regional
banks, which includes banking functions for Bank of Albuquerque, Bank of
Arkansas and Bank of Texas. These five principal lines of business combined
account for approximately 86% of total revenue. Other lines of business include
the TransFund ATM system and BOSC, Inc.
Corporate Banking
The Corporate Banking Division provides loan and lease financing and
treasury and cash management services to businesses throughout Oklahoma and
seven surrounding states. In addition to serving the banking needs of middle
market and larger customers, the Corporate Banking Division has specialized
groups which serve customers in the energy, agriculture, healthcare and
banking/finance industries. The Corporate Banking Division contributed 53% of
consolidated net income for 1999 compared to 48% of consolidated net income for
1998. Total revenue for this division increased 16% primarily due to a 26%
increase in outstanding loans. Operating expense for this division increased 7%.
Table 5 Corporate Banking
(In Thousands)
Years ended December 31,
----------------------------------------
1999 1998 1997
----------------------------------------
Total revenue $ 127,539 $ 110,271 $ 95,197
============================================================
Operating expense 51,731 48,214 33,647
============================================================
Net income 46,998 37,878 37,690
============================================================
Average assets 3,222,779 2,562,320 2,136,278
============================================================
Average equity 337,742 268,677 221,205
============================================================
Return on assets 1.46% 1.48% 1.76%
============================================================
Return on equity 13.92% 14.10% 17.04%
============================================================
Efficiency ratio 40.56% 43.72% 35.34%
============================================================
Consumer Banking
The Consumer Banking Division provides its customers throughout Oklahoma
with a full line of deposit, loan and fee-based services through four major
distribution channels: traditional branches, supermarket branches, the 24-hour
ExpressBank call center, and the Internet. Additionally, the division is a
significant referral source for the Bank of Oklahoma Mortgage Division ("BOk
Mortgage") and BOSC's Retail Brokerage division. The Consumer Banking Division
contributed 12% of consolidated net income for 1999 and 11% of consolidated net
income for 1998. Total revenue, which consists primarily of intercompany credit
for funds provided to other divisions within BOK Financial and fees generated by
various services, increased 4% during 1999. Operating expenses for this same
period decreased slightly during 1999. The result is an improvement in returns
on average assets and equity for the division and a lower efficiency ratio.
Table 6 Consumer Banking
(In Thousands)
Years ended December 31,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
Total revenue $ 69,126 $ 66,246 $ 65,002
============================================================
Operating expense 49,692 50,348 50,029
============================================================
Net income 10,369 8,429 7,609
============================================================
Average assets 1,886,620 1,941,184 1,927,948
============================================================
Average equity 43,412 46,008 47,220
============================================================
Return on assets 0.55% 0.43% 0.39%
============================================================
Return on equity 23.89% 18.32% 16.11%
============================================================
Efficiency ratio 71.89% 76.00% 76.97%
============================================================
<PAGE> 14
Mortgage Banking
BOK Financial engages in mortgage banking activities through BOk Mortgage.
These activities include the origination, marketing and servicing of mortgage
loans. BOk Mortgage contributed 2% to consolidated net income in 1999 compared
to 8% in 1998.
Total revenue from BOk Mortgage decreased $7.2 million or 14% during 1999.
Revenue provided by origination and marketing activities in 1999 decreased $4.7
million or 57% compared to 1998. Total mortgage loan production was $688 million
for 1999 compared to $923 million in 1998. The decrease in loan production was
due to rising interest rates in 1999.
Commitments to originate mortgage loans create both credit and interest
rate risk. Credit risk is managed through underwriting policies and procedures,
and interest rate risk is partially hedged through forward sales contracts. All
fixed rate mortgage loans are generally sold in the secondary market pursuant to
forward sales contracts. All adjustable rate mortgage loans are sold to an
affiliate. BOk Mortgage currently does not securitize pools of mortgage loans
either for sale or retention.
Mortgage loan servicing revenue totaled $33.4 million for 1999 compared to
$33.5 million for 1998. Mortgage loans serviced by BOk Mortgage totaled $7.0
billion at December 31, 1999 compared to $6.4 billion at the end of 1998. These
amounts include loans serviced for BOk of $107 million for 1999 and $130 million
for 1998.
Capitalized mortgage servicing rights, which totaled $114.1 million at
December 31, 1999 and $69.2 million at December 31, 1998 represent 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 are 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 servicing rights while falling
interest rates have the opposite effect. A valuation allowance is provided for
the excess of the carrying value of servicing rights over their fair values. In
1998, BOk Mortgage implemented a program that uses futures contracts and call
and put options to hedge against this risk. Gains generated by this program
reduce the cost basis of the mortgage servicing rights while losses incurred by
this program increase the cost basis of the servicing rights. At December 31,
1999, cumulative hedging losses increased the cost of mortgage servicing rights
by $10.4 million. At December 31, 1998, cumulative gains generated by this
program increased the cost basis of the mortgage servicing rights by $22.5
million. Additional discussion about the sensitivity of the mortgage servicing
portfolio to changes in interest rates is in the Market Risk section.
Table 7 Mortgage Banking
(In Thousands)
Years ended December 31,
------------------------------------
1999 1998 1997
------------------------------------
Total revenue $ 42,864 $ 50,056 $ 39,307
========================================================
Operating expense 39,724 41,926 33,208
========================================================
Provision for
impairment of
mortgage servicing
rights - (2,290) 4,100
========================================================
Net income 1,868 6,288 1,121
========================================================
Average assets 355,888 367,934 391,011
========================================================
Average equity 25,273 30,213 28,050
========================================================
Return on assets 0.52% 1.71% 0.29%
========================================================
Return on equity 7.39% 20.81% 4.00%
========================================================
Efficiency ratio 92.67% 83.76% 84.48%
========================================================
Trust Services
BOK Financial provides a wide range of trust services, including
institutional, investment and retirement products and services to affluent
individuals and businesses, to not-for-profit organizations and governmental
agencies through the Bank of Oklahoma Trust Division and Bank of Texas Trust
Company. Trust services are primarily provided to clients in Oklahoma, Texas,
Arkansas and New Mexico. Additionally, trust services include a nationally
competitive self-directed 401-K program with clients in Dallas, Chicago, New
York and Los Angeles. At December 31, 1999, trust assets with an aggregate
market value of $17.2 billion were subject to various fiduciary arrangements,
compared to $14.4 billion at December 31, 1998. Trust services contributed 10%
to consolidated net income for 1999 compared to 8% for 1998. Total revenue from
trust services increased $8.6 million or 19% during 1999 while operating
expenses increased $3.8 million.
Table 8 Trust Services
(In Thousands)
Years ended December 31,
--------------------------------------
1999 1998 1997
------------- ----------- ------------
Total revenue $ 54,863 $ 46,224 $ 38,408
=============================================================
Operating expense 39,602 35,788 28,496
=============================================================
Net income 9,282 6,300 5,946
=============================================================
Average assets 333,423 293,562 254,430
=============================================================
Average equity 35,476 29,827 24,112
=============================================================
Return on assets 2.78% 2.15% 2.34%
=============================================================
Return on equity 26.16% 21.12% 24.66%
=============================================================
Efficiency ratio 72.18% 77.42% 74.19%
=============================================================
<PAGE> 15
Regional Banks
Regional banks include Bank of Texas, Bank of Arkansas, and Bank of
Albuquerque. Each of these banks provides a full range of corporate and consumer
banking, trust services, treasury services and retail investments in their
respective markets. Small businesses and middle-market corporations are the
regional banks' primary customer focus. During 1999, BOK Financial acquired
Canyon Creek National Bank, Mid Cities National Bank and Swiss Avenue State
Bank. These acquisitions added assets of $430 million and deposits of $354
million to Bank of Texas.
Regional banks contributed $7.7 million or 9% to consolidated net income in
1999 compared to $5.7 million or 7% in 1998. Total revenue for 1999 increased
$38.9 million compared to 1998 while operating expenses increased $35.3 million.
The increase in operating expenses included a $6.1 million increase in
intangible amortization expense. Average equity assigned to the regional banks
included both an amount based on management's assessment of risk and an
additional amount based upon BOK Financial's investment in these entities.
Table 9 Regional Banks
(In Thousands)
Years ended December 31,
------------------------------------
1999 1998 1997
--------------------------------------
Total revenue $ 70,908 $ 31,999 $ 23,542
=========================================================
Operating expense 56,892 21,563 15,881
=========================================================
Net income 7,717 5,744 2,973
=========================================================
Average assets 1,808,218 644,236 465,780
=========================================================
Average equity 191,477 85,197 63,648
=========================================================
Return on assets 0.43% 0.89% 0.64%
=========================================================
Return on equity 4.03% 6.74% 4.67%
=========================================================
Efficiency ratio 80.23% 67.39% 67.46%
=========================================================
YEAR 2000 CONSIDERATIONS
The Year 2000 issue, in general, is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
computer programs that have date sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including among
other things, a temporary inability to process transactions or to engage in
similar normal business activities.
BOK Financial personnel continue to monitor its information technology and
non-information technology systems and to communicate with large customers to
determine whether any disruptions have occurred. To date, no significant
disruptions in operations have been identified. Total accumulated expenditures
directly related to the Year 2000 issue were less than $1 million and no more
are expected.
OTHER OPERATING EXPENSE
Other operating expense totaled $280.5 million for 1999 compared to $234.0
million in 1998, an increase of 20%. Approximately $30.2 million of this
increase was related to acquisitions. Operating expenses for acquisitions
increased personnel costs by $11.5 million, occupancy, equipment and data
processing expenses by $5.5 million, and amortization of intangible assets by
$6.8 million. Excluding the effects of acquisitions, other operating expense
increased $16.3 million or 7%.
Personnel costs increased $26.6 million or 24%. Regular compensation and
benefits (including overtime and temporary assistance) increased $18.0 million
or 22%. Staffing on a full time equivalent ("FTE") basis increased by 333
employees or 13% while average compensation expense per FTE increased by 9%. The
transition toward performance based compensation continued during 1999.
Incentive compensation increased by $5.4 million or 46% compared to 1998 due to
growth in revenue over pre-determined targets and growth in the number of
business units covered by incentive plans.
Net occupancy, equipment and data processing expense for 1999 increased
$14.5 million or 33%. Net occupancy expense increased by $4.4 million, including
$2.5 million due to acquisitions. The remaining increase was due to additional
locations in Oklahoma and Texas. Data processing expenses increased $5.9 million
or 28%, including $1.2 million from acquisitions. Amortization and maintenance
costs increased $1.3 million during 1999 to $3.3 million due primarily to
various systems implemented over the past two years. The remaining increase was
due to a higher volume of transactions processed.
Other operating expenses for the fourth quarter of 1999 totaled $74.3
million compared to $62.3 million for the fourth quarter of 1998. The fourth
quarter of 1999 included expenses of $9.4 million related to recent acquisitions
and the fourth quarter of 1998 included the reversal of the valuation allowance
for mortgage servicing rights of $4.3 million. Excluding the effects of these
items, operating expenses for the quarters were essentially unchanged.
Other operating expense totaled $234.0 million for 1998 compared to $199.9
million in 1997, an increase of 17%. Personnel costs increased $18.8 million due
primarily to an 11% increase in the number of full time equivalent staffing and
a 6% increase in average compensation per employee. Net occupancy, equipment and
data processing expenses increased $7.3 million. Occupancy costs increased by
$2.5 million due to lower rental income of $1.2 million and a $1.3 million
increase in expenses. The lower rental income was related to a change in BOk's
ownership interest in its Oklahoma City headquarters building while the increase
in occupancy expenses was due to an increase in rent for BOk. Data processing
expenses increased $4.1 million or 24% due to a greater volume of transactions
processed. Additionally, data processing expenses for 1998 included $350
thousand for Bank of Albuquerque system conversions and related start up costs.
<PAGE> 16
<TABLE>
Table 10 Other Operating Expense
(In Thousands)
Years ended December 31,
------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Personnel expense $136,010 $109,437 $ 90,625 $ 74,460 $ 69,562
Business promotion 9,077 8,220 8,886 6,552 6,243
Contribution of stock to BOk Charitable Foundation - 2,257 3,638 - -
Professional fees and services 9,584 9,781 6,906 5,508 5,978
Net occupancy, equipment and data processing expense 58,024 43,519 36,265 31,460 27,943
FDIC and other insurance 1,356 1,368 1,380 1,812 4,596
Special deposit insurance assessment - - - 3,820 -
Printing, postage and supplies 11,599 9,524 8,067 7,042 6,565
Net gains and operating expenses on repossessed assets (3,473) (474) (3,831) (4,496) (2,903)
Amortization of intangible assets 15,823 9,515 8,968 5,555 6,109
Write-off of core deposit intangible assets related to
SAIF-insured deposits - - - 3,821 -
Mortgage banking costs 23,932 25,949 19,968 15,473 11,990
Provision for impairment of mortgage servicing rights - (2,290) 4,100 361 539
Other expense 18,584 17,189 14,882 11,837 9,675
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total $280,516 $233,995 $199,854 $163,205 $146,297
======================================================== ========== ========== ========== ========== ==========
</TABLE>
Income Taxes
Income tax expense was $44.5 million, $37.2 million, and $16.5 million for
1999, 1998, and 1997, respectively, representing 33%, 32%, and 20%,
respectively, of book taxable income. Tax expense currently payable totaled
$43.8 million in 1999 compared to $46.4 million in 1998 and $11.0 million in
1997. The Internal Revenue Service closed its examination of 1996 during the
first quarter of 2000. This examination had no adverse impact on the financial
statements and BOK Financial is evaluating the impact, if any, on its tax
reserve. During 1998, Internal Revenue Service examinations for 1994 and 1995
were closed with no significant adjustments. During 1997, the Internal Revenue
Service closed its examination of BOk and BOK Financial for 1992 and 1993,
respectively. As a result of the outcome of these examinations, BOK Financial
reduced its tax reserve by $9.0 million. Income tax expense for 1997 was 30% of
pre-tax book income excluding the elimination of this allowance.
<PAGE> 17
<TABLE>
Table 11 Selected Quarterly Financial Data
(In Thousands Except Per Share Data)
Fourth Third(1) Second(1) First(1)
------------ ------------ ------------ ------------
1999
---------------------------------------------------
<S> <C> <C> <C> <C>
Interest revenue $139,714 $131,734 $118,256 $110,570
Interest expense 74,571 69,347 61,673 58,559
---------------------------------------------------- ------------ ------------ ------------ ------------
Net interest revenue 65,143 62,387 56,583 52,011
Provision for loan losses 2,255 2,142 2,538 3,430
---------------------------------------------------- ------------ ------------ ------------ ------------
Net interest revenue after provision for loan losses 62,888 60,245 54,045 48,581
Other operating revenue 46,641 45,320 49,719 47,191
Securities gains (losses), net 80 (485) (288) 274
Other operating expense 74,257 70,755 70,678 64,826
---------------------------------------------------- ------------ ------------ ------------ ------------
Income before taxes 35,352 34,325 32,798 31,220
Income tax expense 12,155 11,589 10,742 9,983
---------------------------------------------------- ------------ ------------ ------------ ------------
Net income $ 23,197 $ 22,736 $ 22,056 $ 21,237
==================================================== ============ ============ ============ ============
Earnings per share:
Basic .47 .46 .44 .43
==================================================== ============ ============ ============ ============
Diluted .42 .41 .40 .38
==================================================== ============ ============ ============ ============
Average shares:
Basic 49,063 49,011 48,938 48,894
==================================================== ============ ============ ============ ============
Diluted 55,729 55,787 55,834 55,786
==================================================== ============ ============ ============ ============
1998
---------------------------------------------------
Interest revenue $106,726 $102,589 $96,974 $96,543
Interest expense 55,628 53,728 50,461 52,589
---------------------------------------------------- ------------ ------------ ------------ ------------
Net interest revenue 51,098 48,861 46,513 43,954
Provision for loan losses 4,087 4,061 3,973 2,470
---------------------------------------------------- ------------ ------------ ------------ ------------
Net interest revenue after provision for loan losses 47,011 44,800 42,540 41,484
Other operating revenue 42,417 42,877 41,599 38,790
Securities gains, net 2,967 538 3,320 2,512
Other operating expense 62,299 58,171 55,186 58,339
---------------------------------------------------- ------------ ------------ ------------ ------------
Income before taxes 30,096 30,044 32,273 24,447
Income tax expense 9,729 10,049 10,624 6,847
---------------------------------------------------- ------------ ------------ ------------ ------------
Net income $ 20,367 $ 19,995 $21,649 $17,600
==================================================== ============ ============ ============ ============
Earnings per share:
Basic .41 .40 .43 .35
==================================================== ============ ============ ============ ============
Diluted .37 .36 .39 .31
==================================================== ============ ============ ============ ============
Average shares:
Basic 48,839 48,842 48,906 49,006
==================================================== ============ ============ ============ ============
Diluted 55,720 55,727 55,891 55,945
==================================================== ============ ============ ============ ============
<FN>
(1) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
</FN>
</TABLE>
<PAGE> 18
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 that 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 on available for sale securities, less
applicable deferred taxes, are recorded as accumulated other comprehensive
income in Shareholders' Equity.
During 1999, BOK Financial increased its securities portfolio by $335
million. Most notably, mortgage-backed securities increased by $460 million
while municipal securities decreased by $78 million.
BOK Financial's total securities portfolio value changed from an unrealized
gain of $19 million at December 31, 1998 to an unrealized loss of $73 million at
December 31, 1999 due to an increase in market interest rates during the year.
Rising interest rates tend to both decrease the value of fixed rate securities
and extend the average expected life of mortgage-backed securities.
The average expected life of the mortgage-backed securities was 4.4 years
at December 31, 1999 compared to 4.0 years at December 31, 1998. The effect of
changes in interest rates on BOK Financial's earnings and equity is discussed in
the Market Risk section of this report.
Table 12 presents the book values and fair values of BOK Financial's
securities portfolio at December 31, 1999, 1998 and 1997. Additional information
regarding the securities portfolio is presented in Note 4 to the Consolidated
Financial Statements.
<TABLE>
Table 12 Securities
(In Thousands)
December 31,
-----------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- -------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------ ------------ ------------ ------------ ------------ ------------
Investment:
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 196 $ 198 $ 600 $ 600 $ 850 $ 845
Municipal and other tax-exempt 186,177 184,748 184,988 184,521 164,379 164,873
Mortgage-backed U.S. agency securities 18,051 17,926 30,385 30,829 46,849 47,374
Other debt securities 8,756 8,752 11,804 11,804 1,033 1,033
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total $ 213,180 $ 211,624 $ 227,777 $ 227,754 $ 213,111 $ 214,125
=========================================== ============ ============ ============ ============ ============ ============
Available for sale:
U.S. Treasury $ 112,902 $ 111,860 $ 170,862 $ 171,707 $ 292,732 $ 293,692
Municipal and other tax-exempt 13,086 13,094 92,082 93,131 113,278 114,907
Mortgage-backed securities:
U.S. agencies 2,174,916 2,106,094 1,902,568 1,913,869 1,289,167 1,295,409
Other 202,229 200,558 1,772 1,762 2,183 2,185
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total mortgage-backed securities 2,377,145 2,306,652 1,904,340 1,915,631 1,291,350 1,297,594
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Other debt securities 353 353 456 462 4,480 4,498
Equity securities and mutual funds 156,476 156,745 142,460 148,444 132,150 141,694
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total $ 2,659,962 $ 2,588,704 $ 2,310,200 $ 2,329,375 $ 1,833,990 $ 1,852,385
=========================================== ============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 19
LOANS
Loans increased $996 million or 27% during 1999, including $148 million
from acquisitions. Excluding acquisitions, loans increased $848 million or 23%.
Commercial loans increased by $675 million or 34% over 1998. This continues a
trend of strong growth in commercial loans. All segments of commercial loans
grew by more than 10% except agriculture. Commercial loans now comprise 57% of
total loans compared to 55% at December 31, 1998. Energy loans increased by $138
million or 29% during 1999 and totaled $607 million or 13% of the loan portfolio
at year-end. Commercial loans to service entities increased by $172 million or
27% during 1999. Total commercial real estate loans grew by $334 million or 44%
during 1999. Multifamily loans and construction and land development loans,
which consists primarily of single family construction loans, increased by 42%
and 43%, respectively, during 1999. Management plans to decrease the rate of
loan growth in 2000 through a selective tightening of credit standards. The
primary focus will be on commercial lending activities that have an opportunity
to provide other banking services to the customer.
