-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eszn7MA7y1KGOgbiAP1ygfI4HhbnQdg63HDAau2V7DCoUmDdfTsVlqWv73awIdbj ubJoTr65y1TUQ1hWr0srQA== 0000875357-01-000002.txt : 20010329 0000875357-01-000002.hdr.sgml : 20010329 ACCESSION NUMBER: 0000875357-01-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOK FINANCIAL CORP ET AL CENTRAL INDEX KEY: 0000875357 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 731373454 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19341 FILM NUMBER: 1581464 BUSINESS ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: PO BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 BUSINESS PHONE: 9185886416 MAIL ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: P O BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 10-K 1 0001.txt FORM 10-K FOR YEAR ENDED 12/31/00 As filed with the Securities and Exchange Commission on March 28, 2001 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 2000 Commission File No. 0-19341 BOK FINANCIAL CORPORATION Incorporated in the State I.R.S. Employer Identification of Oklahoma No.73-1373454 Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 Registrant's Telephone Number, Including Area Code (918) 588-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (NONE) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK ($.00006 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-X is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the Registrant: $153,517,903 as of February 28, 2001. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 49,297,009 shares of common stock ($.00006 par value) as of the start of business on March 1, 2001. List hereunder the following documents if incorporated by reference and the part of Form 10-K in which the document is incorporated: Part I - Annual Report to Shareholders For Fiscal Year Ended December 31, 2000 (designated portions only) Part II - Annual Report to Shareholders For Fiscal Year Ended December 31, 2000 (designated portions only) Part III - Proxy Statement for Annual Meeting of Shareholders scheduled for April 24, 2001 (designated portions only) Part IV - Annual Report to Shareholders For Fiscal Year Ended December 31, 2000 (designated portions only) ================================================================================ BOK FINANCIAL CORPORATION FORM 10-K ANNUAL REPORT INDEX ITEM PAGE PART I 1. Business 3 2. Properties 5 3. Legal Proceedings 5 4. Submission of Matters to a Vote of Security Holders 5 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 5 6. Selected Financial Data 6 7. Management's Discussion and Analysis of Financial Condition and 6 Results of Operations 7A. Quantitative and Qualitative Disclosures About Market Risk 6 8. Financial Statements and Supplementary Data 6 9. Changes in and Disagreements with Accountants on Accounting and 6 Financial Disclosure PART III 10. Directors and Executive Officers of the Registrant 6 11. Executive Compensation 6 12. Security Ownership of Certain Beneficial Owners and Management 7 13. Certain Relationships and Related Transactions 7 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 7 - 12 Signatures 13 PART I ITEM 1 - BUSINESS General Development of Business Developments relating to individual aspects of the business of BOK Financial Corporation ("BOK Financial") are described below. Additional discussion of BOK Financial's activities during the current year is incorporated by reference to "Management's Assessment of Operations and Financial Condition" (pages 10 - 24) in BOK Financial's 2000 Annual Report to Shareholders. Information regarding BOK Financial's acquisitions is incorporated by reference to Note 2 of "Notes to Consolidated Financial Statements" (page 35) in BOK Financial's 2000 Annual Report to Shareholders. Narrative Description of Business BOK Financial is a financial holding company whose activities are limited by the Bank Holding Company Act of 1956 ("BHCA"), as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act. BOK Financial's banking and bank-related activities are primarily performed through Bank of Oklahoma, N.A. ("BOk"), Bank of Texas, N.A., Bank of Albuquerque N.A., and Bank of Arkansas, N.A. Other significant operating subsidiaries include BOSC, Inc., which is a full-service securities firm with specialized expertise in public and municipal finance and private placements. Other nonbank subsidiary operations are not significant. As of December 31, 2000, BOK Financial and its subsidiaries had 3,003 full-time equivalent employees. Industry Segments BOK Financial operates four principal lines of business under its BOk franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth principal line of business, regional banks, which includes banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Discussion of these principal lines of business is incorporated by reference to Lines of Business in "Management's Assessment of Operations and Financial Condition " (pages 12 - 14) and Note 16 of "Notes to Consolidated Financial Statements" (pages 48 - 51) in BOK Financial's 2000 Annual Report to Shareholders. Competition The banking industry in each of our markets is highly competitive. BOK Financial, through four subsidiary banks, competes with other banks in obtaining deposits, making loans and providing additional services related to banking. All market share information below is based on share of deposits in specified area. BOk is the largest banking subsidiary of BOK Financial. It has the largest market share in Oklahoma and a leading position in eight of the eleven Oklahoma counties in which it operates. BOk competes with two super-regional banks and numerous locally owned banks in both Tulsa and Oklahoma City areas, as well as several locally owned small community banks in every other community in which we do business throughout the rest of the state. BOK Financial competes in the Dallas-Ft. Worth combined metropolitan area, in the Albuquerque, New Mexico market, and in Fayetteville, Arkansas through subsidiary banks. Bank of Texas competes against numerous financial institutions, including some of the largest in the U.S. Bank of Texas's market share is approximately 2%. Bank of Albuquerque has a number four market share position in the City of Albuquerque behind two super-regional competitors and also competes with several locally-owned smaller community banks. Bank of Arkansas operates as a community bank serving Benton and Washington counties in Arkansas. Supervision and Regulation Financial holding companies and banks are extensively regulated under both federal and state law. The following information, to the extent it describes statutory or regulatory provisions, is qualified in its entirety by reference to the particular statutory and regulatory provisions. It is not possible to predict the changes, if any, that may be made to existing banking laws and regulations or whether such changes, if made, would have a materially adverse effect on the business and prospects of BOK Financial, BOk, Bank of Texas, Bank of Albuquerque, or Bank of Arkansas. BOK FINANCIAL As a financial holding company, BOK Financial is subject to regulation under the BHCA (as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act) and to supervision by the Board of Governors of the Federal Reserve System (the "Reserve Board"). Under the BHCA, BOK Financial files with the Reserve Board quarterly reports and such other additional information as the Reserve Board may require. The Reserve Board may also make examinations of BOK Financial and its subsidiaries. The BHCA requires notification to the Reserve Board in any case where a financial holding company proposes to acquire control of more than five percent of the voting shares of any bank, unless it already controls a majority of such voting shares. Additionally, approval must also be obtained before a financial holding company may acquire all or substantially all of the assets of another bank or before it may merge or consolidate with another financial holding company. The BHCA further provides that the Reserve Board shall not approve any such acquisition, merger or consolidation that will substantially lessen competition, tend to create a monopoly or be in restraint of trade, unless it finds the anti-competitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. The BHCA also requires a financial holding company to notify the Reserve Board within 30 days of engaging in new activities the Reserve Board has determined to be financial in nature. These activities include dealing in and underwriting debt and equity, operating a mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; servicing loans and other extensions of credit; providing investment and financial advice; acting as an insurance underwriter and/or agent; owning and operating savings and loan associations; and leasing personal property on a full pay-out, nonoperating basis. BOKF is already engaged in some of these activities and has so notified the Federal Reserve. A financial holding company and its subsidiaries are further prohibited under the BHCA from engaging in certain tie-in arrangements in connection with the provision of any credit, property or services. Thus, a subsidiary of a financial holding company may not extend credit, lease or sell property, furnish any services or fix or vary the consideration for these activities on the condition that (1) the customer obtain or provide some additional credit, property or services from or to the financial holding company or any subsidiary thereof or (2) the customer may not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to insure the soundness of credit extended. The Federal Deposit Insurance Corporation Improvement Act of 1991 established five capital rating tiers ranging from "well capitalized" to "critically undercapitalized". A financial institution is considered to be well capitalized if its Leverage, Tier 1 and Total Capital ratios are at 5%, 6% and 10%, respectively. Any institution experiencing significant growth or acquiring other institutions or branches is expected to maintain capital ratios above the well capitalized level. At December 31, 2000, BOK Financial's Leverage, Tier 1 and Total Capital ratios were 6.51%, 8.06% and 11.23%, respectively. BANK SUBSIDIARIES BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas are national banking associations and are subject to the National Banking Act and other federal statutes governing national banks. Under federal law, the Office of the Comptroller of the Currency ("Comptroller") charters and serves as the primary regulator of national banks. In addition, the Comptroller must approve certain corporate or structural changes, including an increase or decrease in capitalization, payment of dividends, change of place of business, establishment of a branch and establishment of an operating subsidiary. The Comptroller performs its functions through national bank examiners who provide the Comptroller with information concerning the soundness of a national bank, the quality of management and directors, and compliance with applicable laws, rules and regulations. The National Banking Act authorizes the Comptroller to examine every national bank as often as necessary. Although the Comptroller has primary supervisory responsibility for national banks, such banks must also comply with Reserve Board rules and regulations as members of the Federal Reserve System. Bank of Arkansas is also subject to certain consumer-protection laws incorporated in the Arkansas Constitution, which, among