10-Q 1 0001.txt SEPT. 30, 2000 QUARTERLY FINANCIAL STATEMENTS As filed with the Securities and Exchange Commission on November 14, 2000 -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 2000 Commission File No. 0-19341 BOK FINANCIAL CORPORATION Incorporated in the State of Oklahoma I.R.S. Employer Identification No. 73-1373454 Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 Registrant's Telephone Number, Including Area Code (918) 588-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (NONE) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK ($.00006 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 49,142,400 shares of common stock ($.00006 par value) as of October 31, 2000. -------------------------------------------------------------------------------- BOK Financial Corporation Form 10-Q Quarter Ended September 30, 2000 Index Part I. Financial Information Management's Discussion and Analysis 2 Report of Management on Consolidated Financial Statements 16 Consolidated Statements of Earnings 17 Consolidated Balance Sheets 18 Consolidated Statements of Changes in Shareholders' Equity 19 Consolidated Statements of Cash Flows 20 Notes to Consolidated Financial Statements 21 Financial Summaries - Unaudited 24 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 27 Signature 27 MANAGEMENT'S ASSESSMENT OF OPERATIONS AND FINANCIAL CONDITION Assessment of Operations Summary of Performance BOK Financial Corporation ("BOK Financial") recorded net income of $25.6 million or $0.46 per diluted common share for the third quarter of 2000 compared to $22.7 million or $0.41 per diluted common share for the third quarter of 1999. The return on average assets was 1.17% for the quarter ended September 30, 2000 compared to 1.15% for the same period of 1999. Returns on average equity were 16.42% and 16.81% for the third quarters of 2000 and 1999, respectively. Net interest revenue grew $5.8 million due primarily to a $820 million increase in average earning assets. Fees and commissions increased $5.1 million. All categories of fee income increased in the third quarter of 2000 when compared to the same quarter of 1999. Operating expenses increased $3.2 million or 5% compared to the third quarter of 1999. The provision for loan loss increased $2.9 million to $5.0 million. Year to date net income and earnings per diluted common share were $74.6 million and $1.34, respectively, for 2000 compared to $66.0 million and $1.18, respectively for 1999. Returns on average assets and equity were 1.17% and 16.92%, respectively, for 2000 compared to 1.19% and 16.40%, respectively, for 1999. During the third quarter of 2000, BOK Financial announced an agreement to acquire CNBT Bancshares, Inc. ("CNBT") for $91 million. CNBT has total assets of $424 million and operates six banking locations in the Houston, Texas area. The acquisition is expected to close during the first quarter of 2001. Tangible Operating Results Since inception, BOK Financial has completed several acquisitions that were accounted for by the purchase method of accounting. The purchase method results in the recording of goodwill and other identifiable intangible assets that are amortized as non-cash charges in subsequent years into operating expense. The intangible assets that result from the purchase method of accounting are deducted from shareholders' equity when determining regulatory capital. Tangible net income, net income excluding the after-tax effect of intangible amortization, represents regulatory capital generated during the year. We believe that tangible net income is an appropriate measure of the growth in regulatory capital, which affects the amounts available for future growth. Operating results excluding the impact of these intangible assets are summarized below: ---------------------------------------------------- ----------------------------------------------------- TABLE 1 - TANGIBLE OPERATING RESULTS (Dollars in thousands) ------------------------------ --------------------------- Three months ended Nine months ended --------------------------------------------------------- September 30, September 30, September 30, September 30, 2000 1999 2000 1999 ---------------------------------------------------------- Net income $ 25,637 $ 22,736 $ 74,644 $ 66,029 After-tax impact of amortization of intangible assets 3,302 3,769 10,120 9,349 ---------------------------------------------------------------------------------------------------------- Tangible net income $ 28,939 $ 26,505 $ 84,764 $ 75,378 ---------------------------------------------------------------------------------------------------------- Tangible net income per diluted share $ 0.52 $ 0.47 $ 1.56 $ 1.35 ---------------------------------------------------------------------------------------------------------- Tangible return on average shareholders' equity 18.74% 19.81% 19.27% 18.72% ---------------------------------------------------------------------------------------------------------- Tangible return on average assets 1.34% 1.35% 1.32% 1.36% ----------------------------------------------------------------------------------------------------------
Net Interest Revenue Net interest revenue on a tax-equivalent basis was $70.1 million for the third quarter of 2000 compared to $64.4 million for the third quarter of 1999. Average earning assets increased by $820 million. Average loans increased $765 million and now comprise 64% of average earning assets. Average loans were 61% of average earning assets for the third quarter of 1999. Loans generally have higher yields than other types of earning assets therefore, the increase in loans significantly increased net interest revenue. Average interest-bearing liabilities increased $740 million and now comprise 81% of all funding sources. Average interest-bearing liabilities were 80% of all funding sources for the third quarter of 1999. Table 2 shows how net interest revenue was affected by changes in average balances and interest rates for various types of earning assets and interest-bearing liabilities. ----------------------------------------------------------------------------------------------------------------- TABLE 2 - VOLUME/RATE ANALYSIS (In thousands) Three months ended Nine months ended September 30, 2000/1999 September 30, 2000/1999 ------------------------------------------------------------------------- Change Due To (1) Change Due To (1) ------------------------ --------------------- Yield Yield Change Volume /Rate Change Volume /Rate ------------------------------------------------------------------------- Tax-equivalent interest revenue: Securities $ 2,873 $ 941 $ 1,932 $ 14,904 $ 7,962 $ 6,942 Trading securities (23) (195) 172 (856) (1,681) 825 Loans 28,641 16,959 11,682 89,353 59,973 29,380 Funds sold 296 142 154 506 52 454 ----------------------------------------------------------------------------------------------------------------- Total 31,787 17,847 13,940 103,907 66,306 37,601 ----------------------------------------------------------------------------------------------------------------- Interest expense: Interest bearing transaction deposits 1,406 383 1,023 5,501 4,610 891 Savings deposits (79) (77) (2) (219) (102) (117) Time deposits 13,239 6,583 6,656 35,259 21,598 13,661 Other borrowings 11,186 3,497 7,689 34,597 15,486 19,111 Subordinated debenture 331 (1) 332 823 42 781 ----------------------------------------------------------------------------------------------------------------- Total 26,083 10,385 15,698 75,961 41,634 34,327 ----------------------------------------------------------------------------------------------------------------- Tax-equivalent net interest revenue 5,704 $ 7,462 $ (1,758) 27,946 $ 24,672 $ 3,274 Change in tax-equivalent adjustment (56) (768) ----------------------------------------------------------------------------------------------------------------- Net interest revenue $ 5,760 $ 28,714 ----------------------------------------------------------------------------------------------------------------- (1) Changes attributable to both volume and yield are allocated to both volume and yield/rate on an equal basis.