During 1999, BOK Financial securitized and sold approximately $100 million
of automobile loans for net cash proceeds of $94.5 million. BOK Financial
retained the servicing rights associated with the loans and a residual interest
in cash flows in excess of set targets. At December 31, 1999, the carrying value
of the servicing rights was $343 thousand and the carrying value of the residual
interest was $9.8 million. These carrying values are based on the present value
of future net cash that BOK Financial expects to receive. Additional information
regarding the automobile loan securitization is presented in Note 5 to the
Consolidated Financial Statements.
<TABLE>
Table 13 Loans
(In Thousands)
December 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Commercial:
Energy $ 606,561 $ 468,700 $ 333,988 $ 290,162 $ 220,845
Manufacturing 344,175 245,268 205,836 147,931 145,660
Wholesale/retail 407,785 279,265 264,029 242,859 210,678
Agriculture 173,653 160,241 155,868 129,202 106,502
Services 807,184 635,585 482,476 340,956 289,685
Other commercial and industrial 325,343 200,214 107,260 128,158 143,336
Commercial real estate:
Construction and land development 249,160 174,059 104,322 69,265 51,559
Multifamily 257,187 181,525 103,218 150,457 143,643
Other real estate loans 588,195 404,985 284,220 221,499 197,937
Residential mortgage:
Secured by 1-4 family residential properties 531,058 500,690 435,753 403,958 410,914
Residential mortgages held for sale 57,057 100,269 79,779 96,789 75,369
Consumer 296,131 296,298 299,272 249,008 264,477
- ------------------------------------------------- ------------ ------------ ------------- ------------ ------------
Total $4,643,489 $3,647,099 $2,856,021 $2,470,244 $2,260,605
================================================= ============ ============ ============= ============ ============
</TABLE>
While BOK Financial continues to increase geographic diversification
through expansion in the Dallas, Texas and Albuquerque, New Mexico areas,
geographic concentration subjects the loan portfolio to the general economic
conditions in Oklahoma. Notable loan concentrations by the primary industry of
the borrowers are presented in Table 13. Agriculture includes loans totaling
$144 million to the cattle industry. Services include loans totaling $195
million to the health care industry and $108 million to the hotel industry.
Approximately 53% of commercial real estate loans are secured by property
located in Oklahoma, primarily in the Tulsa or Oklahoma City metropolitan areas.
An additional 12% of commercial real estate loans are secured by property
located in Texas. The major components of other real estate loans are office
buildings, $207 million and retail facilities, $169 million.
<TABLE>
Table 14 Loan Maturity and Interest Rate Sensitivity on December 31, 1999
(In Thousands)
Remaining Maturities of Selected Loans
---------------------------------------
Total Within 1 Year 1-5 Years After 5 Years
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Loan maturity:
Commercial $2,664,701 $1,137,809 $1,198,550 $328,342
Commercial real estate 1,094,542 362,349 492,885 239,308
- --------------------------------------------- ------------- ------------ ------------- ------------
Total $3,759,243 $1,500,158 $1,691,435 $567,650
- --------------------------------------------- ------------- ------------ ------------- ------------
Interest rate sensitivity for selected loans with:
Predetermined interest rates $ 797,075 $ 102,160 $ 474,528 $220,387
Floating or adjustable interest rates 2,962,168 1,397,998 1,216,907 347,263
- --------------------------------------------- ------------- ------------ ------------- ------------
Total $3,759,243 $1,500,158 $1,691,435 $567,650
============================================= ============= ============ ============= ============
</TABLE>
<PAGE> 20
SUMMARY OF LOAN LOSS EXPERIENCE
The reserve for loans losses, which is available to absorb losses
inherent in the loan portfolio, totaled $76 million at December 31, 1999,
compared to $66 million at December 31, 1998. This represents 1.66% and 1.86% of
total loans, excluding loans held for sale, at December 31, 1999 and 1998,
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 15 presents
statistical information regarding the reserve for loan losses for the past five
years.
<TABLE>
Table 15 Summary of Loan Loss Experience
(Dollars In Thousands)
Years ended December 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $65,922 $54,044 $45,907 $39,116 $39,236
Loans charged-off:
Commercial 2,136 3,219 3,350 2,469 864
Commercial real estate 35 175 698 529 182
Residential mortgage 617 202 440 240 204
Consumer 4,560 4,000 4,791 3,515 2,924
- ------------------------------------------------------------------------------------------------------------------------------
Total 7,348 7,596 9,279 6,753 4,174
- ------------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Commercial 3,110 1,487 2,543 3,748 1,632
Commercial real estate 487 1,398 957 4,113 993
Residential mortgage 17 162 557 262 378
Consumer 2,156 1,836 1,578 1,002 850
- ------------------------------------------------------------------------------------------------------------------------------
Total 5,770 4,883 5,635 9,125 3,853
- ------------------------------------------------------------------------------------------------------------------------------
Net loans charged-off (recoveries) 1,578 2,713 3,644 (2,372) 321
Provision for loan losses 10,365 14,591 9,256 4,419 201
Additions due to acquisitions 1,525 - 2,525 - -
- ------------------------------------------------------------------------------------------------------------------------------
Ending balance $76,234 $65,922 $54,044 $45,907 $39,116
- ------------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses to loans outstanding at year-end(1) 1.66% 1.86% 1.95% 1.93% 1.79%
Net charge-offs (recoveries) to average loans .04 .09 .14 (.10) .02
Provision for loan losses to average loans .26 .48 .35 .19 .01
Recoveries to gross charge-offs 78.52 64.28 60.73 135.13 92.31
Reserve as a multiple of net charge-offs (recoveries) 48.31x 24.30x 14.83x (19.35)x 121.86x
- ------------------------------------------------------------------------------------------------------------------------------
Problem Loans
- ------------------------------------------------------------------------------------------------------------------------------
Loans past due (90 days) $11,336 $ 9,553 $10,710 $ 9,729 $ 2,755
Nonaccrual(2) 19,465 14,095 19,761 19,964 30,159
Renegotiated - - 207 - -
- ------------------------------------------------------------------------------------------------------------------------------
Total $30,801 $23,648 $30,678 $29,693 $32,914
- ------------------------------------------------------------------------------------------------------------------------------
Foregone interest on nonaccrual loans(2) $ 2,321 $ 2,271 $ 2,981 $ 3,088 $ 3,015
==============================================================================================================================
<FN>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(2) Interest collected and recognized on nonaccrual loans was $3.3 million in
1998 and was not significant in 1999 and previous years disclosed.
</FN>
</TABLE>
The adequacy of the reserve for loan losses is assessed by management based
upon an ongoing quarterly evaluation of the probable estimated losses inherent
in the portfolio, and includes probable losses on both outstanding loans and
unused commitments to provide financing. A consistent methodology has been
developed that includes reserves assigned to specific criticized loans, general
reserves that are based upon a statistical migration analysis for each category
of loans, and unallocated reserves that are based upon an analysis of current
economic conditions, loan concentrations, portfolio growth, and other relevant
factors. An independent Credit Administration department is responsible for
performing this evaluation for all of BOK Financial's subsidiaries to ensure
that the methodology is applied consistently.
All significant criticized loans are reviewed quarterly with written
documentation. Specific reserves for impairment are determined in accordance
with generally accepted accounting principles and appropriate regulatory
standards. At December 31, 1999 specific impairment reserves totaled $2.5
million.
The adequacy of general loan loss reserves is determined primarily through
an internally developed migration analysis model. Management uses an
eight-quarter aggregate accumulation of net loan losses as the basis for this
model. Greater emphasis is placed on net loan losses in the more recent periods.
This model is used to assign general loan loss reserves to commercial loans and
leases, residential mortgage loans and consumer loans. All loans, leases and
letters of credit are allocated a migration factor by this model. Management can
override the general allocation only by utilizing a specific allocation that is
greater than the general allocation. General loan loss reserves assigned to
various categories of loans are presented in Table 16.
A nonspecific allowance for loan losses is maintained for risks beyond
those factors specific to a particular loan or those identified by the migration
analysis. These factors include trends in general economic conditions in BOK
Financial's primary lending areas, duration of the business cycle, specific
conditions in industries where BOK Financial has a concentration of loans,
overall growth in the loan portfolio, bank regulatory examination results, error
potential in either the migration analysis model or in the underlying data, and
other relevant factors. A range of potential losses is then determined for each
factor identified.
<PAGE> 21
At December 31, 1999, the loss potential ranges for the more significant
factors are:
Concentration of large loans - $1.1 million to $2.1 million
Loan portfolio growth and expansion into new markets - $1.3 million to $2.6
million
A provision for loan losses is charged against earnings in amounts
necessary to maintain an adequate allowance for loan losses. These provisions
totaled $10.4 million for 1999, $14.6 million for 1998 and $9.3 million for
1997. The provision for 1999 reflected management's assessment of changes in the
risk of loan losses due primarily to continued growth in the loan portfolio and
geographic expansion of BOK Financial's market area to include North Texas and
New Mexico.
<TABLE>
Table 16 Loan Loss Reserve Allocation
(Dollars in Thousands)
December 31,
--------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ------------------- ------------------ ------------------- -------------------
% of % of % of % of % of
Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1)
--------- --------- --------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan category:
Commercial(2) $47,261 58.10% $37,570 56.09% $35,009 55.81% $26,741 53.91% $26,532 51.12%
Commercial real estate 11,216 23.86 7,949 21.44 3,236 17.71 3,907 18.59 3,774 17.98
Residential mortgage 2,137 11.58 1,807 14.12 1,783 15.70 1,659 17.01 646 18.80
Consumer 6,721 6.46 6,689 8.35 5,763 10.78 5,174 10.49 2,567 12.10
Nonspecific allowance 8,899 - 11,907 - 8,253 - 8,426 - 5,597 -
- ------------------------- --------- --------- --------- --------- --------- -------- --------- --------- --------- ---------
Total $76,234 100.00 $65,922 100.00 $54,044 100.00 $45,907 100.00 $39,116 100.00
========================= ========= ========= ========= ========= ========= ======== ========= ========= ========= =========
<FN>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(2) Specific allocation for Year 2000 risks were $2.0 million in 1999, $3.6
million in 1998 and $4.8 million in 1997.
(3) Specific allocation for the loan concentration risks are included in the
appropriate category: Energy, Agriculture and Hotel/Motel.
</FN>
</TABLE>
NONPERFORMING ASSETS
Information regarding nonperforming assets, which were $23 million at
December 31, 1999 and $19 million at December 31, 1998 is presented in Table 17.
Nonperforming loans include nonaccrual loans and renegotiated loans and excludes
loans 90 days or more past due. Nonaccrual commercial loans increased during
1999 due primarily to an identified weakness in one agriculture loan.
The loan review process also identifies loans 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, 1999, loans totaling $67 million were assigned to the
substandard risk category and loans totaling $29 million were assigned to the
special mention risk category, compared to $60 million and $31 million,
respectively, at December 31, 1998.
<TABLE>
Table 17 Nonperforming Assets
(Dollars in Thousands)
December 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Nonaccrual loans:
Commercial $12,686 $ 8,394 $12,745 $13,495 $15,107
Commercial real estate 2,046 1,950 3,276 2,813 10,808
Residential mortgage 3,383 2,583 2,985 3,070 2,946
Consumer 1,350 1,168 755 586 1,298
- ------------------------------------------------ ------------- ------------ ------------ ------------ -----------
Total nonaccrual loans 19,465 14,095 19,761 19,964 30,159
Renegotiated loans - - 207 - -
- ------------------------------------------------ ------------- ------------ ------------ ------------ -----------
Total nonperforming loans 19,465 14,095 19,968 19,964 30,159
Other nonperforming assets 3,478 4,667 5,281 4,620 3,712
- ------------------------------------------------ ------------- ------------ ------------ ------------ -----------
Total nonperforming assets $22,943 $18,762 $25,249 $24,584 $33,871
================================================ ============= ============ ============ ============ ===========
Ratios:
Reserve for loan losses to nonperforming loans 391.65% 467.70% 270.65% 229.95% 129.70%
Nonperforming loans to period-end loans(2) .42 .40 .72 .84 1.38
================================================ ============= ============ ============ ============ ===========
Loans past due (90 days)(1) $11,336 $ 9,553 $10,710 $ 9,729 $ 2,755
================================================ ============= ============ ============ ============ ===========
<FN>
(1) Includes residential mortgages guaranteed by agencies
of the U.S. Government. $ 8,538 $ 8,122 $ 7,072 $ 4,755 $ -
Excludes residential mortgages guaranteed by agencies
of the U.S. Government in foreclosure. 8,310 6,953 7,396 9,177 6,754
(2) Excludes residential mortgage loans held for sale.
</FN>
</TABLE>
<PAGE> 22
DEPOSITS
Average deposits for 1999 increased $771 million compared to 1998,
including $596 million from acquisitions. Demand deposits, interest-bearing
transaction accounts and time deposits increased by $65 million, $501 million
and $196 million, respectively. The average cost of each category of interest
bearing deposits has decreased during 1999 due to lower market interest rates.
As shown in Table 18, average core deposits increased $487 million to $3.2
billion. This represented 65% of average deposits in both 1999 and 1998.
Concurrently, uninsured deposits increased to 27% of total deposits for 1999
compared to 24% in 1998. Average uninsured deposits included approximately $257
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 styling that would determine insurance based on FDIC
regulations.
Table 18 Deposit Analysis
(In Thousands) Average Balances
----------------------------
1999 1998
----------------------------
Core deposits $3,155,930 $2,668,954
Public funds 383,329 423,702
Uninsured deposits 1,322,679 997,999
- ------------------------------------------------------------
Total $4,861,938 $4,090,655
============================================================
BOK Financial competes for deposits by offering a broad range of products
and services to its customers. While this includes offering competitive interest
rates and fees, the primary means of competing for deposits is convenience and
service to the customers. BOk offers banking convenience to its customers though
69 branches, including 26 branches with extended hours in local supermarkets and
a 24-hour ExpressBank call center. During 1999, BOk opened four supermarket
branches to further enhance customer convenience. Acquisitions during 1999 added
6 locations to Bank of Texas which brought its total locations to 13. Bank of
Albuquerque has 15 banking locations in Albuquerque, New Mexico and Bank of
Arkansas has 3 locations in Fayetteville, Arkansas.
Table 19 Maturity of Domestic CDs and Public Funds in
Amounts of $100,000 or More
(In Thousands) December 31,
---------------------------
1999 1998
---------------------------
Months to maturity:
3 or less $ 461,647 $491,560
Over 3 through 6 274,456 107,855
Over 6 through 12 285,010 116,270
Over 12 167,670 68,699
- ------------------------------------------------------------
Total $1,188,783 $784,384
============================================================
BORROWINGS AND CAPITAL
BOK Financial and its subsidiary banks use several borrowing sources to
supplement deposits as a source of funds to support loan and securities growth.
Primarily these sources include federal funds purchased and securities
repurchase agreements, advances from the Federal Home Loan Bank, and borrowings
from lines of credit through commercial banks. Average borrowed funds increased
$811 million or 71% over 1998 and represented 28% of all funds for 1999 compared
to 22% for 1998. Interest rates and maturity dates for the various sources of
funds are matched with specific types of assets in the asset/liability
management process.
In February 1999, the Board of Directors increased the number of shares
which management is authorized to repurchase an additional 400,000 shares,
increasing total authorization to 800,000 shares. Since the original
authorization announced in 1998, the Company has repurchased 466,540 shares.
During the fourth quarter of 1999, BOK Financial negotiated a $125 million
variable rate, unsecured line of credit. The proceeds of this line were
primarily used to pay off bank debt that had been incurred to fund acquisitions.
Interest on amounts outstanding under this line is based on either the LIBOR
rate or a base rate, plus a defined margin which is determined by the amount of
principal outstanding and BOK Financial's debt rating. The base rate is defined
as the greater of either the daily federal funds rate or the prime rate.
Equity capital for BOK Financial averaged $542 million and $486 million for
1999 and 1998, respectively. The $56 million increase resulted from 1999
earnings and a $24 million decrease in unrealized gains on available for sale
securities. See Note 15 to the Consolidated Financial Statements for additional
information regarding the capital adequacy of BOK Financial and its subsidiary
banks.
Management has identified capital and funding needs totaling approximately
$50 million for anticipated growth in 2000. Resources available to meet these
needs include dividends from BOK Financial's subsidiary banks and the possible
issuance of debt. Management currently believes that its funding needs can be
met by dividends from its subsidiary banks. However, the timing and extent of
future growth plans will be evaluated based upon available resources.
MARKET RISK
Market risk is a broad term for the risk of economic loss due to adverse
changes in the fair value of a financial instrument. These changes may be the
result of various factors, including interest rates, foreign exchange 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 both its portfolio of assets held for purposes
other than trading and trading assets. The effect of other changes, such as
foreign exchange rates, commodity prices or equity prices do not pose
significant market risk to BOK Financial. The responsibility for managing market
risk rests with the Asset/Liability Committee which operates under policy
guidelines established by the Board of Directors. 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 is generally limited by these
guidelines to +/- 10%. These guidelines also 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.
<PAGE> 23
Interest Rate Risk Management (Other than Trading)
BOK Financial performs a sensitivity analysis to identify more
dynamic interest rate risk exposures, including embedded option positions on net
interest revenue, net income and economic value of equity. A simulation model is
used to estimate the effect of changes in interest rates over the next twelve
months based on three interest rate scenarios. These are a "most likely" rate
scenario and two "shock test" scenarios, 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. The Federal Reserve Bank's discount
rate affects short-term borrowings, the prime lending rate and the London
InterBank Offering Rate ("LIBOR"). These rates in turn are the basis for much of
the variable-rate loan pricing, the 30-year mortgage rate (which directly
affects the prepayment speeds for mortgage-backed securities and mortgage
servicing rights), and the 10-year U.S. Treasury rate (which affects the value
of the mortgage servicing hedges) and, therefore, are BOK Financial's primary
interest rate exposures. 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 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. 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. The impact of planned growth and
new business activities is factored into the simulation model. At December 31,
1999 and 1998, this modeling indicated interest rate sensitivity as follows:
<TABLE>
Table 20 Interest Rate Sensitivity
(Dollars in Thousands) 200 bp Increase 200 bp Decrease Most Likely
------------------------ ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------------------ ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Anticipated impact over the next twelve months:
Net interest revenue $ (3,936) $ 2,314 $3,406 $(3,932) $ (413) $(1,013)
(1.4)% 1.1% 1.2% (1.9)% (0.1)% (0.5)%
===================================================================== ========================= ==========================
Net income $ (2,440) $ 1,847 $2,112 $(4,114) $ (256) $ (41)
(2.4)% 2.0% 2.1% (4.5)% (0.3)% 0.0%
===================================================================== ========================= ==========================
Economic value of equity $ (36,214) $ (79,092) $1,669 $ 3,763 $ (4,943) $ 10,096
(3.2)% (10.1)% 0.1% 0.5% (0.4)% 1.3%
===================================================================== ========================= ==========================
</TABLE>
The estimated changes in interest rates on net interest revenue, net
income, and economic value of equity is within guidelines established by the
Board of Directors for all interest rate scenarios.
BOK Financial has a significant risk of loss on its capitalized mortgage
servicing rights in a declining interest rate environment. During 1998, a
program to hedge this exposure through the use of futures contracts, call
options and put options was developed. These derivatives are based upon 10-year
U.S. Treasury securities. The changes in value of these derivatives have a
highly correlated, inverse relation to changes in value of the mortgage
servicing rights within a +/- 50 basis point range. During 1999, the interest
rates that affect the value of the servicing rights and the hedging derivatives
increased by 179 basis points. This large change in rates caused the derivatives
to generate losses of $32.2 million while the value of the hedged portion of the
servicing portfolio increased by $25.9 million. Cumulative losses on the hedging
portfolio at December 31, 1999 were $8.9 million before amortization. The
interest rate sensitivity of the mortgage servicing portfolio and the related
hedge is modeled over a range of + or - 50 basis points. At December 31, 1999
and 1998, the pre-tax results of this modeling are as follows:
Table 21 Mortgage Servicing Interest Rate Sensitivity
(In Thousands)
1999 1998
---------------------------------------
50 bp 50 bp 50 bp 50 bp
Increase Decrease Increase Decrease
---------------------------------------
Anticipated change in:
Mortgage servicing
rights $ 3,721 $(5,231) $12,962 $(17,303)
Hedging instruments (4,577) 4,678 (11,567) 11,960
- ------------------------------------------------------------
Net $ (856) $ (553) $ 1,395 $ (5,343)
============================================================
The simulations used to manage market risk are 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 timing, magnitude and frequency of interest
rate changes and changes in market conditions and management strategies, among
other factors.