other restrictions, limit the maximum interest rate on general loans to five percent above the Federal Reserve Discount Rate. The rate on consumer loans is five percent above the discount rate or seventeen percent, whichever is lower. Applicable federal statutes and regulations require national banks to meet certain leverage and risk-based capital requirements. At December 31, 2000, all of BOK Financial Corporation's leverage and risk-based capital ratios were well above the required minimum ratios. Additional discussion regarding regulatory capital is incorporated by reference to Note 14 of "Notes to Consolidated Financial Statements" (page 46 - 47) in BOK Financial's 2000 Annual Report to Shareholders. Governmental Policies and Economic Factors The operations of BOK Financial and its subsidiaries are affected by legislative changes and by the policies of various regulatory authorities and, in particular, the credit policies of the Reserve Board. An important function of the Reserve Board is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Reserve Board to implement its objectives are: open market operations in U.S. Government securities; changes in the discount rate on bank borrowings; and changes in reserve requirements on bank deposits. The effect of such policies in the future on the business and earnings of BOK Financial and its subsidiaries cannot be predicted with certainty. Foreign Operations BOK Financial does not engage in operations in foreign countries, nor does it lend to foreign governments. ITEM 2 - PROPERTIES BOK Financial, through BOk, BOk's subsidiaries, Bank of Texas, Bank of Albuquerque and Bank of Arkansas, owns improved real estate that was carried at $82 million, net of depreciation and amortization, as of December 31, 2000. BOK Financial conducts its operations through 65 locations in Oklahoma, 22 locations in Texas, 15 locations in New Mexico, and 3 locations in Arkansas as of December 31, 2000. BOK Financial's facilities are suitable for their respective uses and present needs. The information set forth in Notes 5 and 12 of "Notes to Consolidated Financial Statements" (pages 39 and 45, respectively) of BOK Financial's 2000 Annual Report to Shareholders provides further discussion related to properties and is incorporated herein by reference. ITEM 3 - LEGAL PROCEEDINGS The information set forth in Note 12 of "Notes to Consolidated Financial Statements" (page 45) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended December 31, 2000. PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS BOK Financial's $.00006 par value common stock is traded over-the-counter and is reported on the facilities of the National Association of Securities Dealers Automated Quotation system ("NASDAQ"), with the symbol BOKF. At December 31, 2000, common shareholders of record numbered 1,152 with 49,218,502 shares outstanding. BOK Financial's quarterly market information follows: First Second Third Fourth ------------- -------------- -------------- --------------- 2000: Low $15.31 $15.63 $16.75 $21.25 High 20.56 17.56 18.75 17.50 1999: Low $22.03 $23.75 $18.94 $19.81 High 25.94 25.75 25.50 21.75 BOK Financial has continued its common stock repurchase program with authority to repurchase up to 800,000 shares. The purchases were made from time-to-time in accordance with SEC Rule 10(b)18 transactions. Since the original authorization announced in 1998, BOK Financial has repurchased 617,051 shares. The information set forth under the captions "Table 1 - Consolidated Selected Financial Data" (page 9), "Table 10 - Selected Quarterly Financial Data" (page 16) and Note 14 of "Notes to Consolidated Financial Statements" (page 46) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information set forth under the caption "Table 1 - Consolidated Selected Financial Data" (page 9) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the captions "Management's Assessment of Operations and Financial Condition" (pages 10 - 24), "Annual Financial Summary - Unaudited" (pages 56 - 57) and "Quarterly Financial Summary Unaudited" (pages 58 - 59) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information set forth under the caption "Market Risk" (pages 22 -23) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The supplementary data regarding quarterly results of operations set forth under the caption "Table 10 - Selected Quarterly Financial Data" (page 16) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the captions "Election of Directors" and "Executive Compensation" in BOK Financial's 2001 Annual Proxy Statement for its Annual Meeting of Shareholders scheduled for April 24, 2001 ("2001 Annual Proxy Statement") is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION The information set forth under the caption "Executive Compensation" in BOK Financial's 2001 Annual Proxy Statement is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Election of Directors" in BOK Financial's 2001 Annual Proxy Statement is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Certain Transactions" in BOK Financial's 2001 Annual Proxy Statement is incorporated herein by reference. The information set forth under Note 4 of "Notes to Consolidated Financial Statements" (pages 38 - 39) of BOK Financial's 2000 Annual Report to Shareholders is incorporated herein by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) List of Financial Statements filed. The following financial statements and reports included in BOK Financial's Annual Report to Shareholders for the Fiscal Year Ended December 31, 2000 are incorporated by reference in Parts I and II of this Annual Report on Form 10-K. Exhibit 13 2000 Annual Report Description Page Number Consolidated Selected Financial Data 9 Selected Quarterly Financial Data 16 Report of Management on Financial Statements 25 Report of Independent Auditors 25 Consolidated Statements of Earnings 26 Consolidated Balance Sheets 27 Consolidated Statements of Changes in Shareholders' Equity 28-29 Consolidated Statements of Cash Flows 30 Notes to Consolidated Financial Statements 31-55 Annual Financial Summary - Unaudited 56 -57 Quarterly Financial Summary - Unaudited 58-59 (A)(2) List of Financial Statement Schedules filed. The schedules to the consolidated financial statements required by Regulation S-X are not required under the related instructions or are inapplicable and are therefore omitted. (A)(3) List of Exhibits filed. Exhibit Number Description of Exhibit 3.0 The Articles of Incorporation of BOK Financial, incorporated by reference to (i) Amended and Restated Certificate of Incorporation of BOK Financial filed with the Oklahoma Secretary of State on May 28, 1991, filed as Exhibit 3.0 to S-1 Registration Statement No. 33-90450, and (ii) Amendment attached as Exhibit A to Information Statement and Prospectus Supplement filed November 20, 1991. 3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit 3.1 of S-1 Registration Statement No. 33-90450. 4.0 The rights of the holders of the Common Stock and Preferred Stock of BOK Financial are set forth in its Certificate of Incorporation. 10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.0 of S-1 Registration Statement No. 33-90450. 10.1 Amendment to Purchase and Sale Agreement effective March 29, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.2 of S-1 Registration Statement No. 33-90450 10.2 Letter agreement dated April 12, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.3 of S-1 Registration Statement No. 33-90450. 10.3 Second Amendment to Purchase and Sale Agreement effective April 15, 1991, among BOK Financial, Kaiser, and the FDIC, incorporated by reference to Exhibit 2.4 of S-1 Registration Statement No. 33-90450. 10.4 Employment agreements. 10.4(a) Employment Agreement between BOk and Stanley A. Lybarger, incorporated by reference to Exhibit 10.4(a) of Form 10-K for the fiscal year ended December 31, 1991. 10.5 Director indemnification agreement dated June 30, 1987, between BOk and Kaiser, incorporated by reference to Exhibit 10.5 of S-1 Registration Statement No. 33-90450. Substantially similar director indemnification agreements were executed between BOk and the following: Date of Agreement James E. Barnes June 30, 1987 William H. Bell June 30, 1987 James S. Boese June 30, 1987 Dennis L. Brand June 30, 1987 Chester E. Cadieux June 30, 1987 William B. Cleary June 30, 1987 Glenn A. Cox June 30, 1987 William E. Durrett June 30, 1987 Leonard J. Eaton, Jr. June 30, 1987 William B. Fader December 5, 1990 Gregory J. Flanagan June 30, 1987 Jerry L. Goodman June 30, 1987 David A. Hentschel July 7, 1987 Philip N. Hughes July 8, 1987 Thomas J. Hughes, III June 30, 1987 William G. Kerr June 30, 1987 Philip C. Lauinger, Jr. June 30, 1987 Stanley A. Lybarger December 5, 1990 Patricia McGee Maino June 30, 1987 Robert L. Parker, Sr. June 30, 1987 James A. Robinson June 30, 1987 William P. Sweich June 30, 1987 10.6 Capitalization and Stock Purchase Agreement dated May 20, 1991, between BOK Financial and Kaiser, incorporated by reference to Exhibit 10.6 of S-1 Registration Statement No. 33-90450. 10.7 BOK Financial Corporation 1991 Special Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-44122. 10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-55312. 10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-70102. 10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-79834. 10.7.4 BOK Financial Corporation 1994 Stock Option Plan (Typographical Error Corrected January 16, 1995), incorporated by reference to Exhibit 10.7.4 of Form 10-K for the fiscal year ended December 31, 1994. 10.7.5 BOK Financial Corporation 1997 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 333-32649. 10.7.6 BOK Financial Corporation 2000 Stock Option Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 333-93957. 10.7.7 BOK Financial Corporation Directors' Stock Compensation Plan, incorporated by reference to Exhibit 4.0 of S-8 Registration Statement No. 33-79836. 10.7.8 Bank of Oklahoma Thrift Plan (Amended and Restated Effective as of January 1, 1995), incorporated by reference to Exhibit 10.7.6 of Form 10-K for the year ended December 31, 1994. 10.7.9 Trust Agreement for the Bank of Oklahoma Thrift Plan (December 30, 1994), incorporated by reference to Exhibit 10.7.7 of Form 10-K for the year ended December 31, 1994. 10.8 Lease Agreement between One Williams Center Co. and National Bank of Tulsa (predecessor to BOk) dated June 18, 1974, incorporated by reference to Exhibit 10.9 of S-1 Registration Statement No. 33-90450. 10.9 Lease Agreement between Security Capital Real Estate Fund and BOk dated January 1, 1988, incorporated by reference to Exhibit 10.10 of S-1 Registration Statement No. 33-90450. 10.10 Asset Purchase Agreement (OREO and other assets) between BOk and Phi-Lea-Em Corporation dated April 30, 1991, incorporated by reference to Exhibit 10.11 of S-1 Registration Statement No. 33-90450. 10.11 Asset Purchase Agreement (Tanker Assets) between BOk and Green River Exploration Company dated April 30, 1991, incorporated by reference to Exhibit 10.12 of S-1 Registration Statement No. 33-90450. 10.12 Asset Purchase Agreement (Recovery Rights) between BOk and Kaiser dated April 30, 1991, incorporated by reference to Exhibit 10.13 of S-1 Registration Statement No. 33-90450. 10.13 Purchase and Assumption Agreement dated August 7, 1992 among First Gibraltar Bank, FSB, Fourth Financial Corporation and BOk, as amended, incorporated by reference to Exhibit 10.14 of Form 10-K for the fiscal year ended December 31, 1992. 