Net interest margin, the ratio of net interest revenue to average earning assets, was 3.57% for the third quarter of 2000 compared to 3.66% for the third quarter of 1999 and 3.66% for the second quarter of 2000. BOK Financial's interest bearing liabilities react more quickly to changes in interest rates than its earning assets. This causes the net interest margin to decrease during periods of rising interest rates. While market interest rate increases and growth in loans caused the yield on average earning assets for the third quarter of 2000 to increase 84 basis points, the cost of interest-bearing liabilities increased 102 basis points for this same period. Since inception, BOK Financial has followed a strategy of fully utilizing its capital resources by borrowing funds in the capital markets to supplement deposit growth in order to fund increased investments in securities. Although this strategy frequently results in a net interest margin that falls below those normally seen in the commercial banking industry, it provides positive net interest revenue. Management estimates that for the third quarter of 2000, this strategy resulted in a 90 basis point decrease in net interest margin. However, this strategy contributed $151 thousand to net interest revenue. Net interest revenue contributed by this strategy has decreased over the past several quarters due to rising interest rates that have increased the costs of funds borrowed to purchase the securities. Management employs various techniques to control, within established parameters, the interest rate and liquidity risk inherent in this strategy, the results of which are presented in the Market Risk section. Other Operating Revenue Other operating revenue increased $5.0 million compared to the same quarter of 1999. Total fees and commissions, which are included in other operating revenue, increased $5.1 million. Transaction card revenue increased $2.4 million compared to the same quarter of last year. This increase included $1.0 million from the early buyout of several ATM servicing contracts and the favorable resolution of a revenue dispute during the quarter. Transaction card revenue increased 17% excluding these non-recurring revenue items due to a greater volume of transactions processed. --------------------------------------------------------------------------------------------- TABLE 3 - OTHER OPERATING REVENUE (In thousands) Three Months Ended ----------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ----------------------------------------------------------- Brokerage and trading revenue $ 3,451 $ 4,219 $ 4,426 $ 4,781 $ 3,237 Transaction card revenue 10,739 9,331 8,620 8,767 8,298 Trust fees and commissions 10,072 9,743 9,523 9,439 9,045 Service charges and fees on deposit accounts 11,012 10,736 10,255 10,684 10,857 Mortgage banking revenue 9,774 9,427 7,834 8,628 9,189 Leasing revenue 931 1,192 744 514 526 Other revenue 4,371 3,344 4,973 3,716 4,129 --------------------------------------------------------------------------------------------- Total fees and commissions 50,350 47,992 46,375 46,529 45,281 --------------------------------------------------------------------------------------------- Gain on student loan sales 28 38 433 16 39 Gain on sale of other assets - - - 96 - Gain (loss) on securities (538) (682) (17) 80 (485) --------------------------------------------------------------------------------------------- Total other operating revenue $ 49,840 $ 47,348 $ 46,791 $ 46,721 $ 44,835 ---------------------------------------------------------------------------------------------
Year to date fees and commissions for 2000 increased 6% compared to 1999. Transaction card revenue and trust fee increases of 20% and 14%, respectively, were partially offset by decreased mortgage banking revenue. While management expects continued growth in other operating revenue, the future rate of increase could be affected by increased competition from national and regional financial institutions and from market saturation. Continued growth may require BOK Financial to introduce new products or to enter new markets. This growth introduces additional demands on capital and managerial resources. Many of BOK Financial's fee generating activities, such as brokerage and trading activities, trust fees, and mortgage banking revenue are indirectly affected by changes in interest rates. Significant increases in interest rates may tend to decrease the volume of trading activities and may lower the value of trust assets managed, which is the basis for certain fees, but would tend to decrease mortgage loan prepayments. Similarly, a decrease in economic activity would decrease transaction card revenue. Other Operating Expense Operating expenses for the third quarter of 2000 increased $3.2 million or 5% compared to the third quarter of 1999. Excluding significant or nonrecurring items as shown in Table 5, operating expenses increased $2.3 million or 3%. Personnel costs increased $1.7 million or 5%. Compensation and benefits increased by 3% due to normal compensation increases. Incentive compensation, which varies directly with revenue growth, increased by $757 thousand to $4.5 million for the third quarter of 2000. Occupancy, equipment and data processing increased $1.3 million or 8%. Most notably, equipment expense increased $475 thousand or 14% due primarily to a $238 thousand increase in depreciation expense at Bank of Texas. This reflects a $2.9 million investment in new equipment made since the third quarter of 1999. Additionally, other expenses for the third quarter of 2000 included $723 thousand of depreciation expense on equipment leased under operating leases compared to $292 thousand for the third quarter of 1999. --------------------------------------------------------------------------------------------- TABLE 4 - OTHER OPERATING EXPENSE (In thousands) Three Months Ended ------------------------------------------------------------ Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ------------------------------------------------------------ Personnel $ 35,937 $ 35,789 $ 37,289 $ 35,801 $ 34,262 Business promotion 1,941 2,148 2,335 2,244 1,925 Professional fees/services 2,145 2,161 2,318 2,451 2,452 Net occupancy, equipment and data processing 16,480 16,244 15,897 16,061 15,198 FDIC and other insurance 403 387 380 338 323 Printing, postage and supplies 2,546 3,095 2,811 3,035 2,729 Net gains and operating expenses on repossessed assets (574) (118) (583) (544) (1,501) Amortization of intangible assets 3,940 4,016 4,078 4,389 4,519 Mortgage banking costs 5,600 5,540 5,437 5,658 6,183 Other expense 5,546 5,655 4,654 4,824 4,665 --------------------------------------------------------------------------------------------- Total $ 73,964 $ 74,917 $ 74,616 $ 74,257 $ 70,755 ---------------------------------------------------------------------------------------------
Operating expenses through September 30, 2000 were $17 million or 8% higher than operating expenses for the first nine months of 1999. Excluding significant or nonrecurring entries and the effects of 1999's acquisitions, operating expenses increased $10 million or 5%. ------------------------------------------------------------------------------------------------- TABLE 5 - OTHER OPERATING EXPENSE, EXCLUDING SIGNIFICANT OR NONRECURRING ITEMS (In thousands) Three Months Ended ----------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ----------------------------------------------------------------- Total other operating expense $ 73,964 $ 74,917 $ 74,616 $ 74,257 $ 70,755 Reorganization costs - (638) - - Net gains and operating expenses from repossessed assets 574 118 583 544 1,501 ------------------------------------------------------------------------------------------------- Total $ 74,538 $ 75,035 $ 74,561 $ 74,801 $ 72,256 -------------------------------------------------------------------------------------------------
LINES OF BUSINESS BOK Financial operates four principal lines of business under its Bank of Oklahoma franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth line of business, regional banks, which includes all functions for Bank of Arkansas, N.A., Bank of Texas, N.A., and Bank of Albuquerque, N.A. Other lines of business include the TransFund ATM system and BOSC, Inc., a securities broker-dealer. Corporate Banking The Corporate Banking Division, which provides loan and lease financing and treasury and cash management services to businesses throughout Oklahoma and seven surrounding states, contributed $13.3 million or 52% to consolidated net income for the third quarter of 2000. This is compared to $13.4 million or 59% of consolidated net income for the third quarter of 1999. The decreased contribution from the Corporate Banking Division was primarily due to an increase in net charge-offs and lower gains on repossessed asset sales. Table 6 Corporate Banking (In thousands) Three months ended Nine months ended September 30, September 30, -------------------------------------------------------- 2000 1999 2000 1999 ----------- -- ----------- ----------------------------- Revenue(expense) from external sources $ 68,394 $ 57,330 $ 193,195 $ 160,188 Revenue(expense) from internal sources (32,093) (23,887) (89,115) (61,779) Total revenue 36,301 33,443 104,080 98,409 Operating expense 13,390 12,216 41,170 37,574 Net income 13,302 13,372 37,455 37,877 Average assets $ 3,770,896 $ 3,394,134 $ 3,763,070 $ 3,317,819 Average equity 411,836 344,999 405,368 335,470 Return on assets 1.40% 1.56% 1.33% 1.53% Return on equity 12.85 15.38 12.34 15.10 Efficiency ratio 36.89 36.53 39.56 38.18
Consumer Banking The Consumer Banking Division, which provides a full line of deposit, loan and fee-based services to customers throughout Oklahoma, contributed $4.2 million or 16% to consolidated net income for the third quarter of 2000. This is compared to $2.9 million or 13% of consolidated net income for the third quarter of 1999. The increase in contribution to net income from the Consumer Banking Division was due primarily to an increase in the internal interest rate paid for funds provided by this Division. Table 7 Consumer Banking (In thousands) Three months ended Nine months ended September 30, September 30, -------------------------- -------------------------- 2000 1999 2000 1999 ---------- -- ----------- -------------- ------------ Revenue (expense) from external sources $ (1,649) $ (2,037) $ (4,972) $ (4,537) Revenue (expense) from internal sources 22,214 17,815 62,179 52,694 Total revenue 20,565 15,778 57,207 48,157 Operating expense 12,926 11,086 37,686 33,721 Net income 4,165 2,945 10,580 7,967 Average assets $1,805,429 $ 1,709,411 $ 1,809,275 $ 1,718,907 Average equity 55,672 45,549 54,403 45,080 Return on assets 0.92% 0.68% 0.78% 0.62% Return on equity 29.77 25.65 25.98 23.63 Efficiency ratio 62.85 70.26 65.88 70.02