<PAGE> 24
BOK Financial uses interest rate swaps, a form 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. During 1999,
income from these swaps exceeded the cost 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.
Trading Activities
BOK Financial enters into trading account activities both as an
intermediary for customers and for its own account. As an intermediary, BOK
Financial will take positions in securities, generally mortgage-backed
securities, government agency securities, and municipal bonds. These securities
are purchased for resale to customers, which include individuals, corporations,
foundations, and financial institutions. BOK Financial will also take trading
positions in U.S. Treasury securities, mortgage-backed securities, municipal
securities, and financial futures for its own account either through BOk or
BOSC, Inc. These positions are taken with the objective of generating trading
profits. Both of these activities involve interest rate risk.
A variety of methods are used to manage the interest rate risk of
trading activities. These methods include daily marking of all positions to
market value, independent verification of inventory pricing, and position limits
for each trading activity. Hedges in either the futures or cash markets may be
used to reduce the risk associated with some trading programs. The Risk
Management Department monitors trading activity daily and reports to senior
management and the Risk Oversight and Audit Committee of the BOK Financial Board
of Directors any exceptions to trading position limits and risk management
policy exceptions.
BOK Financial uses a Value at Risk ("VAR") methodology to measure the
market risk inherent in its trading activities. VAR is calculated based upon
historical simulations over the past five years. It represents an amount of
market loss that is likely to be exceeded only one out of every 100 two-week
periods. Trading positions are managed within guidelines approved by the Board
of Directors. These guidelines limit the nominal aggregate trading positions to
$360 million, the VAR to $6.5 million. At December 31, 1999, the nominal
aggregate trading positions was $4.9 million, the VAR was $149 thousand. The
greatest value at risk during 1999 was $2.1 million.
NEW ACCOUNTING STANDARDS
During 1998, the Financial Accounting Standards Board adopted Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
The effective date for FAS 133 has been deferred until fiscal years beginning
after June 15, 2000. BOK Financial expects to adopt FAS 133 effective January 1,
2001. FAS 133 will require the recognition of all derivatives on the balance
sheet at fair value. Derivatives that do not qualify for special hedge
accounting treatment must be adjusted to fair value through income. If the
derivative qualifies for hedge accounting, depending on the nature of the hedge,
changes in the fair value of the derivatives will either be offset against
changes in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings.
BOK Financial is currently analyzing the effect of FAS 133 on the
derivatives used as part of its asset/liability management program. The effect
of FAS 133 on earnings and financial position has not yet been determined.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates, and
projections about BOK Financial, the financial services industry, and the
economy in general. Words such as "anticipates," "believes," "estimates,"
"expects," "forecasts," "plans," "projects," variations of such words, and
similar expressions are intended to identify such forward-looking statements.
Management judgments relating to, and discussion of the provision and reserve
for loan losses involve judgments as to future events and are inherently
forward-looking statements. Assessments that BOK Financial's acquisitions and
other growth endeavors will be profitable are necessary statements of belief as
to the outcome of future events, based in part on information provided by others
which BOK Financial has not independently verified. These statements are not
guarantees of future performance and involve certain risks, uncertainties, and
assumptions which are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what is expressed, implied or forecasted in such
forward-looking statements. Internal and external factors that might cause such
a difference include, but are not limited to, (1) the ability to fully realize
expected cost savings from mergers within the expected time frames, (2) the
ability of other companies on which BOK Financial relies to provide goods and
services in a timely and accurate manner, (3) changes in interest rates and
interest rate relationships, (4) demand for products and services, (5) the
degree of competition by traditional and nontraditional competitors, (6) changes
in banking regulations, tax laws, prices, levies, and assessments, (7) the
impact of technological advances, and (8) trends in customer behavior as well as
their ability to repay loans. BOK Financial and its affiliates undertake no
obligation to update, amend, or clarify forward-looking statements, whether as a
result of new information, future events, or otherwise.
<PAGE> 25
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 accounting principles
generally accepted in the United States. 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 a Risk Oversight and
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 accounting principles generally
accepted in the United States 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 as of December 31, 1999 and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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 referred to above
present fairly, in all material respects, the consolidated financial position of
BOK Financial Corporation at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
January 18, 2000
<PAGE> 26
BOK FINANCIAL CORPORATION
<TABLE>
Consolidated Statements of Earnings
(In Thousands Except Share Data)
1999 1998(1) 1997(1)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Interest Revenue
Loans $336,630 $267,458 $234,568
Taxable securities 144,901 115,733 101,853
Tax-exempt securities 14,233 16,274 17,099
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total securities 159,134 132,007 118,952
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Trading securities 2,291 1,046 287
Funds sold and resell agreements 2,219 2,321 3,267
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total interest revenue 500,274 402,832 357,074
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Interest Expense
Deposits 150,621 138,004 127,802
Borrowed funds 104,195 64,709 62,874
Subordinated debenture 9,334 9,693 4,166
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total interest expense 264,150 212,406 194,842
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Net Interest Revenue 236,124 190,426 162,232
Provision for Loan Losses 10,365 14,591 9,256
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Net Interest Revenue After Provision for Loan Losses 225,759 175,835 152,976
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Other Operating Revenue
Brokerage and trading revenue 16,233 15,301 9,556
Transaction card revenue 32,648 24,426 19,339
Trust fees and commissions 35,127 29,956 24,072
Service charges and fees on deposit accounts 41,067 33,920 30,181
Mortgage banking revenue 36,986 41,733 32,235
Leasing revenue 3,725 7,111 5,861
Other revenue 17,589 11,688 10,330
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total fees and commissions 183,375 164,135 131,574
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Gain on student loan sales 600 1,548 1,311
Gain on loan securitization 270 - -
Gain on sale of other assets 4,626 - -
Gain (loss) on securities (419) 9,337 (1,329)
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total other operating revenue 188,452 175,020 131,556
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Other Operating Expense
Personnel expense 136,010 109,437 90,625
Business promotion 9,077 8,220 8,886
Contribution of stock to BOk Charitable Foundation - 2,257 3,638
Professional fees and services 9,584 9,781 6,906
Net occupancy, equipment and data processing expense 58,024 43,519 36,265
FDIC and other insurance 1,356 1,368 1,380
Printing, postage and supplies 11,599 9,524 8,067
Net gains and operating expenses on repossessed assets (3,473) (474) (3,831)
Amortization on intangible assets 15,823 9,515 8,968
Mortgage banking costs 23,932 25,949 19,968
Provision for impairment of mortgage servicing rights - (2,290) 4,100
Other expense 18,584 17,189 14,882
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Total other operating expense 280,516 233,995 199,854
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Income Before Taxes 133,695 116,860 84,678
Federal and state income tax 44,469 37,249 16,523
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
Net Income $ 89,226 $ 79,611 $ 68,155
================================================================== ================= ================= =================
Earnings Per Share(2):
Basic:
Net income 1.79 1.60 1.36
================================================================== ================= ================= =================
Diluted:
Net income 1.60 1.43 1.23
================================================================== ================= ================= =================
Average Shares Used in Computation(2):
Basic 48,974 48,897 48,895
Diluted 55,771 55,803 55,636
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
<FN>
(1) Restated for pooling of interest in 1999.
(2) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 27
<TABLE>
Consolidated Balance Sheets
(In Thousands Except Share Data)
December 31,
--------------------------------
1999 1998(1)(2)
---------------- --------------
<S> <C> <C>
Assets
Cash and due from banks $ 397,895 $ 431,874
Funds sold and resell agreements 28,960 39,551
Trading securities 14,452 41,138
Securities:
Available for sale 2,588,704 2,329,375
Investment (fair value: 1999 - $211,624; 1998 - $227,754) 213,180 227,777
- --------------------------------------------------------------------------------- ---------------- --------------
Total securities 2,801,884 2,557,152
- --------------------------------------------------------------------------------- ---------------- --------------
Loans 4,643,489 3,647,099
Less reserve for loan losses 76,234 65,922
- --------------------------------------------------------------------------------- ---------------- --------------
Net loans 4,567,255 3,581,177
- --------------------------------------------------------------------------------- ---------------- --------------
Premises and equipment, net 119,239 87,721
Accrued revenue receivable 67,640 64,409
Excess cost over fair value of net assets acquired and core deposit premiums
(net of accumulated amortization: 1999 - $65,292; 1998 - $49,469) 125,011 97,578
Mortgage servicing rights, net 114,134 69,224
Real estate and other repossessed assets 3,478 4,667
Bankers' acceptances 30,161 5,343
Other assets 103,888 79,673
- --------------------------------------------------------------------------------- ---------------- --------------
Total assets $8,373,997 $7,059,507
================================================================================= ================ ==============
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits $1,020,996 $1,165,283
Interest-bearing deposits:
Transaction 1,866,499 1,453,236
Savings 155,839 185,971
Time 2,219,850 1,803,237
- --------------------------------------------------------------------------------- ---------------- --------------
Total deposits 5,263,184 4,607,727
- --------------------------------------------------------------------------------- ---------------- --------------
Funds purchased and repurchase agreements 1,345,683 1,040,683
Other borrowings 938,020 660,347
Subordinated debenture 148,642 146,921
Accrued interest, taxes and expense 62,431 58,034
Bankers' acceptances 30,161 5,343
Other liabilities 28,712 15,659
- --------------------------------------------------------------------------------- ---------------- --------------
Total liabilities 7,816,833 6,534,714
- --------------------------------------------------------------------------------- ---------------- --------------
Shareholders' equity:
Preferred stock 25 25
Common stock ($.00006 par value; 2,500,000,000 shares authorized; issued:
1999 - 49,382,262; 1998 - 48,111,647) 3 3
Capital surplus 274,980 236,726
Retained earnings 332,751 278,365
Treasury stock (shares at cost: 1999 - 316,325; 1998 - 748,576) (7,018) (2,623)
Accumulated other comprehensive income (loss) (43,577) 12,297
- --------------------------------------------------------------------------------- ---------------- --------------
Total shareholders' equity 557,164 524,793
- --------------------------------------------------------------------------------- ---------------- --------------
Total liabilities and shareholders' equity $8,373,997 $7,059,507
================================================================================= ================ ==============
<FN>
(1) Restated for pooling of interest in 1999.
(2) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 28
BOK FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In Thousands)
Preferred Stock(4) Common Stock(4)
----------------- ---------------
Shares Amount Shares(3) Amount
----------------- ----------------
December 31, 1996 250,000 $23 45,348 $ 3
Comprehensive income:
Net income - - - -
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 17 -
Issuance of common stock to Thrift Plan - - 36 -
Exercise of stock options - - 216 -
Payments on stock options notes receivable - - - -
Purchase of common stock - - - -
Dividends paid in shares of common stock:
Preferred stock - - 107 -
Common stock - - 1,278 -
----------------------------------
December 31, 1997 250,000 23 47,002 3
Comprehensive income:
Net income - - - -
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 12 -
Issue preferred stock - 2 - -
Treasury stock purchase - - - -
Issuance of common stock to Thrift Plan - - - -
Exercise of stock options - - 234 -
Payments on stock options notes receivable - - - -
Common stock dividend - - - -
Dividends paid in shares of common stock:
Preferred stock - - 69 -
Common stock - - 795 -
----------------------------------
December 31, 1998 250,000 25 48,112 3
Comprehensive income: - - - -
Net income
Other comprehensive loss, net of tax:
Unrealized loss on securities available for sale - - - -
Total comprehensive income
Director retainer shares - - 9 -
Treasury stock purchase - - - -
Cancel treasury stock - - (725) -
Issuance of common stock to Thrift Plan - - 17 -
Exercise of stock options - - 480 -
Common stock dividend - - - -
Dividends paid in shares of common stock:
Preferred stock - - 57 -
Common stock - - 1,432 -
----------------------------------
December 31, 1999 250,000 $25 49,382 $ 3
================================================================================
(1) December 31,
---------------------------------
1999 1998 1997
---------------------------------
Reclassification adjustment:
Unrealized gains (losses)on available for
sale securities $(56,155) $ 6,785 $ 9,170
Less reclassification adjustment for gains
(losses) realized and included in net
income, net of tax (281) 6,157 (1,059)
---------------------------------
Net unrealized gains on securities $(55,874) $ 628 $10,229
=================================
(2) Notes receivable from exercise of stock options.
(3) Shares and per share data have been restated to reflect the 3% stock
dividend paid in October 1999.
(4) Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements.
<PAGE> 29
Consolidated Statements of Changes in Shareholders' Equity, (Continued)
Accumulated
Other
Comprehensive Capital Retained Treasury Stock(4) Notes
----------------------
Income(Loss)(4)Surplus(4)Earnings(4)Shares(3) Amount Receivable(2)(4) Total(4)
- ----------- ----------- --------- --------- ------------ ------------- ---------
$ 1,440 $179,527 $194,988 808 $(2,623) $(87) $373,271
- - 68,155 - - - 68,155
10,229 - - - - - 10,229
---------
78,384
---------
- 258 - (1) 2 - 260
- 715 - - - - 715
- 2,390 - 80 (1,639) - 751
- - - - - 83 83
- 45 - (10) 27 - 72
- 1,500 (1,500) - - - -
- 27,448 (29,023) 4 (81) - (1,656)
- ----------- ----------- --------- --------- ------------ ------------- ---------
11,669 211,883 232,620 881 (4,314) (4) 451,880
- - 79,611 - - - 79,611
628 - - - - - 628
---------
80,239
---------
- 292 - - - - 292
- - - - - - 2
- - - 386 (9,138) - (9,138)
- 94 - (56) 1,204 - 1,298
- 3,937 - 55 (1,355) - 2,582
- - - - - 4 4
- - (2,344) - - - (2,344)
- 1,500 (1,500) - - - -
- 19,020 (30,022) (517) 10,980 - (22)
- ----------- ----------- --------- --------- ------------ ------------- ---------
12,297 236,726 278,365 749 (2,623) - 524,793
- - 89,226 - - - 89,226
(55,874) - - - - - (55,874)
---------
33,352
---------
- 294 - - - - 294
- - - 74 (1,574) - (1,574)
- (2,062) - 725) 2,062 - -
- 406 - (1) 36 - 442
- 7,424 - 215 (4,823) - 2,601
- - (2,734) - (2,734)
- 1,500 (1,500) - -
- 30,692 (30,606) 4 (96) - (10)
- ----------- ----------- --------- --------- ------------ ------------- ---------
$ (43,577) $274,980 $332,751 316 $ (7,018) $ - $557,164
=========== =========== ========= ========= ============ ============= =========
<PAGE> 30
BOK FINANCIAL CORPORATION
<TABLE>
Consolidated Statements of Cash Flows
(In Thousands)
1999 1998(1) 1997(1)
------------ ------------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 89,226 $ 79,611 $ 68,155
Adjustments to reconcile net income to net cash provided by operating
activities:
Provisions for loan losses 10,365 14,591 9,256
Provisions for mortgage servicing rights - (2,290) 4,100
Depreciation and amortization 41,088 39,962 32,865
Net amortization of securities
discounts and premiums 1,413 701 3,012
Net gain on sale of assets (15,039) (23,209) (7,802)
Contribution of stock to BOk Charitable Foundation - 2,257 3,638
Mortgage loans originated for resale (687,857) (922,585) (849,457)
Proceeds from sale of mortgage loans held for resale 738,109 913,700 870,198
(Increase) decrease in trading securities 34,734 (36,139) 1,455
(Increase) decrease in accrued revenue receivable 21 (11,999) 399
(Increase) decrease in other assets (65,824) (14,971) 6,563
Increase (decrease) in accrued interest, taxes and expense 24,151 14,533 (12,713)
Increase in other liabilities 29,806 3,139 3,867
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Net cash provided by operating activities 200,193 57,301 133,536
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Cash Flows From Investing Activities:
Proceeds from sales of available for sale securities 1,397,956 1,816,796 1,026,464
Proceeds from maturities of investment securities 59,684 33,163 25,904
Proceeds from maturities of available for sale securities 634,527 511,690 237,302
Purchases of investment securities (45,330) (48,791) (40,701)
Purchases of available for sale securities (2,223,829) (2,795,309) (1,446,877)
Loans originated or acquired net of principal collected (1,045,516) (684,389) (272,585)
Proceeds from sales of assets 190,673 60,505 14,674
Purchases of assets (93,755) (45,028) (74,543)
Cash and cash equivalents of subsidiaries and branches acquired and sold, net 25,584 311,977 12,365
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Net cash used by investing activities (1,100,006) (839,386) (517,997)
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits, transaction
deposits, and savings accounts (20,535) 118,411 154,202
Net increase in certificates of deposit 321,702 68,730 39,738
Net increase in other borrowings 554,433 675,128 66,986
Repayment of subordinated debenture - - (20,000)
Issuance of subordinated debt - - 168,356
Repurchase of subordinated debt - (1,538) -
Issuance of preferred, common and treasury stock, net 3,961 4,152 1,777
Purchase of treasury stock (1,574) (9,138) -
Dividends paid (2,744) (2,344) (1,636)
Payments on notes receivable - 4 83
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Net cash provided by financing activities 855,243 853,405 409,506
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Net increase (decrease) in cash and cash equivalents (44,570) 71,320 25,045
Cash and cash equivalents at beginning of period 471,425 400,105 375,060
- -------------------------------------------------------------------------------------- ------------ ------------- ------------
Cash and cash equivalents at end of period $ 426,855 $ 471,425 $ 400,105
====================================================================================== ============ ============= ============
Cash paid for interest $ 265,548 $ 182,143 $ 192,146
====================================================================================== ============ ============= ============
Cash paid for taxes 43,664 29,569 20,167
====================================================================================== ============ ============= ============
Net loans transferred to repossessed real estate 1,857 2,945 3,165
====================================================================================== ============ ============= ============
Payment of dividends in common stock 32,192 31,500 28,948
====================================================================================== ============ ============= ============
<FN>
(1) Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 31
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 accounting principles
generally accepted in the United States, 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"), Bank of Texas, N.A., Bank of Arkansas, N.A., and Bank of
Albuquerque, 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, North Texas and Northern
New Mexico. 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 consolidated 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. These conditions would include an
ongoing performance history and a forecast of anticipated performance that is
significantly below management's expectations for acquired entities. Impairment
would be determined by a comparison of the fair value of assets and liabilities
of the acquired entity plus an estimate of current market premiums paid for
similar entities. 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. Unrealized gains and losses are recorded,
net of deferred income taxes, as accumulated other comprehensive income (loss)
in shareholders' equity. Realized gains and losses on sales of securities are
based upon the amortized 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. 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. 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> 32
Reserve for Loan Losses
The adequacy of the reserve for loan losses is assessed by management based
upon an ongoing quarterly evaluation of the probable estimated losses inherent
in the portfolio, and includes probable losses on both outstanding loans and
unused commitments to provide financing. A consistent methodology has been
developed that includes reserves assigned to specific criticized loans, general
reserves that are based upon a statistical migration analysis for each category
of loans, and other allocated reserves that are based upon an analysis of
current economic conditions, loan concentrations, portfolio growth, and other
relevant factors. The reserve for loan losses related to loans that are
identified for evaluation in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("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. 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 reserve
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.
Asset Securitization
BOK Financial securitizes and sells pools of assets. These transactions are
designed to comply with the requirements of Statement of Financial Accounting
Standard No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," ("FAS 125") for treatment as a sale. As
part of these sales, BOK Financial may retain the right to service the assets
and a residual interest in excess cash flows generated by the assets. The fair
value of these retained assets is determined by a discounting of expected future
net cash to be received using assumed market interest rates for these
instruments. Servicing rights are carried at the lower of amortized cost or fair
value. A valuation allowance is provided when amortized cost of servicing rights
exceeds fair value. Residual interests are carried at fair value. Changes in
fair values are recorded in income.
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, which
is determined by 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. During 1998, BOK Financial adopted Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use." The statement requires the capitalization of certain costs incurred to
acquire, develop and install computer software subject to certain conditions.
Previously, only costs to acquire software were capitalized. All other costs,
including installation costs, were charged to expense. Upgrades and enhancements
to existing software will generally continue to be charged to expense. The
current year effect of this statement was not material.
Mortgage Servicing Rights
Capitalized mortgage servicing rights are carried at the lower of cost or
fair value. Cost is determined by acquisition amount minus accumulated
amortization plus/minus deferred loss/gain on hedges and changes in valuation
allowances, if any. 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 risk-adjusted 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 capitalized servicing rights
is based upon an interest rate stratification. 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 net amortized cost of each
interest rate strata exceeds the calculated fair value.