10.13.1 Allocation Agreement dated August 7, 1992 between BOk and Fourth Financial Corporation, incorporated by reference to Exhibit 10.14.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.14 Merger Agreement among BOK Financial, BOKF Merger Corporation Number Two, Brookside Bancshares, Inc., The Shareholders of Brookside Bancshares, Inc. and Brookside State Bank dated December 22, 1992, as amended, incorporated by reference to Exhibit 10.15 of Form 10-K for the fiscal year ended December 31, 1992. 10.14.1 Agreement to Merge between BOk and Brookside State Bank dated January 27, 1993, incorporated by reference to Exhibit 10.15.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.15 Merger Agreement among BOK Financial, BOKF Merger Corporation Number Three, Sand Springs Bancshares, Inc., The Shareholders of Sand Springs Bancshares, Inc. and Sand Springs State Bank dated December 22, 1992, as amended, incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended December 31, 1992. 10.15.1 Agreement to Merge between BOk and Sand Springs State Bank dated January 27, 1993, incorporated by reference to Exhibit 10.16.1 of Form 10-K for the fiscal year ended December 31, 1992. 10.16 Partnership Agreement between Kaiser-Francis Oil Company and BOK Financial dated December 1, 1992, incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended December 31, 1993. 10.16.1 Amendment to Partnership Agreement between Kaiser-Francis Oil Company and BOK Financial dated May 17, 1993, incorporated by reference to Exhibit 10.16.1 of Form 10-K for the fiscal year ended December 31, 1993. 10.17 Purchase and Assumption Agreement between BOk and FDIC, Receiver of Heartland Federal Savings and Loan Association dated October 9, 1993, incorporated by reference to Exhibit 10.17 of Form 10-K for the fiscal year ended December 31, 1993. 10.18 Merger Agreement among BOk, Plaza National Bank and The Shareholders of Plaza National Bank dated December 20, 1993, incorporated by reference to Exhibit 10.18 of Form 10-K for the fiscal year ended December 31, 1993. 10.18.1 Amendment to Merger Agreement among BOk, Plaza National Bank and The Shareholders of Plaza National Bank dated January 14, 1994, incorporated by reference to Exhibit 10.18.1 of Form 10-K for the fiscal year ended December 31, 1993. 10.19 Stock Purchase Agreement between Texas Commerce Bank, National Association and BOk dated March 11, 1994, incorporated by reference to Exhibit 10.19 of Form 10-K for the fiscal year ended December 31, 1993. 10.20 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation Number Four, Citizens Holding Company and others dated May 11, 1994, incorporated by reference to Exhibit 10.20 of Form 10-K for the fiscal year ended December 31, 1994. 10.21 Stock Purchase and Merger Agreement among Northwest Bank of Enid, BOk and The Shareholders of Northwest Bank of Enid effective as of May 16, 1994, incorporated by reference to Exhibit 10.21 of Form 10-K for the fiscal year ended December 31, 1994. 10.22 Agreement and Plan of Merger among BOK Financial Corporation, BOKF Merger Corporation Number Five and Park Cities Bancshares, Inc. dated October 3, 1996, incorporated by reference to Exhibit C of S-4 Registration Statement No. 333-16337. 10.23 Agreement and Plan of Merger among BOK Financial Corporation and First TexCorp., Inc. dated December 18, 1996, incorporated by reference to Exhibit 10.24 of S-4 Registration Statement No. 333-16337. 10.24 Purchase and Assumption Agreement between Bank of America National Trust and Savings Association and BOK Financial Corporation dated July 27, 1998. 10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation No. Seven, First Bancshares of Muskogee, Inc., First National Bank and Trust Company of Muskogee, and Certain Shareholders of First Bancshares of Muskogee, Inc. dated December 30, 1998. 10.26 Merger Agreement among BOK Financial Corporation, BOKF Merger Corporation Number Nine, and Chaparral Bancshares, Inc. dated February 19, 1999. 10.27 Merger Agreement among BOK Financial Corporation, Park Cities Bancshares, Inc., Mid-Cities Bancshares, Inc. and Mid-Cities National Bank dated February 24, 1999. 10.28 Merger Agreement among, BOK Financial Corporation, Park Cities Bancshares, Inc., PC Interim State Bank, Swiss Avenue State Bank and Certain Shareholders of Swiss Avenue State Bank dated March 4, 1999. 10.29 Merger Agreement among, BOK Financial Corporation, Park Cities Bancshares, Inc.and CNBT Bancshares, Inc. dated August 18, 2000. 13.0 Annual Report to Shareholders for the fiscal year ended December 31, 1999. Such report, except for those portions thereof which are expressly incorporated by reference in this filing, is furnished for the information of the Commission and is not deemed to be "filed" as part of this Annual Report on Form 10-K. 21.0 Subsidiaries of BOK Financial. 23.0 Consent of independent auditors-Ernst & Young LLP 27.0 Financial Data Schedule for year ended December 31, 2000. 99.0 Additional Exhibits. 99.1 Undertakings incorporated by reference into S-8 Registration Statement No. 33-44121 for Bank of Oklahoma Master Thrift Plan and Trust, incorporated by reference to Exhibit 99.1 of Form 10-K for the fiscal year ended December 31, 1993. 99.2 Undertakings incorporated by reference into S-8 Registration Statement No. 33-44122 for BOK Financial Corporation 1991 Special Stock Option Plan, incorporated by reference to Exhibit 99.2 of Form 10-K for the fiscal year ended December 31, 1993. 99.3 Undertakings incorporated by reference into S-8 Registration Statement No. 33-55312 for BOK Financial Corporation 1992 Stock Option Plan, incorporated by reference to Exhibit 99.3 of Form 10-K for the fiscal year ended December 31, 1993. 99.4 Undertakings incorporated by reference into S-8 Registration Statement No. 33-70102 for BOK Financial Corporation 1993 Stock Option Plan, incorporated by reference to Exhibit 99.4 of Form 10-K for the fiscal year ended December 31, 1993. 99.5 Undertakings incorporated by reference into S-8 Registration Statement No. 33-79834 for BOK Financial Corporation 1994 Stock Option Plan, incorporated by reference to Exhibit 99.5 of Form 10-K for the fiscal year ended December 31, 1994. 99.6 Undertakings incorporated by reference into S-8 Registration Statement No. 33-79836 for BOK Financial Corporation Directors' Stock Compensation Plan, incorporated by reference to Exhibit 99.6 of Form 10-K for the fiscal year ended December 31, 1994. 99.7 Undertakings incorporated by reference into S-8 Registration Statement No. 333-32649 for BOK Financial Corporation 1997 Stock Option Plan, Incorporated by reference to Exhibit 99.7 of Form 10-K for the fiscal year ended December 31, 1997. 99.8 Undertakings incorporated by reference into S-8 Registration Statement No. 333-93957for BOK Financial Corporation 2000 Stock Option Plan, Incorporated by reference to Exhibit 99.8 of Form 10-K for the fiscal year ended December 31, 1999. 99.9 Undertakings incorporated by reference into S-8 Registration Statement No. 333-40280 for BOK Financial Corporation Thrift Plan for Hourly Employees, Incorporated by reference to Exhibit 99.9 of Form 10-K for the fiscal year ended December 31, 2000. (B) Reports on Form 8-K None. (C) Exhibits Required by Item 601 of Regulation S-K The exhibits listed in response to Item 14(A)(3) are filed as part of this report. (D) Financial Statement Schedules None. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOK FINANCIAL CORPORATION /s/ George B. Kaiser DATE: March 27, 2001 BY: George B. Kaiser, Chairman of the Board of Directors Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 27, 2000, by the following persons on behalf of the Registrant and in the capacities indicated. OFFICERS /s/ George B. Kaiser /s/ Stanley A. Lybarger George B. Kaiser, Stanley A. Lybarger, Chairman of the Board of Directors Director, President and Chief Executive Officer /s/ Steven E. Nell /s/ John C. Morrow Steven E. Nell, John C. Morrow Executive Vice President and Senior Vice President and Director of Chief Financial Officer Financial Accounting and Reporting DIRECTORS /s/ W. Wayne Allen /s/ Robert J. LaFortune - --------------------------------------- ------------------------------------- W. Wayne Allen Robert J. LaFortune /s/ Philip C. Lauinger, Jr. - --------------------------------------- ------------------------------------- C. Fred Ball, Jr. Philip C. Lauinger, Jr. /s/ John C. Lopez - --------------------------------------- ------------------------------------- James E. Barnes John C. Lopez /s/ Sharon J. Bell /s/ Frank A. McPherson - --------------------------------------- ------------------------------------- Sharon J. Bell Frank A. McPherson /s/ Steven E. Moore - --------------------------------------- ------------------------------------- Peter C. Boylan, III Steven E. Moore /s/ Luke R. Corbett /s/ J. Larry Nichols - --------------------------------------- ------------------------------------- Luke R. Corbett J. Larry Nichols /s/ Robert H. Donaldson /s/ Ronald J. Norick - --------------------------------------- ------------------------------------- Robert H. Donaldson Ronald J. Norick /s/ Robert L. Parker, Sr. - --------------------------------------- ------------------------------------- William E. Durrett Robert L. Parker, Sr. /s/ James O. Goodwin /s/ James W. Pielsticker - --------------------------------------- ------------------------------------- James O. Goodwin James W. Pielsticker /s/ V. Burns Hargis - --------------------------------------- ------------------------------------- V. Burns Hargis James A. Robinson /s/ Howard E. Janzen /s/ L. Francis Rooney, III - --------------------------------------- ------------------------------------- Howard E. Janzen L. Francis Rooney, III /s/ E. Carey Joullian, IV - --------------------------------------- E. Carey Joullian, IV EX-10.29 2 0002.txt MERGER AGREEMENT WITH CNBT BANCSHARES, INC. AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of August 18, 2000, is entered into by and among BOK Financial Corporation, an Oklahoma corporation, ("BOKF"), BOKF Merger Corporation Number Ten, a Texas corporation and a wholly-owned subsidiary of BOKF ("BOKSub"), and CNBT Bancshares, Inc., a Texas corporation ("CNBT"). WHEREAS, BOKF is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and BOKSub is a wholly-owned subsidiary of BOKF; and WHEREAS, CNBT is a registered bank holding company under the BHCA, which controls Citizens National Bank of Texas, a national banking association (the "Bank"); and WHEREAS, CNBT owns all of the issued and outstanding capital stock of CNBT Bancshares (Delaware), Inc., a Delaware corporation ("Delaware"); and WHEREAS, Delaware is a registered bank holding company under the BHCA, which owns all of the issued and outstanding capital stock of the Bank; and WHEREAS, the respective Boards of Directors of each of BOKF and CNBT deem it advisable for BOKSub to merge with and into CNBT upon the terms and subject to the conditions described herein; NOW, THEREFORE, for and in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, conditions, and promises hereinafter contained, the parties hereto covenant and agree as follows: ARTICLE I THE MERGER Section 1.1. The Merger. Pursuant to the terms and provisions of this Agreement and the Texas Business Corporation Act (the "TBCA"), BOKSub shall merge with and into CNBT (the "Merger"). Section 1.2. Merging Corporation. BOKSub shall be the merging corporation under the Merger and its corporate identity and existence, separate and apart from CNBT, shall cease on consummation of the Merger. Section 1.3. Surviving Corporation. CNBT shall be the surviving corporation in the Merger. No changes in the articles of incorporation or bylaws of CNBT shall be effected by the Merger. The officers and directors of CNBT after the Merger shall be the same as the officers and directors of BOKSub as of the Effective Time (as defined in Section 9.2). 