As filed with the Securities and Exchange Commission on March 27, 2002
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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, 2001 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: $496,420,615 as of February 28, 2002.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 51,286,073 shares of common
stock ($.00006 par value) as of the start of business on March 1, 2002.
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,
2001 (designated portions only)
Part II - Annual Report to Shareholders For Fiscal Year Ended December 31,
2001 (designated portions only)
Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for
April 30, 2002 (designated portions only)
Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31,
2001 (designated portions only)
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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 Stockholder Matters 5
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition and 6
Results of Operations
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 6
Financial Disclosure
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
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 - 28)
in BOK Financial's 2001 Annual Report to Shareholders. Information regarding BOK
Financial's acquisitions is incorporated by reference to Note 2 of "Notes to
Consolidated Financial Statements" (page 38) in BOK Financial's 2001 Annual
Report to Shareholders.
Narrative Description of Business
BOK Financial is a financial holding company whose activities are limited by the
Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services
Modernization Act or Gramm-Leach-Bliley Act. 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. Other nonbank subsidiary operations are not
significant. As of December 31, 2001, BOK Financial and its subsidiaries had
3,392 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 87% 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 18 of "Notes to Consolidated
Financial Statements" (pages 52 - 55) in BOK Financial's 2001 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. All
market share information below is based on share of deposits in specified area.
BOk is the largest banking subsidiary of BOK Financial. It has the largest
market share in Oklahoma and a leading position in eight of the eleven Oklahoma
counties in which it operates. BOk competes with two super-regional banks,
several regional and numerous locally owned banks in both the Tulsa and Oklahoma
City areas, as well as 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 Houston, Texas 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 United
States. Bank of Texas's market share is approximately 2% in the Dallas-Ft. Worth
area and 1% in the Houston market. Bank of Albuquerque has a number four market
share position in the Albuquerque area behind two super-regional competitors,
some regional banks and several locally-owned smaller community banks. Bank of
Arkansas operates as a community bank serving Benton and Washington counties in
Arkansas.
Supervision and Regulation
Financial 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.
BOK Financial
As a financial 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 quarterly reports 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 notification to the Reserve Board in any case where a
financial 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 financial
holding company may acquire all or substantially all of the assets of another
bank or before it may merge or consolidate with another financial 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 requires a financial holding company to notify the Reserve Board
within 30 days of engaging in new activities the Reserve Board has determined to
be financial in nature. These activities include dealing in and underwriting
debt and equity, 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 underwriter and/or agent; owning and
operating savings and loan associations; and leasing personal property on a full
pay-out, nonoperating basis. BOKF is already engaged in some of these activities
and has notified the Federal Reserve.
A financial 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 financial
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 financial 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, 2001, BOK Financial's Leverage, Tier 1 and
Total Capital ratios were 6.38%, 8.08% and 11.56%, respectively. Further
discussion of regulatory capital is incorporated by reference to Note 16 of
"Notes to Consolidated Financial Statements" (page 50 - 51) in BOK Financial's
2001 Annual Report to Shareholders.
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 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, 2001, 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 16 of "Notes to Consolidated
Financial Statements" (page 50 - 51) in BOK Financial's 2001 Annual Report to
Shareholders.
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
$93 million, net of depreciation and amortization, as of December 31, 2001. BOK
Financial conducts its operations through 64 locations in Oklahoma, 21 locations
in Texas, 18 locations in New Mexico, and 3 locations in Arkansas as of December
31, 2001. BOK Financial's facilities are suitable for their respective uses and
present needs.
The information set forth in Notes 6 and 14 of "Notes to Consolidated Financial
Statements" (pages 43 and 50, respectively) of BOK Financial's 2001 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 14 of "Notes to Consolidated Financial
Statements" (page 50) of BOK Financial's 2001 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,
2001.
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,
2001, common shareholders of record numbered 1,077 with 51,195,914 shares
outstanding.
BOK Financial's quarterly market information follows:
First Second Third Fourth
--------------- -------------- -------------- ---------------
2001:
Low 21.31 23.12 26.00 28.81
High 24.56 26.90 32.56 32.75
2000:
Low $15.31 $15.63 $16.75 $21.25
High 20.56 17.56 18.75 17.50
BOK Financial has not purchased any stock under its common stock repurchase
program during 2001. Under this program BOK Financial has authority to
repurchase up to 800,000 shares. These purchases have been 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 617,051
shares.
The information set forth under the captions "Table 1 - Consolidated Selected
Financial Data" (page 9), "Table 10 - Selected Quarterly Financial Data" (page
17) and Note 16 of "Notes to Consolidated Financial Statements" (page 50 - 51)
of BOK Financial's 2001 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 2001 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 - 28), "Annual Financial Summary -
Unaudited" (pages 60 - 61) and "Quarterly Financial Summary Unaudited" (pages 62
- - 63) of BOK Financial's 2001 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 25 -27) of BOK
Financial's 2001 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 10 - Selected Quarterly Financial Data" (page 17) of BOK
Financial's 2001 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 2002 Annual Proxy Statement for its
Annual Meeting of Shareholders scheduled for April 30, 2002 ("2002 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 2002 Annual Proxy Statement is incorporated herein by reference.
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in BOK Financial's
2002 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 2002 Annual Proxy Statement is incorporated herein by reference.
The information set forth under Note 5 and Note 10 of "Notes to Consolidated
Financial Statements" (pages 42 - 43 and page 46) of BOK Financial's 2001 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, 2001 are
incorporated by reference in Parts I and II of this Annual Report on Form 10-K.
Description Page Number
Consolidated Selected Financial Data 9
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 28
Report of Independent Auditors 28
Consolidated Statements of Earnings 29
Consolidated Balance Sheets 30
Consolidated Statements of Cash Flows 31
Consolidated Statements of Changes in Shareholders' Equity 32 - 33
Notes to Consolidated Financial Statements 34 - 59
Annual Financial Summary - Unaudited 60 - 61
Quarterly Financial Summary - Unaudited 62 - 63
(A)(2) List of Financial Statement Schedules filed.
The schedules to the consolidated financial statements required by Regulation
S-X are not required under the related instructions or are inapplicable and are
therefore omitted.
(A)(3) List of Exhibits filed.
Exhibit Number Description of Exhibit
3.0 The Articles of Incorporation of BOK Financial, incorporated by
reference to (i) Amended and Restated Certificate of
Incorporation of BOK Financial filed with the Oklahoma Secretary
of State on May 28, 1991, filed as Exhibit 3.0 to S-1
Registration Statement No. 33-90450, and (ii) Amendment attached
as Exhibit A to Information Statement and Prospectus Supplement
filed November 20, 1991.
3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit 3.1
of S-1 Registration Statement No. 33-90450.
4.0 The rights of the holders of the Common Stock and Preferred Stock
of BOK Financial are set forth in its Certificate of
Incorporation.
10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK
Financial, Kaiser, and the FDIC, incorporated by reference to
Exhibit 2.0 of S-1 Registration Statement No. 33-90450.
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 Financial and Stanley A.
Lybarger, incorporated by reference to Exhibit 10.4(a) of Form
10-K for the fiscal year ended December 31, 1991.
10.4(b) Amendment to 1991 Employment Agreement between BOK Financial
and Stanley A. Lybarger, as filed herin for fiscal year ended
December 31, 2001.