Mortgage Banking The Mortgage Banking Division contributed $969 thousand or 4% to consolidated net income for the third quarter of 2000. This is compared to $473 thousand or 2% of consolidated net income for the third quarter of 1999. Loan servicing fees were $8.2 million for the third quarter of 2000 compared to $8.4 million in 1999. However, gains on loans sold increased $830 thousand for the same periods. Capitalized mortgage servicing rights totaled $114.1 million compared to $106.5 million at September 30, 1999 and $114.1 million at December 31, 1999. At September 30, 2000, capitalized mortgage servicing rights included $10.4 million of deferred hedging losses. Table 8 Mortgage Banking (In thousands) Three months ended Nine months ended September 30, September 30, --------------------------- ------------------------ 2000 1999 2000 1999 ------------- -------------- ------------------------ Revenue (expense) from external sources $ 14,936 $ 12,730 $ 39,606 $ 39,327 Revenue (expense) from internal sources (3,942) (1,929) (9,527) (6,156) Total revenue 10,994 10,801 30,079 33,171 Operating expense 9,388 10,010 28,231 30,266 Net income 969 473 1,105 1,740 Average assets 410,344 $ 361,957 $ 382,730 $ 357,549 Average equity 31,791 32,543 30,710 33,104 Return on assets 0.94% 0.52% 0.39% 0.65% Return on equity 12.13 5.77 4.81 7.03 Efficiency ratio 85.63 92.68 93.95 91.24
Trust Services Trust Services, which includes institutional, investment and retirement products and services to affluent individuals, businesses, not-for-profit organizations, and governmental agencies, contributed $2.6 million or 10% of consolidated net income for the third quarter of 2000. This is compared to $2.1 million or 9% of consolidated net income for the same quarter of 1999. At September 30, 2000, trust assets with an aggregate market value of $18.4 billion were subject to various fiduciary arrangements, compared to trust assets of $15.6 billion at September 30, 1999. Table 9 Trust Services (In thousands) Three months ended Nine months ended September 30, September 30, ------------------------------------------------ 2000 1999 2000 1999 ----------- ------------------------------------ Revenue (expense) from external sources $ 10,794 $ 10,277 $ 33,051 $ 29,275 Revenue (expense) from internal sources 2,395 1,798 6,147 5,668 Total revenue 13,189 12,075 39,198 34,943 Operating expense 8,995 8,755 27,460 25,983 Net income 2,562 2,050 7,054 5,475 Average assets $ 354,376 $336,286 $ 343,823 $ 334,975 Average equity 38,772 34,404 38,316 33,868 Return on assets 2.88% 2.42% 2.74% 2.19% Return on equity 26.29 23.64 24.59 21.61 Efficiency ratio 68.20 72.51 70.05 74.36
Regional Banks Regional banks provide a full range of corporate and consumer banking, trust services, treasury services and retail investments in their respective markets. Small businesses and middle-market corporations are the regional banks' primary customer focus. Regional banks contributed $3.0 million or 12% to consolidated net income for the third quarter of 2000. This is compared to $2.7 million or 12% of consolidated net income for the third quarter of 1999. Growth in the regional banks' contribution to net income was partially offset by a $1.0 million increase in loan loss provision. The increase in loan loss provision reflected the additional credit risk at Bank of Texas. Average equity assigned to regional banks included both an amount based on management's assessment of risk and an additional amount based on BOK Financial's investment in these entities. Management measures performance for regional banks based on tangible net income, return on assets and return on equity as reflected below: Table 10 Regional Banks (In thousands) Three months ended Nine months ended September 30, September 30, ---------------------------------------------------- 2000 1999 2000 1999 ----------- -------------- ------------------------- Revenue (expense) from external sources $ 27,878 $ 22,409 $ 79,896 $ 54,469 Revenue (expense) from internal sources (4,931) (2,152) (12,630) (4,496) Total revenue 22,947 20,257 67,266 49,973 Operating expense 15,506 14,932 50,168 39,330 Net income 2,954 2,698 7,044 5,448 Tangible net income 5,948 6,066 16,164 13,469 Average assets $2,368,557 $ 1,902,056 $2,323,961 $1,677,338 Average equity 268,551 211,499 260,431 196,943 Tangible return on assets 1.00% 1.27% 0.93% 1.07% Tangible return on equity 8.81 11.38 8.29 9.14 Efficiency ratio 67.55 73.65 74.52 78.66
INCOME TAXES The Internal Revenue Service closed its examination of 1996 and management completed a review of the various tax issues during the first quarter of 2000. As a result of these events, BOK Financial reduced its tax reserve by $3.0 million. Year to date income tax expense at September 30, 2000 was $37.3 million or 34% of pre-tax book income excluding the reduction in this reserve. Assessment of Financial Condition The aggregate loan portfolio at September 30, 2000 totaled $5.2 billion, an increase of $257 million since June 30, 2000 and $555 million since December 31, 1999. Energy loans increased $109 million during the third quarter and comprised 15% of total loans. The energy category included loans to oil and gas producers which totaled $517 million, loans to borrowers involved in the transportation and sale of oil and gas, and loans to borrowers that manufacture equipment and provide other services to the energy industry. Loans to the services industry increased $84 million during the third quarter and comprised 17% of total loans at September 30, 2000. Services included loans totaling $229 million to medical and nursing facilities and $76 million to the hotel industry. Agriculture loans, which included loans totaling $133 million to the cattle industry, decreased $26 million. This decrease was due in part to seasonal factors and to improved feedlot operations. --------------------------------------------------------------------------------------------------------- TABLE 11 - LOANS (In thousands) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 --------------------------------------------------------------------- Commercial: Energy $ 774,284 $ 665,550 $ 601,991 $ 606,561 $ 593,944 Manufacturing 418,986 389,823 368,337 378,341 360,361 Wholesale/retail 450,337 450,681 435,026 407,785 400,730 Agricultural 159,099 185,473 184,299 173,653 162,531 Services 901,749 817,871 782,825 773,018 800,505 Other commercial and industrial 289,787 323,162 310,224 325,343 206,045 Commercial real estate: Construction and land development 303,965 291,871 278,551 249,160 258,947 Multifamily 268,595 258,658 269,667 257,187 259,276 Other real estate loans 676,176 635,089 624,309 588,195 523,324 Residential mortgage: Secured by 1-4 family residential properties 597,464 573,346 551,639 531,058 526,622 Residential mortgages held for 58,888 55,332 42,967 57,057 58,466 sale Consumer 299,199 294,466 269,964 296,131 259,414 --------------------------------------------------------------------------------------------------------- Total $5,198,529 $ 4,941,322 $ 4,719,799 $4,643,489 $4,410,165 ---------------------------------------------------------------------------------------------------------
While BOK Financial continues to increase geographic diversification through expansion into the Dallas, Texas and Albuquerque, New Mexico areas, geographic concentration subjects the loan portfolio to the general economic conditions in Oklahoma. Approximately 71% of the loan portfolio is attributed to Oklahoma and approximately 19% of the loan portfolio is attributed to Texas. Approximately 61% of commercial real estate loans was secured by property in Oklahoma, primarily in the Tulsa and Oklahoma City metropolitan areas. An additional 22% of commercial real estate loans was secured by property in Texas. The major components of other commercial real estate loans were office buildings, $233 million and retail facilities, $197 million. SUMMARY OF LOAN LOSS EXPERIENCE The loan loss reserve, which is available to absorb losses inherent in the loan portfolio, totaled $81 million at September 30, 2000, $79 million at June 30, 2000, and $75 million at September 30, 1999. This represented 1.58%, 1.63% and 1.73% of total loans, excluding loans held for sale, at September 30, 2000, June 30, 2000, and September 30, 1999, respectively. Losses on loans held for sale, principally mortgage loans accumulated for placement in securitized pools, are charged to earnings through adjustments in carrying value to the lower of cost or market value in accordance with accounting standards applicable to mortgage banking. Table 12 presents statistical information regarding the reserve for loan losses for the past five quarters. ------------------------------------------------------------------------------------------ TABLE 12 - SUMMARY OF LOAN LOSS EXPERIENCE (In thousands) Three Months Ended ------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ------------------------------------------------------- Beginning balance $ 79,405 $ 77,828 $ 76,234 $ 75,186 $ 72,732 Loans charged-off: Commercial 1,747 1,165 845 641 71 Commercial real estate 615 311 250 - - Residential mortgage 63 62 21 546 20 Consumer 1,511 1,329 1,148 820 1,237 ------------------------------------------------------------------------------------------ Total 3,936 2,867 2,264 2,007 1,328 ------------------------------------------------------------------------------------------ Recoveries of loans previously charged-off: Commercial 121 348 261 308 830 Commercial real estate 100 39 265 39 208 Residential mortgage 17 3 134 14 2 Consumer 707 520 559 439 600 ------------------------------------------------------------------------------------------ Total 945 910 1,219 800 1,640 ------------------------------------------------------------------------------------------ Net loans charged-off (recoveries) 2,991 1,957 1,045 1,207 (312) Provision for loan losses 5,031 3,534 2,639 2,255 2,142 ------------------------------------------------------------------------------------------ Ending balance $ 81,445 $ 79,405 $ 77,828 $ 76,234 $ 75,186 ------------------------------------------------------------------------------------------ Reserve to loans outstanding at period-end(1) 1.58% 1.63% 1.66% 1.66% 1.73% Net loan charge-offs/(recoveries) (annualized)to average loans (1) 0.24% 0.16 0.09 0.11 (0.03) ------------------------------------------------------------------------------------------ (1) Excludes residential mortgage loans held for sale which are carried at the lower of aggregate cost or market value.