19 Section 1.4. Effect of the Merger. The Merger shall have all of the effects provided by the TBCA. CNBT, as the surviving corporation, may, at any time after the Effective Time, take any action (including executing and delivering any documents) in the name and on behalf of either BOKSub or CNBT as are appropriate in order to carry out and effectuate the transactions contemplated by this Agreement. Section 1.5. Merger Consideration; Conversion of Shares. (a) At the Effective Time, each share of common stock of CNBT, par value $1.00 per share (the "CNBT Common") then issued and outstanding, other than shares the holders of which have duly exercised and perfected their dissenters' rights under the TBCA, shall be automatically converted into the right to receive an amount (the "Merger Consideration") equal to (i) Ninety-Two Million Dollars ($92,000,000), minus the amount of any dividends paid by CNBT to its shareholders during the period from August 1, 2000, to the date of consummation of the Merger in excess of the sum of $0.12 per share per calendar quarter for each of two calendar quarters and one special dividend not exceeding seven cents ($0.07), minus the payments contemplated by Section 12.2. divided by (ii) the number of shares of CNBT Common issued and outstanding as of the Effective Time (and after exercise of all of the Stock Options (as defined in Section 2.2)) The Merger Consideration shall be paid to each holder of the CNBT Common as of the Effective Time as herein provided. (b) CNBT, BOKF, and BOKSub acknowledge and understand that (i) all Stock Options shall be exercised immediately prior to consummation of the Merger, (ii) all shares of CNBT Common issuable upon exercise of the Stock Options shall be deemed issued and outstanding immediately prior to the consummation of the Merger, and (iii) the CNBT Common to be converted into the right to receive the Merger Consideration shall include, without limitation, the CNBT Common to be issued upon the exercise of the Stock Options. (c) At the Effective Time, BOKF shall deposit or cause to be deposited into an interest bearing account at the Bank of Texas, National Association One Million Dollars ($1,000,000) of the Merger Consideration to be governed by Section 11.2 (the "Representation Escrow Funds"). The Merger Consideration less the Representation Escrow Funds is referred to herein as the "Closing Consideration". (d) At the Effective Time, all of the shares of CNBT Common, by virtue of the Merger and without any action on the part of the holders thereof, shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each holder of any certificate or certificates that immediately prior to the Effective Time represented outstanding shares of CNBT Common (the "Certificates") or of any holder of Stock Options shall thereafter cease to have any rights with respect to such shares, except the right of such holders to receive the Merger Consideration upon the surrender of such Certificate or Certificates or exercise of such Stock Options in accordance with Section 1.6. (e) At the Effective Time, each share of CNBT Common, if any, held in the treasury of CNBT immediately prior to the Effective Time shall be canceled. (f) At the Effective Time, each share of common stock, par value $1.00 per share, of BOKSub outstanding immediately prior to the Effective Time shall be converted into one share of CNBT Common. (g) If any holder of CNBT Common is entitled to dissent from the Agreement and the Merger under the TBCA and such holder thereof perfects such holder's rights under the TBCA in accordance with the provisions thereof, any issued and outstanding shares of CNBT Common held by such dissenting holder ("Dissenting Shares") shall not be converted as described in this Section 1.5, but from and after the Effective Time shall represent only the right to receive such cash consideration as may be determined to be due to such dissenting holder pursuant to the TBCA; provided, however, that each share of CNBT Common outstanding immediately prior to the Effective Time and held by a dissenting holder who shall, after the Effective Time, withdraw his demand for appraisal or lose his right of appraisal shall have only such rights as are provided under the TBCA. Section 1.6. Exchange Procedures; Surrender of Certificates. (a) Bank of New York , or other entity mutually satisfactory to CNBT and BOKF, shall act as paying agent in the Merger (the "Paying Agent"). Immediately after the Effective Time, BOKF will cause CNBT, as the surviving corporation, to furnish the Paying Agent cash sufficient in the aggregate for the Paying Agent to make full payment of the Merger Consideration to the holders of all outstanding shares of CNBT Common (other than Dissenting Shares). (b) At least twenty (20) days prior to the Effective Time, the Paying Agent shall mail, without any further action on the part of BOKF or CNBT, to each record holder of the Certificates, addressed to the most current address of such shareholder according to the records of CNBT, a letter of transmittal (and instructions) for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Each such letter (the "Merger Transmittal Letter") shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper receipt of the Certificates by the Paying Agent and shall be in such form and have such other provisions as BOKF may reasonably specify. If a holder of the CNBT Common surrenders the Certificates representing shares of such stock and a properly executed Merger Transmittal Letter to the Paying Agent at least three (3) business days prior to the Closing Date, then on the Closing Date, the Paying Agent shall pay to such shareholder the Closing Consideration with respect to such shares of CNBT Common. If a holder of the CNBT Common surrenders the Certificates representing shares of such stock and a properly executed Merger Transmittal Letter to the Paying Agent at any time after three (3) business days prior to the Closing Date, then promptly, and in no event later than three (3) business days after receipt of such Certificates and Merger Transmittal Letter, the Paying Agent shall pay to such shareholder the Closing Consideration with respect to such shares of CNBT Common. No interest on the Closing Consideration issuable upon the surrender of the Certificates shall be paid or accrued for the benefit of holders of Certificates . If the Closing Consideration is to be issued to a person other than a person in whose name a surrendered Certificate is registered, it shall be a condition of issuance that the surrendered Certificate shall be properly endorsed or otherwise executed in proper form for transfer and that the person requesting such issuance shall pay to the Paying Agent any required transfer or other taxes or establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable. (c) With respect to any shares of CNBT Common that are acquired as a result of the exercise of the Stock Options, the purchase price for such shares under the Stock Options shall be subtracted from or "netted-out" of the Closing Merger Consideration to be paid such shareholders in order to provide for a cashless exercise of the Stock Options. That is, upon the exercise of the Stock Options such option holder shall not be required to pay CNBT the purchase price specified in the Stock Options, but such amount shall be deducted from the amount of Closing Consideration that would otherwise have been paid to such option holder. (d) After the Effective Time, there shall be no further registration or transfers on the records of CNBT of outstanding certificates formerly representing shares of CNBT Common and, if a certificate formerly representing such shares is presented to CNBT or BOKF, it shall be forwarded to the Paying Agent for cancellation and exchange for the Closing Consideration. (e) All Merger Consideration paid upon the surrender of CNBT Common in accordance with the above terms and conditions shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of CNBT Common. (f) In the event any certificate for CNBT Common shall have been lost, stolen, or destroyed, the Paying Agent shall issue in exchange for such lost, stolen, or destroyed certificate, such Merger Consideration as may be required pursuant to this Agreement; provided, however, that BOKF may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate to deliver an affidavit of lost certificate and indemnification agreement in form reasonably acceptable to BOKF. (g) At any time following six months after the Effective Time, BOKF shall be entitled to terminate the Paying Agent relationship, and thereafter holders of Certificates shall be entitled to look only to BOKF (subject to abandoned property, escheat, or other similar laws) with respect to the Merger Consideration payable upon surrender of their Certificates. ARTICLE II REPRESENTATIONS AND WARRANTIES OF CNBT In order to induce BOKF and BOKSub to enter into, execute, deliver and perform this Agreement, CNBT represents and warrants to BOKF and BOKSub as follows: Section 2.1. Organization, Standing and Power. (a) CNBT is a corporation duly organized, validly existing, and in good standing under laws of the State of Texas. CNBT (i) has all requisite power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted; (ii) is subject to the supervision of the Board of Governors of the Federal Reserve System (the "Fed"); and (iii) is a bank holding company registered with the Fed under the BHCA. (b) Delaware is a corporation duly organized, validly existing, and in good standing under laws of the State of Delaware. Delaware (i) has all requisite power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted; (ii) is subject to the supervision of the Fed; and (iii) is a bank holding company registered with the Fed under the BHCA. (c) The Bank is a national banking association duly organized, validly existing, and in good standing under laws of the United States. The Bank (i) has all requisite power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted; (ii) is subject to the supervision of the Federal Deposit Insurance Corporation ("FDIC") and the Office of the Comptroller of the Currency ("OCC"); and (iii) is an insured bank as defined in the Federal Deposit Insurance Act. (d) CNBT has delivered to BOKF and BOKSub complete and correct copies, as of a date not more than 30 days prior to the date hereof, of (i) the Articles of Association or Incorporation or Certificate of Incorporation and all amendments thereto, and (ii) the Bylaws and all amendments thereto, of each of CNBT, Delaware, the Bank and CNB Mortgage Company, a Texas corporation.. Section 2.2. Capital Structure. (a) The authorized capital stock of CNBT consists of 30,000,000 shares of Common Stock, par value $1.00 per share. As of the date of this Agreement, 4,941,361 shares of CNBT Common were outstanding (net of shares held by CNBT in treasury). CNBT does not have any commitment or obligation to repurchase, reacquire, or redeem any of the outstanding CNBT Common. As of the date of this Agreement, CNBT had outstanding stock options granted, pursuant to the CNBT Employee Stock Option Plans, representing the right to acquire an aggregate of 