10.5 Director indemnification agreement dated June 30, 1987, between
BOk and Kaiser, incorporated by reference to Exhibit 10.5 of S-1
Registration Statement No. 33-90450. Substantially similar
director indemnification agreements were executed between BOk and
the following:
Date of Agreement
James E. Barnes June 30, 1987
William H. Bell June 30, 1987
James S. Boese June 30, 1987
Dennis L. Brand June 30, 1987
Chester E. Cadieux June 30, 1987
William B. Cleary June 30, 1987
Glenn A. Cox June 30, 1987
William E. Durrett June 30, 1987
Leonard J. Eaton, Jr. June 30, 1987
William B. Fader December 5, 1990
Gregory J. Flanagan June 30, 1987
Jerry L. Goodman June 30, 1987
David A. Hentschel July 7, 1987
Philip N. Hughes July 8, 1987
Thomas J. Hughes, III June 30, 1987
William G. Kerr June 30, 1987
Philip C. Lauinger, Jr. June 30, 1987
Stanley A. Lybarger December 5, 1990
Patricia McGee Maino June 30, 1987
Robert L. Parker, Sr. June 30, 1987
James A. Robinson June 30, 1987
William P. Sweich June 30, 1987
10.6 Capitalization and Stock Purchase Agreement dated May 20, 1991,
between BOK Financial and Kaiser, incorporated by reference to
Exhibit 10.6 of S-1 Registration Statement No. 33-90450.
10.7 BOK Financial Corporation 1991 Special Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-44122.
10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-55312.
10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-70102.
10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-79834.
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.
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.
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.
10.29 Merger Agreement among, BOK Financial Corporation, Park Cities
Bancshares, Inc. and CNBT Bancshares, Inc. dated August 18, 2000.
13.0 Annual Report to Shareholders for the fiscal year ended December
31, 2001. 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.
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.
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.
99.9 Undertakings incorporated by reference into S-8 Registration
Statement No. 333-40280 for BOK Financial Corporation Thrift Plan
for Hourly Employees, Incorporated by reference to Exhibit 99.9
of Form 10-K for the fiscal year ended December 31, 2000.
(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.
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 26, 2002 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 26, 2002, 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
Executive Vice President and Senior Vice President and Director of
Chief Financial Officer Financial Accounting and Reporting
DIRECTORS
/s/ Robert J. LaFortune
- ----------------------------------- ----------------------------------------
C. Fred Ball, Jr. Robert J. LaFortune
/s/ Sharon J. Bell
- ----------------------------------- ----------------------------------------
Sharon J. Bell Philip C. Lauinger, Jr.
/s/ Peter C. Boylan, III
- ----------------------------------- ----------------------------------------
Peter C. Boylan, III John C. Lopez
/s/ Joseph E. Cappy
- ----------------------------------- ----------------------------------------
Joseph E. Cappy Frank A. McPherson
- ----------------------------------- ----------------------------------------
Luke R. Corbett Steven E. Moore
- ----------------------------------- ----------------------------------------
William E. Durrett J. Larry Nichols
/s/ James O. Goodwin
- ----------------------------------- ----------------------------------------
James O. Goodwin Robert L. Parker, Sr.
/s/ V. Burns Hargis /s/ James A. Robinson
- ----------------------------------- ----------------------------------------
V. Burns Hargis James A. Robinson
/s/ Howard E. Janzen /s/ L. Francis Rooney, III
- ----------------------------------- ----------------------------------------
Howard E. Janzen L. Francis Rooney, III
/s/ E. Carey Joullian, IV /s/ Scott F. Zarrow
- ----------------------------------- ----------------------------------------
E. Carey Joullian, IV Scott F. Zarrow
- -----------------------------------
David L. Kyle
BOK Financial Corporation
Exhibit 10.4(b)
Employment Agreement
BOK FINANCIAL CORPORATION
Amendment to 1991 Employment Agreement
This amendment to 1991 Employment Agreement (the "First Amendment") is
made this 31st, day of July 2001 (the "Amendment Date") between the following
parties (the "Parties"):
i. Stanley A. Lybarger, an individual residing in Tulsa, Oklahoma
("Executive"); and,
ii. Bank of Oklahoma, National Association ("Bank").
The Bank and Executive, in exchange for the promises hereafter set
forth and other good and valuable consideration (the receipt and adequacy of
which the Parties hereby acknowledge), and intending to be legally bound hereby,
agree as follows:
1. Purpose of this Agreement. The Parties have heretofore entered in that
certain Employment Agreement effected June 7, 1991 and signed December
17, 1991 (the "Employment Agreement"). The purpose of this First
Amendment is to amend the Employment Agreement as herein provided. BOK
Financial Corporation ("BOKF") owns all of the issued and outstanding
capital stock of Bank.
2. Special Provisions Respecting Executive's Employee Stock Options.
Executive has heretofore been awarded options to acquire BOKF Common
Stock pursuant to the BOKF 1997 Stock Option Plan, the BOKF 1996 Stock
Option Plan, the BOKF 1995 Stock Option Plan, the BOKF 1994 Stock
Option Plan and the BOKF 1993 Stock Option Plan and may be awarded
options to acquire BOKF Common Stock pursuant to future BOKF stock
option plans (collectively, the "Stock Option Plans" and the "Stock
Options").
a. Notwithstanding any provisions of the Stock Option Plans to the
contrary, all Stock Options which have been awarded to Executive
as of Termination shall fully vest, subject to the following
conditions precedent:
i. Unless terminated by BOKF without cause or terminated by
Executive pursuant to Paragraph 6(a) of the Employment
Agreement ("Termination By the Executive Following
Occurrence of a Termination Event"), Executive shall have
satisfactorily (as determined by the agreement of the
Chairman of the Board and Executive) served as Chief
Executive Officer until Executive reaches 57 years of age;
ii. Executive shall have recruited a chief operating officer for
BOKF ( the "COO");
iii. At the time of recruitment, the COO possessed the experience
and qualifications on the basis of which the Chairman of the
Board and Executive mutually agree it is reasonable to
assume the COO should become qualified to be the Chief
Executive Officer of BOKF at Termination;
iv. The Board of Directors of BOKF approve the employment of the
COO;
v. The COO shall have completed a minimum of three years
employment with BOKF as of Termination;
vi. The Chairman of the Board and Executive, each in the
exercise of his good faith judgment, agree that the COO is
qualified to be the Chief Executive Officer of the
Corporation at Termination;
vii. The Board of directors of BOKF shall approve the election of
the COO and Chief Executive Officer of BOKF; and,
viii.The Chairman of the Board and Executive, each in the
exercise of his good faith judgment, agree that BOKF has
maintained satisfactory performance through the term of this
Agreement and is satisfactorily performing at Termination,
in each instance giving due consideration to the performance
of the United States economy in general and peer group
financial institutions in the United States in particular.
ix. In the event the Chairman of the Board and Executive do not,
each in the exercise of his good faith judgment, reach the
agreements described in sub-paragraphs a(i), a(iii) and
a(viii) above, the issue or issues shall be presented to the
full Board of Directors of Bank for determination and the
determination of the Bank Board of Directors shall be
binding upon Bank and Executive.
b. Notwithstanding any provisions of the Stock Option Plans to the
contrary, all Stock Options which have been awarded to Executive
and which have vested as of the Termination (whether pursuant to
the provisions of the preceding subparagraph or otherwise) shall
terminate, if not sooner exercised, six months following
Termination.
3. Executive's Continued Involved with BOKF Beyond Termination and Prior
to Age 65. In the event of Termination prior to reaching age 65,
Executive will be permitted to continue to be involved in the business
and affairs of BOKF as a part-time special employee, consultant,
director with special duties, or in some other capacity to the extent
reasonably required to permit Executive to continue to participate in
BOKF's employee health care benefits until age 65, but only for so long
as Executive continues to owe a duty of loyalty to BOKF. The costs of
such participation shall be allocated between Bank and Executive
equitably depending upon the level of Executive's continued involvement
with BOKF.