The adequacy of the reserve for loan losses is assessed by management based upon an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused financing commitments. A consistent methodology has been developed that includes reserves assigned to specific criticized loans, general reserves that are based upon a statistical migration analysis for each category of loans, and unallocated reserves that are based upon an analysis of current economic conditions, loan concentrations, portfolio growth, and other relevant factors. An independent Credit Administration department is responsible for performing this evaluation for all of BOK Financial's subsidiaries to ensure that the methodology is applied consistently. All significant criticized loans are reviewed quarterly. Written documentation of these reviews is maintained. Specific reserves for impairment are determined in accordance with generally accepted accounting principles and appropriate regulatory standards. At September 30, 2000, specific impairment reserves totaled $8.7 million on loans that totaled $26 million. The adequacy of the general loan loss reserve is determined primarily through an internally developed migration analysis model. Management uses an eight-quarter aggregate accumulation of net loan losses as the basis for this model. Greater emphasis is placed on net losses in the more recent periods. This model is used to assign general loan loss reserves to commercial loans and capital leases, residential loans, and consumer loans. All loans, capital leases, and letters of credit are allocated a migration factor by this model. Management can override the general allocation only by utilizing a specific allocation that is greater than the general allocation. A nonspecific reserve for loan losses is maintained for risks beyond those factors specified to a particular loan or those identified by the migration analysis. These factors include trends in general economic conditions in BOK Financial's primary lending areas, duration of the business cycle, specific conditions in industries where BOK Financial has a concentration of loans, overall growth in the loan portfolio, bank regulatory examination results, error potential in either the migration analysis model or in the underlying data, and other relevant factors. A range of potential losses is then determined for each factor identified. At September 30, 2000, the loss potential for the more significant factors was: Concentration of large loans - $1.1 million to $2.1 million Loan portfolio growth and expansion into new markets - $1.3 million to $2.6 million A provision for loan losses is charged against earnings in amounts necessary to maintain an adequate reserve for loan losses. These provisions were $5.0 million for the third quarter of 2000, compared to $2.1 million for the third quarter of 1999. NONPERFORMING ASSETS Information regarding nonperforming assets, which totaled $41 million at September 30, 2000, $29 million at June 30, 2000, and $22 million at September 30, 1999, is presented in Table 13. Nonperforming loans included nonaccrual loans and renegotiated loans and excluded loans 90 days or more past due but still accruing. The increase in nonaccruing loans since March 31, 2000 has generally been due to circumstances unique to two borrowers. One borrower filed for bankruptcy protection after their previously issued audited financial statements had to be restated due to improper accounting. The second borrower has experienced operating problems due to a change in demand from its major customer. The specific impairment loan loss reserve reflects losses that may be incurred on these loans. --------------------------------------------------------------------------------------------------------------------- TABLE 13 - NONPERFORMING ASSETS (In thousands) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ---------------------------------------------------------------------- Nonperforming assets: Nonperforming loans: Nonaccrual loans: Commercial $ 34,421 $ 21,445 $ 13,448 $ 12,686 $ 12,088 Commercial real estate 169 823 1,629 2,046 1,796 Residential mortgage 2,115 2,410 2,555 3,383 44 Consumer 474 709 970 1,350 3,938 --------------------------------------------------------------------------------------------------------------------- Total nonaccrual loans 37,179 25,387 18,602 19,465 17,866 Renegotiated loans 88 89 - - - --------------------------------------------------------------------------------------------------------------------- Total nonperforming loans 37,267 25,476 18,602 19,465 17,866 Other nonperforming assets 3,790 3,805 3,972 3,478 4,447 --------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $ 41,057 $ 29,281 $ 22,574 $ 22,943 $ 22,313 --------------------------------------------------------------------------------------------------------------------- Ratios: Reserve for loan losses to nonperforming loans 219.06% 311.69% 418.39% 391.65% 420.83% Nonperforming loans to period-end loans (2) 0.73 0.52 0.40 0.42 0.41 --------------------------------------------------------------------------------------------------------------------- Loans past due (90 days) (1) $ 10,931 $ 9,828 $ 9,704 $ 11,336 $ 12,757 --------------------------------------------------------------------------------------------------------------------- (1) Includes residential mortgages guaranteed by agencies of the U.S. Government $ 7,369 $ 7,363 $ 7,623 $ 8,538 $ 7,712 Excludes residential mortgages guaranteed by agencies of the U.S. Government in foreclosure. 5,202 6,817 8,102 8,310 8,159 (2) Excludes residential mortgage loans held for sale ---------------------------------------------------------------------------------------------------------------------
The loan review process also identifies loans that possess more than the normal amount of risk due to deterioration in the financial condition of the borrower or the value of the collateral. Because the borrowers are performing in accordance with the original terms of the loan agreements and no loss of principal or interest is anticipated, such loans are not included in the Nonperforming Assets totals. These loans are assigned to risk categories in order to focus management's attention on the loans with higher risk of loss. At September 30, 2000, loans totaling $117 million were assigned to the substandard risk category and loans totaling $106 million were assigned to the special mention risk category. This is compared to $86 million of loans classified as substandard and $42 million of loans classified as special mention at June 30, 2000, and loans that totaled $95 million and $77 million classified as substandard and special mentions, respectively, at September 30, 1999. The increase in special mention and substandard loans generally reflects loans for business acquisitions that were ineffectively managed by our borrowers. Further deterioration of the borrowers' performance may occur and a more severe classification may be required before improvement is demonstrated. LEASING BOK Financial expanded its equipment leasing activities during 2000. Other assets included $24 million of equipment held for various operating leases at September 30, 2000, compared to $14 million at December 31, 1999. These activities include a much greater range of equipment financing than the natural gas compressors that were the focus of BOK Financial's previous leasing activities and introduce unique credit, collateral valuation, and transaction structure risk to the company. MARKET RISK Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices, or equity prices. Additionally, the financial instruments subject to market risk can be classified either as held for trading or held for purposes other than trading. BOK Financial is subject to market risk primarily through the effect of changes in interest rates on its portfolio of assets held for purposes other than trading and trading assets. The effect of other changes, such as foreign exchange rates, commodity prices or equity prices, is not material to BOK Financial. The responsibility for managing market risk rests with the Asset/Liability Committee which operates under policy guidelines which have been established by the Board of Directors. The negative acceptable variation in net interest revenue and economic value of equity due to a 200 basis point increase or decrease in interest rates is limited by these guidelines to +/- 10%. These guidelines also establish maximum levels for short-term borrowings, short-term assets, and public and brokered deposits, and establish minimum levels for unpledged assets, among other things. Compliance with these guidelines is reviewed monthly. Interest Rate Risk Management (Other than Trading) BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including embedded option positions, on net interest revenue, net income and economic value of equity. A simulation model is used to estimate the effect of changes in interest rates over the next twelve months based three interest rate scenarios. These are a "most likely" rate scenario and on two "shock test" scenarios, the first assuming a sustained parallel 200 basis point increase and the second a sustained parallel 200 basis point decrease in interest rates. An independent source is used to determine the most likely interest rates for the next year. BOK Financial's primary interest rate exposures include the Federal Reserve Bank's discount rate which affects short-term borrowings, the prime lending rate and the London InterBank Offering Rate ("LIBOR") which are the basis for much of the variable-rate loan pricing and the 30-year mortgage rate which directly affects the prepayment speeds for mortgage-backed securities and mortgage servicing rights. Derivative financial instruments and other financial instruments used for purposes other than trading are included in this simulation. In addition, sensitivity of fee income to market interest rate levels, such as those related to cash management services and mortgage servicing, are included. The model incorporates management's assumptions regarding the level of interest rate or balance changes on indeterminable maturity deposits (demand deposits, interest-bearing transaction accounts and savings accounts) for a given level of market rate changes. The assumptions have been developed through a combination of historical analysis and future expected pricing behavior. Interest rate swaps on all products are included to the extent that they are effective in the 12-month simulation period. Additionally, changes in prepayment behavior of mortgage-backed securities, residential mortgage loans and mortgage servicing in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. Finally, the impact of planned growth and new business activities is factored into the simulation model. At September 30, 2000 and 1999, this modeling indicated interest rate sensitivity as follows: Table 14 - Interest Rate Sensitivity (Dollars in Thousands) 200 bp Increase 200 bp Decrease Most Likely ------------------------- --------------------------- ----------------------- 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ -------------- ----------- ----------- Anticipated impact over the next twelve months: Net interest revenue $ 2,752 $(1,741) $(2,641) $1,163 $ (554) $ (2,215) 1.0% (0.6)% (0.9)% 0.4% (0.2)% (0.8)% ------------------------------------------- ------------- ----------- -------------- ----------- ----------- Net income $ 1,720 $(1,079) $(1,651) $ 721 $ (346) $ (1,373) 1.7% (1.1)% (1.6)% 0.7% (0.3)% (1.4)% ------------------------------------------- ------------- ----------- -------------- ----------- ----------- Economic value of equity $ (5,412) $(43,667) $(52,266) $(2,515) $ (3,427) $ (539) (0.4)% (3.9)% (4.3)% 0.2% (0.3)% (0.0)% ------------------------------------------- ------------- ----------- -------------- ------------ ----------