Originated mortgage servicing rights are 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.
<PAGE> 33
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 similar duration
to 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 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 estimated life of the loan servicing portfolio. 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.
Interest Rate Swaps and Forward Commitments
Interest rate swaps and forward sales contracts are used as part of an
interest rate risk management strategy. Interest rate swaps are used primarily
to modify the interest expense of certain long-term, fixed rate assets and
liabilities. 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 obligations, any realized or unrealized gain or loss from
the swaps would be recognized in income coincident with the redemption. The fair
value of the swap agreements and changes in the fair value due to changes in
market interest rates are not recognized in the financial statements.
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
BOK Financial utilizes the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based upon
the difference between the values of the assets and liabilities as reflected in
the financial statement and their related tax basis using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled. As changes in tax law or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
BOK Financial and its subsidiaries file consolidated tax returns. The
subsidiaries provide for income taxes on a separate return basis, and remit to
BOK Financial amounts determined to be currently payable.
Employee Benefit Plans
BOK Financial sponsors various plans, including a defined benefit pension
plan ("Pension Plan"), qualified profit sharing plans ("Thrift Plans"), and
employee health care plans. Employer contributions to the Thrift Plans, 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 has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock options on the date of grant, no compensation expense is
recorded. BOK Financial has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), included in Note 12.
Fiduciary Services
Fees and commissions on approximately $17 billion of assets managed by BOK
Financial under various fiduciary arrangements are recognized on the accrual
method.
Comprehensive Income
As of January 1, 1998, BOK Financial adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS
130 establishes new rules for reporting and display of comprehensive income and
its components; however, the adoption of FAS 130 had no impact on BOK
Financial's net income or shareholders' equity. FAS 130 requires unrealized
gains or losses on available-for-sale securities to be included in other
comprehensive income. The components of comprehensive income are disclosed in
the Consolidated Statements of Changes in Shareholders' Equity.
<PAGE> 34
Segment Disclosures
On December 31, 1998, BOK Financial adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 established standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers. BOK Financial operates five
principal lines of business - corporate banking, consumer banking, mortgage
banking, trust services and regional banks which account for more than 75% of
total revenue. The disclosures required by FAS 131 have been included in Note
17.
Effect of Pending Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
FAS 133, which requires BOK Financial to recognize all derivatives on the
balance sheet at fair value, is effective for years beginning after June 15,
2000. FAS 133 permits early adoption as of the beginning of any fiscal quarter
that begins after June 1998. BOK Financial expects to adopt FAS 133 effective
January 1, 2001. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of the assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portions of a derivative's change in
fair value will be immediately recognized in earnings. BOK Financial has not yet
determined what effect the adoption of this statement will have on its results
of operations or financial positions.
(2) ACQUISITIONS
On May 14, 1999, BOK Financial paid $26.8 million to acquire all
outstanding common shares of Chaparral Bancshares, Inc. and its subsidiaries,
including Canyon Creek National Bank, (collectively "Canyon Creek"). On June 2,
1999, BOK Financial paid $17.0 million to acquire all outstanding stock of
Mid-Cities Bancshares, Inc. and its subsidiaries (collectively "Mid-Cities"). On
June 15, 1999, BOK Financial paid $32.0 million to acquire all outstanding stock
of Swiss Avenue State Bank ("Swiss").
On December 4, 1998, BOK Financial, through Bank of Albuquerque, paid a
premium of $34 million to Bank of America to assume the deposits and to acquire
the premises and equipment and certain loans at 17 branches, primarily in
Albuquerque, New Mexico.
During the first quarter of 1997, BOK Financial completed the acquisitions
of Park Cities Bancshares, Inc. and its subsidiary, First National Bank of Park
Cities, Dallas, Texas (collectively "Park Cities") and First Texcorp, Inc. and
its subsidiary First Texas Bank, Dallas, Texas (collectively "First Texas"). On
February 12, 1997, BOK Financial issued notes totaling $10.9 million and $40
million in cash to acquire all outstanding common shares of Park Cities and on
March 4, 1997, BOK Financial paid $39.3 million to acquire all outstanding
common shares of First Texas.
All of the above transactions were accounted for by the purchase method of
accounting. Allocation of the purchase price to the net assets acquired in 1999
and the aggregate acquisitions in 1998 and 1997 were as follows (in thousands):
1999
------------------------------
Aggregate Acquisitions
Canyon --------------------
Creek Mid-Cities Swiss 1998 1997
---------- ---------- -------- ---------- ---------
Cash and cash equivalents $ 34,858 $ 17,405 $ 50,952 $ 9,029 $ 91,581
Securities 13,347 19,018 114,037 - 148,472
Loans 54,074 43,183 50,440 144,209 137,838
Less reserve for loan losses 356 583 586 - 2,525
--------- --------- --------- ---------- ---------
Loans, net 53,718 42,600 49,854 144,209 135,313
Premises and equipment 6,672 452 8,942 11,205 5,141
Core deposit premium 3,943 2,240 6,338 13,495 11,109
Other assets 2,665 849 2,060 233 9,382
--------- --------- --------- ---------- ---------
Total assets acquired 115,203 82,564 232,183 178,171 400,998
Deposits:
Noninterest bearing 31,164 12,993 7,678 47,361 123,716
Interest bearing 67,946 59,557 174,954 418,490 221,016
---------- --------- --------- ---------- ---------
Total deposits 99,110 72,550 182,632 465,851 344,732
Borrowed funds 21 165 28,240 - 623
Other liabilities 866 136 1,232 9 2,793
---------- --------- --------- ---------- ---------
Net assets acquired 15,206 9,713 20,079 (287,689) 52,850
Less purchase price 26,751 17,000 32,005 (267,189) 90,118
---------- --------- --------- ---------- ---------
Goodwill $ 11,545 $ 7,287 $ 11,926 $ 20,500 $ 37,268
========== ========= ========= ========== =========
<PAGE> 35
On June 30, 1999, BOK Financial issued 2,371,809 common shares to acquire
First Muskogee Bancshares, Inc. and its subsidiary, First National Bank and
Trust Company of Muskogee (collectively "First Muskogee") in a pooling of
interests. Financial statements of BOK Financial for 1997 and 1998 have been
restated to reflect this merger. Information regarding this acquisition follows
(in thousands):
Six
Months ended
June 30, 1999 December 31
-------------------------
(Unaudited) 1998 1997
- -----------------------------------------------------------
Net interest revenue:
BOK Financial $104,233 $182,252 $155,600
First Muskogee 4,361 8,174 6,632
- --------------------- ------------- ----------- -----------
Combined $108,594 $190,426 $162,232
===================== ============= =========== ===========
Net income:
BOK Financial $ 40,845 $ 74,716 $ 64,625
First Muskogee 2,448 4,895 3,530
- --------------------- ------------- ----------- -----------
Combined $ 43,293 $ 79,611 $ 68,155
===================== ============= =========== ===========
Earnings per share:
Basic:
BOK Financial $ .82 $ 1.50 $ 1.29
First Muskogee .05 .10 .07
- --------------------- ------------- ----------- -----------
Combined $ .87 $ 1.60 $ 1.36
===================== ============= =========== ===========
Diluted:
BOK Financial $ .73 $ 1.34 $ 1.16
First Muskogee .05 .09 .07
- --------------------- ------------- ----------- -----------
Combined $ .78 $ 1.43 $ 1.23
===================== ============= =========== ===========
Average shares:
Basic 48,911 48,897 48,895
Diluted 55,784 55,803 55,636
- --------------------- ------------- ----------- -----------
The following unaudited condensed consolidated pro forma statements of
earnings for BOK Financial presents the effects on income had all of these
acquisitions described above occurred at the beginning of 1998:
Condensed Consolidated Pro Forma Statements of Earnings For the Years ended
December 31, 1999 and 1998
(In Thousands)
(Unaudited)
1999 1998
------------ -----------
Net interest revenue $240,796 $217,278
Provision for loan losses 10,397 17,551
- ----------------------------------- ------------ -----------
Net interest revenue after
provision for loan losses 230,399 199,727
Other operating revenue 189,111 182,901
Other operating expense 284,332 260,058
- ----------------------------------- ------------ -----------
Income before taxes 135,178 122,570
Federal and state income tax 44,969 39,102
- ----------------------------------- ------------ -----------
Net income $ 90,209 $ 83,468
=================================== ============ ===========
Earnings per share:
Basic net income $ 1.81 $ 1.68
Diluted net income 1.62 1.50
- ----------------------------------- ------------ -----------
Average shares:
Basic 48,974 48,897
Diluted 55,771 55,803
- ----------------------------------- ------------ -----------
In 1999, BOK Financial acquired a mortgage bank office in the Kansas City
area for $1.3 million. In 1998, BOK Financial completed the acquisitions of Leo
Oppenheim & Co., a public finance firm, and a branch office in Bartlesville,
Oklahoma which provided net cash of $35.8 million and deposits of $30.3 million.
These acquisitions were not material to BOK Financial's financial position or
results of operations.
<PAGE> 36
(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 $688 thousand, $3.2
million and $829 thousand for 1999, 1998 and 1997, respectively.
(4) SECURITIES
Investment Securities
The amortized cost and fair values of investment securities are as follows
(in thousands):
<TABLE>
December 31,
-------------------------------------------------------------------------------------
1999 1998
---------------------------------------- --------------------------------------------
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 $ 196 $ 198 $ 2 $ - $ 600 $ 600 $ - $ -
Municipal and other tax exempt 186,177 184,748 696 (2,125) 184,988 184,521 1,159 (1,626)
Mortgage-backed U.S. agency
securities 18,051 17,926 70 (195) 30,385 30,829 452 (8)
Other debt securities 8,756 8,752 1 (5) 11,804 11,804 - -
- --------------------------------------------------------------------------------------------------------------------
Total $213,180 $211,624 $769 $(2,325) $227,777 $227,754 $1,611 $(1,634)
====================================================================================================================
</TABLE>
The amortized cost and fair values of investment securities at December 31,
1999, by contractual maturity, are as shown in the following table (dollars in
thousands):
<TABLE>
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity(4)
------------ -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries:
Amortized cost $ 196 $ - $ - $ - $ 196 .17
Fair value 198 - - - 198
Nominal yield 5.21% - - - 5.21%
Municipal and other tax exempt:
Amortized cost 30,691 114,639 37,554 3,293 186,177 3.27
Fair value 30,538 114,112 36,908 3,190 184,748
Nominal yield(1) 7.20% 6.98% 7.55% 9.14% 7.17%
Other debt securities:
Amortized cost 1,015 956 6,685 100 8,756 4.53
Fair value 1,016 956 6,684 96 8,752
Nominal yield 4.70% 5.73% 6.76% 7.00% 6.41%
------------ -------------- ------------- ------------- ------------- -------------
Total fixed maturity securities:
Amortized cost $31,902 $115,595 $44,239 $3,393 195,129 3.32
Fair value 31,752 115,068 43,592 3,286 193,698
Nominal yield 7.10% 6.97% 7.43% 9.08% 7.13%
============ ============== ============= =============
Mortgage-backed securities:
Amortized cost 18,051 -(2)
Fair value 17,926
Nominal yield(3) 6.91%
-------------
Total investment securities:
Amortized cost $213,180
Fair value 211,624
Nominal yield 7.11%
=============
<FN>
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 3.4 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.
(4) Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
penalty.
</FN>
</TABLE>
<PAGE> 37
Available for Sale Securities
The amortized cost and fair value of available for sale securities
are as follows (in thousands):
<TABLE>
December 31,
-----------------------------------------------------------------------------------------------
1999 1998
----------------------------------------------- -----------------------------------------------
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 $ 112,902 $ 111,860 $ 10 $ (1,052) $ 170,862 $ 171,707 $ 1,223 $ (378)
Municipal and other tax exempt 13,086 13,094 75 (67) 92,082 93,131 1,324 (275)
Mortgage-backed securities:
U. S. agencies 2,174,916 2,106,094 290 (69,112) 1,902,568 1,913,869 13,391 (2,090)
Other 202,229 200,558 1 (1,672) 1,772 1,762 - (10)
- -------------------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 2,377,145 2,306,652 291 (70,784) 1,904,340 1,915,631 13,391 (2,100)
- ------------------------------------------------------------------------------- -----------------------------------------------
Other debt securities 353 353 2 (2) 456 462 6 -
Equity securities and mutual 156,476 156,745 1,104 (835) 142,460 148,444 8,041 (2,057)
funds
- ------------------------------------------------------------------------------- -----------------------------------------------
Total $2,659,962 $2,588,704 $1,482 $(72,740) $2,310,200 $2,329,375 $23,985 $(4,810)
===============================================================================================================================
</TABLE>
The amortized cost and fair values of available for sale securities at
December 31, 1999, by contractual maturity, are as shown in the following table
(dollars in thousands):
<TABLE>
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity(5)
------------ -------------- ------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries:
Amortized cost $67,936 $44,966 $ - $ - $ 112,902 1.10
Fair value 67,734 44,126 - - 111,860
Nominal yield 5.57% 5.01% - - 5.35%
Municipal and other tax exempt:
Amortized cost 1,947 8,737 2,402 - 13,086 3.30
Fair value 1,939 8,734 2,421 - 13,094
Nominal yield(1) 6.91% 7.06% 8.33% - 7.27%
Other debt securities:
Amortized cost - - 153 200 353 10.40
Fair value - - 152 201 353
Nominal yield(1) - - 7.38% 7.22% 7.29%
------------ -------------- ------------- ------------- -------------- -----------
Total fixed maturity securities:
Amortized cost $69,883 $53,703 $2,555 $200 126,341 1.35
Fair value 69,673 52,860 2,573 201 125,307
Nominal yield 5.61% 5.35% 8.27% 7.22% 5.55%
============ ============== ============= =============
Mortgage-backed securities:
Amortized cost 2,377,145 -(2)
Fair value 2,306,652
Nominal yield(4) 6.17%
--------------
Equity securities and mutual funds:
Amortized cost 156,476 -(3)
Fair value 156,745
Nominal yield 6.88%
--------------
Total available-for-sale securities:
Amortized cost $2,659,962
Fair value 2,588,704
Nominal yield 6.18%
==============
<FN>
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 4.4 years based upon current prepayment assumptions.
(3) Primarily common stock 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.
(5) Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalty.
</FN>
</TABLE>
<PAGE> 38
Sales of available for sale securities resulted in gains and losses as follows
(in thousands):
1999 1998 1997
----------- ----------- ----------
Proceeds $1,397,956 $1,816,796 $1,026,464
Gross realized gains 4,069 15,508 3,159
Gross realized losses 4,488 6,171 4,488
Related federal and state
income tax expense (138) 3,180 (270)
(benefit)
=========================== =========== =========== ==========
Securities with amortized costs of $2.1 billion and $1.7 billion at
December 31, 1999 and 1998, 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,
-----------------------------------------------------------------------------------------------
1999 1998
------------------------------------------------ ----------------------------------------------
Fixed Variable Non- Fixed Variable Non-
Rate Rate accrual Total Rate Rate accrual Total
------------------------------------------------ ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 489,545 $2,162,470 $12,686 $2,664,701 $ 308,624 $1,672,255 $ 8,394 $1,989,273
Commercial real estate 305,208 787,288 2,046 1,094,542 251,875 506,744 1,950 760,569
Residential mortgage 369,860 157,815 3,383 531,058 315,946 182,161 2,583 500,690
Residential mortgage - held 57,057 - - 57,057 100,269 - - 100,269
for sale
Consumer 221,399 73,382 1,350 296,131 214,691 80,439 1,168 296,298
- ------------------------------------------------------------------------------------------------------------------------------
Total $1,443,069 $3,180,955 $19,465 $4,643,489 $1,191,405 $2,441,599 $14,095 $3,647,099
==============================================================================================================================
Foregone interest on nonaccrual loans $ 2,321 $ 2,271
==============================================================================================================================
</TABLE>
The majority of the commercial and consumer loan portfolios and
approximately 63% of the residential mortgage loan portfolio (excluding loans
held for sale) are loans to businesses and individuals in Oklahoma. 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 $606.6 million, or 13% of total loans. Other notable segments
include wholesale/ retail, $407.8 million; manufacturing, $344.2 million;
agriculture, $173.7 million, which includes $143.9 million loans to the cattle
industry; and services, $807.2 million, which include nursing homes of $84.6
million, hotels of $108.0 million and healthcare of $110.3 million.
Approximately 53% of commercial real estate loans are secured by
properties located in Oklahoma, primarily in the Tulsa or Oklahoma City
metropolitan areas. An additional 12% of commercial real estate loans are
secured by property located in Texas. The major components of these properties
are multifamily residences, $257.2 million; construction and land development,
$249.2 million; retail facilities, $169.4 million; and office buildings, $207.5
million.
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):
1999 1998
----------- ------------
Beginning balance $63,098 $69,668
Advances 46,820 9,950
Payments (11,205) (15,135)
Adjustments (3,852) (1,385)
-----------------------------------------------------------
Ending balance $94,861 $63,098
===========================================================
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):
1999 1998 1997
--------------------------------
Beginning balance $65,922 $54,044 $45,907
Provision for loan losses 10,365 14,591 9,256
Loans charged off (7,348) (7,596) (9,279)
Recoveries 5,770 4,883 5,635
Addition due to acquisitions 1,525 - 2,525
-----------------------------------------------------------
Ending balance $76,234 $65,922 $54,044
===========================================================
At December 31, 1999, 1998 and 1997, respectively, the recorded investment
in loans that are considered to be impaired under FAS 114 was $15.6 million,
$11.3 million and $16.8 million (all of which were on a nonaccrual basis).
Included in this amount at December 31, 1999, is $9.1 million of impaired loans
for which the related specific reserve for loan losses is $2.5 million and $6.6
million that did not have a specific related reserve for loan losses. At
December 31, 1998 and 1997, respectively, this amount included $2.7 million and
$2.6 million, of impaired loans for which the related allowance for credit loss
was $1.4 million and $919 thousand and $8.6 million and $14.2 million,
respectively, that did not have a related allowance for credit losses. The
average recorded investments in impaired loans during the years ended December
31, 1999, 1998 and 1997 were approximately $15.3 million, $13.8 million and
$19.5 million, respectively. Interest income recognized on impaired loans during
1999, 1998 and 1997 was not significant.
<PAGE> 39
During 1999, BOK Financial sold approximately $100 million of automobile
loans and retained the right to service the loans and a residual interest in
certain excess cash flows generated by the loans. The proceeds of the sale were
provided by the issuance of debt certificates that totaled $95.9 million by an
independent special purpose entity. These retained interests are being carried
on the books in accordance with FAS 125. A spread account is maintained by a
trustee to hold excess cash received. Funds will be released from the spread
account to BOK Financial once certain criteria are met. At December 31, 1999,
the carrying values of the servicing rights asset and residual interest were
$343 thousand and $9.8 million, respectively. Significant information and
assumptions used to determine the value of these assets at December 31, 1999
were:
Current outstanding loan principal $56.7 million
Average interest rate on loans sold 11.44%
Current outstanding debt certificates $52.6 million
Interest rate on debt certificates 6.07%
Current spread account balance $ 4.6 million
Estimated remaining life including Prepayments 30 months
Discount rates:
Servicing rights 10.00%
Residual interest 12.00%
(6) PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows (in
thousands):
December 31,
-------------------------
1999 1998
------------ ------------
Land $ 22,474 $15,559
Buildings and improvements 65,646 47,695
Furniture and equipment 93,388 68,335
- ---------------------------------- ------------ ------------
Subtotal 181,508 131,589
- ---------------------------------- ------------ ------------
Less accumulated depreciation 62,269 43,868
- ---------------------------------- ------------ ------------
Total $119,239 $87,721
================================== ============ ============
Depreciation expense of premises was $13.3 million, $8.6 million and
$8.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
(7) MORTGAGE BANKING ACTIVITIES
BOK Financial engages in mortgage-banking activities through the BOk
Mortgage Division of BOk. Residential mortgage loans held for sale totaled $57.1
million and $100.3 million and outstanding mortgage loan commitments totaled
$123.2 million and $239.0 million, respectively, at December 31, 1999 and 1998.
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, 1999, forward sales
contracts totaled $72.3 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, 1999, BOk owned the rights to service 94,352 mortgage loans
with outstanding principal balances of $7.0 billion, including $107.4 million
serviced for BOk, and held related funds for investors and borrowers of $93.6
million. The weighted average interest rate and remaining term was 7.46% and 272
months, respectively. Mortgage loans sold with recourse totaled $4.2 million at
December 31, 1999. At December 31, 1998, BOk owned the rights to service
mortgage loans with outstanding principal balances of $6.4 billion and held
related funds for investors and borrowers of $153.8 million.