4. Agreement Not To Compete. In consideration for the foregoing, Executive
agrees not to Compete (as hereafter defined) for a period of two years
following Termination except in the case of Termination by the Bank
without cause. Executive agrees that (i) the restrictions imposed upon
Executive by this Non-Competition Agreement are essential and necessary
to ensure BOKF continues to enjoy the goodwill of the Bank, and (iii)
all the restrictions (including particularly the time and geographical
limitations) are fair and reasonable.
a. As used herein, Compete means to directly or indirectly (whether
individually or as an officer, director, employee, partner,
stockholder, creditor, agent, or representative of other persons
or entities) (i) engage in the banking business generally, or in
any business in which the Bank or any of the Bank's affiliates
has as of the date of such termination engaged, in any
metropolitan area or any County contiguous thereto in which the
Bank or any of the Bank's affiliates maintains an office as of
the date of such termination, (ii) solicit clients of Bank or
Bank's affiliates for banking business generally or for any
business in which the Bank or any of Bank's affiliates have
engaged as of the date of such termination, or accept business
therefrom, or (iii) solicit any employee of Bank or any of Bank's
affiliates to seek employment with any person or entity except
the Bank and its affiliates, whether, in either case, such
solicitation is made within or without the area described herein.
b. Executive agrees that any remedy at law for any breach of this
promise would be inadequate and, in the event of any such breach,
BOKF shall be entitled to both immediate and permanent injunctive
relief without the necessity of posting any bond therefor to
preclude any such breach (in addition to any remedies of law
which BOKF may be entitled).
5. Ratification of Employment Agreement. As amended by this First Amendment,
the Employment Agreement shall remain in full force and effect in
accordance with its terms.
6. Miscellaneous Provisions The Miscellaneous Provisions of Paragraph 8 of the
Employment Agreement shall apply to this First Amendment.
Dated as of the Agreement Date.
Bank of Oklahoma, National Association
By /s/ George B. Kaiser
--------------------------------------
Stanley A. Lybarger
/s/ Stanley A. Lybarger
---------------------------------------
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 28
Report of Independent Auditors 28
Consolidated Financial Statements 29
Notes to Consolidated Financial Statements 34
Annual Financial Summary - Unaudited 60
Quarterly Financial Summary - Unaudited 62
Appendix A - Graph Data 69
2001 Annual Report
BOK FINANCIAL
CORPORATION
1 Management Letter
10 Management's Assessment of Operations and Financial Condition
28 Report of Management on Financial Statements
28 Report of Independent Auditors
29 Consolidated Financial Statements
64 Shareholder and Corporate Information
BOK Financial Corporation
Net Income and Acquisition Timeline Graph Data
Net Income*
03/31/91 2,609 1991 - BOK Financial Corporation, purchases Bank of Oklahoma; George B. Kaiser becomes chairman.
06/30/91 2,824 1991 - Company acquires eight Oklahoma City locations of Continental Federal Savings & Loan Association.
09/30/91 4,748
12/31/91 2,661
03/31/92 5,223 1992 - BOk purchases 19 offices of Sooner Federal Savings & Loan Association
06/30/92 6,257
09/30/92 6,830
12/31/92 7,333
03/31/93 9,613 1993 - Company acquires Brookside State Bank and Sand Springs State Bank.
06/30/93 8,404
09/30/93 8,807
12/31/93 8,950
03/31/94 10,658 1994 - BOK expands outside of its home state with the acquisition of Citizens Holding Co., operating in
06/30/94 11,279 Muskogee, OK and Feyetteville, AR.
09/30/94 11,390
12/31/94 11,738
03/31/95 11,967
06/30/95 12,082
09/30/95 12,493
12/31/95 12,663
03/31/96 12,995 1996 - Company announces agreements to purchase two Dallas banks, FNB Park Cities and First
06/30/96 13,591 Texas Bank, totaling $390 million in assets.
09/30/96 12,975
12/31/96 14,566
03/31/97 15,347 1997 - BOK Financial's assets top $5 billion and trust assets top $10 billion.
06/30/97 16,064
09/30/97 16,376
12/31/97 16,818
03/31/98 16,313 1998 - Company purchases Bank of America branches in New Mexico, leading to the
06/30/98 20,438 creation of Bank of Albuquerque.
09/30/98 18,750
12/31/98 19,215
03/31/99 21,237 1999 - Dallas presence is expanded with the acquisition of three metroplex banks, adding $417 million in
06/30/99 22,056 assets and $354 million of deposits.
09/30/99 22,736
12/31/99 23,197
03/31/00 24,813 2000 - BOK Financial's earnings exceed $100 million for the first time.
06/30/00 24,194
09/30/00 25,637
12/31/00 25,496
03/31/01 27,402 2001 - BOK Financial enters Houston market with the purchase of CNBT Bancshares, with $442
06/30/01 28,981 million in assets and seven branch locations.
09/30/01 29,787
12/31/01 30,132
* Net income as reported and not restated for any subsequent years
pooling-of-interests or changes in accounting.
TO BE THE BEST AT EVERYTHING WE DO
Financial Highlights
(Dollars In Thousands Except Per Share Data)
2001 2000 1999
------------------------------------
For the Years Ended December 31
Net income $ 116,302 $ 100,140 $ 89,226
Earnings per share:
Basic 2.25 1.95 1.73
Diluted 2.01 1.75 1.55
Book value per share $ 16.18 $ 13.88 $ 11.02
Return on average assets 1.14% 1.15% 1.17%
Return on average shareholders' equity 14.93 16.46 16.45
--------------------------------------------------------------------------------------------
Tangible operating results1:
Tangible net income $ 124,566 $ 105,487 $ 94,926
Tangible net income per diluted share 2.15 1.84 1.65
Tangible return on average assets 1.22% 1.21% 1.25%
Tangible return on average shareholders' equity 15.99 17.34 17.50
--------------------------------------------------------------------------------------------
As of December 31
Loans, net of reserves $ 6,193,473 $ 5,435,207 $ 4,567,255
Assets 11,130,388 9,748,334 8,373,997
Deposits 6,905,744 6,046,005 5,263,184
Shareholders' equity 828,483 703,576 557,164
Nonperforming assets2 50,708 43,599 22,943
--------------------------------------------------------------------------------------------
Tier 1 capital ratio 8.08% 8.06% 7.27%
Total capital ratio 11.56 11.23 10.72
Leverage ratio 6.38 6.51 5.92
Average shareholders' equity to average assets 7.62 7.00 7.12
Reserve for loan losses to nonperforming loans2 233.90 207.95 391.65
Reserve for loan losses to loans3 1.66 1.51 1.66
Net charge offs to average loans3 .35 .22 .04
--------------------------------------------------------------------------------------------
1 Operating results excluding the after-tax effect of certain
goodwill amortization that will be discontinued after 2001
(see Note 1 to Consolidated Financial Statements).
2 Includes nonaccrual loans, renegotiated loans and assets
acquired in satisfaction of loans. Excludes loans past due
90 days or more and still accruing.
3 Excludes residential mortgage loans held for sale.
To Our Shareholders, Customers, Employees, and Friends:
For BOK Financial Corporation, 2001 capped a decade of record earnings
growth. Work begun 10 years ago to build on Bank of Oklahoma's traditional local
strengths has since created a regional financial company doing business in six
states. BOK Financial offers an array of products and services for consumers and
businesses and has provided consistent asset and income growth for shareholders.
With this annual report, we celebrate past successes, present efforts and future
plans without forgetting our most valuable asset - employees who enabled the
company to emerge as a leader.
In 2001, growth was sustained by record net income of $116.3 million,
an increase of 16 percent over 2000. Earnings per diluted share* increased 15
percent, to $2.01. Income growth was driven by a 22 percent rise in net interest
revenue. Fees and commissions grew 18 percent in 2001, and accounted for 40
percent of total revenue, still near the top of our peer group, though down from
prior periods. Transaction card revenue was up 15 percent, driven primarily by
merchant fees and debit card transactions that continue to become more popular
with consumers. Mortgage banking revenue benefited in 2001 from declining
interest rates and rose 35 percent. We diversified our brokerage and trading
offerings and increased business 36 percent. Loans rose 14 percent to $6.3
billion at the end of the year, despite a slow-down in the second half. Deposits
grew 14 percent as well, keeping pace with the growth in loans.