The estimated changes in interest rates on net interest revenue, net income, and economic value of equity is not projected to be significant within the +/- 200 basis point range of assumptions. Subsequent to September 30, 2000, management restructured a portion of the securities portfolio by selling $250 million of securities at a loss of approximately $1.5 million and terminated interest rate swaps with a notional amount of $270 million at a gain of approximately $3.0 million. The proceeds of the securities sales were reinvested in securities with a higher yield and longer duration. These actions are not expected to significantly affect BOK Financial's interest rate risk. BOK Financial hedges its portfolio of mortgage servicing rights by acquiring mortgage-backed and principal only securities whenever the prepayment risk exceeds certain levels. The fair value of these securities is expected to vary inversely to the value of the mortgage servicing rights. Management may sell these securities and to recognize gains when necessary to offset losses on the mortgage servicing rights. At September 30, 2000, securities with a fair value of $63 million and aggregate unrealized gains of $1.1 million were held for this program. The interest rate sensitivity of the mortgage servicing portfolio and the securities held as hedges is modeled over a range of +/- 50 basis points. At September 30, 2000, the pre-tax results of this modeling are: 50 bp increase 50 bp decrease ----------------- ------------------ Anticipated change in: Mortgage servicing rights $ 5,013 $ (8,571) Hedging instruments (3,529) 4,065 ----------------- ------------------ Net $ 1,484 $ (4,506) ================= ================== The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest revenue, net income or economic value of equity or precisely predict the impact of higher or lower interest rates on net interest revenue, net income or economic value of equity. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors. BOK Financial uses interest rate swaps, a form of off-balance sheet derivative product, in managing its interest rate sensitivity. These products are generally used to match interest received or paid on certain long-term, fixed rate loans, certificates of deposit and subordinated debt with other variable rate assets and liabilities. BOK Financial accrues and periodically receives a fixed amount from the counterparties to these swaps and accrues and periodically makes a variable payment to the counterparties. During the third quarter of 2000 income from these swaps exceeded the cost of the swaps by $540 thousand. Credit risk from these swaps is closely monitored and counterparties to these contracts are selected on the basis of their credit worthiness, among other factors. Derivative products are not used for speculative purposes. -------------------------------------------------------------------------------- TABLE 15 - INTEREST RATE SWAPS (In thousands) Notional Pay Receive Fair Amount Rate Rate Value ------------------------------------------------------------ Expiration: 2001 $ 4,324 5.03% 6.618% (1) $ 42 2002 211,660 6.21 - 6.81 (1) 6.62 - 6.94 (1) (317) 2003 94,481 4.82 - 6.81 (1) 6.62 - 7.91 (1) 1,411 2004 83,604 5.65 - 6.81 (1) 6.62 - 7.36 (1) 1,512 2005 8,383 5.08 - 5.21 6.618 (1) 413 2006 16,500 7.26 6.81 (1) (142) 2007 210,884 5.23 - 7.48 (1) 6.62 - 6.82 (1) (895) 2008 51,285 5.15 - 6.68 6.62 (1) 1,432 2009 82,732 5.22 - 6.85 6.62 (1) 1,722 2010 22,749 7.01 - 7.41 6.62 (1) (497) -------------------------------------------------------------------------------- (1)Rates are variable based on LIBOR and reset monthly, quarterly or semiannually. Trading Activities BOK Financial enters into trading account activities both as an intermediary for customers and for its own account. As an intermediary, BOK Financial will take positions in securities, generally mortgage-backed securities, government agency securities, and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations, and other financial institutions. BOK Financial may also take trading positions in U.S. Treasury securities, mortgage-backed securities, municipal bonds, and financial futures for its own account through BOk and BOSC, Inc. These positions are taken with the objective of generating trading profits. Both of these activities involve interest rate risk. A variety of methods are used to manage the interest rate risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Hedges in either the futures or cash markets may be used to reduce the risk associated with some trading positions. The Risk Management Department monitors trading activity daily and reports to senior management and the Risk Oversight and Audit Committee of the Board of Directors on any exceptions to trading position limits and risk management policy. BOK Financial uses a Value at Risk ("VAR") methodology to measure the market risk inherent in its trading activities. VAR is calculated based upon historical simulations over the past five years. It represents an amount of market loss that is likely to be exceeded only one out of every 100 two-week periods. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the nominal aggregate trading positions to $360 million, the VAR to $6.5 million. At September 30, 2000, the nominal aggregate trading positions was $4.8 million, the VAR was $157 thousand. -------------------------------------------------------------------------------- TABLE 16 - CAPITAL RATIOS Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2000 2000 2000 1999 1999 ---------------------------------------------------- Average shareholders' equity to average assets 6.89% 6.79% 6.71% 6.80% 6.72% Risk-based capital: Tier 1 capital 8.14 7.80 7.45 7.27 7.09 Total capital 11.49 11.15 10.80 10.72 10.67 Leverage 6.48 6.23 6.06 5.92 5.64 NEW ACCOUNTING STANDARDS During 1998, the Financial Accounting Standards Board adopted Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The effective date for FAS 133 as been deferred until fiscal years beginning after June 15, 2000. BOK Financial will adopt FAS 133 effective January 1, 2001. FAS 133 will require the recognition of all derivatives on the balance sheet at fair value. Derivatives that do not qualify for special hedge accounting must be adjusted to fair value through income. Accounting for changes in fair value of derivatives that qualify for special hedge accounting depends on the nature of the hedge. Changes in the fair value of derivatives that qualify for hedge accounting will either be offset against changes in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. At this time, management expects that few of the derivatives used to hedge the various financial risks will qualify for special hedge accounting and that changes in the fair value of derivatives will generally be included in income. The fair value of BOK Financial's off balance sheet derivatives increased by $1.1 million during the third quarter of 2000. This amount would have increased pre-tax income for the quarter, excluding the non-recurring effects of initial transition adjustments. The increase in income may not be indicative of future earnings from derivatives since their fair value of these instruments can be volatile and because changes in fair value of the hedged assets or liabilities are not included in income under current accounting principles. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry, and the economy in general. Words such as "anticipates", "believes", "estimates", "expects", "forecasts", "plans", "projects", variations of such words, and similar expressions are intended to identify such forward-looking statements. Management judgments relating to, and discussion of the provision and reserve for loan losses involve judgments as to future events and are inherently forward-looking statements. Assessments that BOK Financial's acquisitions and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in part on information provided by others which BOK Financial has not independently verified. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to, (1) the ability to fully realize expected cost savings from mergers with the expected time frames, (2) the ability of other companies on which BOK Financial relies to provide goods and services in a timely and accurate manner, (3) changes in interest rates and interest rate relationships, (4) demand for products and services, (5) the degree of competition by traditional and nontraditional competitors, (6) changes in banking regulations, tax laws, prices, levies, and assessments, (7) the impact of technological advances, and (8) trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. REPORT OF MANAGEMENT ON CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial condition, results of operations and cash flows of BOK Financial and its subsidiaries at the dates and for the periods presented. The financial information included in this interim report has been prepared by management without audit by independent public accountants and should be read in conjunction with BOK Financial's 1999 Form 10-K filed with the Securities and Exchange Commission which contains audited financial statements. ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Consolidated Statement of Earnings (In Thousands Except Share Data) Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------- --- ------------- ------------- --- ------------- Interest Revenue Loans $ 118,250 $ 89,655 $ 328,486 $ 239,302 Taxable securities 41,135 37,735 124,150 106,520 Tax-exempt securities 3,031 3,456 9,381 11,170 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total securities 44,166 41,191 133,531 117,690 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Trading securities 370 393 1,045 1,901 Funds sold 791 503 2,173 1,276 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total interest revenue 163,577 131,742 465,235 360,169 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Interest Expense Deposits 53,859 39,293 148,693 108,152 Other borrowings 38,867 27,690 109,077 74,089 Subordinated debenture 2,704 2,372 7,770 6,947 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total interest expense 95,430 69,355 265,540 189,188 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Net Interest Revenue 68,147 62,387 199,695 170,981 Provision for Loan Losses 5,031 2,142 11,204 8,110 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Net Interest Revenue After Provision for Loan Losses 63,116 60,245 188,491 162,871 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Other Operating Revenue Brokerage and trading revenue 3,451 3,237 12,096 11,452 Transaction card revenue 10,739 8,298 28,690 23,881 Trust fees and commissions 10,072 9,045 29,338 25,688 Service charges and fees on deposit accounts 11,012 10,857 32,003 30,383 Mortgage banking revenue, net 9,774 9,189 27,035 28,358 Leasing revenue 931 526 2,867 3,211 Other revenue 4,371 4,129 12,688 13,873 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total fees and commissions revenue 50,350 45,281 144,717 136,846 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Gain on sale of student loans 28 39 499 584 Gain on loan securitization - - - 270 Gain on sale of other assets - - - 4,530 Securities gains (losses), net (538) (485) (1,237) (499) ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total other operating revenue 49,840 44,835 143,979 141,731 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Other Operating Expense Personnel 35,937 34,262 109,015 100,209 Business promotion 1,941 1,925 6,424 6,833 Professional fees and services 2,145 2,452 6,624 7,133 Net occupancy, equipment & data processing 16,480 15,198 48,621 41,963 FDIC and other insurance 403 323 1,170 1,018 Printing, postage and supplies 2,546 2,729 8,452 8,564 Net gains and operating expenses of repossessed assets (574) (1,501) (1,275) (2,929) Amortization of intangible assets 3,940 4,519 12,034 11,434 Mortgage banking costs 5,600 6,183 16,577 18,274 Other expense 5,546 4,665 15,855 13,760 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Total Other Operating Expense 73,964 70,755 223,497 206,259 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Income Before Taxes 38,992 34,325 108,973 98,343 Federal and state income tax 13,355 11,589 34,329 32,314 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Net Income $ 25,637 $ 22,736 $ 74,644 $ 66,029 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Earnings Per Share: Net Income Basic $ 0.51 $ 0.46 $ 1.50 $ 1.32 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Diluted $ 0.46 $ 0.41 $ 1.34 $ 1.18 ---------------------------------------------- --- ------------- --- ------------- -- ------------- --- ------------- Average Shares Used in Computation: Basic 49,058,328 49,068,809 49,106,905 49,002,358 ---------------------------------------------- ----------------- ----------------- ---------------- ----------------- Diluted 55,530,973 55,844,944 55,575,413 55,843,212 ---------------------------------------------- ----------------- ----------------- ---------------- ----------------- See accompanying notes to consolidated financial statements.