The portfolio of mortgage servicing rights exposes BOk to interest rate
risk. During periods of falling interest rates, mortgage loan prepayments
increase. This reduces the value of the mortgage servicing rights. BOk uses a
combination of futures contracts and options related to 10-year U.S. Treasury
securities to hedge this risk. The value of these derivative instruments moves
inversely to the value of the mortgage servicing rights. See Note 1 for specific
accounting policies for mortgage servicing rights and the related hedges.
<PAGE> 40
Activity in capitalized mortgage servicing rights and related valuation
allowance during 1999, 1998 and 1997 are as follows (in thousands):
<TABLE>
Capitalized Mortgage Servicing Rights Valuation Hedging
-------------------------------------
Purchased Originated Total Allowance (Gain)/Loss Net
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $57,256 $ 5,188 $ 62,444 $ (900) $ - $ 61,544
Additions 33,238 6,013 39,251 - - 39,251
Amortization expense (11,533) (1,272) (12,805) - - (12,805)
Provision for impairment - - - (4,100) - (4,100)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 78,961 9,929 88,890 (5,000) - 83,890
Additions 9,443 14,355 23,798 - - 23,798
Amortization expense (15,185) (3,085) (18,270) - 739 (17,531)
Provision for impairment - - - 2,290 - 2,290
Impairment charge-off (2,710) - (2,710) 2,710 - -
Realized hedge gains - - - - (22,705) (22,705)
Unrealized hedge gains - - - - (518) (518)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 70,509 21,199 91,708 - (22,484) 69,224
Additions 16,509 11,073 27,582 - - 27,582
Amortization expense (12,106) (3,457) (15,563) - 734 (14,829)
Realized hedge losses - - - 28,293 28,293
Unrealized hedge losses - - - 3,864 3,864
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $74,912 $28,815 $103,727 $ - $10,407 $114,134
==========================================================================================================================
Estimated fair value of mortgage servicing rights at:
December 31, 1997(1) $86,335 $14,022 $100,357 $100,357
December 31, 1998(1) $66,663 $23,527 $ 90,190 $ 90,190
December 31, 1999(1) $83,279 $37,547 $120,826 $120,826
- --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Excludes approximately, $19 million, $9 million and $8 million at December
31, 1997, 1998 and 1999, respectively, of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
</FN>
</TABLE>
Fair value is determined by discounting the projected net cash flows.
Significant assumptions are:
Discount rate - Risk adjusted rates by loan product, ranging from 9.50% to
21.25%.
Prepayment rate - Industry consensus annual prepayment estimates ranging
from 7.32% to 43.58% from an independent reporting source based upon
loan interest rate, original term and loan type.
Loan servicing costs - $40 to $50 per loan based upon loan type.
Stratification of the mortgage loan servicing portfolio, outstanding principal
of loans serviced, and related hedging information by interest rate at December
31, 1999 follows (in thousands):
<TABLE>
< 6.50% 6.50% - 7.49% 7.50% - 8.49% => 8.50% Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost less accumulated amortization $ 9,203 $ 62,417 $ 29,357 $ 2,750 $ 103,727
Deferred hedge losses - 8,177 2,230 - 10,407
- ---------------------------------------------------------------------------------------------------------------------------
Adjusted cost 9,203 70,594 31,587 2,750 114,134
Fair value 10,420 71,929 33,468 5,009 120,826
- ---------------------------------------------------------------------------------------------------------------------------
Impairment $ - $ - $ - $ - $ -
===========================================================================================================================
Outstanding principal of loans serviced $ 614,812 $ 3,810,409 $ 1,814,772 $ 296,754 $ 6,536,747(1)
===========================================================================================================================
<FN>
(1) Excludes outstanding principal of $491.5 million for loans serviced by BOk for which there are no capitalized mortgage
servicing rights.
</FN>
</TABLE>
(8) DEPOSITS
Interest expense on deposits is summarized as follows (in thousands):
1999 1998 1997
-----------------------------------
Transaction deposits $ 46,510 $ 37,148 $ 33,730
Savings 2,971 3,837 3,472
Time:
Certificates of
deposits under $100,000 41,418 43,789 43,772
Certificates of
deposits $100,000 and over 49,166 42,110 35,358
Other time deposits 10,556 11,120 11,470
- -------------------------------------------------------------------
Total time 101,140 97,019 90,600
===================================================================
Total $150,621 $138,004 $127,802
===================================================================
The aggregate amounts of time deposits in denominations of $100,000 or more
at December 31, 1999 and 1998 were $1.2 billion and $784.4 million,
respectively.
Time deposit maturities are as follows: 2000 - $1.7 billion, 2001 - $230.0
million, 2002 - $25.9 million, 2003 - $18.9 million, 2004 - $2.3 million and
$1.0 million thereafter.
Interest expense on time deposits during 1999 and 1998 was reduced by net
income from interest rate swaps of $79.0 thousand and $542.3 thousand,
respectively.
<PAGE> 41
(9) OTHER BORROWINGS
Information relating to other borrowings is summarized as follows
(dollars in thousands):
<TABLE>
Rate at Maximum
Period-End Daily average end of outstanding at
---------------------------
Balance Balance Rate year any month-end
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999:
Funds purchased and
repurchase agreements $1,345,683 $1,146,918 5.12% 6.58% $1,384,596
Other 1,086,662 960,606 5.71 5.91 1,086,662
- ------------------------------------------------------------
Total $2,432,345 $2,107,524 5.39 6.28 2,432,345
====================================================================================================
1998:
Funds purchased and
repurchase agreements $1,040,683 $ 733,031 5.38% 4.98% $1,040,683
Other 807,268 563,188 6.20 5.98 807,268
- ------------------------------------------------------------
Total $1,847,951 $1,296,219 5.74 5.41 1,847,951
====================================================================================================
1997:
Funds purchased and repurchase
agreements $ 631,815 $ 705,870 5.53% 5.83% $ 822,109
Other 542,443 449,348 6.23 4.50 548,355
- ------------------------------------------------------------
Total $1,174,258 $1,155,218 5.80 5.22 $1,287,295
====================================================================================================
</TABLE>
Other borrowings at December 31, 1999 included $816.3 million in advances
from the Federal Home Loan Bank. These advances, which are used for funding
purposes, include term funds of $426.3 million bearing interest from 5.37% -
7.80%. Of these term funds, $352.1 million mature in 2000, $18.1 million mature
in 2001, $17.5 million mature in 2002, $54 thousand mature in 2003, and $38.5
million mature thereafter. In accordance with policies of the Federal Home Loan
Bank, BOK Financial has granted a blanket pledge of eligible assets (generally
unencumbered U.S. Treasury and mortgage-backed securities, 1-4 family loans and
multifamily loans) as collateral for these advances. The unused credit available
to BOK Financial at December 31, 1999 pursuant to the Federal Home Loan Bank's
collateral policies is $78.0 million.
BOK Financial has a revolving, unsecured credit agreement from certain
banks at December 31, 1999 with available credit of $125 million that expires in
November 2002; $105 million was outstanding at year-end. Interest is based on
either LIBOR or a base rate, plus a defined margin which is determined by the
amount of principal outstanding and BOK Financial's debt rating. The base rate
is defined as the greater of either the daily federal funds rate or the prime
rate. Interest is paid quarterly. Facility fees are paid quarterly on the
average daily undrawn commitment at a rate of 0.20% - 0.30 % as determined by
BOK Financial's current debt rating. This credit agreement also includes, among
other things, certain restrictive covenants relative to additional borrowings,
capital levels, maintenance of certain net worth ratios and dividends on capital
stock.
BOK Financial filed a shelf registration statement with the Securities and
Exchange Commission for the issuance of up to $250 million of senior debt
securities during the fourth quarter of 1998. These securities will be direct,
unsecured obligations, and are not insured by the Federal Deposit Insurance
Corporation or guaranteed by any governmental agency. None of this debt has been
issued at December 31, 1999. BOk issued $150 million of subordinated debentures
in 1997 at a discounted cost of 7.2%, which had a balance at December 31, 1999
of $148.6 million and will mature in 2007. Interest expense on the subordinated
debenture was reduced by net income from interest rate swaps of $1.5 million
during 1999.
Funds purchased generally mature within one to 90 days from the transaction
date. At December 31, 1999, securities sold under agreements to repurchase
totaled $906.9 million with related accrued interest payable of $1.6 million.
Additional information relating to repurchase agreements at December 31, 1999 is
as follows (dollars in thousands):
<TABLE>
Carrying Market Repurchase Average
Security Sold/Maturity Value Value Liability(1) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities:
Overnight $ 28,474 $ 28,099 $ 15,636 4.04%
U.S. Agency Securities:
Overnight 407,163 391,506 288,334 5.03
Term of up to 30 days 317,122 307,811 268,733 6.14
Term of 30 to 90 days 381,621 369,216 335,818 5.95
- ----------------------------------------------------------------------------------------------
Total Agency Securities 1,105,906 1,068,533 892,885 5.71
- ----------------------------------------------------------------------------------------------
Total $1,134,380 $1,096,632 $908,521 5.61
==============================================================================================
<FN>
(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.
</FN>
</TABLE>
<PAGE> 42
(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,
----------------------
1999 1998
----------------------
Deferred tax liabilities:
Available for sale securities
Mark-to-market $ 400 $ 7,800
Pension contributions in excess
of book expense 3,800 3,000
Securities valuation adjustments 4,200 3,500
Mortgage servicing 14,800 12,600
Other 3,400 2,900
- -------------------------------------------------------------
Total deferred tax liabilities 26,600 29,800
- -------------------------------------------------------------
Deferred tax assets:
Available for sale securities
Mark-to-market 28,000 400
Loan loss reserve 28,800 24,500
Valuation adjustments 15,400 18,700
Book expense in excess of tax 4,200 4,900
Other 7,300 4,500
- -------------------------------------------------------------
Total deferred tax assets 83,700 53,000
- -------------------------------------------------------------
Deferred tax assets in
excess of deferred tax $57,100 $23,200
liabilities
=============================================================
The reconciliations of income attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense are as
follows (in thousands):
Years ended December 31,
-------------------------------
1999 1998 1997
-------------------------------
Amount:
Federal statutory tax $46,793 $40,901 $29,637
Tax exempt revenue (3,715) (4,110) (4,219)
Effect of state income taxes,
Net of federal benefit 3,050 3,533 2,184
Goodwill amortization 2,987 2,296 2,267
Utilization of tax credits (786) (750) (774)
Reduction of tax reserve - - (9,000)
Income taxed at shareholder
Level (1,026) (1,713) (1,209)
Other, net (2,834) (2,908) (2,363)
- -------------------------------------------------------------
Total $44,469 $37,249 $16,523
=============================================================
As of December 31, 1997, the Internal Revenue Service closed its
examination of BOk and BOK Financial for 1992 and 1993, respectively. As a
result of the outcome of these examinations, BOK Financial reduced its tax
reserve by $9 million, which was credited against current federal income tax
expense in 1997. In addition, the Internal Revenue Service has closed its
examination for 1994 and 1995 with no material impact on the financial
statements. The Internal Revenue Service closed its examination of 1996 during
the first quarter of 2000. This examination had no adverse impact on the
financial statements and BOK Financial is evaluating the impact, if any, on its
tax reserve.
The significant components of the provision for income taxes attributable
to continuing operations for BOK Financial are shown below (in thousands):
Years ended December 31,
-----------------------------------
1999 1998 1997
-----------------------------------
Current:
Federal $40,860 $41,415 $ 9,631
State 2,948 4,937 1,333
- ------------------------------------------------------------
Total current 43,808 46,352 10,964
- ------------------------------------------------------------
Deferred:
Federal 559 (7,699) 4,708
State 102 (1,404) 851
- ------------------------------------------------------------
Total deferred 661 (9,103) 5,559
- ------------------------------------------------------------
Total income tax $44,469 $37,249 $16,523
============================================================
Years ended December 31,
-------------------------------
1999 1998 1997
-------------------------------
Percent of pretax income:
Federal statutory rate 35% 35% 35%
Tax-exempt revenue (3) (4) (5)
Effect of state income taxes,
Net of federal benefit 3 3 3
Goodwill amortization 2 2 3
Utilization of tax credits (1) (1) (1)
Reduction of tax reserve - - (11)
Income taxed at shareholder
Level (1) (1) (1)
Other, net (2) (2) (3)
- --------------------------------------------------------------
Total 33% 32% 20%
==============================================================
The above income tax analysis has been restated to include the operations
of First Muskogee. Additionally, for income tax purposes, First Muskogee elected
to be treated as an S Corporation effective January 1, 1997. This type of
corporation does not generally pay income taxes and its income and expense items
are passed through to its shareholders. For this reason, First Muskogee did not
pay federal or state income taxes for the years ended December 31, 1998 and
1997. If First Muskogee had been required to pay income taxes in those years as
a regular corporation, such amounts would not have been material to the
consolidated results of operations of BOK Financial.
<PAGE> 43
(11)EMPLOYEE BENEFITS
BOK Financial sponsors a defined benefit Pension Plan for all employees who
satisfy certain age and service requirements. The following table presents
information regarding this plan (dollars in thousands):
December 31,
---------------------------
1999 1998
---------------------------
Change in projected benefit obligation:
Projected benefit obligation, at beginning of year $ 15,622 $ 13,313
Service cost 2,908 2,145
Interest cost 1,041 897
Actuarial (gain) loss (612) 592
Benefits paid (2,067) (1,325)
- --------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 16,892 $ 15,622
================================================================================
Change in plan assets:
Plan assets at fair value, at beginning of year $ 20,419 $ 17,102
Actual return on plan assets 1,848 2,681
Company contributions 5,203 1,961
Benefits paid (2,067) (1,325)
- --------------------------------------------------------------------------------
Plan assets at fair value at end of year $ 25,403 $ 20,419
================================================================================
Reconciliation of prepaid (accrued) and total amount recognized:
Benefit obligation $(16,892) $(15,622)
Fair value of assets 25,403 20,419
- --------------------------------------------------------------------------------
Funded status of the plan 8,511 4,797
Unrecognized net loss 464 1,154
Unrecognized prior service cost 741 801
- --------------------------------------------------------------------------------
Prepaid pension costs $ 9,716 $ 6,752
================================================================================
Components of net periodic benefit costs:
Service cost $ 2,908 $ 2,145
Interest cost 1,041 897
Expected return on plan assets (1,850) (1,638)
Amortization of unrecognized amounts:
Net loss 81 90
Prior service cost 60 60
- --------------------------------------------------------------------------------
Net periodic pension cost $ 2,240 $ 1,554
================================================================================
Weighted-average assumptions as of December 31:
Discount rate 8.00% 7.00%
Expected return on plan assets 10.00% 10.00%
Rate of compensation increase 5.25% 5.25%
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 Plans, defined contribution plans, are
matched by BOK Financial up to 5% 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 Plans totaled
$2.4 million, $1.9 million and $1.5 million for 1999, 1998 and 1997,
respectively.
BOK Financial also 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 of the retiree
medical plan consist primarily of shares in a cash management fund. Eligibility
for the post-retirement plan is limited to current retirees and certain
employees currently age 60 or older.
Under various performance incentive plans, participating employees may be
granted awards based on defined formulas or other criteria. Earnings were
charged $19.3 million in 1999, $14.9 million in 1998 and $10.4 million in 1997,
for such awards.
<PAGE> 44
(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.
The following table presents options outstanding during 1998 and 1999 under
these plans:
Weighted-
Average
Exercise
Number Price
--------------------------
Options outstanding at
December 31, 1996 2,382,687 9.22
Options awarded 659,676 10.19
Options exercised (237,775) 8.48
Options forfeited (97,599) 9.89
Options expired (288) 8.92
- -------------------------------------------------------------
Options outstanding at
December 31, 1997 2,706,701 11.45
Options awarded 684,067 18.19
Options exercised (245,717) 8.94
Options forfeited (170,650) 12.02
Options expired (980) 8.98
- -------------------------------------------------------------
Options outstanding at
December 31, 1998 2,973,421 13.87
Options awarded 536,475 21.41
Options exercised (434,865) 9.37
Options forfeited (115,249) 15.20
Options expired (585) 9.27
- -------------------------------------------------------------
Options outstanding at
December 31, 1999 2,959,197 15.68
=============================================================
Options vested at
December 31, 1999 867,006 11.90
=============================================================
The following table summarizes information concerning currently outstanding
and vested options:
Options Outstanding Options Vested
- ------------------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Vested Price
- -------------------------------------------------------------------------
$ 6.10 112,707 1.92 $ 6.10 112,707 $ 6.10
9.06-10.91 1,111,416 3.29 9.85 517,698 9.75
18.19 586,625 4.85 18.19 149,276 18.19
20.52-21.41 1,148,449 5.96 20.99 87,325 21.41
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:
1999 1998 1997
--------- --------- ---------
Average risk-free interest rate 6.12% 4.71% 5.72%
Dividend yield None None None
Volatility factors .192 .198 .200
Weighted-average expected life 7 years 7 years 7 years
The weighted-average fair value of options granted during 1999, 1998 and
1997 was $7.34, $7.00 and $5.93, respectively. 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:
1999(1) 1998(1) 1997(1)
-------------------------------
Pro forma net income $87,736 $78,504 $67,478
Pro forma earnings per share:
Basic 1.76 $1.58 $1.35
Diluted 1.57 1.41 1.21
(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> 45
(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 $3.2 million. BOk subleases portions of
its space for annual rents of $406 thousand in 2000 and $22 thousand for years
2001 through 2003. Net rent expense on this lease was $2.8 million in 1999, and
$2.7 million in 1998 and 1997. Total rent expense for BOK Financial was $10.2
million in 1999, $9.0 million in 1998 and $7.7 million in 1997.
At December 31, 1999, the future minimum lease payments for equipment and
premises under operating leases were as follows: $10.8 million in 2000, $10.1
million in 2001, $8.8 million in 2002, $6.6 million in 2003, $5.9 million in
2004 and a total of $106.7 million thereafter.
BOk and Williams Companies, Inc. guaranteed 30 percent and 70 percent,
respectively, of the $15.7 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 $273 thousand in 1999,
$281 thousand in 1998 and $226 thousand in 1997.
The Federal Reserve Bank requires member banks to maintain certain minimum
average cash balances. These balances were approximately $164.6 million for 1999
and $90.8 million for 1998.
(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, 1999, outstanding commitments
totaled $2.4 billion. 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, 1999, outstanding
standby letters of credit totaled $155.0 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, 1999, outstanding commercial letters of credit
totaled $4.7 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 of certain long-term, fixed rate
assets and liabilities. 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, 1999, the notional amount of BOK Financial's interest rate swaps
totaled $575.6 million with related credit exposure, represented by the fair
value of the contracts, of $9.2 million. During 1999 and 1998, income from the
swaps exceeded costs by $1.4 million and $1.7 million, respectively, which
reduced interest expense. Scheduled repricing periods for the swaps are as
follows (notional value in thousands):
31-90 91-365 Over
days days 1 year Total
--------------------------------------------
Pay floating $(316,000) $(28,000) $ - $(344,000)
Receive fixed - - 344,000 344,000
Pay fixed - - (231,583) (231,583)
Receive floating 231,583 - - 231,583
- ------------------------------------------------------------------
Total $ (84,417) $(28,000) $112,417 $ -
==================================================================
The expiration dates of the swap contracts are designed to match the
estimated maturity dates of the underlying assets and liabilities and matures as
follows: $4.2 million in 2001, $201.6 million in 2002, $39.5 million in 2003,
$22.8 million in 2004, $8.0 million in 2005, $16.5 million in 2006, $164.3
million in 2007, $35.5 million in 2008 and $83.2 million in 2009.
BOK Financial utilized securities forward sales contracts associated with
its mortgage banking activities as described in Note 7.
<PAGE> 46
(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 41 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 1999, 1998 and
1997, 57,340 shares, 68,765 shares and 107,230 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 1999, 1998 and
1997, based on average market price, as defined, for a 65 business day period
preceding declaration.
Various officers own 125 nonvoting units in an entity owned by 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 and BOK Financial's
credit agreement restricts the payment of dividends by the holding company.