In addition to strengthening our leadership position in Oklahoma during
2001, we saw even faster growth outside the state. Our operations elsewhere
accounted for 32 percent of the company's loans and 31 percent of deposits at
year end. The growth in lending was led by a 35 percent increase in the Texas
portfolio. Texas loans expanded by 17 percent, excluding the acquisition of CNBT
Bancshares of Houston. In New Mexico, loans rose 14 percent.
Our growth from serving the needs of longstanding customers, attracting
new business from rivals and making strategic acquisitions boosted total assets
above $11 billion last year. That was more than five times the assets at the end
of 1991 and more than double our size just five years ago.
In addition to an ongoing expansion in Texas and New Mexico, we opened
a commercial loan office in Denver in January 2002. Throughout the company,
newer technologies were implemented to enable us to better serve customers and
maintain operating efficiencies.
Despite the challenges of a slowing economy last year, we were pleased
with our performance and look forward to more success in the future. This annual
report commemorates the 10th year for BOK Financial and outlines the progress
we've made. As always, we will look to our strong local banking roots to
maintain our customer service strengths as we pursue new opportunities to expand
our products and presence and create new value for customers, employees and
shareholders.
Sincerely,
Stanley A. Lybarger George B. Kaiser
President and Chief Executive Officer Chairman
* All per share figures are restated to reflect the 3 percent stock dividend
paid in May 2001. Net income would have been $124.6 million, or $2.15 per
diluted share, if a new accounting standard had been effective that permits some
amortization of goodwill to be discontinued. The new standard becomes effective
as of January 1, 2002.
NATIONALLY COMPETITIVE PRODUCTS DELIVERED WITH COMMUNITY BANK SERVICE
A DECADE OF CHANGE AND CHALLENGE
Preserving our heritage. Maintaining our leadership. Expanding our
reach. That's the essence of our steadfast mission of the past decade and our
vision for the future. For 10 years, BOK Financial Corporation has consistently
built quality assets and achieved record earnings by delivering an array of
sophisticated big bank offerings with community bank service. We have kept our
edge by enhancing longstanding relationships, attracting new business from
rivals and targeting acquisitions in growing markets where we fill key niches
under-served during a wave of mega-bank mergers. Through growth and change, BOK
Financial's goal remains the same -- satisfy customers who have helped make us a
regional leader while we remain sensitive to the needs of shareholders and
employees.
Much has changed since BOK Financial was formed in 1991 and acquired
Bank of Oklahoma. Large banks acquired smaller ones in a wave of mergers. Bigger
banks themselves were then bought up, leaving behind a swell of dissatisfied
customers. Four of the five largest locally owned banks in Oklahoma disappeared.
The only stand-alone survivor, Bank of Oklahoma, emerged as the largest
full-service, home-owned bank in the state by maintaining local authority over
service issues important to our customers. We have since carried this approach
forward to banks in Arkansas, New Mexico and Texas, where local decision-making
and responsiveness set us apart from the competition.
SERVICE STRATEGY
From our strong local ties, we have grown into a thriving,
middle-market bank with more than 100 locations in six states. We balance our
regional size and specific focus by recruiting strong local management and staff
in each market we serve. Then, we centralize our support functions in order to
maximize efficiencies and streamline work processes. The result is a mix of
products and services giving the customer the best of both worlds.
Asset Graph - See Appendix A
Loan Graph - See Appendix A
We enjoyed tremendous success in 2001 across our network, from our
community banks in Oklahoma to our urban banks in large cities throughout the
Southwest. Each of our franchises has unique characteristics. Some are retail
oriented, and others specialize in commercial lending while various offices
focus exclusively on mortgage or private banking. Across the board, however, our
commitment to quality remains constant through the efforts of our exceptional
employees.
SUCCESS ACROSS THE REGION
In our home state of Oklahoma, we are the leader in practically every
market segment. Now at 12 percent, market share for Bank of Oklahoma continues
to grow while that of our largest competitors declines. Last year, loans and
deposits grew 9 percent and 7 percent, respectively, in the state. Oklahoma
operations were responsible for $84.7 million of BOK Financial's net income, up
8 percent.
Our three-year-old Bank of Albuquerque franchise is thriving. Acquired
as a branch network focused largely on retail banking, today the bank is No. 4
in the market with a full array of products and services. Last year we expanded
our branch network from 16 to 18, adding our first two Albertsons supermarket
branches and moving a branch to an upgraded location. We added key managers and
completed the staffing of our private banking and trust groups and now have
personal, corporate and employee benefit trust services.
Loans in New Mexico grew 14 percent in 2001 and have almost tripled
since we opened our doors in December 1998. Deposits last year grew 14 percent
and fee-based revenue 15 percent. BOK Financial's net income attributable to New
Mexico doubled to $8.2 million.
Deposits Graph - See Appendix A
The company's Bank of Texas franchise continues to expand in the
economically vibrant markets of Dallas and Houston, where native Texans with
local roots manage our banks. Internal growth and acquisitions have boosted
Texas assets to $2.1 billion, or 19 percent of BOK Financial's total. The
company's overall net income from Texas rose to $21 million, up 30 percent.
The acquisition of CNBT Bancshares of Houston highlighted our growth
last year in the Lone Star State. Like Dallas, we entered the Houston market by
acquiring a solid local mid-sized bank and arrived with a plan to compete on a
broader scale. We have a great platform in Houston and a pool of top-notch local
talent. We combined CNBT's expertise in consumer and small business banking with
the strength of Bank of Texas' middle-market and private banking services. The
Houston operation now has stronger fee-based services than most local
competitors and a greater expertise and capacity in commercial lending. In
Texas, loans and deposits grew 35 percent and 48 percent, respectively, over
2000 (or 17 percent and 11 percent excluding the impact of the CNBT
acquisition). Fee revenue grew 40 percent in Texas, or 16 percent when excluding
CNBT.
Our efforts in northwest Arkansas remain focused on commercial lending
and related fee services at Bank of Arkansas. Loans grew almost 17 percent in
2001. Deposits grew 8 percent. BOK Financial's Arkansas operations accounted for
$2.5 million of company net income, a 67 percent increase.
TRADITIONAL BANKING SERVICES - COMMERCIAL & CONSUMER
Although we value strong ties to our past, we aren't afraid to break
with tradition when a change enables us to better serve customers and expand our
market share. Among our most successful endeavors during 2001 was the
introduction of free checking. It led to significant growth in new accounts,
checking balances and related fees.
We have 107 branches in four states. For the last decade, much of our
focus has been on expanding our extended-hours services through supermarket
branches, Internet banking, and 24-hour telephone banking. Now, we are focusing
more on expanding our branch system.
In the Dallas-Fort Worth Metroplex, we opened a new location in
Grapevine and acquired land for a new location due to open this fall in Plano.
Plans are also underway for construction of a new branch in the Houston suburb
of Katy. A new branch has opened in Edmond, Okla., to better serve the needs of
one of Oklahoma's fastest growing communities.
Last year we introduced a long-term sales and service initiative called
"Perfect Banking." The vision is based on one overriding reality - that banking
is still about people, and that quality service is a critical reason that people
choose to do their banking with us. With a strong commitment to professional
training, consumer bankers now profile clients to determine current and future
financial needs with the goal of creating an exceptional experience with each
and every contact.
We believe favorable interaction with a service representative is
paramount, and we are dedicated to constantly improving each client's
experience.
Commercial banking has been a major part of our organization since its
inception. In fact, when the original bank first formed in 1910, its main
purpose was to provide funding to Oklahoma's then-new oil and gas business.
Today we still meet the needs of the region's growing companies. Overall, loan
growth in 2001 was realized in every segment, with loan volumes up 14 percent.
Fee Based Revenue Graph - See Appendix A
Our Treasury Services group is closely aligned with commercial banking
and continued to prosper in 2001, reflected in a 19 percent growth in revenue.