-------------------------------------------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data) September 30, December 31, September 30, 2000 1999 1999 -------------------------------------------------- ASSETS Cash and due from banks $ 503,583 $ 397,895 $ 409,014 Funds sold 38,690 28,960 180,170 Trading securities 18,218 14,452 15,945 Securities: Available for sale 2,569,722 2,588,704 2,454,018 Investment (fair value: September 30, 2000 - $230,081; December 31, 1999 -$211,624; September 30, 1999 - $204,623 230,453 213,180 213,125 -------------------------------------------------------------------------------------------------------------------- Total securities 2,800,175 2,801,884 2,667,143 -------------------------------------------------------------------------------------------------------------------- Loans 5,198,529 4,643,489 4,410,165 Less reserve for loan losses 81,445 76,234 75,186 -------------------------------------------------------------------------------------------------------------------- Net loans 5,117,084 4,567,255 4,334,979 -------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 128,449 119,239 116,614 Accrued revenue receivable 68,596 67,640 64,403 Excess cost over fair value of net assets acquired and core deposit premiums (net of accumulated amortization: September 30, 2000 - $77,326; December 31, 1999 - $65,292; September 30, 1999 - $57,903 112,489 125,011 131,332 Mortgage servicing rights 114,076 114,134 106,532 Real estate and other repossessed assets 3,790 3,478 4,447 Bankers' acceptances 9,104 6,801 16,470 Other assets 101,746 103,888 81,885 -------------------------------------------------------------------------------------------------------------------- Total assets $ 9,016,000 $ 8,350,637 $ 8,128,934 -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand deposits $ 1,100,178 $ 1,020,996 $ 961,009 Interest-bearing deposits: Transaction 1,883,749 1,866,499 1,806,433 Savings 146,954 155,839 162,395 Time 2,615,454 2,219,850 2,217,401 -------------------------------------------------------------------------------------------------------------------- Total deposits 5,746,335 5,263,184 5,147,238 -------------------------------------------------------------------------------------------------------------------- Funds purchased and repurchase agreements 1,501,221 1,345,683 1,306,792 Other borrowings 882,954 938,020 888,239 Subordinated debenture 148,771 148,642 148,597 Accrued interest, taxes and expense 59,595 62,431 57,545 Bankers' acceptances 9,104 6,801 16,470 Other liabilities 21,141 28,712 18,830 -------------------------------------------------------------------------------------------------------------------- Total liabilities 8,369,121 7,793,473 7,583,711 -------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 25 25 25 Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding September 30, 2000 - 49,535,381; December 31, 1999 - 49,382,262; September 30, 1999 - 49,164,957 3 3 3 Capital surplus 276,445 274,980 269,423 Retained earnings 406,269 332,751 309,928 Treasury stock (shares at cost: September 30, 2000 - 453,501; December 31, 1999 - 316,325; September 30, 1999 - 152,691 (9,391) (7,018) (3,553) Accumulated other comprehensive loss (26,472) (43,577) (30,603) -------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 646,879 557,164 545,223 -------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 9,016,000 $ 8,350,637 $ 8,128,934 -------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
-------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands) Accumulated Preferred Stock Common Stock Other Treasury Stock ------------------ ----------------Comprehensive Capital Retained ------------------- Shares Amount Shares Amount Income(loss) Surplus Earnings Shares Amount Total ---------------------------------------------------------------------------------------------------- Balances at December 31, 1998 250,000 $ 25 48,112 $ 3 $12,297 $236,726 $278,365 749 $ (2,623) $524,793 Comprehensive income: Net income - - - - - - 66,029 - - 66,029 Other Comprehensive income, net of tax: Unrealized gains(loss) on securities available for sale (1) - - - - (42,900) - - - - (42,900) ----------- Comprehensive income 23,129 ----------- Exercise of stock option - - 280 - - 2,312 - 101 (2,352) (40) Issuance of common stock to Thrift Plan - - 17 - - 405 - (1) 36 441 Common stock dividend - - - - - - (2,735) - - (2,735) Dividends paid in shares of common stock: Preferred stock - - 40 - - 1,125 (1,125) - - - Common stock - - 1,432 - - 30,702 (30,606) 4 (96) - Director retainer shares - - 9 - - 215 - - - 215 Cancel treasury stock - - (725) - - (2,062) - (725) 2,062 - Treasury stock purchase - - - - - - - 25 (580) (580) -------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 1999 250,000 $ 25 49,165 $ 3 $(30,603) $269,423 $309,928 153 $ (3,553) $ 545,223 --------------------------------------------------------------------------------------------------------------------------- Balances at December 31, 1999 250,000 $ 25 49,382 $ 3 $(43,577) $274,980 $332,751 316 $ (7,018) $557,164 Comprehensive income: Net income - - - - - - 74,644 - - 74,644 Other Comprehensive income, net of tax: Unrealized gains(loss) on securities available for sale(1) - - - - 17,105 - - - - 17,105 ----------- Comprehensive income 91,749 ----------- Exercise of stock options - - 123 - - 1,088 - 36 (724) 364 Preferred dividends paid in shares of common stock - - 26 - - 328 (1,125) (40) 797 - Preferred stock dividend - - - - - - (1) - - (1) Director retainer shares - - 4 - - 49 - (9) 187 236 Treasury stock purchase - - - - - - - 151 (2,633) (2,633) --------------------------------------------------------------------------------------------------------------------------- Balances at September 30, 2000 250,000 $ 25 49,535 $ 3 $(26,472) $276,445 $406,269 454 $ (9,391) $646,879 --------------------------------------------------------------------------------------------------------------------------- (1) September 30, 2000 September 30, 1999 ------------------ ------------------ Reclassification adjustments: Unrealized losses on available for sale securities $ 16,258 $ (43,235) Less: reclassification adjustment for gains/(losses) realized included in net income, net of tax (847) (335) ---------------------------------- Net unrealized losses on securities $ 17,105 $ (42,900) ----------------------------------
--------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended September 30, --------------------------------- 2000 1999 --------------------------------- Cash Flow From Operating Activities: Net income $ 74,644 $ 66,029 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 11,204 8,110 Depreciation and amortization 38,251 31,071 Tax reserve reversal 3,000 - Net amortization of security discounts and premiums (3,145) 1,226 Net gain on sale of assets (5,768) (14,879) Mortgage loans originated for resale (389,980) (558,043) Proceeds from sale of mortgage loans held for resale 394,440 604,863 Change in trading securities (3,485) 33,241 Change in accrued revenue receivable (956) 3,258 Change in other assets 42,770 (85,940) Change in accrued interest, taxes and expense (17,376) 25,989 Change in other liabilities (24,577) 57,184 --------------------------------------------------------------------------------------------- Net cash provided by operating activities 119,022 172,109 --------------------------------------------------------------------------------------------- Cash Flow From Investing Activities: Proceeds from maturities of investment securities 38,017 53,962 Proceeds from maturities of available for sale securities 307,490 527,181 Purchases of investment securities (55,607) (39,496) Purchases of available for sale securities (1,008,079) (1,929,299) Proceeds from sales of available for sale securities 734,978 1,352,130 Proceeds from sales of investment securities 175 - Loans originated or acquired net or principal collected (603,816) (809,352) Proceeds from disposition of assets 45,200 187,545 Purchases of assets (43,551) (71,512) Cash and cash equivalents of branches & subsidiaries acquired and sold, net - 25,584 --------------------------------------------------------------------------------------------- Net cash used by investing activities (585,193) (703,257) --------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Net change in demand deposits, transaction deposits, money market deposits, and savings accounts 87,547 (134,032) Net change in certificates of deposit 395,604 319,253 Net change in other borrowings 100,472 465,763 Purchase of treasury stock (2,633) (580) Common stock dividend - (2,735) Preferred stock dividend (1) - Issuance of preferred, common and treasury stock, net 600 1,238 --------------------------------------------------------------------------------------------- Net cash provided by financing activities 581,589 648,907 --------------------------------------------------------------------------------------------- Net change in cash and cash equivalents 115,418 117,759 Cash and cash equivalents at beginning of period 426,855 471,425 --------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 542,273 $ 589,184 --------------------------------------------------------------------------------------------- Cash paid for interest $ 236,628 $ 191,416 --------------------------------------------------------------------------------------------- Cash paid for taxes $ 38,591 $ 19,468 --------------------------------------------------------------------------------------------- Net loans transferred to repossessed real estate and other assets $ 1,481 $ 2,041 --------------------------------------------------------------------------------------------- Payment of preferred stock dividends in common stock $ 1,125 $ 1,125 --------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ACCOUNTING POLICIES Basis of Presentation The accounting and reporting policies of BOK Financial Corporation conform to accounting principles generally accepted in the United States and generally accepted practices within the banking industry. The Consolidated Financial Statements of BOK Financial include the accounts of BOK Financial and its subsidiaries, primarily Bank of Oklahoma, N.A. ("BOk"), Bank of Albuquerque, N.A., Bank of Arkansas N.A., Bank of Texas, N.A. and BOSC, Inc. Certain prior period balances have been reclassified to conform with the current period presentation. (2) MORTGAGE BANKING ACTIVITIES At September 30, 2000, BOk owned the rights to service 92,635 mortgage loans with outstanding principal balances of $6.9 billion, including $143.9 million serviced for BOk. The weighted average interest rate and remaining term was 7.48% and 271 months, respectively. Activity in capitalized mortgage servicing rights and related valuation allowance during the nine months ending September 30, 2000 is as follows: Capitalized Mortgage Servicing Rights ------------------------------------------------------------------------------- Valuation Hedging Purchased Originated Total Allowance (Gain)/Loss Net -------------------------- ------------------------- ---------------- --------- Balance at December 31, 1999 $ 74,912 $ 28,815 $ 103,727 $ - $ 10,407 $ 114,134 Additions 3,640 6,484 10,124 - - 10,124 Amortization expense (7,579) (2,558) (10,137) - (1,088) (11,225) Realized hedge losses - 4,389 4,389 Unrealized hedge gains - (3,346) (3,346) ----------------------------- -- --------- - ---------- -- ---------- ------------ -- ---------- -- --------- Balance at September 30, 2000 $ 70,973 $ 32,741 $ 103,714 $ - $ 10,362 $ 114,076 ----------------------------- -- --------- - ---------- -- ---------- ------------ -- ---------- -- --------- Estimated fair value of mortgage servicing rights (1) $ 83,119 $ 44,570 $ 127,689 $ 127,689 ----------------------------- -- --------- - ---------- -- ---------- -- --------- - ---------- -- ---------- (1) Excludes approximately $8.2 million of loan servicing rights on mortgage loans originated prior to the adoption of FAS 122.