139,670 shares of CNBT Common (the "Stock Options"). Schedule 2.2 (a) sets forth the name of each person that has been granted Stock Options, the number of shares that may be acquired as of the date of this Agreement by each such person, and the exercise price of such Stock Options. The outstanding shares of the CNBT Common are validly issued and outstanding, fully paid, and non-assessable. Except for the Stock Options, there are no outstanding subscriptions, conversion privileges, calls, warrants, options, commitments, or agreements of any character obligating CNBT to issue, sell, or dispose of any shares of any of its capital stock. (b) The authorized capital stock of Delaware consists solely of 10,000 shares of common stock, par value $1.00 per share (the "Delaware Common Stock"). As of the date of this Agreement, 1,000 shares of Delaware Common Stock were issued and outstanding, and all of such outstanding shares are held of record by CNBT. There are no outstanding subscriptions, conversion privileges, calls, warrants, option, commitments, or agreements obligating Delaware to issue, sell, or dispose of any shares of any of its capital stock. (c) The authorized capital stock of the Bank consists of 30,000,000 shares of common stock, par value $1.00 per share (the "the Bank Common Stock"). As of the date of this Agreement, 200,000 shares of the Bank Common Stock were issued and outstanding, all of which are held of record by Delaware. There are no outstanding shares of preferred stock, nor any subscriptions, conversion privileges, calls, warrants, options, commitments, or agreements obligating the Bank to issue, sell, or dispose of any shares of any of its capital stock. (d) CNBT has no subsidiaries except Delaware, the Bank and CNB Mortgage Company, a Texas corporation. Section 2.3. Authority. Subject to the approval of this Agreement by the shareholders of CNBT as contemplated by Section 5.6 hereof, the execution and delivery of this Agreement and the consummation of the Merger contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of CNBT. Neither the execution and delivery of this Agreement, the consummation of the Merger contemplated hereby, nor compliance by CNBT with any of the provisions hereof will (i) conflict with or result in a breach of any material provision of its Articles of Incorporation or Bylaws or constitute a default (or give rise to any right of termination, cancellation, or acceleration) under any of the terms, conditions, or provisions of any material note, bond, mortgage, indenture, license, agreement, or other instrument or obligation to which CNBT is a party, or by which it or any of its properties or assets may be bound, except for such conflict, breach, or default as to which requisite waivers or consents either shall have been obtained by CNBT by the Effective Time or the obtaining of which shall have been waived by BOKF, or (ii) violate any material order, writ, injunction, decree, statute, rule, or regulation applicable to CNBT or any of its properties or assets. No other consent or approval by any governmental authority, other than compliance with applicable federal and state securities and banking laws and regulations of the Fed, is required in connection with the execution and delivery by CNBT of this Agreement or the consummation by CNBT of the Merger contemplated hereby. Section 2.4. Financial Statements. (a) CNBT has previously delivered or made available to BOKF complete copies of the (i) the consolidated balance sheets of CNBT and its subsidiaries as of December 31, 1999, and related consolidated statements of income, changes in stockholders' equity, and cash flows for the three years ended December 31, 1999, together with the notes thereto, included in CNBT's Annual Report on Form 10-K for the year ended 1999, as currently on file with the Securities and Exchange Commission ("SEC") and the unaudited consolidated balance sheet of CNBT and its subsidiaries as of June 30, 2000, and the related unaudited consolidated income statement and statements of changes in stockholders' equity and cash flows for the six months then ended included in CNBT's Quarterly Report on Form 10-Q for the quarter then ended, as currently on file with the SEC and (ii) the Reports of Condition and Income of the Bank as filed with the OCC for each of the quarterly periods during 1999 and 2000 (collectively the "CNBT Financial Statements"). (b) The CNBT Financial Statements set forth in clause (a)(i) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as disclosed therein) and fairly present the consolidated financial position and the consolidated results of operations, changes in stockholders' equity, and cash flows of CNBT and its consolidated subsidiaries as of the dates and for the periods indicated (subject, in the case of interim financial statements, to normal recurring year-end adjustments, none of which will be material). As of the respective date of each of the CNBT Financial Statements, neither CNBT, nor Delaware, nor Bank has any material liabilities (including, but not limited to, whether similar or dissimilar, liabilities or obligations for taxes, whether due or to be come due) except those fully reflected or reserved against, or otherwise disclosed in the Financial Statements. Section 2.5. Absence of Changes. Except as set forth in Schedule 2.5, since June 30, 2000, there has not been any material adverse change in the condition (financial or otherwise) of the assets, liabilities, earnings, or business of CNBT, Delaware, or the Bank. Since such date, the business of CNBT, Delaware, and the Bank has been conducted only in the ordinary course consistent with prior practices and such entities have not incurred any additional material liabilities (not already reflected in the CNBT Financial Statements) except: (i) those incurred in the ordinary course of business consistent with past practices without negligence or willful malfeasance, or (ii) expenses or liabilities incurred in connection with this Agreement and the transactions contemplated hereby in an amount not exceeding $175,000. Without limiting the generality of the foregoing, since June 30, 2000, except as set forth on Schedule 2.5 or as permitted by this Agreement, none of CNBT, Delaware, or the Bank have paid any dividends, made any distributions of assets, made any material changes in compensation or benefits of any employee (other than by reason of promotion to increased responsibility), or entered into any contracts for services or materials except such contracts and materials which either: (i) may be terminated without penalty within 90 days or, (ii) provide for the payment or other consideration to be furnished by CNBT, Delaware, or the Bank in an amount of not more than $25,000, individually or $100,000 for all such contracts and materials. Notwithstanding the foregoing, any changes in banking laws, generally accepted accounting principles, prevailing interest rates or other developments that affect the entire banking industry generally shall not be deemed to have a material adverse effect in the financial condition, the results of operations or the business of CNBT, Delaware, or the Bank. Section 2.6. Tax Matters. (a) CNBT, Delaware, and the Bank have timely filed all federal, state, and local (and, if applicable, foreign) income, franchise, bank, excise, real property, personal property, and other tax returns required by applicable laws to be filed by them (including, without limitation, estimated tax returns, income tax returns, information returns, and withholding and employment tax returns) and have paid, or where payment is not required to have been made, have set up an adequate reserve or accrual for the payment of, all taxes required to be paid with respect of the periods covered by such returns and, as of the Effective Time, will have paid, or where payment is not required to have been made, will have set up an adequate reserve or accrual for the payment of, all taxes for any subsequent periods ending on or prior to the Effective Time. None of CNBT, Delaware, or the Bank will have any material liability for any such taxes in excess of the amounts so paid or reserves or accruals so established. No payment of any amount to any employee of any of CNBT, Delaware, or the Bank is an excess parachute payment within the meaning of Section 280G of the Code. (b) All federal, state and local income, franchise, bank, excise, real property, personal property, and other tax returns filed by CNBT, Delaware and the Bank are complete and accurate in all material respects. None of CNBT, Delaware, or the Bank is delinquent in the payment of any tax, assessment, or governmental charge, and none of them has requested any extension of time within which to file any tax returns in respect of any fiscal year or portion thereof which have not since been filed. There are currently no agreements in effect with respect to CNBT, Delaware, or the Bank to extend the period of limitations for the assessment or collection of any tax. As of the date hereof, no audit, examination or deficiency or refund litigation with respect to any such return is pending or, to CNBT's knowledge, threatened. Section 2.7. Property. CNBT, Delaware, and the Bank own all property reflected on the balance sheet dated June 30, 2000, included in the CNBT Financial Statements (except personal property sold or otherwise disposed of since June 30, 2000, in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges, or encumbrances of any nature whatsoever, except those reflected in the CNBT Financial Statements, liens for current taxes not yet due and payable and such encumbrances and imperfections of title, if any, as are not substantial in character or amount or do not otherwise materially impair business operations. Section 2.8. Legal Proceedings. There is no material legal, administrative, arbitration, or other proceeding or governmental investigation pending or, to CNBT's knowledge, threatened which might reasonably be expected to result in material money damages payable by CNBT, Delaware, or the Bank in excess of insurance coverage or in a permanent injunction against CNBT, Delaware, or the Bank. To CNBT's knowledge, each of CNBT, Delaware and the Bank have complied with, and are not in default in any material respect under, any laws, ordinances, requirements, regulations, or orders applicable to their business. None of CNBT, Delaware, or the Bank is a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, or decree, which materially and adversely affects, or might reasonably be expected materially and adversely to affect, the business operations, properties, assets, or condition, financial, or otherwise, of CNBT, Delaware, or the Bank. Section 2.9. Brokers and Finders. Except as set forth in Section 12.2, none of CNBT, its subsidiaries, or any of its officers, directors, or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the Merger contemplated herein. Section 2.10. Loan Portfolio. Except as to any breach that would reasonably be expected to have an adverse effect of less than $20,000 in respect of any single credit (related credits shall be aggregated for this purpose) and $60,000 when aggregated with all such breaches, , (i) all loans and discounts shown on the CNBT Financial Statements at June 30, 2000, or which were entered into after June 30, 2000, but before the Closing Date were and will be made in all material respects for good, valuable, and adequate consideration in the ordinary course of the Bank, in accordance in all material