We assist our customers with currency exchange, letters of credit and a full
complement of sophisticated cash management products. Last year we completed the
implementation of our new image-based retail remittance service. BOK Financial
ranks 40th among all U.S. banks in ACH payments with a growth rate of 38
percent.
FEE BASED REVENUE
While our traditional consumer and commercial banking services continue
expanding, our fee-based lines of business remain one of our greatest success
stories of the past 10 years.
Fee-based revenue grew by 18 percent in 2001 and comprises 40 percent
of total revenue. This compares with an average of 31 percent in our peer group.
We emphasize fee-based revenue because the underlying businesses are less
capital-intensive and provide stability through economic cycles. Our fee revenue
is very diverse and continued growth remains a top priority.
Our trust assets grew last year to over $18 billion, continued evidence of
this historical strength of BOK Financial. Assets under management reached $9.7
billion. The trust division manages a family of proprietary mutual funds,
including one named the best in the nation. Lipper Inc. recognized the American
Performance Short-Term Income Fund as the No. 1 performing short-term bond fund
over the past five years. The fund returned 7.04 percent annually for the period
ending December 31, 2001, compared with an industry average of 5.93 percent.
We also manage employee benefit plans for 110,000 participants. We
offer a specialized self-directed 401(k) product that we have successfully
marketed coast to coast to law firms, medical clinics and closely-held
companies.
A few years ago, BOK Financial acquired the leading public finance firm
in Oklahoma, Leo Oppenheim. Last year we also entered the corporate finance
sector of the investment banking business, giving us the opportunity to leverage
the bank's current market presence in the corporate sector through the Oppenheim
division of BOSC Inc., our broker/dealer. This new diversification, in addition
to favorable reception to our product mix in newer markets, helped boost our
brokerage and trading revenue 36 percent, to $21.8 million.
Our mortgage banking operation is among the most successful in the
country. We offer mortgage services in all our banking markets plus the greater
Kansas City area. Benefiting from declining interest rates, mortgage banking
revenue grew 35 percent in 2001. Originations totaled $1.1 billion and generated
revenue of $17.8 million. This compares to $590 million and $4.8 million,
respectively, in 2000.
Among the most successful of our fee-based businesses during the last
decade was TransFund, our electronic funds transfer network. TransFund is the
13th largest network nationally and has experienced a compound annual growth
rate in transactions exceeding 16 percent, to 95.3 million last year. The system
had no non-Oklahoma clients in 1991. Today one third of the 324 financial
institutions served are located outside of Oklahoma, with recent growth
principally in Texas, Colorado and Kansas. The number of cardholders increased
from 378,000 a decade ago to 1.47 million at the end of 2001.
IMPROVEMENTS IN TECHNOLOGY AND EFFICIENCY
With our ongoing commitment to efficiency and service, 2001 marked
another important milestone in the history of BOK Financial - the completed
occupancy of the new BOK Technology Center in Tulsa. With 184,000 square-feet in
one state-of-the-art facility, we have simplified our workflow process and have
given ourselves room to grow efficiently. In previous years, the processes were
handled in five separate buildings.
Net Income Graph - See Appendix A
Two new technologies have vastly improved our service quality. We
completed installing a new imaging technology for the retail remittance business
with 100 percent of existing customers opting for the service. We also converted
all signature cards to images, enabling instant company-wide access for
signature verification.
Last year we implemented a new fraud and kite detection system expected
to minimize fraud losses. Our customers now have quicker access to even more
up-to-date account information because of a new check-processing center we
opened in Dallas.
Through all the progress, we will remain focused on preserving our
community bank heritage and close-knit relationships with all our customers. We
will continually update and expand our offerings to maintain our leadership in
the financial services arena. We will expand our reach through greater market
share in existing lines of business and through new ventures that help us
achieve our consistent goal of being the best for customers-- for the next 10
years and beyond.
MAINTAIN OKLAHOMA LEADERSHIP WHILE PURSUING OPPORTUNITIES IN HIGH-GROWTH
METROPOLITAN MARKETS
Table 1 Consolidated Selected Financial Data
(Dollars In Thousands Except Per Share Data)
December 31,
---------------------------------------------------------------------
2001 2000 1999 19982 19972
---------------------------------------------------------------------
Selected Financial Data
For the year:
Interest revenue $ 654,633 $ 638,730 $ 500,274 $ 402,832 $ 357,074
Interest expense 327,859 369,843 264,150 212,406 194,842
Net interest revenue 326,774 268,887 236,124 190,426 162,232
Provision for loan losses 37,610 17,204 10,365 14,591 9,256
Net income 116,302 100,140 89,226 79,611 68,155
Period-end:
Loans, net of reserve 6,193,473 5,435,207 4,567,255 3,581,177 2,801,977
Assets 11,130,388 9,748,334 8,373,997 7,059,507 5,613,233
Deposits 6,905,744 6,046,005 5,263,184 4,607,727 3,924,405
Subordinated debentures 186,302 148,816 148,642 146,921 148,356
Shareholders' equity 828,483 703,576 557,164 524,793 451,880
Nonperforming assets3 50,708 43,599 22,943 18,762 25,249
Profitability Statistics
Earnings per share (based on average equivalent shares):
Basic $ 2.25 $ 1.95 $ 1.73 $ 1.55 $ 1.32
Diluted 2.01 1.75 1.55 1.38 1.19
Percentages (based on daily averages):
Return on average assets 1.14% 1.15% 1.17% 1.34% 1.29%
Return on average shareholders' equity 14.93 16.46 16.45 16.38 16.78
Average shareholders' equity to average assets 7.62 7.00 7.12 8.17 7.71
Common Stock Performance
Per Share:
Book Value $ 16.18 $ 13.88 $ 11.02 $ 10.57 $ 9.08
Market price: December 31 close 31.51 21.25 20.19 23.38 19.40
Market range - High trade 32.75 21.25 25.94 25.63 22.00
- Low trade 21.31 15.31 18.94 19.50 13.88
Selected Balance Sheet Statistics
Period-end:
Tier 1 capital ratio 8.08% 8.06% 7.27% 7.93% 9.87%
Total capital ratio 11.56 11.23 10.72 12.02 14.95
Leverage ratio 6.38 6.51 5.92 6.60 7.06
Reserve for loan losses to nonperforming loans3 233.90 207.95 391.65 467.70 270.65
Reserve for loan losses to loans1 1.66 1.51 1.66 1.86 1.95
Miscellaneous (at December 31)
Number of employees (FTE) 3,392 3,003 3,101 2,850 2,404
Number of banking locations 114 105 100 91 76
Number of TransFund locations 1,325 1,111 1,020 998 785
Mortgage loan servicing portfolio $ 6,645,868 $ 6,874,995 $ 7,028,247 $ 6,375,239 $ 6,981,744
- -------------------------------------------------------------------------------------------------------------------------------
1 Excludes residential mortgage loans held for sale.
2 Restated for pooling of interest in 1999.
3 Includes nonaccrual loans, renegotiated loans and assets acquired in
satisfaction of loans. Excludes loans past due 90 days or more and still
accruing.
Management's Assessment of Operations and Financial Condition
BOK Financial Corporation ("BOK Financial") is a financial holding company
that offers full service banking in Oklahoma, Northwest Arkansas, Dallas and
Houston, Texas metropolitan areas 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 subsidiaries include BOSC,
Inc., a broker/dealer that engages in retail and institutional securities sales
and municipal underwriting.
Assessment of Operations
Summary of Performance
BOK Financial recorded net income of $116.3 million or $2.01 per diluted
share for 2001 compared to $100.1 million or $1.75 per diluted share for 2000.
Prior years' earnings per share have been restated to reflect a 3% stock
dividend in 2001. Returns on average assets and average equity were 1.14% and
14.93%, respectively, for 2001 compared to 1.15% and 16.46%, respectively, for
2000. Net income in 2000 included a $3.0 million reduction in income tax expense
due to favorable resolution of an Internal Revenue Service examination. Diluted
earnings per share were $1.69, return on equity was 16.05%, and return on
average assets was 1.12% excluding this resolution.