Stratification of the mortgage loan servicing portfolio, outstanding principal of loans serviced, and related hedging information by interest rate at September 30, 2000 follows (in thousands): < 6.50% 6.50% - 7.49% 7.50% - 8.49% => 8.50% Total ------------ ------------- -------------------------- ------------ Cost less accumulated amortization $ 9,528 $ 59,114 $ 32,252 $ 2,820 $ 103,714 Deferred hedge losses - 8,345 2,017 - 10,362 --------------------------------------------------- ------------- -------------------------- ------------ Adjusted cost 9,528 67,459 34,269 2,820 114,076 Fair value 11,405 72,962 38,255 5,067 127,689 --------------------------------------------------- ------------- -------------------------- ------------ Impairment $ - $ - $ - $ - $ - --------------------------------------------------- ------------- -------------------------- ------------ Outstanding principal of loans serviced(1) $ 611,600 $ 3,632,400 $ 1,925,400 $ 273,900 $ 6,443,300 --------------------------------------------------- ------------- -------------------------- ------------ (1) Excludes outstanding principal of $457.4 million for loans serviced for which there is no capitalized mortgage servicing rights.
(3) DISPOSAL OF AVAILABLE FOR SALE SECURITIES Sales of available for sale securities resulted in gains and losses as follows (in thousands): Nine Months Ended September 30, ------------------------------- 2000 1999 -------------- ------------ Proceeds $ 734,978 $ 1,352,130 Gross realized gains 624 3,966 Gross realized losses 1,861 4,465 Related federal and state income tax benefit (390) (164) (4) EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per share (dollars in thousands except share data): Three Months Ended Nine Months Ended ---------------------------------------------------------- September 30, September 30, September 30, September 30, 2000 1999 2000 1999 ---------------------------------------------------------- Numerator: Net income $ 25,637 $ 22,736 $ 74,644 $ 66,029 Preferred stock dividends 375 375 1,125 1,125 ---------------------------------------------------------------------------------------------------------------- Numerator for basic earnings per share - income available to common stockholders 25,262 22,361 73,519 64,904 ---------------------------------------------------------------------------------------------------------------- Effect of dilutive securities: Preferred stock dividends 375 375 1,125 1,125 ---------------------------------------------------------------------------------------------------------------- Numerator for diluted earnings per share - income available to common stockholders after assumed conversion $ 25,637 $ 22,736 $ 74,644 $ 66,026 ---------------------------------------------------------------------------------------------------------------- Denominator: Denominator for basic earnings per share -weighted average shares 49,058,328 49,068,809 49,106,905 49,002,358 Effect of dilutive securities: Employee stock options (1) 323,280 626,770 319,143 691,489 Convertible preferred stock 6,149,365 6,149,365 6,149,365 6,149,365 ---------------------------------------------------------------------------------------------------------------- Dilutive potential common shares 6,472,645 6,776,135 6,468,508 6,840,854 ---------------------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 55,530,973 55,844,944 55,575,413 55,843,212 ---------------------------------------------------------------------------------------------------------------- Basic earnings per share $ 0.51 $ 0.46 $ 1.50 $ 1.32 ---------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 0.46 $ 0.41 $ 1.34 $ 1.18 ---------------------------------------------------------------------------------------------------------------- (1) Employee stock options to purchase 1,640,647 shares of common stock at a range from $18.18 to $20.52 per share were outstanding at September 30, 2000 but were not included in the computation of diluted earnings per share since the options' exercise price was greater than the average market price of the common. At September 30, 1999, the average market price of common shares exceeded the exercise price for all outstanding employee stock options. ----------------------------------------------------------------------------------------------------------------
(5) REPORTABLE SEGMENTS Reportable segments reconciliation to the Consolidated Financial Statements for the Nine months ended September 30, 2000 is as follows: Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------- -- ------------- --- -------------- -- -------------- Total reportable lines of business $ 190,743 $ 107,109 $ 184,715 $ 8,622,859 Total non-reportable lines of business 471 36,751 27,439 28,841 Unallocated items: Tax-equivalent adjustment 5,784 - - - Funds management 19,787 927 9,261 159,354 Eliminations and all others, net (17,090) 429 2,082 (263,026) -------------- -- ------------- --- -------------- -- -------------- BOK Financial consolidated $ 199,695 $ 145,216 $ 223,497 $ 8,548,028 ============== == ============= === ============== == ============== (1) Excludes securities gains/losses.
Reportable segments reconciliation to the Consolidated Financial Statements for the Nine months ended September 30, 1999 is as follows: Other Other Net Interest Operating Operating Average Revenue Revenue(1) Expense Assets -------------- -- ------------- --- -------------- -- -------------- Total reportable lines of business $ 157,249 $ 107,434 $ 166,874 $ 7,406,588 Total non-reportable lines of business 1,056 32,516 25,499 67,136 Unallocated items: Tax-equivalent adjustment 6,552 - - - Funds management 20,712 722 10,444 107,940 Eliminations and all others, net (14,588) 1,558 3,442 (145,368) -------------- -- ------------- --- -------------- -- -------------- BOK Financial consolidated $ 170,981 $ 142,230 $ 206,259 $ 7,436,296 ============== == ============= === ============== == ============== (1) Excludes securities gains/losses.
(6) CONTINGENT LIABILITIES In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the proceedings, will not be material in the aggregate. ------------------------------------------------------------------------------------------------------------------------------ NINE MONTH FINANCIAL SUMMARY - UNAUDITED Consolidated Daily Average Balances, Average Yields and Rates (In Thousands Except Share Data) For Nine months ended ------------------------------------------------------------------------------------ September 30, 2000 September 30, 1999 ----------------------------------------- ----------------------------------- Average Revenue/ Yield Average Revenue/ Yield Balance Expense(1) /Rate Balance Expense(1) /Rate ------------------------------------------------------------------------------------ Assets Taxable securities $ 2,564,415 $ 124,150 6.47% $ 2,359,405 $ 106,520 6.04% Tax-exempt securities 267,465 14,404 7.19 297,776 17,130 7.69 ------------------------------------------------------------------------------------------------------------------------------ Total securities 2,831,880 138,554 6.54 2,657,181 123,650 6.22 ------------------------------------------------------------------------------------------------------------------------------ Trading securities 14,684 1,045 9.51 44,134 1,901 5.76 Funds sold 46,524 2,173 6.24 45,291 1,667 4.92 Loans(2) 4,823,378 329,247 9.12 3,900,878 239,894 8.22 Less reserve for loan losses 79,508 71,004 ------------------------------------------------------------------------------------------------------------------------------ Loans, net of reserve 4,743,870 329,247 9.27 3,829,874 239,894 8.37 ------------------------------------------------------------------------------------------------------------------------------ Total earning assets(2) 7,636,958 471,019 8.24 6,576,480 367,112 7.46 ------------------------------------------------------------------------------------------------------------------------------ Cash and other assets 911,070 859,816 ------------------------------------------------------------------------------------------------------------------------------ Total assets $ 8,548,028 $ 7,436,296 ------------------------------------------------------------------------------------------------------------------------------ Liabilities And Shareholders' Equity Transaction deposits $ 1,882,969 39,373 2.79% $ 1,660,558 33,872 2.73% Savings deposits 154,523 2,030 1.75 162,172 2,249 1.85 Other time deposits 2,435,860 107,290 5.88 1,908,636 72,031 5.05 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 4,473,352 148,693 4.44 3,731,366 108,152 3.88 ------------------------------------------------------------------------------------------------------------------------------ Other borrowings 2,278,019 109,077 6.40 1,921,536 74,480 5.18 Subordinated debenture 148,706 7,770 6.98 147,937 6,947 6.28 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 6,900,077 265,540 5.14 5,800,839 189,579 4.37 ------------------------------------------------------------------------------------------------------------------------------ Demand deposits 972,824 1,006,552 Other liabilities 85,951 90,566 Shareholders' equity 589,176 538,339 ------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $ 8,548,028 $ 7,436,296 ------------------------------------------------------------------------------------------------------------------------------ Tax-Equivalent Net Interest Revenue 205,479 3.10% 177,533 3.09% Tax-Equivalent Net Interest Revenue To Earning Assets 3.59 3.61 Less tax-equivalent adjustment 5,784 6,552 ------------------------------------------------------------------------------------------------------------------------------ Net Interest Revenue 199,695 170,981 Provision for loan losses 11,204 8,110 Other operating revenue 143,979 141,731 Other operating expense 223,497 206,259 ------------------------------------------------------------------------------------------------------------------------------ Income Before Taxes 108,973 98,343 Federal and state income tax 34,329 32,314 ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 74,644 $ 66,029 ------------------------------------------------------------------------------------------------------------------------------ Earnings Per Share: Net Income Basic $ 1.50 $ 1.32 ------------------------------------------------------------------------------------------------------------------------------ Diluted $ 1.34 $ 1.18 ------------------------------------------------------------------------------------------------------------------------------ (1) Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. (2) The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income. (3) Yield/Rate excludes $1,468 million of non-recurring collection of foregone interest in June 30, 1998.