respects with sound banking practices, and are not subject to any material known defenses, setoffs, or counterclaims, including without limitation any such as are afforded by usury or truth in lending laws, except as may be provided by bankruptcy, insolvency, or similar laws or by general principles of equity; (ii) the notes or other evidences of indebtedness evidencing such loans and all forms of pledges, mortgages, and other collateral documents and security agreements are and will be, in all material respects, enforceable, valid, true, and genuine and what they purport to be; and (iii) CNBT, Delaware and the Bank have complied and will prior to the Closing Date comply with all laws and regulations relating to such loans, or to the extent there has not been such compliance, such failure to comply will not materially interfere with the collection of any such loan. Notwithstanding the foregoing, BOKF acknowledges and agrees that it has made its own determination as to the collectibility of the loan portfolio of CNBT and the Bank. Section 2.11. Environmental. To CNBT's knowledge, the ownership, location, construction, use, and operation of all real property owned or leased by CNBT or the Bank (fixed asset or OREO) is, and has at all times been, in material compliance with applicable Environmental Law, as hereinafter defined. Delaware does not own or lease any real property and has not since its incorporation. To CNBT's knowledge, there are no pending or threatened, and there have been no administrative, regulatory, or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, or proceedings relating in any way to any Environmental Law relating to the real property owned by CNBT or the Bank. To CNBT's knowledge, (i) no real property owned by CNBT or the Bank has at any time been used by CNBT or the Bank, or by any person, as a landfill or for the storage or disposal, or as a site of spilling, dumping, depositing, or otherwise disposing of, any hazardous or toxic substances or waste; and (ii) no real property owned by CNBT or the Bank is, or has been, an industrial site or landfill. For the purposes hereof, "Environmental Law" means any federal, state, or local statute, law, rule, regulation, ordinance, code, policy, or rule of common law now in effect and in each case as amended and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree, or judgment, relating to the environment, health, safety or "hazardous materials," "hazardous wastes," "toxic substances," "toxic pollutants," "contaminants," or words or terms of similar import (including under any Environmental Law), including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq., the Hazardous Materials Transportation Act, as amended, 49 U.S.C. 1801 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., the Safe Drinking Water Act, 42 U.S.C. 3808 et seq., the Texas Solid Waste Disposal Act, Tex. Health & Safety Code Ann. Ch. 361, the Texas Clean Air Act, Tex. Health & Safety Code Ann. Ch. 382, the Texas Water Code, Tex. Water Code Ann., and the Texas Hazardous Substances Spill Prevention and Control Act, Tex. Water Code Ann. Section 2.12. Zoning and Related Laws. To CNBT's knowledge, all real property owned or leased by CNBT or the Bank and the use thereof complies with all applicable laws, ordinances, regulations, orders, or requirements, including without limitation, building, zoning, and other laws, except as to any violations which would not have a material adverse affect on the financial condition of CNBT or the Bank. Section 2.13. Compliance with Law. CNBT, Delaware, and the Bank have all licenses, franchises, permits, and other governmental authorizations that are legally required to enable them to conduct their respective businesses in all material respects and are in compliance with all applicable laws and regulations (including the Employee Retirement Income Security Act and regulations promulgated pursuant thereto) except to the extent that the failure to so comply could not have a material adverse effect on CNBT, Delaware or, the Bank. Section 2.14. Agreements with Regulatory Agencies. None of CNBT, Delaware, or the Bank is subject to any cease-and-desist or other order issued by, or a party to any written agreement or memorandum of understanding with or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of (each a "Regulatory Agreement") any regulatory agency that materially restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor have CNBT, Delaware, or the Bank been advised by any regulatory agency that it is considering issuing or requesting any Regulatory Agreement. Section 2.15. Employees. Except as set forth in Schedule 2.15 attached hereto, (i) none of the employees of CNBT, Delaware, or the Bank is employed under any employment contract (oral or written) that will survive the Merger and (ii) none of CNBT, Delaware, or the Bank have any employee benefit plans. Section 2.16. Contracts and Commitments. A list of all contracts, leases, and commitments, other than deposit, safe deposit, credit, and lending transactions entered into in the ordinary course of the Bank's banking business, which are material to the business, operations, or financial condition of CNBT, Delaware, or the Bank as of this date is set forth in Schedule 2.16. For the purpose of Schedule 2.16, materiality shall mean those contracts and commitments for which payment or other consideration to be furnished by CNBT, Delaware, or the Bank is more than $25,000. CNBT, Delaware, and the Bank have performed in all material respects and are performing all material contractual and other obligations required to be performed by them. Section 2.17. Sale of Credit Card Portfolio - Sponsored Accounts. Without limiting any other representation made herein, CNBT, Delaware, and Bank will suffer no loss by reason of the guarantee by CNBT and/or Bank of the collectibility of those accounts known as the Sponsored Accounts, which guarantee was given in connection with the sale of the Bank's Credit Card Portfolio. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BOKF In order to induce CNBT to enter into, execute, deliver and perform this Agreement, BOKF represents and warrants to CNBT as follows: Section 3.1. Organization, Standing and Power. BOKF is a corporation duly organized, validly existing, and in good standing under the State of Oklahoma. BOKF (i) has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and to own, lease, and operate its properties and to carry on its business as now being conducted; and (ii) is a bank holding company registered with the Fed under the BHCA. Section 3.2. Authority. The execution and delivery of this Agreement, the consummation of the Merger and payment of the Merger Consideration , and the other transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of BOKF. This Agreement has been duly executed by BOKF and constitutes the valid and binding obligation of BOKF, enforceable in accordance with its terms and conditions, except as enforceability may be limited by bankruptcy, conservatorship, insolvency, moratorium, reorganization, receivership, or similar laws and judicial decisions affecting the rights of creditors generally and by general principles of equity (whether applied in a proceeding at law or in equity). Neither the execution and delivery of this Agreement, the consummation of the Merger and payment of the Merger Consideration )and the other transactions contemplated hereby, nor compliance by BOKF with any of the provisions hereof will (i) conflict with or result in a breach of any provision of its Articles of Incorporation or Bylaws or constitute a default (or give rise to any right of termination, cancellation, or acceleration) under any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, agreement, or other instrument or obligation to which BOKF is a party, or by which it or any of its properties or assets may be bound except for such conflict, breach, or default as to which requisite waivers or consents either shall have been obtained by BOKF by the Effective Time, or the obtaining of which shall have been waived by CNBT, or (ii) violate any order, writ, injunction, decree, statute, rule, or regulation applicable to BOKF or any of its properties or assets. No consent or approval by any governmental authority, other than compliance with applicable federal and state securities and banking laws and regulations of the Fed, is required in connection with the execution and delivery by BOKF of this Agreement or the consummation by BOKF of the Merger and payment of the Merger Consideration and the other transactions contemplated hereby. Section 3.3. Subsidiaries. Each of BOKF's subsidiaries is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power to own its respective properties and assets, to incur its respective liabilities and to carry on its respective business as now being conducted. Section 3.4. Financial Information. The consolidated balance sheets of BOKF and its subsidiaries as of December 31, 1999 and related consolidated statements of income, changes in stockholders' equity and cash flows for the three years ended December 31, 1999, together with the notes thereto, included in BOKF's Annual Report on Form 10-K for the year ended 1999, as currently on file with the SEC and the unaudited consolidated balance sheet of BOKF and its subsidiaries as of June 30, 2000, and the related unaudited consolidated income statement and statements of changes in stockholders' equity and cash flows for the sixmonths then ended included in BOKF's Quarterly Report on Form 10-Q for the quarter then ended, as currently on file with the SEC (together the "BOKF Financial Statements"), have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as disclosed therein) and fairly present the consolidated financial position and the consolidated results of operations, changes in stockholders' equity and cash flows of BOKF and its consolidated subsidiaries as of the dates and for the periods indicated (subject, in the case of interim financial statements, to normal recurring year-end adjustments, none of which will be material). Section 3.5. Absence of Changes. Since June 30, 2000, there has not been any material adverse change in the financial condition, the results of operations, or the business of BOKF and its subsidiaries taken as a whole, nor have there been any events or transactions having such a material adverse effect which should be disclosed in order to make the BOKF Financial Statements not misleading. Notwithstanding the foregoing, any changes in banking laws, generally accepted accounting principles, prevailing interest rates or other developments which affect the entire banking industry generally shall not be deemed to be a material adverse change in the financial condition, the results of operations or the business of BOKF and its subsidiaries taken as a whole. Section 3.6. Litigation. There is no litigation, claim, or other proceeding pending or, to the knowledge of BOKF, threatened, against BOKF or any of its subsidiaries, of which the property of BOKF or any of its subsidiaries is or would be subject which if adversely determined would have a material adverse effect on the business of BOKF and its subsidiaries taken as a whole. Section 3.7. Reports. Since January 1, 1993 (in the case of subsidiaries of BOKF, the date of acquisition thereof by BOKF, if later) BOKF and each of its significant subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with (i) the SEC, (ii) the Fed, (iii) the OCC, (iv) the FDIC, (v) any applicably state securities or banking authorities, (vi) the Nasdaq Stock Market, and (vii) any other governmental authority with jurisdiction over BOKF or any of its significant subsidiaries. As of their respective dates, each of such reports and documents, as amended, including the financial statements, exhibits, and schedules thereto, complied in all material respects with the relevant statutes, rules, and regulations enforced or promulgated by the regulatory authority with which they were filed, and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 3.8. Compliance With Law. BOKF and its significant subsidiaries have all licenses, franchises, permits, and other governmental authorizations that are legally required to enable them to conduct their respective businesses in all material respects and are in compliance with all applicable laws and regulations, except to the extent that the failure to so comply would not have a material adverse effect on BOKF and its subsidiaries taken as a whole. Section 3.9. Regulatory Approvals. BOKF is not aware of any matter (including, but not limited to, compliance with capital adequacy guidelines adopted by the Fed and the Community Reinvestment Act) that would delay or prevent BOKF from obtaining all requisite regulatory approvals necessary to consummate the Merger as set forth in this Agreement. Section 3.10 Ability to Pay Merger Consideration. BOKF will have available to it as of the Closing Date, as a result of dividends or distributions from its subsidiaries, borrowings on its existing line of credit, or capital contribution, sufficient cash to pay the Merger Consideration as set forth in Section 1.5 to the shareholders of CNBT. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BOKSUB In order to induce CNBT to enter into, execute, deliver and perform this Agreement, BOKSub represents and warrants to CNBT as follows: Section 4.1. Organization, Standing and Power. BOKSub is a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas, with all requisite power and authority to own, lease, and operate its properties and to carry on its business as now being conducted. Section 4.2. Authority. The execution and delivery of this Agreement and the consummation of the Merger contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of BOKSub. Neither the execution and delivery of this Agreement, the consummation of the Merger contemplated hereby, nor the compliance by BOKSub with any of the provisions hereof will (i) conflict with or result in a breach of any provision of its Articles of Incorporation or Bylaws or constitute a default (or give rise to any right of termination, cancellation, or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, or other instrument or obligation to which BOKSub is a party, or by which it or any of its properties or assets may be bound except for such conflict, breach, or default as to which requisite waivers or consents either shall have been obtained by BOKSub by the Effective Time, or the obtaining of which shall have been waived by BOKSub, or (ii) violate any order, writ, injunction, decree, statute, rule, or regulation applicable to BOKSub or any of its properties or assets. No consent or approval by any governmental authority, other than those required by applicable federal and state securities and banking laws and regulations is required in connection with the execution and delivery by BOKSub of this Agreement. ARTICLE V PRE-CLOSING COVENANTS Section 5.1. Access to Records and Properties of CNBT. (a) Between the date of this Agreement and the Effective Time, CNBT agrees to give BOKF reasonable access to all of its and the Bank's premises, books, records (including tax returns filed and those in preparation), financial information, and other information pertinent to its operations, including, without limitation, access to independent auditors with respect to the preparation of the financial statements and tax planning of CNBT and the Bank; provided, however, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the business of CNBT or the Bank. CNBT will cooperate fully in permitting BOKF to make a full investigation of the business, properties, financial condition and investments of CNBT and the Bank, in the preparation of all applications, reports, and other documents necessary or advisable for the successful consummation of the Merger. (b) BOKF will treat and hold confidential any information concerning the business and affairs of CNBT, Delaware or the Bank that is not generally available to the public ("Confidential Information") it receives from any of CNBT, Delaware, the Bank, or their respective shareholders, officers, directors, or agents, in the course of its review of CNBT, Delaware or the Bank. BOKF will not use any of the Confidential Information except in connection with this Agreement. If this Agreement is terminated for any reason whatsoever, BOKF and BOKSub will promptly return to CNBT, Delaware, or the Bank, as the case may be, all tangible embodiments (and all copies) of the Confidential Information which are in its possession, and will not at any time use any Confidential Information for any business purpose or disclose it to any third party. Any information provided to BOKF by CNBT, Delaware or the Bank shall not be deemed to be Confidential Information if: (i) it was in BOKF's lawful possession or within BOKF's knowledge at the time of disclosure; (ii) at the time of disclosure, it was in the public domain; (iii) after CNBT's disclosure, it becomes, through no act or omission on BOKF's part, in the public domain; or (iv) it was lawfully and independently obtained by BOKF from a third party who was not under an obligation of confidentiality. Section 5.2. Operation of the Business of CNBT. CNBT agrees that from the date hereof to the Effective Time, except as contemplated by this Agreement or to the extent that BOKF shall otherwise consent (which consent shall not be unreasonably withheld), (a) CNBT will operate its business substantially as presently operated and only in the ordinary course, and, consistent with such operation, it will use its reasonable best efforts to preserve intact its present business organization and its relationships with persons having business dealings with it. (b) CNBT will maintain and keep its properties in as good repair and condition as at present, except for depreciation due to ordinary wear and tear and damage due to casualty, maintain in full force and effect insurance comparable in amount and scope of coverage to that now maintained, perform all its obligations under contracts, leases and documents relating to or affecting its assets, properties and business, and fully comply with and perform all material obligations and duties imposed upon it by applicable laws and governmental rules, regulations and orders imposed by governmental authorities. (c) Except as expressly permitted by subsections (e), (f), and (g) below, CNBT will not, other than in the ordinary course of business and consistent with CNBT's or the Bank's prior practices, (i) grant any material salary increase to any officer or employee or enter into any new bonus, incentive compensation, deferred compensation, profit sharing, retirement, severance, pension, group insurance, or other benefit plan, or any new employment or consulting agreement; (ii) create or otherwise become liable with respect to any indebtedness for money borrowed or purchase money indebtedness; (iii) make or allow any amendment of its Articles of Association, Articles of Incorporation, or Bylaws; (iv) issue or contract to issue any shares of CNBT Common or securities exchangeable for or convertible into CNBT Common, except in connection with the exercise of the Stock Options; (v) purchase any shares of CNBT Common; (vi) enter into or assume any material contract or obligation; (vii) incur a lien on any of its properties either real or personal; (viii) make any substantial renovation of any of its properties or enter into any lease or agreement involving any substantial obligation; or (ix) waive any right of substantial value. (d) From August 1, 2000, until the Closing Date, CNBT will not pay total dividends exceeding the amount of earnings at CNBT, on a consolidated basis, during such period, CNBT will not pay dividends in excess of $0.12 (twelve cents) per calendar quarter for each of two calendar quarters plus one special dividend not exceeding $0.07 (seven cents), and CNBT will not permit the Bank to pay any dividend that would cause the Bank to no longer be "well capitalized" under applicable federal capital adequacy guidelines. (e) Notwithstanding anything in this Agreement to the contrary, (i) the Stock Options may be exercised and CNBT may issue CNBT Common in connection therewith and otherwise perform its obligations thereunder; and (ii) the Stock Option exercise dates may be accelerated or extended in the discretion of CNBT subject to the provisions of this Agreement respecting the exercise of such Stock Options in connection with the consummation of the Merger. (f) Notwithstanding anything in this Agreement to the contrary, CNBT may pay usual and customary bonuses (consistent with prior practice. (g) Notwithstanding anything in this Agreement to the contrary, CNBT may (subject to the approval of BOKF which approval shall not be unreasonably denied, withheld, or delayed) commit to pay to certain key employees of CNBT or the Bank (who do not enter into employment or noncompetition agreements) an aggregate amount of $75,000 in consideration of such employees entering into retention agreements whereby such employees would continue their employment with CNBT or the Bank at least through the earlier of (i) February 28, 2002 or (ii) the date of the data processing conversion of the Bank to the data processing system used by Bank of Texas, National Association ("BOT"). Section 5.3. Regulatory Approvals and Cooperation. (a) BOKF and BOKSub shall promptly, but in no event later than twenty (20) days after the date of this Agreement, file or cause to be filed applications to fulfill all governmental, regulatory and other requirements (including, without limitation, obtaining the approval of the OCC, the FDIC, the Fed, SEC, and/or any other governmental entity having jurisdiction over CNBT, Delaware, the Bank, or BOKF and pay all fees and expenses associated therewith) required by BOKF, or BOKSub for the completion of the transaction contemplated by this Agreement; and promptly furnish CNBT with copies of all such regulatory filings. (b) CNBT shall take all action necessary and fully cooperate in good faith with BOKF and BOKSub to bring about the Merger contemplated by this Agreement as soon as practicable. CNBT will give any notices to third parties, and CNBT will use its best efforts to obtain any third party consents, that BOKF may reasonably request in connection with the consummation of the Merger. Section 5.4. Public Disclosure. None of BOKF, BOKSub, CNBT, or any representative of said parties, will make any public disclosure concerning this Agreement or the Merger contemplated herein without the mutual consent of each of the other parties hereto to the timing and content of the disclosure; provided, however, the parties hereto may make any disclosure (i) necessary to maintain compliance with applicable federal or state laws or regulations, (ii) required in connection with the making of any application necessary to effect the Merger, or (iii) as contemplated by Section 5.6. Section 5.6. Shareholder Approval. CNBT, acting through its