Net interest revenue grew $57.9 million or 22% during 2001 due primarily to
an increase in average earning assets of $1.4 billion. Fees and commissions
revenue grew $35.7 million or 18%, which included increases in all major
categories of fee income compared to 2000. Gain on sales of securities included
gains on sales of securities used as an economic hedge of the mortgage-servicing
portfolio. The net impact of these sales and the provision for impairment of the
mortgage-servicing portfolio was a gain of $2.8 million. Excluding the
securities gains on this hedge, net gains on sales of securities were $17.9
million. Operating expenses increased $32.5 million or 11% excluding $20.7
million from Citizens National Bank of Texas ("CNBT"), which was acquired in
January 2001 and $15.6 million provision for impairment of mortgage servicing
rights. The provision for loan loss increased $20.4 million to $37.6 million.
Net income for the fourth quarter of 2001 was $30.1 million or $0.52 per
diluted common share, an increase of 18% over the same period of 2000. These
increases included an increase of $17.8 million or 26% in net interest revenue
and a $10.6 million or 20% increase in fees and commissions. These increases
were partially offset by a $17.2 million or 23% increase in other operating
expense, excluding provisions for impairment of mortgage servicing rights. This
increase was due primarily to amortization of mortgage servicing rights.
Net income for 1999 was $89.2 million or $1.55 per diluted common share.
Returns on average assets and equity were 1.17% and 16.45%, respectively.
Net Interest Revenue
Tax equivalent net interest revenue totaled $334.8 million for 2001 compared
to $276.7 million for 2000. 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 2001, most notably average loan growth of $1.1 billion.
This growth in loans improved the mix of earning assets since loans generally
have higher yields than other types of earning assets. Average loans now
comprise 65% of average earning assets compared to 63% in 2000. The growth in
average earning assets was funded by a $1.2 billion increase in interest-bearing
liabilities, including an $845 million increase in interest-bearing deposits.
Table 2 reflects the effect on net interest revenue of changes in average
balances and interest rates for the various types of earning assets and
interest-bearing liabilities.
Net interest margin, the ratio of net interest revenue to average earning
assets, increased from 3.56% in 2000 to 3.64% in 2001. This increase reflects
the effect of changes in interest rates on BOK Financial's earning assets and
interest-bearing liabilities. BOK Financial's interest-bearing liabilities react
more quickly to changes in interest rates than its earning assets, causing the
net interest margin to increase during periods of declining interest rates.
Management expects the favorable effect of declining interest rates to moderate
as yields on earning assets decline and as overall market rates stabilize.
Table 2 Volume/Rate Analysis
(In Thousands)
2001/2000 2000/1999
------------------------------------- ------------------------------------
Change Due To(1) Change Due To(1)
------------------------ ------------------------
Change Volume Yield/Rate Change Volume Yield/Rate
------------ ----------- ------------ ----------- ------------ -----------
Tax-equivalent interest revenue:
Securities $17,329 $ 26,009 $ (8,680) $ 20,384 $11,444 $ 8,940
Trading securities (250) 226 (476) (841) (1,683) 842
Loans 1,149 88,815 (87,666) 117,643 77,933 39,710
Funds sold and resell agreements (2,133) (1,516) (617) 743 164 579
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Total 16,095 113,534 (97,439) 137,929 87,858 50,071
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Interest expense:
Transaction deposits (5,126) 9,642 (14,768) 8,509 4,847 3,662
Savings deposits (422) 50 (472) (268) (174) (94)
Time deposits 5,686 26,304 (20,618) 49,387 28,452 20,935
Borrowed funds (42,608) 15,392 (58,000) 46,962 22,154 24,808
Subordinated debenture 486 2,059 (1,573) 1,103 15 1,088
- ---------------------------------------- ------------ ----------- ------------ -- ----------- ------------ -----------
Total (41,984) 53,447 (95,431) 105,693 55,294 50,399
- ---------------------------------------- ------------ -- -----------
----------- ------------ ------------ -----------
Tax-equivalent net interest revenue 58,079 $ 60,087 $ (2,008) 32,236 $32,564 $ (328)
----------- ------------ ------------ -----------
(Increase) decrease in tax-equivalent
adjustment (192) 527
- ---------------------------------------- ------------ -- -----------
Net interest revenue $57,887 $ 32,763
- ---------------------------------------- ------------ -- -----------
4th Qtr 2001/4th Qtr 2000
-----------------------------------
Change Due To(1)
-----------------------
Change Volume Yield/Rate
----------- ----------- -----------
Tax-equivalent interest revenue:
Securities $ 1,534 $ 7,337 $ (5,803)
Trading securities (160) 67 (227)
Loans (26,211) 18,863 (45,074)
Funds sold and resell agreements (703) (360) (343)
- ------------------------------------------ ----------- ----------- -----------
Total (25,540) 25,907 (51,447)
- ------------------------------------------ ----------- ----------- -----------
Interest expense:
Transaction deposits (5,713) 3,202 (8,915)
Savings deposits (184) 55 (239)
Time deposits (12,493) 2,315 (14,808)
Borrowed funds (24,807) 3,494 (28,301)
Subordinated debenture 97 619 (522)
- ------------------------------------------ ----------- ----------- -----------
Total (43,100) 9,685 (52,785)
- ------------------------------------------ -----------
----------- -----------
Tax-equivalent net interest revenue 17,560 $16,222 $ 1,338
----------- -----------
Decrease in tax-equivalent adjustment 267
- ------------------------------------------ -----------
Net interest revenue $17,827
- ------------------------------------------ -----------
(1) Changes attributable to both volume and yield/rate are allocated to both
volume and yield/rate on an equal basis.
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. The primary objective of
this strategy is to reduce total interest rate risk. The interest rate on these
borrowed funds, which generally reacts quickly to changes in market interest
rates, tends to match the effect of changes in interest rates on the loan
portfolio. Interest rates earned on the securities purchased with the proceeds
of these borrowed funds are affected less quickly by changes in market interest
rates. The timing of changes in interest rates earned on securities more closely
matches the timing of changes in interest rates paid on deposit accounts.
Although this strategy frequently results in a net interest margin that falls
below those normally seen in the commercial banking industry, it provides net
interest revenue as well as a reduction in interest rate risk. Management
estimates that this strategy resulted in a 31 basis point decrease in net
interest margin for 2001. However, this strategy contributed $38.8 million to
net interest revenue. Net interest margin, excluding this strategy, was 3.95%
for 2001. 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
effectiveness of these strategies are reflected in the overall changes in net
interest revenue due to changes in interest rates as shown in Table 2.
Tax-equivalent net interest revenue for the fourth quarter of 2001 was
$88.8 million compared to $71.3 million for the fourth quarter of 2000. This
increase was due to the growth in average earning assets, which increased $1.4
billion or 17%. Net interest margin increased 22 basis points to 3.69% due to
the effect of declining rates over the past year as discussed above.
Tax-equivalent net interest revenue totaled $276.7 million for 2000
compared to $244.5 million in 1999. The increase in net interest revenue during
2000 was primarily due to an increase in average earning assets. Average earning
assets increased by $1.0 billion during 2000. Additionally, the mix of earning
assets improved during 2000. Average loans, which generally have higher yields
than other types of earning assets, increased to 63% of earning assets in 2000
compared to 60% in 1999. These volume factors contributed $87.9 million to the
increase in net interest revenue.
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 have 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 loan and deposit products and
other financial services traditionally associated with a large bank with the
responsiveness of a smaller, community bank.