------------------------------------------------------------------------------------------------------------------------------ QUARTERLY FINANCIAL SUMMARY - UNAUDITED Consolidated Daily Average Balances, Average Yields and Rates (In Thousands Except Share Data) For Three months ended ------------------------------------------------------------------------------------- September 30, 2000 June 30, 2000 ------------------------------------------ ------------------------------------- Average Revenue/ Yield Average Revenue/ Yield Balance Expense(1) /Rate Balance Expense(1) /Rate ------------------------------------------------------------------------------------- Assets Taxable securities $ 2,520,917 $ 41,135 6.49% $ 2,625,306 $ 42,738 6.55% Tax-exempt securities 274,402 4,692 6.80 267,320 5,111 7.69 ------------------------------------------------------------------------------------------------------------------------------ Total securities 2,795,319 45,827 6.52 2,892,626 47,849 6.65 ------------------------------------------------------------------------------------------------------------------------------ Trading securities 16,873 370 8.72 12,562 315 10.09 Funds sold 47,053 791 6.69 44,731 680 6.11 Loans (2) 5,020,994 118,523 9.39 4,796,948 109,453 9.18 Less reserve for loan losses 81,194 79,503 ------------------------------------------------------------------------------------------------------------------------------ Loans, net of reserve 4,939,800 118,523 9.55 4,717,445 109,453 9.33 ------------------------------------------------------------------------------------------------------------------------------ Total earning assets (2) 7,799,045 165,511 8.44 7,667,364 158,297 8.30 ------------------------------------------------------------------------------------------------------------------------------ Cash and other assets 910,737 920,169 ------------------------------------------------------------------------------------------------------------------------------ Total assets $ 8,709,782 $ 8,587,533 ------------------------------------------------------------------------------------------------------------------------------ Liabilities And Shareholders' Equity Transaction deposits $ 1,916,712 13,684 2.84% $ 1,875,180 12,888 2.76% Savings deposits 151,385 700 1.84 156,369 658 1.69 Other time deposits 2,510,655 39,475 6.26 2,431,978 35,252 5.83 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 4,578,752 53,859 4.68 4,463,527 48,798 4.40 ------------------------------------------------------------------------------------------------------------------------------ Other borrowings 2,299,155 38,867 6.73 2,318,426 37,094 6.44 Subordinated debenture 148,750 2,704 7.23 148,705 2,552 6.90 ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 7,026,657 95,430 5.40 6,930,658 88,444 5.13 ------------------------------------------------------------------------------------------------------------------------------ Demand deposits 974,478 989,716 Other liabilities 87,439 82,438 Shareholders' equity 621,208 584,721 ------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders'equity $ 8,709,782 $ 8,587,533 ----------------------------------------------------------------------------------------------------------------------------- Tax-Equivalent Net Interest Revenue 70,081 3.04% 69,853 3.17% Tax-Equivalent Net Interest Revenue To Earning Assets 3.57 3.66 Less tax-equivalent adjustment 1,934 1,983 ------------------------------------------------------------------------------------------------------------------------------ Net Interest Revenue 68,147 67,870 Provision for loan losses 5,031 3,534 Other operating revenue 49,840 47,348 Other operating expense 73,964 74,917 ------------------------------------------------------------------------------------------------------------------------------ Income Before Taxes 38,992 36,767 Federal and state income tax 13,355 12,573 ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 25,637 $ 24,194 ------------------------------------------------------------------------------------------------------------------------------ Earnings Per Share: Net Income Basic $ 0.51 $ 0.48 ------------------------------------------------------------------------------------------------------------------------------ Diluted $ 0.46 $ 0.44 ------------------------------------------------------------------------------------------------------------------------------ (1) Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. (2) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income.
------------------------------------------------------------------------------------------------------------------------- For Three months ended ------------------------------------------------------------------------------------------------------------------------- March 31, 2000 December 31, 1999 September 30, 1999 ------------------------------------------------------------------------------------------------------------------------- Average Revenue/ Yield Average Revenue/ Yield Average Revenue/ Yield Balance Expense(1) /Rate Balance Expense(1) /Rate Balance Expense(1) /Rate ------------------------------------------------------------------------------------------------------------------------- $ 2,547,499 $ 40,275 6.36% $ 2,453,800 $ 38,381 6.21% $ 2,456,120 $ 37,735 6.10% 260,593 4,602 7.10 259,760 4,656 7.11 275,749 5,219 7.51 ------------------------------------------------------------------------------------------------------------------------- 2,808,092 44,877 6.43 2,713,560 43,037 6.29 2,731,869 42,954 6.24 ------------------------------------------------------------------------------------------------------------------------- 14,593 360 9.92 17,845 390 8.67 27,606 393 5.65 47,782 703 5.92 37,650 552 5.82 37,558 495 5.23 4,650,020 101,271 8.76 4,480,283 97,563 8.64 4,256,430 89,882 8.38 77,808 76,166 74,539 ------------------------------------------------------------------------------------------------------------------------- 4,572,212 101,271 8.91 4,404,117 97,563 8.79 4,181,891 89,882 8.53 ------------------------------------------------------------------------------------------------------------------------- 7,442,679 147,211 7.96 7,173,172 141,542 7.83 6,978,924 133,724 7.60 ------------------------------------------------------------------------------------------------------------------------- 909,666 922,100 890,218 ------------------------------------------------------------------------------------------------------------------------- $ 8,352,345 $ 8,095,272 $ 7,869,142 ------------------------------------------------------------------------------------------------------------------------- $ 1,856,644 12,801 2.77% $ 1,885,730 12,639 2.66% $ 1,858,386 12,278 2.62% 155,848 672 1.73 159,442 721 1.79 167,875 779 1.84 2,364,126 32,563 5.54 2,206,956 29,109 5.23 2,046,295 26,236 5.09 ------------------------------------------------------------------------------------------------------------------------- 4,376,618 46,036 4.23 4,252,128 42,469 3.96 4,072,556 39,293 3.83 ------------------------------------------------------------------------------------------------------------------------- 2,216,244 33,116 6.01 2,071,787 29,715 5.69 2,065,207 27,681 5.32 148,663 2,514 6.80 148,620 2,387 6.37 148,576 2,373 6.34 ------------------------------------------------------------------------------------------------------------------------- 6,741,525 81,666 4.87 6,472,535 74,571 4.57 6,286,339 69,347 4.38 ------------------------------------------------------------------------------------------------------------------------- 954,307 977,825 969,289 95,268 91,489 76,815 561,245 553,423 536,699 ------------------------------------------------------------------------------------------------------------------------- $ 8,352,345 $ 8,095,272 $ 7,869,142 ------------------------------------------------------------------------------------------------------------------------- 65,545 3.08% 66,971 3.26% 64,377 3.22% 3.05 3.54 3.70 3.66 1,867 1,828 1,990 ------------------------------------------------------------------------------------------------------------------------- 63,678 65,143 62,387 2,639 2,255 2,142 46,791 46,721 44,835 74,616 74,257 70,755 ------------------------------------------------------------------------------------------------------------------------- 33,214 35,352 34,325 8,401 12,155 11,589 ------------------------------------------------------------------------------------------------------------------------- $ 24,813 $ 23,197 $ 22,736 ------------------------------------------------------------------------------------------------------------------------- $ 0.50 $ 0.46 $ 0.46 ------------------------------------------------------------------------------------------------------------------------- $ 0.45 $ 0.42 $ 0.41 -------------------------------------------------------------------------------------------------------------------------
PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (A) Exhibits: No. 27.0 Financial Data Schedule filed herewith electronically. (B) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOK FINANCIAL CORPORATION ------------------------- (Registrant) Date: November 14, 2000 /s/ Steven E. Nell ----------------- ------------------ Steven E. Nell Senior Vice President and Corporate Controller /s/ John C. Morrow ------------------ John C. Morrow Senior Vice President and Director of Financial Accounting & Reporting