During 1999, 1998 and 1997, 3% dividends payable in shares of BOK Financial
common stock were declared and paid. The shares issued were valued at $30.6
million, $30.3 million and $27.4 million, respectively, based on the average
closing bid/ask prices on the day preceding declaration. Presently, management
plans to recommend continued payment of annual dividends in shares of common
stock.
All share and per share amounts for previous years presented have been
retroactively adjusted for a two-for-one stock split effected in the form of a
stock dividend declared January 26, 1999 for stockholders of record on February
8, 1999.
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, 1999, BOK Financial's subsidiary
banks could declare dividends up to $81.8 million without prior regulatory
approval. The subsidiary banks declared and paid dividends of $63.0 million in
1999, $26.3 million in 1998 and $69.8 million in 1997.
Loans to a single affiliate may not exceed 10.0% and loans to all
affiliates may not exceed 20.0% of unimpaired capital and surplus, as defined.
Additionally, loans to affiliates must be fully secured. As of December 31, 1999
and 1998, these loans totaled $35.3 million and $40.4 million, respectively,
including $9.2 million and $27.9 million to consolidated entities. Total loan
commitments to affiliates at December 31, 1999 were $82.7 million.
Regulatory Capital
BOK Financial and its banking subsidiaries are subject to various capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that could have a material
effect on BOK Financial's operations. These capital requirements include
quantitative measures of assets, liabilities, and certain off-balance sheet
items. The capital standards are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
For a banking institution to qualify as well capitalized, its Tier I, Total
and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. Tier
I capital consists primarily of common stockholders' equity, excluding
unrealized gains or losses on available for sale securities, less goodwill, core
deposit premiums, and certain other intangible assets. Total capital consists
primarily of Tier I capital plus preferred stock, subordinated debt and reserves
for loan losses, subject to certain limitations. All of BOK Financial's banking
subsidiaries exceeded the regulatory definition of well capitalized.
<PAGE> 47
December 31,
---------------------------------------
1999 1998
---------------------------------------
Amount Ratio Amount Ratio
---------------------------------------
(Dollars in thousands)
Total Capital (to Risk Weighted Assets):
Consolidated $700,875 10.72% $628,782 12.02%
BOk 594,182 10.80 535,070 12.13
Bank of Arkansas 11,569 15.73 11,323 11.33
Bank of Texas(1) 87,299 12.41 55,848 15.81
Bank of Albuquerque 57,451 16.04 40,716 18.87
Tier I Capital (to Risk Weighted Assets):
Consolidated $475,687 7.27% $414,918 7.93%
BOk 383,255 6.96 331,426 7.51
Bank of Arkansas 10,639 14.47 10,073 10.08
Bank of Texas(1) 78,382 11.15 51,430 14.56
Bank of Albuquerque 56,075 15.65 40,341 18.70
Tier I Capital (to Average Assets):
Consolidated $475,687 5.92% $414,918 6.60%
BOk 383,255 5.88 331,426 6.02
Bank of Arkansas 10,639 9.86 10,073 9.47
Bank of Texas(1) 78,382 8.19 51,430 11.52
Bank of Albuquerque 56,075 6.78 40,341 8.91
(1) Includes Mid-Cities National Bank, Canyon Creek National Bank and Swiss
Avenue State Bank, all of which were acquired in 1999 and will be merged
into Bank of Texas during 2000.
The decrease in regulatory capital ratios for BOK Financial consolidated,
BOk and Bank of Texas reflects the increase in goodwill and core deposit
premiums during the year as well as a higher level of assets.
(16)EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings
per share (dollars in thousands except share data):
<TABLE>
Years ended December 31,
-------------------------------------------
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $89,226 $79,611 $68,155
Preferred stock dividends (1,500) (1,500) (1,500)
- ---------------------------------------------------------------------------------------------------------------------
Numerator for basic earnings per share - income
available to common stockholders 87,726 78,111 66,655
- ---------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Preferred stock dividends 1,500 1,500 1,500
- ---------------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share - income available
to common stockholders after assumed conversion $89,226 $79,611 $68,155
=====================================================================================================================
Denominator:
Denominator for basic earnings per share -weighted average shares 48,974,382 48,897,092 48,894,809
Effect of dilutive securities:
Employee stock options(1) 647,633 756,662 591,716
Convertible preferred stock 6,149,365 6,149,365 6,149,365
- ---------------------------------------------------------------------------------------------------------------------
Dilutive potential common shares 6,796,998 6,906,027 6,741,081
- ---------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 55,771,380 55,803,119 55,635,890
=====================================================================================================================
Basic earnings per share $1.79 $1.60 $1.36
=====================================================================================================================
Diluted earnings per share $1.60 $1.43 $1.23
=====================================================================================================================
<FN>
(1) Excludes employee stock options with exercise price 7,344 - -
greater than current market price
</FN>
</TABLE>
<PAGE> 48
(17) REPORTABLE SEGMENTS
BOK Financial operates four principal lines of business under its Bank of
Oklahoma franchise: corporate banking, consumer banking, mortgage banking and
trust services. It also operates a fifth principal line of business, regional
banks, which includes all banking functions for Bank of Albuquerque, Bank of
Arkansas and Bank of Texas. These five principal lines of business combined
account for approximately 86% of total revenue. Other lines of business include
the TransFund ATM system and BOSC, Inc. The Corporate Banking segment consists
of eight operating units that provide credit and lease financing, deposit and
cash management, and international collection services to commercial and
industrial customers and to other financial institutions in Oklahoma and
surrounding states. The Consumer Banking segment consists of two operating units
which provide direct and indirect consumer loans and deposit services to
individuals primarily within Oklahoma. The Mortgage Banking segment consists of
two operating units that originate a full range of mortgage products from
federally sponsored programs to "jumbo loans" on higher priced homes in BOK
Financial's primary market areas. The Mortgage Banking segment also services
mortgage loans acquired from throughout the United States. The Trust Services
segment consists of one operating unit that provides financial services to both
individual and corporate clients. Individual financial services include personal
trust management, administration of estates and management of investment and
custodial accounts. Individual financial services also includes lending and
investment services to select individuals. Corporate financial services include
administration of employee benefit plans, transfer and paying agent services and
investment advisory services. Regional Banks include Bank of Arkansas, Bank of
Albuquerque and Bank of Texas. Bank of Texas includes Canyon Creek National
Bank, Mid-Cities National Bank and Swiss Avenue State Bank which were acquired
in 1999 and which will be merged into Bank of Texas in 2000. Information
regarding regional banks was included in total nonreportable segments in
previous years.
BOK Financial identifies reportable segments by type of service provided
for the Mortgage Banking and the Trust Services segments and by type of customer
for the Corporate Banking and Consumer Banking segments. Regional Banks are
identified by legal entity. Operating results are adjusted for intercompany loan
participations and allocated service costs and management fees.
BOK Financial evaluates performance and allocates resources based upon a
measurement of performance after the allocation of certain indirect expenses,
taxes and capital cost. Capital is assigned to the lines of business based on an
internal allocation method that reflects management's assessment of risk. An
additional amount of capital is assigned to the regional banks based upon BOK
Financial's investment in these entities. The accounting policies of the
reportable segments generally follow those described in the summary of
significant account policies except interest income is reported on a fully
tax-equivalent basis, loan losses are based on actual net amounts charged off
and the amortization of intangible assets is generally excluded. The cost of
funds provided from one segment to another is transfer-priced at rates that
approximate market for funds with similar duration. Assessment of performance is
based on net interest revenue after internal funds transfer pricing.
Nonreportable business segments include TransFund and BOSC, Inc. The
sources of revenue in these segments include interest, commissions earned on
securities transactions, securities trading gains or losses, and fees earned on
various banking activities, including merchant discounts and interchange fees.
BOK Financial has not made any significant investments in long-term assets
other than financial instruments, including core deposit intangible assets and
purchased mortgage servicing rights. Substantially all revenue is from domestic
customers. No single external customer accounts for more than 10% of total
revenue.
<PAGE> 49
<TABLE>
Corporate Consumer Mortgage Trust Regional All
Banking Banking Banking Services Banks Other Total
------------------------------------------------------------------------------------------------
Year ended December 31, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest revenue/(expense)
from external sources $ 192,783 $ (33,645) $ 11,627 $ 3,626 $ 67,056 $ (5,323) $ 236,124
Net interest revenue/(expense)
from internal sources (94,801) 78,513 (8,296) 7,193 (7,612) 25,003 -
- ------------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 97,982 44,868 3,331 10,819 59,444 19,680 236,124
Provision for loan losses (1,111) 2,462 82 70 64 8,798 10,365
Other operating revenue 29,557 24,258 39,533 44,044 11,464 40,015 188,871
Securities gains/(losses) - - - - (53) (366) (419)
Other operating expense 51,731 49,692 39,724 39,602 56,892 42,875 280,516
Income taxes 29,921 6,603 1,190 5,909 6,182 (5,336) 44,469
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 46,998 $ 10,369 $ 1,868 $ 9,282 $ 7,717 $ 12,992 $ 89,226
==============================================================================================================================
Average assets $ 3,222,779 $ 1,886,620 $ 355,888 $ 333,423 $ 1,808,218 $ 6,122 $ 7,613,050
Average equity 337,742 43,412 25,273 35,476 191,477 (90,988) 542,392
Performance measurements:
Return on assets 1.46% 0.55% 0.52% 2.78% 0.43% - 1.17%
Return on equity 13.92% 23.89% 7.39% 26.16% 4.03% - 16.45%
Efficiency ratio 40.56% 71.89% 92.67% 72.18% 80.23% - 66.00%
Reconciliation to Consolidated Financial Statements
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
--------------------------------------------------------
Total reportable segments $216,444 $148,856 $237,641 $7,606,928
Total nonreportable segments 725 37,262 30,432 58,919
Unallocated items:
Tax-equivalent adjustment (8,380) - - -
Funds management 28,975 1,057 10,996 122,463
All others, net (1,640) 1,696 1,447 (175,260)
- --------------------------------------------------------------------------------------
BOK Financial consolidated $236,124 $188,871 $280,516 $7,613,050
======================================================================================
</TABLE>
<PAGE> 50
<TABLE>
Corporate Consumer Mortgage Trust Regional All
Banking Banking Banking Services Banks Other Total
--------------------------------------------------------------------------------------------------
Year ended December 31, 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest revenue/(expense)
from external sources $ 159,929 $ (40,527) $ 16,133 $ 1,881 $ 29,457 $ 23,553 $ 190,426
Net interest revenue/(expense)
from internal sources (76,711) 83,617 (10,456) 6,415 (1,673) (1,192) -
- -------------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 83,218 43,090 5,677 8,296 27,784 22,361 190,426
Provision for loan losses 64 2,103 128 124 187 11,985 14,591
Other operating revenue 27,053 23,156 44,379 37,928 4,215 28,952 165,683
Securities gains/(losses) - - - - 613 8,724 9,337
Other operating expense 48,214 50,348 41,926 35,788 21,563 38,446 236,285
Provision for impairment of
mortgage servicing rights - - (2,290) - - - (2,290)
Income taxes 24,115 5,366 4,004 4,012 5,118 (5,366) 37,249
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 37,878 $ 8,429 $ 6,288 $ 6,300 $ 5,744 $ 14,972 $ 79,611
===============================================================================================================================
Average assets $ 2,562,320 $ 1,941,184 $ 367,934 $ 293,562 $ 644,236 $ 136,778 $ 5,946,014
Average equity 268,677 46,008 30,213 29,827 85,197 25,957 485,879
Performance measurements:
Return on assets 1.48% 0.43% 1.71% 2.15% 0.89% - 1.34%
Return on equity 14.10% 18.32% 20.81% 21.12% 6.74% - 16.38%
Efficiency ratio 43.72% 76.00% 83.76% 77.42% 7.39% - 66.35%
Reconciliation to Consolidated Financial Statements
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
-----------------------------------------------------------------
Total reportable segments $168,065 $136,731 $197,839 $5,809,236
Total nonreportable segments 507 27,204 21,890 36,439
Unallocated items:
Tax-equivalent adjustment (9,427) - - -
Funds management 31,097 3,371 10,692 138,183
Contribution to BOk Foundation - - 2,257 -
All others, net 184 (1,623) 3,607 (37,844)
- -------------------------------------------------------------------------------------------------------------
BOK Financial consolidated $190,426 $165,683 $236,285 $5,946,014
=============================================================================================================
</TABLE>
<PAGE> 51
<TABLE>
Corporate Consumer Mortgage Trust Regional All
Banking Banking Banking Services Banks Other Total
-------------------------------------------------------------------------------------------------
Year ended December 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest revenue/(expense)
from external sources $ 139,855 $ (43,854) $ 21,897 $ 2,460 $ 20,796 $ 21,078 $ 162,232
Net interest revenue/(expense)
from internal sources (67,274) 87,082 (16,798) 5,864 (490) (8,384) -
- -------------------------------------------------------------------------------------------------------------------------------
Total net interest revenue 72,581 43,228 5,099 8,324 20,306 12,694 162,232
Provision for loan losses (133) 2,520 165` 180 930 5,594 9,256
Other operating revenue 22,616 21,774 34,208 30,084 3,236 20,967 132,885
Securities gains/(losses) - - - - (141) (1,188) (1,329)
Other operating expense 33,647 50,029 33,208 28,496 15,881 34,493 195,754
Provision for impairment of
mortgage servicing rights - - 4,100 - - - 4,100
Income taxes 23,993 4,844 713 3,786 3,617 (20,430) 16,523
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 37,690 $ 7,609 $ 1,121 $ 5,946 $ 2,973 $ 12,816 $ 68,155
===============================================================================================================================
Average assets $ 2,136,278 $ 1,927,948 $ 391,011 $ 254,430 $465,780 $ 90,235 $ 5,265,682
Average equity 221,205 47,220 28,050 24,112 63,648 21,845 406,080
Performance measurements:
Return on assets 1.76% 0.39% 0.29% 2.34% 0.64% - 1.29%
Return on equity 17.04% 16.11% 4.00% 24.66% 4.67% - 16.78%
Efficiency ratio 35.34% 76.97% 84.48% 74.19% 67.46% - 66.33%
Reconciliation to Consolidated Financial Statements
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
----------------------------------------------------------
Total reportable segments $149,538 $111,918 $161,261 $5,175,447
Total nonreportable segments 380 19,172 15,758 16,872
Unallocated items:
Tax-equivalent adjustment (9,716) - - -
Funds management 23,073 992 8,579 23,953
Contribution to BOk Foundation - - 3,638 -
All others, net (1,043) 803 6,518 49,410
- ---------------------------------------------------------------------------------------------------
BOK Financial consolidated $162,232 $132,885 $195,754 $5,265,682
===================================================================================================
</TABLE>
<PAGE> 52
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying values and estimated fair values of
financial instruments as of December 31, 1999 and 1998 (dollars in thousands):
<TABLE>
Range of Average Estimated
Carrying Contractual Repricing Discount Fair
Value Yields (in years) Rate Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999:
Cash and cash equivalents $ 426,855 - - - $ 426,855
Securities 2,816,336 - - - 2,814,780
Loans:
Commercial 2,664,701 4.50-17.00% .56 5.70- 8.65% 2,662,515
Commercial real estate 1,094,542 5.34-13.00 1.41 8.39- 8.58 1,091,407
Residential mortgage 531,058 3.81-14.25 2.21 6.02- 8.47 520,643
Residential mortgage - held for sale 57,057 - - - 57,057
Consumer 296,131 6.51-18.25 2.27 7.96- 13.50 288,402
- ----------------------------------------------------------------------------------------------------------------------
Total loans 4,643,489 4,620,024
Reserve for loan losses (76,234) -
- ----------------------------------------------------------------------------------------------------------------------
Net loans 4,567,255 4,620,024
Deposits with no stated maturity 3,043,334 - - - 3,043,334
Time deposits 2,219,850 2.18- 6.71 .62 5.45- 6.40 2,206,447
Other borrowings 2,283,703 4.94- 8.35 .19 4.74- 7.44 2,263,433
Subordinated debt 148,642 6.29 7.46 7.24 139,267
======================================================================================================================
1998:
Cash and cash equivalents $ 471,425 - - - $ 471,425
Securities 2,598,290 - - - 2,598,267
Loans:
Commercial 1,989,273 4.50- 13.69% .60 6.89- 10.03% 1,992,288
Commercial real estate 760,569 6.08- 12.93 1.37 8.05- 9.75 756,461
Residential mortgage 500,690 3.81- 14.25 3.24 6.62- 6.95 511,644
Residential mortgage - held for sale 100,269 - - - 100,269
Consumer 296,298 6.40- 17.90 1.48 7.02- 12.75 298,997
- ----------------------------------------------------------------------------------------------------------------------
Total loans 3,647,099 - - - 3,659,659
Reserve for loan losses (65,922) - - - -
- ----------------------------------------------------------------------------------------------------------------------
Net loans 3,581,177 - - - 3,659,659
Deposits with no stated maturity 2,804,490 - - - 2,804,490
Time deposits 1,803,237 2.03- 10.00 .62 3.62- 5.12 1,804,564
Other borrowings 1,701,030 4.76- 6.95 .24 4.50- 7.75 1,705,048
Subordinated debt 146,921 6.53 8.46 5.42 158,869
======================================================================================================================
</TABLE>
The preceding table presents the estimated fair values of financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which involved significant judgments by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, BOK Financial does not know
whether the fair values shown above represent values at which the respective
financial instruments could be sold individually or in the aggregate.
<PAGE> 53
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 $12.0 million and $9.6 million at December 31, 1999
and 1998, 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. Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments," ("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 these
off-balance-sheet instruments were not significant at December 31, 1999 and
1998. Residential mortgage loan commitments are included in determining the fair
value of the mortgage loans held for sale. The fair values of interest rate
swaps are based on pricing models using current assumptions to arrive at
replacement cost. The estimated fair value of interest rate swaps were $9.2
million and $10.2 million at December 31, 1999 and 1998, respectively.