Other Operating Revenue
Other operating revenue increased $60.4 million or 30% compared to 2000,
including a $24.5 million increase from gains on financial instruments. Fees and
commissions continue to represent a significant portion of BOK Financial's total
revenue at 40% during 2001. Included in 2001 were fees and commissions of $2.8
million from the CNBT acquisition, including service charges on deposit accounts
of $2.3 million. All major categories of fees and commissions increased over the
same period in 2000. Most notably, mortgage banking revenue increased $13.0
million or 35% due to improved conditions for sales of loans into the secondary
market. Service charges and fees on deposit accounts grew $8.4 million or 19%
over 2000 due to growth in nonsufficient fund charges and growth of treasury
services revenue. When interest rates fall, more corporate customers pay for
banking services through treasury services fees instead of maintaining
compensating deposit balances. Brokerage and trading grew 36% to $21.8 million
during 2001. This growth was driven by diversification into corporate bonds,
favorable reception to the product mix in our newer markets and continued
expansion in revenue from traditional brokerage products. Growth in transaction
card revenue of $5.7 million or 15% was due to growth in merchant fees, which
are directly related to the level of consumer spending and growth in debit card
fees that continue to become more popular with consumers. Trust fees grew 3%
despite declining stock market values on which many fees are based.
Securities and derivatives net gains totaled $26.6 million for 2001. These
gains included $17.9 million from the general securities portfolio, gains of
$12.8 million on a securities portfolio that management has designated as an
economic hedge against the risk of loss on mortgage servicing rights, and losses
of $4.1 million from fair value adjustments of derivative instruments.
Additional discussion about the mortgage servicing rights and related hedge
portfolio and BOK Financial's use of derivative instruments is located in the
Market Risk section of this report.
Table 3 Other Operating Revenue
(In Thousands)
Years ended December 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
------------- ----------- ----------- ----------- -----------
Brokerage and trading revenue $ 21,822 $ 16,074 $ 16,233 $ 15,301 $ 9,556
Transaction card revenue 44,481 38,753 32,648 24,426 19,339
Trust fees and commissions 40,567 39,316 35,127 29,956 24,072
Service charges and fees on deposit accounts 51,284 42,932 41,067 33,920 30,181
Mortgage banking revenue 50,155 37,179 36,986 41,733 32,235
Leasing revenue 3,745 4,244 3,725 7,111 5,861
Other revenue 20,087 17,965 17,589 11,688 10,330
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Total fees and commissions 232,141 196,463 183,375 164,135 131,574
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Gain on sale of student loans 557 529 600 1,548 1,311
Gain on loan securitization - - 270 - -
Gain (loss) on sales of other assets - (148) 4,626 - -
Gain (loss) on sales of securities, net 30,640 2,059 (419) 9,337 (1,329)
Loss on derivatives, net (4,062) - - - -
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Total other operating revenue $259,276 $198,903 $188,452 $175,020 $131,556
- ------------------------------------------------ ------------- ----------- ----------- ----------- -----------
Other operating revenue for the fourth quarter of 2001 totaled $55.3
million compared to $54.9 million for the fourth quarter of 2000. Included in
the fourth quarter 2001 were $676 thousand of fees and commissions from the CNBT
acquisition, including service charges on deposit accounts of $594 thousand. The
fourth quarter of 2001 included securities losses of $3.8 million compared to
gains of $3.3 million in the fourth quarter of 2000. Net securities losses from
the portion of the available for sale portfolio, which serves as an economic
hedge of mortgage servicing rights, totaled $11.1 million. Net securities gains
on the remaining available for sale portfolio totaled $7.3 million. Changes in
the components of other revenue during the fourth quarter were consistent with
the year to date changes. Service charges and fees on deposit accounts increased
$2.8 million. Mortgage banking revenue increased $4.8 million.
Other operating revenue in 2000 increased $10.5 million or 6% compared to
1999. Fees and commissions, which are included in other operating revenue,
increased $13.1 million or 7% while gains on asset sales decreased $2.6 million.
Revenue generated by card-based transactions, such as the TransFund ATM network,
bankcards and related merchant discounts, increased by 19% to $38.8 million.
These increases are generally due to a higher volume of transactions processed
in 2000. Other revenue included $4.5 million of private placement and
underwriting fees.
Management expects continued growth in other operating revenue. However,
increased competition, market saturation and the level of economic activity
could affect the future rate of increase. Additionally, BOK Financial's ability
to generate fee revenue is affected by interest rates, values in the equity
market and consumer spending, all of which can be volatile.
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. BOK Financial 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 87% of total revenue. Other lines of business include:
TransFund ATM network which contributed $7.8 million in 2001, $7.1 million in
2000 and $5.3 million in 1999 to net income; and BOSC, Inc. which contributed
$1.4 million in 2001, $406 thousand in 2000 and $534 thousand in 1999 to net
income.
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 small
businesses, middle market and larger customers, the Corporate Banking Division
has specialized groups that serve customers in the energy, agriculture,
healthcare and banking/finance industries. The Corporate Banking Division
contributed 39% of consolidated net income for 2001 compared to 43% of
consolidated net income for 2000. The reduction in the percent of consolidated
earnings contributed by the Corporate Banking Division reflects the growth in
the Regional Banks Division, most notably Bank of Texas. Total revenue for this
division increased 11% primarily due to a 13% increase in outstanding loans.
This increase in revenue was partially offset by increases in internal funding
rates charged to the Corporate Banking Division. Operating expense for this
division increased 7%. The provision for loan loss represents net loans charged
off or recovered for the Corporate Banking Division.
Table 4 Corporate Banking
(In Thousands)
Years ended December 31,
----------------------------------------
2001 2000 1999
----------------------------------------
Revenue (interest
expense) from
external sources $ 229,277 $ 264,623 $ 207,926
Revenue (interest
expense)from
internal sources (86,615) (136,367) (92,844)
Operating expense 57,322 53,451 47,025
Provision for
loan loss 10,493 3,658 (1,111)
Net income 45,580 43,471 42,262
Average assets $3,854,310 $3,370,044 $2,933,619
Average equity 442,870 392,711 330,091
Return on assets 1.18% 1.29% 1.44%
Return on equity 10.29 11.07 12.80
Efficiency ratio 40.18 41.68 40.86
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 14% of consolidated net income for 2001 and 17% of consolidated net
income for 2000. Net expense from external sources decreased $16.1 million due
primarily to lower rates paid on deposits. This decrease was partially offset by
lower revenue from internal sources due to rates charged to other operating
units. Operating expenses increased $4.2 million or 8% during 2001, including a
$2.0 million increase in personnel costs.
Table 5 Consumer Banking
(In Thousands)
Years ended December 31,
-------------------------------------------
2001 2000 1999
------------- ------------ --------------
Revenue (interest
expense)from
external sources $ (4,054) $ (20,154) $ (1,065)
Revenue (interest
expense)from
internal sources 94,393 107,172 80,973
Operating expense 59,099 54,906 53,545
Net income 16,539 17,379 14,602
Average assets $2,192,698 $2,140,383 $2,100,368
Average equity 69,102 60,813 58,824
Return on assets .75% .81% .70%
Return on equity 23.93 28.58 24.82
Efficiency ratio 65.42 63.10 67.01
Mortgage Banking
BOK Financial engages in mortgage banking activities through the BOk
Mortgage Division of Bank of Oklahoma. These activities include the origination,
marketing and servicing of conventional and government-sponsored mortgage loans.
BOk Mortgage contributed 7% of net income in 2001 compared to 3% in 2000.
Mortgage banking revenue, which is included in other operating revenue,
totaled $50.2 million in 2001, an increase of $13.0 million compared to 2000.
Declining interest rates throughout 2001 were favorable for mortgage lending.
Mortgage loans originated totaled $1.1 billion during 2001, including $562
million for home purchases and $566 million of loans refinanced. Mortgage loans
originated during 2000 totaled $590 million. The increase in volume of new loans
combined with improved pricing resulted in an increase in revenue from loan
production to $17.8 million in 2001 compared to $4.8 million in 2000. Revenue
from loan production included $22.7 million in 2001 and $11.3 million in 2000
from capitalized originated mortgage loan servicing rights. Income before taxes
from loan origination and marketing activities was $12.1 million in 2001
compared to a loss of $3.1 million in 2000. Approximately 71% of the mortgage
loans originated during 2001 were in Oklahoma.