<PAGE> 54
(19) PARENT COMPANY ONLY FINANCIAL STATEMENTS
Summarized financial information for BOK Financial - Parent Company Only
follows:
Balance Sheets
(In Thousands) December 31,
----------------------------
1999 1998
----------------------------
Assets
Cash and cash equivalents $ 12,489 $ 762
Securities - available for sale 9,459 24,904
Investment in subsidiaries 638,850 591,610
Other assets 3,034 2,313
- --------------------------------------------------------------------------------
Total assets $663,832 $619,589
================================================================================
Liabilities and Shareholders' Equity
Other borrowings $105,132 $ 92,132
Other liabilities 1,536 2,664
- --------------------------------------------------------------------------------
Total liabilities 106,668 94,796
- --------------------------------------------------------------------------------
Preferred stock 25 25
Common stock 3 3
Capital surplus 274,980 236,726
Retained earnings 332,751 278,365
Treasury stock (7,018) (2,623)
Accumulated other comprehensive income (loss) (43,577) 12,297
- --------------------------------------------------------------------------------
Total shareholders' equity 557,164 524,793
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $663,832 $619,589
================================================================================
Statements of Earnings
(In Thousands)
<TABLE>
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Dividends, interest and fees received from $63,556 $30,861 $72,439
subsidiaries
Other operating revenue 2,327 1,717 2,612
- -------------------------------------------------------------------------------------------------
Total revenue 65,883 32,578 75,051
- -------------------------------------------------------------------------------------------------
Interest expense 6,225 2,469 3,566
Personnel expense 9 579 293
Professional fees and services 600 670 172
Contribution of stock to BOk Charitable Foundation - 2,257 3,638
Other operating expense 80 116 106
- -------------------------------------------------------------------------------------------------
Total expense 6,914 6,091 7,775
- -------------------------------------------------------------------------------------------------
Income before taxes and equity in undistributed
income of subsidiaries 58,969 26,487 67,276
Federal and state income tax credit (3,243) (3,093) (3,657)
- -------------------------------------------------------------------------------------------------
Income before equity in undistributed income of 62,212 29,580 70,933
subsidiaries
Equity in undistributed income (loss) of subsidiaries 27,014 50,031 (2,778)
- -------------------------------------------------------------------------------------------------
Net income $89,226 $79,611 $68,155
=================================================================================================
</TABLE>
<PAGE> 55
Statements of Cash Flows
(In Thousands)
<TABLE>
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $89,226 $79,611 $ 68,155
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income (loss) of (27,014) (50,030) 2,778
subsidiaries
Gain on sale of available for sale securities - - (1,226)
Contribution of stock to BOk Charitable
Foundation - 2,257 3,638
(Increase) decrease in other assets 1,036 (373) (349)
Increase (decrease) in other liabilities (1,980) 2,593 (3,610)
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 61,268 34,058 69,386
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of available for sale 9,881 - 12,157
securities
Purchases of available for sale securities - - (10,000)
Investment in subsidiaries (72,293) (85,842) (104,488)
- -------------------------------------------------------------------------------------------------
Net cash used in investing activities (62,412) (85,842) (102,331)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in short-term borrowings 13,228 59,245 32,887
Issuance of preferred, common and treasury stock, net 3,961 4,152 1,777
Purchase treasury stock (1,574) (9,138) -
Cash dividends (2,744) (2,344) (1,636)
Payments on notes receivable - 4 83
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 12,871 51,919 33,111
- -------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 11,727 135 166
Cash and cash equivalents at beginning of period 762 627 461
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $12,489 $ 762 $ 627
=================================================================================================
Payment of dividends in common stock $32,192 $ 31,500 $ 28,948
=================================================================================================
Cash paid for interest $ 5,933 $ 2,364 $ 3,395
=================================================================================================
</TABLE>
<PAGE> 56
BOK FINANCIAL CORPORATION
ANNUAL FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
<TABLE>
(Dollars in Thousands Except Per Share Data) 1999
-----------------------------------------------
Average Revenue/ Yield/
Balance Expense(1) Rate
-----------------------------------------------
<S> <C> <C> <C>
Assets
Taxable securities $2,383,198 $144,901 6.08%
Tax-exempt securities 288,094 21,785 7.56
- ---------------------------------------------------------------------------------------------------------------------
Total securities 2,671,292 166,686 6.24
- ---------------------------------------------------------------------------------------------------------------------
Trading securities 37,508 2,291 6.11
Funds sold and resell agreements 43,373 2,219 5.12
Loans(2)(3) 4,046,920 337,458 8.34
Less reserve for loan losses 72,306
- ---------------------------------------------------------------------------------------------------------------------
Loans, net of reserve 3,974,614 337,458 8.49
- ---------------------------------------------------------------------------------------------------------------------
Total earning assets 6,726,787 508,654 7.56
- ---------------------------------------------------------------------------------------------------------------------
Cash and other assets 886,263
- ---------------------------------------------------------------------------------------------------------------------
Total assets $7,613,050
=====================================================================================================================
Liabilities and Shareholders' Equity
Transaction deposits $1,717,314 $ 46,510 2.71%
Savings deposits 161,484 2,971 1.84
Time deposits 1,983,829 101,140 5.10
- ---------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 3,862,627 150,621 3.90
- ---------------------------------------------------------------------------------------------------------------------
Other borrowings 1,959,015 104,195 5.32
Subordinated debenture 148,509 9,334 6.29
- ---------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 5,970,151 264,150 4.42
- ---------------------------------------------------------------------------------------------------------------------
Demand deposits 999,311
Other liabilities 101,196
Shareholders' equity 542,392
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,613,050
=====================================================================================================================
Tax-equivalent Net Interest Revenue $244,504 3.14%
Tax-equivalent Net Interest Revenue to Earning Assets 3.63
Less tax-equivalent adjustment(1) 8,380
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Revenue 236,124
Provision for loan losses 10,365
Other operating revenue 188,452
Other operating expense 280,516
- ---------------------------------------------------------------------------------------------------------------------
Income before taxes 133,695
Federal and state income tax 44,469
- ---------------------------------------------------------------------------------------------------------------------
Net Income $ 89,226
=====================================================================================================================
<FN>
(1) Tax equivalent at the statutory federal and state rates of 38.9% 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. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
(3) Excludes $3,262 of nonrecurring foregone interest in 1998.
</FN>
</TABLE>
<PAGE> 57
<TABLE>
1998 1997
- ------------------------------------------------------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,877,515 $115,733 6.16% $1,629,446 $101,853 6.25%
330,576 25,207 7.63 350,592 26,577 7.58
- ------------------------------------------------------------------------------------------------------
2,208,091 140,940 6.38 1,980,038 128,430 6.49
- ------------------------------------------------------------------------------------------------------
20,038 1,046 5.22 4,785 287 6.00
41,109 2,321 5.65 58,036 3,267 5.63
3,070,245 267,952 8.62(3) 2,677,984 234,806 8.77
59,480 - - 50,940 - -
- ------------------------------------------------------------------------------------------------------
3,010,765 267,952 8.79(3) 2,627,044 234,806 8.94
- ------------------------------------------------------------------------------------------------------
5,280,003 412,259 7.75(3) 4,669,903 366,790 7.85
- ------------------------------------------------------------------------------------------------------
666,011 595,779
- ------------------------------------------------------------------------------------------------------
$5,946,014 $5,265,682
======================================================================================================
$1,216,230 $ 37,148 3.05% $1,070,296 $ 33,728 3.15%
152,830 3,837 2.51 138,030 3,472 2.52
1,787,668 97,019 5.43 1,641,413 90,602 5.52
- ------------------------------------------------------------------------------------------------------
3,156,728 138,004 4.37 2,849,739 127,802 4.48
- ------------------------------------------------------------------------------------------------------
1,147,815 64,709 5.64 1,090,844 62,874 5.76
148,404 9,693 6.53 64,374 4,166 6.47
- ------------------------------------------------------------------------------------------------------
4,452,947 212,406 4.77 4,004,957 194,842 4.87
- ------------------------------------------------------------------------------------------------------
933,927 781,742
73,261 72,904
485,879 406,080
- ------------------------------------------------------------------------------------------------------
$5,946,014 $5,265,683
======================================================================================================
$199,853 2.98%(3) $171,948 2.98%
3.72 (3) 3.68
9,427 9,716
- ------------------------------------------------------------------------------------------------------
190,426 162,232
14,591 9,256
175,020 ` 131,556
233,995 199,854
- ------------------------------------------------------------------------------------------------------
116,860 84,678
37,249 16,523
- ------------------------------------------------------------------------------------------------------
$ 79,611 $ 68,155
======================================================================================================
</TABLE>
<PAGE> 58
BOK FINANCIAL CORPORATION
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data)
<TABLE>
Three Months Ended
-------------------------------------------------------------------------
December 31, 1999 September 30, 1999
---------------------------------- ----------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable securities $2,453,800 $38,381 6.21% $2,456,120 $37,735 6.10%
Tax-exempt securities(1) 259,760 4,656 7.11 275,749 5,219 7.51
-------------------------------------------------------------------------------------- ----------------------------------
Total securities 2,713,560 43,037 6.29 2,731,869 42,954 6.24
-------------------------------------------------------------------------------------- ----------------------------------
Trading securities 17,845 390 8.67 27,606 393 5.65
Funds sold 37,650 552 5.82 37,558 495 5.23
Loans(2) 4,480,283 97,563 8.64 4,256,430 89,882 8.38
Less reserve for loan losses 76,166 74,539
-------------------------------------------------------------------------------------- ----------------------------------
Loans, net of reserve 4,404,117 97,563 8.79 4,181,891 89,882 8.53
-------------------------------------------------------------------------------------- ----------------------------------
Total earning assets 7,173,172 141,542 7.83 6,978,924 133,724 7.60
-------------------------------------------------------------------------------------- ----------------------------------
Cash and other assets 963,257 890,977
-------------------------------------------------------------------------------------- ----------------------------------
Total assets $8,136,429 $7,869,901
====================================================================================== ==================================
Liabilities and Shareholders' Equity
Transaction deposits $1,885,730 $12,639 2.66% $1,858,386 $12,278 2.62%
Savings deposits 159,442 721 1.79 167,875 779 1.84
Other time deposits 2,206,956 29,109 5.23 2,046,295 26,236 5.09
-------------------------------------------------------------------------------------- ----------------------------------
Total interest-bearing deposits 4,252,128 42,469 3.96 4,072,556 39,293 3.83
-------------------------------------------------------------------------------------- ----------------------------------
Other borrowings 2,071,787 29,715 5.69 2,065,207 27,681 5.32
Subordinated debenture 148,620 2,387 6.37 148,576 2,373 6.34
-------------------------------------------------------------------------------------- ----------------------------------
Total interest-bearing liabilities 6,472,535 74,571 4.57 6,286,339 69,347 4.38
-------------------------------------------------------------------------------------- ----------------------------------
Demand deposits 977,825 969,289
Other liabilities 132,646 77,574
Shareholders' equity 553,423 536,699
-------------------------------------------------------------------------------------- ----------------------------------
Total liabilities and shareholders' equity $8,136,429 $7,869,901
====================================================================================== ==================================
Tax-equivalent Net Interest Revenue(1) $66,971 3.26% $64,377 3.22%
Tax-equivalent Net Interest Revenue(1) to Earning Assets 3.70 3.66
Less tax-equivalent adjustment(1) 1,828 1,990
-------------------------------------------------------------------------------------- ----------------------------------
Net Interest Revenue 65,143 62,387
Provision for loan losses 2,255 2,142
Other operating revenue 46,721 44,835
Other operating expense 74,257 70,755
-------------------------------------------------------------------------------------- ----------------------------------
Income before taxes 35,352 34,325
Federal and state income tax (benefit) 12,155 11,589
-------------------------------------------------------------------------------------- ----------------------------------
Net Income $23,197 $22,736
====================================================================================== ==================================
Earnings Per Average Common Share Equivalent:
Net income:
Basic .47 .46
====================================================================================== ==================================
Diluted .42 .41
====================================================================================== ==================================
<FN>
(1) Tax equivalent at the statutory federal and state rates of 38.9% 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
discounted and are stated net of unearned income. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
</FN>
</TABLE>
<PAGE> 59
<TABLE>
Three Months Ended
- ------------------------------------------------------------------------ -----------------------------------
June 30, 1999 March 31, 1999 December 31, 1998
- ---------------------------------- ----------------------------------- -----------------------------------
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>
$2,418,685 $35,841 5.94% $2,198,972 $32,944 6.08% $2,011,692 $30,808 6.08%
295,095 5,742 7.80 324,297 6,168 7.71 328,998 6,269 7.56
- ---------------------------------- ----------------------------------- -----------------------------------
2,713,780 41,583 6.15 2,523,269 39,112 6.29 2,340,690 37,077 6.28
- ---------------------------------- ----------------------------------- -----------------------------------
50,190 812 6.49 54,907 696 5.14 19,415 232 4.74
63,353 759 4.81 34,962 413 4.79 31,779 420 5.24
3,822,018 77,330 8.12 3,617,162 72,683 8.15 3,365,960 71,331 8.41
70,968 67,428 64,682
- ---------------------------------- ----------------------------------- -----------------------------------
3,751,050 77,330 8.27 3,549,734 72,683 8.30 3,301,278 71,331 8.57
- ---------------------------------- ----------------------------------- -----------------------------------
6,578,373 120,484 7.35 6,162,872 112,904 7.43 5,693,162 109,060 7.60
- ---------------------------------- ----------------------------------- -----------------------------------
831,059 833,945 689,808
- ---------------------------------- ----------------------------------- -----------------------------------
$7,409,432 $6,996,817 $6,382,970
================================== =================================== ===================================
$1,655,457 $11,035 2.67% $1,463,556 $10,558 2.93% $1,264,080 $ 9,126 2.86%
162,874 742 1.83 155,634 729 1.90 159,914 950 2.36
1,822,915 22,643 4.98 1,854,590 23,152 5.06 1,720,035 22,775 5.25
- ---------------------------------- ----------------------------------- -----------------------------------
3,641,246 34,420 3.79 3,473,780 34,439 4.02 3,144,029 32,851 4.15
- ---------------------------------- ----------------------------------- -----------------------------------
1,978,349 25,000 5.07 1,715,715 21,799 5.15 1,504,257 20,444 5.39
148,275 2,253 6.09 148,482 2,321 6.34 147,418 2,333 6.28
- ---------------------------------- ----------------------------------- -----------------------------------
5,767,870 61,673 4.29 5,337,977 58,559 4.45 4,795,704 55,628 4.60
- ---------------------------------- ----------------------------------- -----------------------------------
1,008,502 1,042,679 984,589
89,319 83,315 87,304
543,741 532,846 515,373
- ---------------------------------- ----------------------------------- -----------------------------------
$7,409,432 $6,996,817 $6,382,970
================================== =================================== ===================================
$58,811 3.06% $54,345 2.98% ` $53,432 3.00%
3.59 3.58 3.72
2,228 2,334 2,334
- ---------------------------------- ----------------------------------- -----------------------------------
56,583 52,011 51,098
2,538 3,430 4,087
49,431 47,465 45,384
70,678 64,826 62,299
- ---------------------------------- ----------------------------------- -----------------------------------
32,798 31,220 30,096
10,742 9,983 9,729
- ---------------------------------- ----------------------------------- -----------------------------------
$22,056 $21,237 $20,367
================================== =================================== ===================================
.44 .43 .41
================================== =================================== ===================================
.40 .38 .37
================================== =================================== ===================================
</TABLE>
<PAGE> 60
BOK Financial Corporation Board of Directors
W. Wayne Allen (1)
Retired
Chairman of the Board
Phillips Petroleum Company
C. Fred Ball (3)
President & CEO
Bank of Texas, N.A.
James E. Barnes
Retired
Chairman, President & CEO
MAPCO, Inc.
Peter C. Boylan, III (1)(4)
President & COO
TV Guide, Inc.
Sharon J. Bell (1)
Managing Partner
Rogers & Bell
Luke R. Corbett
Chairman & CEO
Kerr-McGee Corporation
Robert H. Donaldson (1)
Trustees Professor of
Political Science
University of Tulsa
William E. Durrett
Senior Chairman
American Fidelity Corp.
James O. Goodwin (1)
Chief Executive Officer
The Oklahoma Eagle
Publishing Company, Inc. LLC
V. Burns Hargis (1)
Vice Chairman
BOK Financial Corporation and Bank of Oklahoma, N.A.
Eugene A. Harris (2)
Executive Vice President
BOK Financial Corporation and Bank of Oklahoma, N.A.
Howard E. Janzen (1)
President & CEO
Williams Communications
E. Carey Joullian, IV (1)
President & CEO
Mustang Fuel Corporation
George B. Kaiser (1)
Chairman
BOK Financial Corporation and Bank of Oklahoma, N.A.
Robert J. LaFortune
Personal Investments
Philip C. Lauinger, Jr.
Chairman & CEO
Lauinger Publishing Co.
John C. Lopez (1)
Chief Executive Officer
Lopez Foods, Inc.
Stanley A. Lybarger (1)(3)
President & CEO
BOK Financial Corporation and Bank of Oklahoma, N.A.
Frank A. McPherson (1)
Retired Chairman & CEO
Kerr-McGee Corporation
Steven E. Moore
Chairman, President & CEO
Oklahoma Gas & Electric Company
J. Larry Nichols (1)
President & CEO
Devon Energy Corporation
Ronald J. Norick (1)
Controlling Manager
Norick Investment
Company, LLC
Robert L. Parker, Sr.
Chairman of the Board
Parker Drilling Company
James W. Pielsticker (1)
President
Arrow Trucking Company
Emmet C. Richards (1)
President
27th Street LLC
James A. Robinson
Personal Investments
L. Francis Rooney, III (1)
Chairman and CEO
Manhattan Construction Company
David J. Tippeconnic
President & CEO
CITGO Petroleum
Corporation
Tom E. Turner (3)
Chairman
Bank of Texas, N.A.
Robert L. Zemanek (3)
President, Energy Delivery
Central and South West Services, Inc.
(1) Director of BOK Financial Corp. and Bank of Oklahoma, N.A.
(2) Director of Bank of Oklahoma, N.A.
(3) Director of BOK Financial Corp. and Bank of Texas, N.A.
(4) Advisory pending election at shareholders meeting April 25
Executive Officers
George B. Kaiser
Chairman of the Board
Stanley A. Lybarger
President,
Chief Executive Officer
V. Burns Hargis
Vice Chairman
Eugene A. Harris
Executive Vice President
Chief Credit Officer
Frederic Dorwart
Secretary
Lowell E. Faulkenberry
Senior Vice President
Director, Risk Management
John C. Morrow
Senior Vice President
Director of Financial
Accounting & Reporting
Steven E. Nell
Senior Vice President
Corporate Controller
Bank of Albuquerque, N.A.
Gregory K. Symons
Chairman, President & CEO
Bank of Arkansas, N.A.
Jeffrey R. Dunn
Chairman, President & CEO
Bank of Oklahoma, N.A.
Steven G. Bradshaw
Executive Vice President
Consumer Banking
Chairman, BOSC, Inc.
Paul M. Elvir
Executive Vice President
Operations & Technology
Mark W. Funke
President, Oklahoma City
H. James Holloman
Executive Vice President
Trust Division
David L. Laughlin
President
BOK Mortgage
W. Jeffrey Pickryl
Executive Vice President
Commercial Banking
Charles D. Williamson
Executive Vice President
Capital Markets
Bank of Texas, N.A.
Tom E. Turner
Chairman
C. Fred Ball, Jr.
President & CEO
Steven D. Poole
President
Bank of Texas Trust Company
<PAGE> 61
Bank of Albuquerque, N.A. Board of Directors
Steven G. Bradshaw
Executive Vice President
Bank of Oklahoma, N.A.
Douglas M. Brown
President & CEO
Tuition Plan, Inc.
Rudy A. Davolos
Athletic Director
University of New Mexico
Thomas D. Growney
President
Tom Growney Equipment, Inc.
Eugene A. Harris
Executive Vice President
BOK Financial Corporation and Bank of Oklahoma, N.A.
Stanley A. Lybarger
President & CEO
BOK Financial Corporation and Bank of Oklahoma, N.A.
W. Jeffrey Pickryl
Executive Vice President
Bank of Oklahoma, N.A.
Doreen Rast
Senior Vice President
Bank of Albuquerque, N.A.
Michael D. Sivage
Chief Executive Officer
Sivage-Thomas Homes, Inc.
David L. Sutter
Senior Vice President
Bank of Oklahoma, N. A.
Gregory K. Symons
Chairman, President and CEO Bank of Albuquerque, N.A.
Bank of Arkansas, N.A. Board of Directors
John W. Anderson
Senior Vice President
Bank of Oklahoma, N.A.
Steven G. Bradshaw
Executive Vice President
Bank of Oklahoma, N.A.
Jeffrey R. Dunn
Chairman, President and CEO Bank of Arkansas, N.A.
George C. Faucette, Jr.
President
Coldwell Banker Faucette Real Estate
Mark W. Funke
President
Bank of Oklahoma-
Oklahoma City
Gerald Jones
President
Jones Motorcars, Inc.
Jerry D. Sweetser
Sweetser Properties, Inc.
Bank of Texas, N.A. Board of Directors
C. Thomas Abbott (2)
Vice Chairman
Bank of Texas, N. A.
Charles A. Angel, Jr. (2)
Vice Chairman
Bank of Texas, N. A.
C. Fred Ball, Jr.(3)
President and CEO
Bank of Texas, N. A.
C. Huston Bell (3)
President
The Vantage Companies
Edward O. Boshell, Jr. (3)
Columbia General Investments, L. P.
Ben R. Briggs (3)
Owner, Ben R. Briggs Investments
R. Neal Bright (3)
Managing Partner
Bright & Bright, L.L.P.
Dudley Chambers (3)
Partner,
Jackson & Walker, L.L.P.
H. Lynn Craft (2)
President & CEO
Baptist Foundation of Texas
Edward F. Doran, Sr. (3)
Charles W. Eisemann (2)
Investments
James J. Ellis (3)
Managing Partner
Ellis/Roiser Associates
R. William Gribble, Jr. (2)
President
Gribble Oil Company
J. T. Hairston, Jr. (3)
Investments
Douglas D. Hawthorne (2)
President & CEO
Texas Health Resources
Noble Hurley (2)
Investments
Jerry Lastelick (3)
Attorney
Lastelick, Anderson and Arneson
Stanley A. Lybarger (3)
President and CEO BOK Financial Corp.
Michael A. McBee (3)
Owner
McBee Operating Co.
Jon L. Mosle, Jr. (1)
Investments
Mrs. Rozene Pride (1)
Investments
Robert F. Sanford, Jr. (2)
Investments
William E. Stahnke (3)
Vice Chairman
Bank of Texas, N. A.
Mrs. Jere W. Thompson (3)
Community Leader
Tom E. Turner (3)
Chairman
Bank of Texas, N. A.
John C. Vogt (2)
Investments
Robert L. Zemanek (3)
President, Energy Delivery
Central and South West Services, Inc.
(1) Park Cities Bancshares, Inc.
(2) Bank of Texas, N. A.
(3) Park Cities Bancshares, Inc./ Bank of Texas, N. A.