The declining interest rate environment had an unfavorable effect on BOk
Mortgage's loan servicing portfolio, as both actual and anticipated prepayments
increased significantly. Total servicing revenue was $32.3 million for 2001
compared to $32.9 million for 2000. Amortization of servicing rights, which is
included in operating expense, increased by $8.3 million to $23.5 million due to
the higher level of prepayments. Additionally, an impairment provision of $15.6
million was recognized in 2001 for actual run-off and anticipated prepayments.
Net gains from the sales of securities that have been designated as an economic
hedge of the loan servicing portfolio totaled $12.8 million in 2001 and $5.3
million in 2000. These factors combined to reduce pretax income on loan
servicing activities to $378 thousand during 2001 compared to pretax income of
$7.8 million for 2000. See the Market Risk section of this report for additional
discussion of the prepayment risk of the mortgage servicing portfolio and
related hedging strategies.
BOk Mortgage services approximately $6.6 billion of mortgage loans.
Approximately 60% of these loans are in BOK Financial's primary market area and
21% are in the southeastern United Sates. Information regarding stratification
of the servicing portfolio by primary risk characteristics is presented in Note
8 to the Consolidated Financial Statements.
Table 6 Mortgage Banking
(In Thousands)
Years ended December 31,
-------------------------------------
2001 2000 1999
-------------------------------------
Revenue (interest
expense)from
external sources $ 62,664 $ 44,907 $ 39,675
Capitalized mortgage
servicing rights 22,695 11,267 11,483
Revenue (interest
expense)from
internal sources (20,867) (15,006) (8,296)
Operating expense 47,750 37,762 39,422
Provision for
impairment of
mortgage servicing
rights 15,551 2,900 -
Gain on sales of
securities, net 12,757 5,257 -
Net income 8,493 3,486 2,051
Average assets $ 651,103 $ 412,219 $ 355,887
Average equity 50,891 32,053 32,006
Return on assets 1.30% .85% .58%
Return on equity 16.69 10.88 6.41
Efficiency ratio 74.04 91.73 91.97
Trust Services
BOK Financial provides a wide range of trust services, including
institutional, investment and retirement products and services to affluent
individuals and businesses, not-for-profit organizations and governmental
agencies. 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, 2001 and 2000, trust assets with an
aggregate market value of $18 billion were subject to various fiduciary
arrangements. BOK Financial has sole or joint discretionary authority over $10
billion of trust assets at December 31, 2001 compared to $9 billion at the end
of 2000. Trust services contributed 8% to consolidated net income for 2001
compared to 10% for 2000. Growth in trust fees was limited by the declining
stock market values during 2001 on which many fees are based. Total revenue from
trust services increased $2.2 million or 4% during 2001, while operating
expenses increased $2.6 million or 7% due primarily to $921 thousand in
personnel costs.
Table 7 Trust Services
(In Thousands)
Years ended December 31,
--------------------------------------
2001 2000 1999
------------- ----------- ------------
Revenue (interest
expense)from
external sources $ 41,064 $ 43,433 $ 39,809
Revenue (interest
expense)from
internal sources 13,589 8,995 7,243
Operating expense 38,534 35,916 33,481
Net income 9,771 10,087 8,249
Average assets $ 475,715 $ 355,150 $ 332,297
Average equity 41,290 37,895 33,473
Return on assets 2.05% 2.84% 2.48%
Return on equity 23.66 26.62 24.64
Efficiency ratio 70.51 68.51 71.16
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, treasury services and retail investments in its respective market.
Small businesses and middle-market corporations are the regional banks' primary
customer focus.
Regional banks contributed $31.7 million or 27% to consolidated net income
in 2001 compared to $21.7 million or 22% in 2000. Total revenue for 2001
increased $40.5 million compared to 2000, while operating expenses increased
$23.0 million. The increase in operating expenses included a $5.0 million
increase in intangible amortization expense.
BOK Financial's operations in Texas, New Mexico and Arkansas contributed
$21.0 million, $8.2 million, and $2.5 million, respectively, to consolidated net
income for 2001. This compared to net income of $16.1 million, $4.1 million, and
$1.5 million for 2000.
Table 8 Regional Banks
(In Thousands)
Years ended December 31,
-----------------------------------------
2001 2000 1999
-------------------------------------------
Revenue (interest
expense)from
external sources $ 158,510 $ 119,036 $ 83,512
Revenue (interest
expense)from
internal sources (11,690) (12,709) (10,458)
Operating expense 91,253 68,224 60,662
Gains (losses) on
sales of securities 484 (356) (53)
Net income 31,651 21,705 7,856
Tangible net income 46,848 31,916 14,807
Average assets $3,352,155 $2,467,530 $1,860,667
Average equity 409,622 282,223 214,226
Tangible return on
assets 1.40% 1.29% .80%
Tangible return on
equity 11.44 11.31 6.91
Efficiency ratio 62.15 64.16 83.04
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. Management excludes the amortization
of all intangible assets when evaluating the performance of the regional banks
on a tangible return basis.
Other Operating Expense
Other operating expense totaled $368.8 million for 2001 compared to $302.8
million in 2000. Excluding a $15.6 million provision for impairment of mortgage
servicing rights in 2001 compared to $2.9 million in 2000 and $20.7 million of
operating expenses from the CNBT acquisition in 2001, other operating expense
increased $32.5 million or 11%. The following discussion excludes CNBT operating
expenses (most notably personnel of $6.3 million, net occupancy and equipment of
$1.7 million and amortization of intangible assets of $7.4 million) to improve
comparability.
Personnel costs increased $11.4 million or 8%. Regular compensation
(including overtime and temporary assistance) and benefits increased $9.3
million or 7%. Average staffing on a full time equivalent ("FTE") basis
increased by 141 employees or 5% while average compensation expense per FTE
increased by 3%. Incentive compensation increased by $2.0 million or 10%
compared to 2000 due to growth in revenue over pre-determined targets.
Professional fees for 2001 increased $3.4 million or 36%, which included
$1.5 million in consulting fees for public finance business at BOSC, Inc. and
$320 thousand for the Perfect Banking sales and service program. Net occupancy
and equipment expense for 2001 increased $5.6 million or 16% due primarily to a
$3.2 million increase in depreciation expense. This increase reflects additional
investments in facilities and technology improvements over the past two years.
Data processing and communications increased $4.4 million or 13% primarily in
transaction card servicing and external processing due to increased volumes.
Mortgage banking costs increased $8.0 million or 36% due primarily to
amortization of mortgage servicing rights, which is caused by an increase in
loan prepayments. A provision for impairment of mortgage servicing rights of
$15.6 million was taken during 2001 due primarily to the interest rate and
prepayment environment.
Table 9 Other Operating Expense
(In Thousands)
Years ended December 31,
------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Personnel expense $163,835 $146,215 $136,010 $109,437 $ 90,625
Business promotion 10,658 8,395 9,077 8,220 8,886
Contribution of stock to BOk Charitable Foundation - - - 2,257 3,638
Professional fees and services 13,391 9,618 9,584 9,781 6,906
Net occupancy and equipment 42,764 35,447 30,789 21,811 18,720
Data processing and communications 40,013 34,962 32,038 23,764 19,444
FDIC and other insurance 1,717 1,569 1,356 1,368 1,380
Printing, postage and supplies 12,329 11,260 11,599 9,524 8,067
Net gains and operating expenses on repossessed assets 1,401 (1,283) (3,473) (474) (3,831)
Amortization of intangible assets 20,113 15,478 15,823 9,515 8,968
Mortgage banking costs 30,261 22,274 23,932 25,949 19,968
Provision for impairment of mortgage servicing rights 15,551 2,900 - (2,290) 4,100
Other expense 16,729 15,980 13,781 15,133 12,983
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Total