<PAGE> 62
Major Customer Service Offices
Business Banking Centers
Albuquerque
Business Banking Group
201 Third St., NW, 14th Fl.
(505) 222-8444
Dallas
2650 Royal Lane
(972) 443-2800
Fayetteville
3500 N. College
(501) 973-2660
Oklahoma City
Commerce Center
9520 N. May
(405) 936-3700
OKC-South
7701 S. Western
(405) 616-7500
Sherman
307 W. Washington
(903) 891-8100
Tulsa
Brookside Banking Center
3237 S. Peoria
(918) 746-7400
Consumer Banking
Albuquerque
3900 Vassar, NE
(505) 855-0850
Dallas
8255 Walnut Hill
(214) 378-0109
Oklahoma City
Windsor Hills
2601 N. Meridian
(405) 272-2000
Tulsa
Bank of Oklahoma Tower
One Williams Center, 16th Fl.
(918) 588-6000
Corporate Banking
Albuquerque
201 Third St., NW, 14th Fl.
(505) 222-8444
Dallas
5956 Sherry Lane, Suite 1800
(214) 987-8800
Fayetteville
3500 N. College
(501) 973-2660
Oklahoma City
Bank of Oklahoma Plaza
Robinson at Robert S. Kerr
(405) 272-2000
Tulsa
Bank of Oklahoma Tower
One Williams Center, 8th Fl.
(918) 588-6127
BOSC, Inc.
(800) 364-1818
Dallas
5956 Sherry Lane, Suite 917
Little Rock
2200 N. Rodney Parham Rd. Suite 215
Oklahoma City
201 Robert S. Kerr, 4th Fl.
9520 N. May
Tulsa
One Williams Center, 9th Fl.
3045 S. Harvard, Suite 101
BOSC Oppenhiem Division
Bank of Oklahoma Plaza
Robinson at Robert S. Kerr
Oklahoma City
(800) 725-2663
BancAlbuquerque
Investment Center
2500 Louisiana Blvd., NE
Albuquerque
BancArkansas
Investment Center
3500 N. College, Fayetteville
BancOklahoma
Investment Center
3045 S. Harvard, Tulsa
Private Banking
Dallas
6701 Preston Road
(214) 525-7600
7600 West Northwest Highway
(214) 706-0373
Private Financial Services
Albuquerque
2500 Louisiana Blvd., NE,
Suite 208
(505) 837-4272
Enid
2308 N. Van Buren
(580) 548-8523
Oklahoma City
Commerce Center
9520 N. May, 2nd Floor
(405) 936-3900
Tulsa
Midtown
2021 S. Lewis, Suite 200
(918) 748-7257
Downtown
320 S. Boston
(918) 588-6214
Brookside
3237 S. Peoria
(918) 746-7487
61st & Yale
6036 S. Yale
(918) 493-5210
Oklahoma
Community Banking
Bartlesville
3815 S.E. Frank Phillips Blvd.
(918) 335-5300
Enid
2308 N. Van Buren
(580) 548-8500
Eufaula
219 S. Main
(918) 689-2567
Grove
201 S. Main
(918) 787-2700
McAlester
One E. Choctaw
(918) 426-1100
Muskogee
215 S. State
(918) 686-5900
Sand Springs
401 E. Broadway
(918) 241-8000
<PAGE> 63
Operating Subsidiaries
Bank of Albuquerque, N.A.
Albuquerque
201 Third St., NW, 14th Fl.
(505) 222-8469
Bank of Arkansas, N.A.
Fayetteville
3500 N. College
(501) 973-2660
Bank of Oklahoma, N.A.
Oklahoma City
Bank of Oklahoma Plaza
Robinson at Robert S. Kerr
(405) 272-2000
Tulsa
Bank of Oklahoma Tower
One Williams Center
(918) 588-6000
Bank of Texas, N.A.
Dallas
5956 Sherry Lane, Suite 1800
(214) 987-8880
Other Operating Subsidiaries
Bank of Oklahoma
Trust Division
Oklahoma City
Commerce Center
9520 N. May, 2nd Floor
(405) 936-3700
Tulsa
Bank of Oklahoma Tower
One Williams Center, 10th Fl.
(918) 588-6437
Southwest
Trust Company
Commerce Center
9520 N. May, 2nd Fl.
(405) 936-3919
Bank of Texas
Trust Division
Dallas
7600 West Northwest Hwy
(214) 706-0309
Sherman
2009 Independence Dr.
(903) 813-5100
Bank of ALBUQUERQUE
Trust Division
Albuquerque
2500 Louisiana Blvd., NE, Suite 208
(505) 837-4133
BOK Mortgage
Edmond
1515 S. Broadway
(405) 272-2307
Enid
2308 N. Van Buren
(580) 548-8528
Lawton
2602 W. Gore Blvd.
(580) 250-0070
Muskogee
215 S. State
(918) 686-5959
Norman
3550 W. Main
(405) 366-3618
Oklahoma City
5015 N. Pennsylvania
(405) 879-8700
7701 S. Western
(405) 879-8700
Owasso
413 E. 2nd Ave.
(918) 588-8650
Tulsa
Copper Oaks
7060 S. Yale, Suite 100
(918) 488-7140
Pine & Lewis
1604 N. Lewis
(918) 588-8608
Bank of ALBUQUERQUE
Mortgage group
Albuquerque
2500 Louisiana Blvd., NE, Suite 220
(505) 837-4111
Bank of Arkansas Mortgage Group
Bentonville
1706 S.E. Walton Blvd., Ste C
(501) 271-6800
Fayetteville
3500 N. College
(501) 973-2600
Little Rock
11610 Pleasant Ridge Rd. Suite 104
(501) 223-9000
Bank of TEXAS
Mortgage Group
Dallas
6209 Hillcrest Ave.
(214) 525-5052
First Mortgage
Investment Company
Lee's Summit, Missouri
987 N.E. Rice Rd.
(816) 246-7000
Lenexa, Kansas
15220 W. 87th St. Parkway
(913) 307-1600
Topeka, Kansas
2655 S.W. Wanamaker Rd.
(785) 272-0375
<PAGE> 64
Shareholder Information
Corporate Headquarters
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
(918) 588-6000
Independent Auditors
Ernst & Young LLP
3900 One Williams Center
Tulsa, Oklahoma 74172
(918) 560-3600
Legal Counsel
Frederic Dorwart Lawyers
Old City Hall
124 E. Fourth St.
Tulsa, Oklahoma 74103-5010
(918) 583-9922
Common Shares:
Traded NASDAQ National Market
NASDAQ Symbol: BOKF
Number of common shareholders of record at December 31, 1999: 1,241
Market Makers:
B-Trade Services LLC
Cantor, Fitzgerald & Co.
CIBC World Markets Corp.
Herzog, Heine, Geduld, Inc.
Howe Barnes Investments
Instinet Corporation
Investment Technology Group
Keefe Bruyette & Woods
Knight Securities LP
Salomon Smith Barney
Sherwood Securities
Southwest Securities, Inc.
Stephens, Inc.
Strike Technologies
Transfer Agent and Registrar
The Bank of New York
(800) 524-4458
Address Shareholders Inquiries to:
Shareholder Relations Department-11E
P.O. Box 11258
Church Street Station
New York, NY 10286 E-Mail Address:
[email protected]
Send Certificates for Transfer
and Address Changes to:
Receive and Deliver Department - 11W
P.O. Box 11002
Church Street Station
New York, NY 10286
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 F. Ulrich, Senior Vice President, Investor Relations,
(918) 588-6752. News media and others seeking general information should contact
Becky J. Frank, Vice President, Public Relations Manager, (918) 588-6831.
Information about BOK Financial is also readily available at our website:
www.bokf.com
<PAGE>
Bank of Albuquerque, N.A.
P.O. Box 26148, Albuquerque, NM 87125
(505) 855-0850
www.bankofalbuquerque.com
BANK OF ARKANSAS, N.A.
P.O. Box 1407, Fayetteville, AR 72703
(501) 973-2660
www.bankofarkansas.com
BANK OF OKLAHOMA, N.A.
Bank of Oklahoma Tower
P.O. Box 2300, Tulsa, OK 74192
(918) 588-6000
www.bankofoklahoma.com
or
www.bok.com
BANK OF OKLAHOMA PLAZA
P.O. Box 24128, Oklahoma City, OK 73124
(405) 272-2000
www.bankofoklahoma.com
or
www.bok.com
BANK OF TEXAS, N.A.
6215 Hillcrest Avenue, Dallas, TX 75205
(214) 525-5000
www.bankoftexas.com
(c)2000 BOK Financial Corporation
<PAGE>
BOK Financial Corporation
Appendix A
Graph I
- --------------------------------------------- ---------------------
Description Percentage
Composition
- --------------------------------------------- ---------------------
Service charges and fees on deposit accounts 22%
- --------------------------------------------- -------------------
Mortgage banking 20%
- --------------------------------------------- -------------------
Trust fees and commissions 19%
- --------------------------------------------- -------------------
Transaction card 18%
- --------------------------------------------- -------------------
Other 10%
- --------------------------------------------- -------------------
Brokerage and trading 9%
- --------------------------------------------- -------------------
Leasing 2%
- --------------------------------------------- -------------------
BOK FINANCIAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Banking Subsidiaries
Bank of Oklahoma, National Association
Bank of Arkansas, National Association
Bank of Texas, National Association
Bank of Albuquerque, National Association
Canyon Creek National Bank
Mid-Cities National Bank
Swiss Avenue State Bank
Other subsidiaries of BOK Financial Corporation
BOK Capital Services Corporation
BOK Plaza Holding Corporation
BOSC, Inc.
Chaparral Bancshares, Inc.
Chaparral Delaware, Inc.
First of Muskogee Insurance Corporation
Merger Corporation Number Seven
Park Cities Bancshares, Inc.
Park Cities Corporation
Sabre 1996 Partnership, an Oklahoma Limited Partnership
Subsidiaries of Bank of Oklahoma, N.A.
Affiliated BancServices, Inc.
Affiliated Financial Holding Company
Affiliated Financial Insurance Agency, Inc.
Affiliated Financial Life Insurance Company
BancOklahoma Agri-Service Corporation
BancOklahoma Mortgage Corporation
BOK Auto Receivable Corporation
BOK Delaware, Inc.
BOK Real Estate Trust
CVV Management, Inc.
CVV Partnership, an Oklahoma General Partnership
Cottonwood Valley Ventures, Inc.
Investment Concepts, Inc.
Pacesetter Leasing Company
Southwest Trust Company
115 East Fifth Corporation
Subsidiaries of Bank of Texas, N.A.
Bank of Texas Trust Company, National Association
All subsidiaries are incorporated in Oklahoma, with the exception of Bank of
Oklahoma, National Association, Bank of Arkansas, National Association, Bank
of Texas, National Association, Bank of Texas Trust Company, National
Association, Bank of Albuquerque, National Association, Mid-Cities National
Bank, and Canyon Creek National Bank which are chartered by the United States
of America; Affiliated Financial Life Insurance Company, which is incorporated
in Arizona; Chaparral Bancshares, Inc., Park Cities Bancshares,
Inc., Swiss Avenue State Bank, and BOK Real Estate Trust, which are
incorporated in Texas; BOK Delaware, Inc. and Chaparral
Delaware which are incorporated in Delaware; and Park Cities
Corporation, which is incorporated in Nevada.
BOK FINANCIAL CORPORATION
Exhibit 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated January 18,
2000, with respect to the consolidated financial statements of BOK Financial
Corporation incorporated by reference in the annual report (Form 10-K) for the
year ended December 31, 1999, in the following registration statements:
o Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer
Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust Agreement.
o Registration Statement (Form S-8, No. 33-44122) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1991 Special Stock Option Plan.
o Registration Statement (Form S-8, No. 33-55312) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1992 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-70102) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1993 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-79834) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation 1994 Stock Option Plan.
o Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer
Prospectus of the BOK Financial Corporation Directors' Stock Compensation
Plan.
o Registration Statement (Form S-8, No. 333-32649) pertaining to the Reoffer
Prospectus of BOK Financial Corporation 1997 Stock Option Plan.
o Registration Statement (Form S-8, No. 333-93957) pertaining to the Reoffer
Prospectus of BOK Financial Corporation 2000 Stock Option Plan.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
March 29, 2000
<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 Decmeber 31, 1999 and is
qualified in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000875357
<NAME> BOK Financial Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 397,895
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,960
<TRADING-ASSETS> 14,452
<INVESTMENTS-HELD-FOR-SALE> 2,588,704
<INVESTMENTS-CARRYING> 213,180
<INVESTMENTS-MARKET> 211,624
<LOANS> 4,643,489
<ALLOWANCE> 76,234
<TOTAL-ASSETS> 8,373,997
<DEPOSITS> 5,263,184
<SHORT-TERM> 1,713,620
<LIABILITIES-OTHER> 91,143
<LONG-TERM> 718,725
23
2
<COMMON> 3
<OTHER-SE> 557,136
<TOTAL-LIABILITIES-AND-EQUITY> 8,373,997
<INTEREST-LOAN> 336,630
<INTEREST-INVEST> 159,134
<INTEREST-OTHER> 4,510
<INTEREST-TOTAL> 500,274
<INTEREST-DEPOSIT> 150,621
<INTEREST-EXPENSE> 264,150
<INTEREST-INCOME-NET> 236,124
<LOAN-LOSSES> 10,365
<SECURITIES-GAINS> (419)
<EXPENSE-OTHER> 280,516
<INCOME-PRETAX> 133,695
<INCOME-PRE-EXTRAORDINARY> 89,226
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,226
<EPS-BASIC> 1.79
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 3.63
<LOANS-NON> 19,465
<LOANS-PAST> 11,336
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,600
<ALLOWANCE-OPEN> 65,922
<CHARGE-OFFS> 7,348
<RECOVERIES> 5,770
<ALLOWANCE-CLOSE> 76,234
<ALLOWANCE-DOMESTIC> 76,234
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8,899
</TABLE>
<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 Decmeber 31, 1999 and is
qualified in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000875357
<NAME> BOK Financial Corporation
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> Year Year
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 431,874 378,500
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 39,551 21,605
<TRADING-ASSETS> 41,138 4,999
<INVESTMENTS-HELD-FOR-SALE> 2,329,375 1,852,385
<INVESTMENTS-CARRYING> 227,777 213,111
<INVESTMENTS-MARKET> 227,754 214,125
<LOANS> 3,647,099 2,856,021
<ALLOWANCE> 65,922 54,044
<TOTAL-ASSETS> 7,059,507 5,613,233
<DEPOSITS> 4,607,727 3,924,405
<SHORT-TERM> 1,511,331 855,822
<LIABILITIES-OTHER> 73,693 62,690
<LONG-TERM> 336,620 318,436
23 23
2 0
<COMMON> 3 3
<OTHER-SE> 524,765 451,854
<TOTAL-LIABILITIES-AND-EQUITY> 7,059,507 5,613,233
<INTEREST-LOAN> 267,458 234,568
<INTEREST-INVEST> 132,007 118,952
<INTEREST-OTHER> 3,367 3,554
<INTEREST-TOTAL> 402,832 357,074
<INTEREST-DEPOSIT> 138,004 127,802
<INTEREST-EXPENSE> 212,406 194,842
<INTEREST-INCOME-NET> 190,426 162,232
<LOAN-LOSSES> 14,591 9,256
<SECURITIES-GAINS> 9,337 (1,329)
<EXPENSE-OTHER> 233,995 199,854
<INCOME-PRETAX> 116,860 84,678
<INCOME-PRE-EXTRAORDINARY> 79,611 68,155
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 79,611 68,155
<EPS-BASIC> 1.60 1.36
<EPS-DILUTED> 1.43 1.23
<YIELD-ACTUAL> 3.72 3.68
<LOANS-NON> 14,095 19,761
<LOANS-PAST> 9,553 10,710
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 8,600 14,200
<ALLOWANCE-OPEN> 54,044 45,907
<CHARGE-OFFS> 7,596 9,279
<RECOVERIES> 4,883 5,635
<ALLOWANCE-CLOSE> 65,992 54,044
<ALLOWANCE-DOMESTIC> 65,992 54,044
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 11,907 8,253
</TABLE>
<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 Decmeber 31, 1999 and is
qualified in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000875357
<NAME> BOK Financial Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 412,557
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,631
<TRADING-ASSETS> 51,924
<INVESTMENTS-HELD-FOR-SALE> 2,506,070
<INVESTMENTS-CARRYING> 230,190
<INVESTMENTS-MARKET> 229,719
<LOANS> 3,680,926
<ALLOWANCE> 68,994
<TOTAL-ASSETS> 7,289,409
<DEPOSITS> 4,570,143
<SHORT-TERM> 1,945,825
<LIABILITIES-OTHER> 89,290
<LONG-TERM> 149,268
23
2
<COMMON> 3
<OTHER-SE> 534,755
<TOTAL-LIABILITIES-AND-EQUITY> 7,289,409
<INTEREST-LOAN> 72,464
<INTEREST-INVEST> 36,930
<INTEREST-OTHER> 1,109
<INTEREST-TOTAL> 110,503
<INTEREST-DEPOSIT> 34,455
<INTEREST-EXPENSE> 56,621
<INTEREST-INCOME-NET> 51,928
<LOAN-LOSSES> 3,430
<SECURITIES-GAINS> 274
<EXPENSE-OTHER> 64,760
<INCOME-PRETAX> 31,278
<INCOME-PRE-EXTRAORDINARY> 21,295
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,295
<EPS-BASIC> .43
<EPS-DILUTED> .38
<YIELD-ACTUAL> 3.49
<LOANS-NON> 15,945
<LOANS-PAST> 13,144
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 72,034
<ALLOWANCE-OPEN> 65,922
<CHARGE-OFFS> 1,217
<RECOVERIES> 859
<ALLOWANCE-CLOSE> 68,994
<ALLOWANCE-DOMESTIC> 68,994
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<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 Decmeber 31, 1999 and is
qualified in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000875357
<NAME> BOK Financial Corporation
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos 9-mos
<FISCAL-YEAR-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<CASH> 422,089 450,700 352,892
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 5,450 37,865 36,826
<TRADING-ASSETS> 19,027 29,240 22,730
<INVESTMENTS-HELD-FOR-SALE> 1,988,991 1,919,488 2,100,329
<INVESTMENTS-CARRYING> 221,825 222,038 221,329
<INVESTMENTS-MARKET> 222,545 227,754 220,161
<LOANS> 2,921,968 2,975,085 3,167,205
<ALLOWANCE> 55,734 58,676 63,057
<TOTAL-ASSETS> 5,854,832 5,939,453 6,169,784
<DEPOSITS> 4,221,744 4,131,013 4,003,211
<SHORT-TERM> 961,655 950,059 1,332,206
<LIABILITIES-OTHER> 57,011 80,118 76,611
<LONG-TERM> 149,204 296,074 243,628
23 23 23
0 0 0
<COMMON> 1 3 3
<OTHER-SE> 465,194 482,163 514,102
<TOTAL-LIABILITIES-AND-EQUITY> 5,854,832 5,939,453 6,169,784
<INTEREST-LOAN> 62,700 127,648 196,240
<INTEREST-INVEST> 32,910 63,960 97,152
<INTEREST-OTHER> 933 1,909 2,714
<INTEREST-TOTAL> 96,543 193,517 296,106
<INTEREST-DEPOSIT> 35,229 70,812 105,153
<INTEREST-EXPENSE> 50,744 32,238 51,625
<INTEREST-INCOME-NET> 43,954 90,467 139,328
<LOAN-LOSSES> 2,470 6,443 10,504
<SECURITIES-GAINS> 2,512 5,832 6,370
<EXPENSE-OTHER> 58,339 113,525 171,696
<INCOME-PRETAX> 24,447 56,720 86,764
<INCOME-PRE-EXTRAORDINARY> 17,600 39,249 59,244
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 17,600 39,249 59,244
<EPS-BASIC> .35 .81 1.19
<EPS-DILUTED> .31 .72 1.06
<YIELD-ACTUAL> 3.72 3.72 3.72
<LOANS-NON> 19,863 15,711 19,442
<LOANS-PAST> 18,471 21,684 15,714
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 52,457 76,810 37,897
<ALLOWANCE-OPEN> 54,044 55,734 58,676
<CHARGE-OFFS> 1,584 3,905 5,437
<RECOVERIES> 804 2,094 3,945
<ALLOWANCE-CLOSE> 55,734 58,676 63,056
<ALLOWANCE-DOMESTIC> 55,734 58,676 63,056
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