Board of Directors, shall, in accordance with applicable law: (a) Duly call, give notice of, convene, and hold a meeting of its shareholders on a date mutually selected by BOKF and CNBT (the "Shareholders's Meeting") for submission of this Agreement and the Merger for approval of such shareholders as required by the TBCA, (b) Subject to its fiduciary duties to the shareholders of CNBT, include in the Proxy Statement (as defined below) the recommendation of its Board of Directors that the shareholders of CNBT vote in favor of the approval and adoption of the Agreement and the Merger, (c) Shall file with the SEC as soon as reasonably practicable after the date hereof the Proxy Statement and shall use all reasonable efforts to have the Proxy Statement approved by the SEC as promptly as practicable, and (d) Cause the Proxy Statement to be mailed to the shareholders of CNBT as soon as practicable, and take such other action as is reasonably necessary to obtain approval of the Agreement and the Merger from its shareholders. The letter to shareholders, notice of meeting, proxy statement, and form of proxy to be distributed to shareholders of CNBT in connection with the Merger and the Merger Agreement shall be in form and substance reasonably satisfactory to BOKF and are collectively referred to herein as the "Proxy Statement." Section 5.7. No Solicitation. (a) Prior to the Effective Time, unless this Agreement is sooner terminated, CNBT shall not, nor shall CNBT permit any officer, director, employee, agent or representative of CNBT or the Bank to, directly or indirectly (i) solicit, initiate or encourage inquiries or proposals with respect to the merger of CNBT or the sale of any of the shares of CNBT Common or other material asset(s) of CNBT (any such transaction being referred to as an "Acquisition Transaction") from any party other than BOKF, or (ii) enter into any Acquisition Transaction with any party except as set forth in this Agreement. (b) Notwithstanding the provisions of paragraph (a) above, CNBT may, in response to an unsolicited written proposal with respect to an Acquisition Transaction ("Acquisition Proposal"), furnish (subject to the execution of a confidentiality agreement and standstill agreement containing provisions substantially similar to the confidentiality and standstill provisions of Section 5.1(b) hereof confidential or non-public information concerning its business, properties, or assets to a financially capable corporation, partnership, person, or other entity or group (a "Potential Acquiror") and negotiate with such Potential Acquiror if (i) the board of directors of CNBT after consulting with one or more of its financial advisers, concludes that such Acquisition Proposal (if consummated pursuant to its terms) would result in a transaction more favorable to CNBT's shareholders than the Merger and (ii) based upon advice of its legal counsel, its board or directors determines in good faith that the failure to provide such confidential and non-public information to such Potential Acquiror would constitute a breach of its fiduciary duty to its shareholders (any such Acquisition Proposal meeting the conditions of clauses (i) and (ii) being referred to as a "Superior Proposal"). (c) CNBT shall immediately notify BOKF after receipt of any Acquisition Proposal or any request for nonpublic information relating to CNBT or the Bank in connection with an Acquisition Proposal or for access to the properties, books, or records of CNBT or the Bank by any person or entity that informs the CNBT board of directors that it is considering making, or has made, an Acquisition Proposal. Such notice to BOKF shall be made orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry, or contact. Section 5.8. Restrictions on Indebtedness. CNBT agrees that from the date hereof to the Effective Time, except as contemplated by this Agreement, CNBT shall not incur any indebtedness for borrowed money or incur any noncurrent indebtedness for the purchase price of any fixed or capital asset, or make any extension of credit or any loans to, guarantee the obligations of, or make any additional investments in, any other person, corporation, or joint venture (whether an existing customer or a new customer) except: (a) Extensions of credit, loans and guarantees (i) less than $500,000per transaction or (ii) less than $1,000,000 with existing customers (related credits being aggregated for this purpose) made by the Bank in the usual and ordinary course of its banking business, consistent with prior practices and policies; provided, however, that the consent of BOKF shall be deemed to have been given unless earlier given or denied in writing (i) with respect to any loan presented at a regularly scheduled meeting of the Bank's Loan Committee, at the later of 3:00 p.m. on the business day of such meeting or the adjournment of such meeting, provided that all information provided to the members of the Bank's Loan Committee with respect to such loan is delivered to BOKF at the same time it is delivered to such committee members, and (ii) with respect to all other loans, at the close of business on the next business day after BOKF's consent is requested and all information relating to the making, renewal or alteration of such loan is furnished to BOKF. (b) Legal investments by the Bank in the usual and ordinary course of its banking business consistent with prior practices and policies. (c) Borrowings from the Federal Home Loan Bank, the Federal Reserve Bank, deposit liabilities, and federal funds transactions by the Bank in the ordinary course of business consistent with past practices. Section 5.9. Information for Proxy Statement and Applications. BOKF will promptly furnish to CNBT all information concerning BOKF and BOKSub required for inclusion in (a) the Proxy Statement and (b) any application or statement to be made by CNBT or filed by CNBT with any body in connection with the transactions contemplated by this Agreement, and BOKF represents and warrants that all information so furnished for such Proxy Statement and applications shall be true and correct in all material respects and shall not omit any material fact required to be stated therein or necessary to make the statements made, in light of the circumstances under which they were made, not misleading. BOKF shall otherwise fully cooperate with CNBT and the Bank in the filing of any applications or other documents necessary to consummate the transactions contemplated by this Agreement, including the Merger. BOKF shall promptly notify CNBT in writing if BOKF becomes aware of any fact or condition that makes untrue, or shows to have been untrue, in any material respect, and schedule or any other information furnished to CNBT or any representation or warranty made in or pursuant to this Agreement. Section 5.10 Repositioning of Securities Portfolio. From and after the date of this Agreement, CNBT shall cause the Bank to consult with BOKF concerning the advisability of repositioning the Bank's securities portfolio, including consideration of moving to overall shorter maturities; provided, however, without limiting the generality of the foregoing the Bank shall not be obligated in any event to sell any security at a loss. Section 5.11 BOKF Guest Attendance at CNBT and Bank Board, Asset and Liability Committee, and Loan Committee Meetings. From and after the date of this Agreement, CNBT and the Bank shall extend an invitation to two representatives of BOKF designated by BOKF to attend as guests all meetings of the boards of directors and all meetings of the Asset and Liability Committee and Loan Committee of CNBT and the Bank; provided, however, such representatives shall excuse themselves, if requested, from such meetings while any confidential matters respecting the rights and obligations of the parties pursuant to this Agreement are being discussed. The representatives may differ from meeting to meeting. ARTICLE VI CONDITIONS OF MERGER - BOKF AND BOKSUB The obligations of BOKF and BOKSub to close the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, unless waived by BOKF and BOKSub. Section 6.1. Representations and Warranties. The representations and warranties of CNBT set forth in Article II hereof shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except as otherwise provided or permitted by this Agreement, and BOKF shall have received a certificate, executed by the President of CNBT to that effect. Section 6.2. Performance of Obligations of CNBT. CNBT shall have performed all obligations and agreements required to be performed by it under this Agreement in all material respects prior to or at the Closing. Section 6.3. Authorization of Merger. All action necessary to authorize the execution, delivery, and performance of this Agreement by CNBT and the consummation of the transactions contemplated hereby shall have been duly and validly taken by the Board of Directors of CNBT, and CNBT shall have full power and right to merge on the terms provided herein. All action necessary to authorize and consummate the Merger contemplated hereby shall have been duly and validly taken by the shareholders of CNBT and holders of not more than 10% of the CNBT Common shall either (i) file with CNBT prior to the Shareholders' Meeting a notice of their intent to exercise their right to dissent to the Merger or (ii) vote against the Merger at the Shareholders' Meeting. ARTICLE VII CONDITIONS OF MERGER - CNBT The obligation of CNBT to close the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions, unless waived by CNBT: Section 7.1. Representations and Warranties. The representations and warranties of BOKF and BOKSub set forth in Article III and Article IV hereof, respectively, shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except as otherwise provided or permitted by this Agreement, and CNBT shall have received a certificate, executed by the Presidents of BOKF and BOKSub to that effect. Section 7.2. Performance of Obligations of BOKF. BOKF and BOKSub shall have performed all obligations and agreements required to be performed by it under this Agreement in all material respects prior to or at the Closing. Section 7.3. Authorization of Merger by BOKF and BOKSub. All action necessary to authorize the execution, delivery, and performance of this Agreement by BOKF and BOKSub and the consummation of the Merger contemplated hereby shall have been duly and validly taken by the Boards of Directors and shareholders of BOKF and BOKSub, respectively, and BOKSub and CNBT shall have full power and right to merge on the terms provided herein. Section 7.4. Authorization of Merger by CNBT. All action necessary to authorize and consummate the Merger contemplated hereby shall have been duly and validly taken by the shareholders of CNBT and holders of not more than one third of the CNBT Common either (i) file with CNBT prior to the Shareholders' Meeting a notice of their intent to exercise their right to dissent to the Merger or (ii) vote against the Merger at the Shareholders' Meeting. Section 7.5. Fairness Opinion. Provided CNBT shall have diligently sought such an opinion, CNBT shall have received from a recognized investment banking firm an opinion, dated as of the date on which the Proxy Statement is first distributed to the shareholders of CNBT, to the effect that the Merger Consideration is fair, from a financial point of view, to the holders of CNBT Common. ARTICLE VIII CONDITIONS TO RESPECTIVE OBLIGATIONS OF BOKF AND CNBT The respective obligations of BOKF and CNBT under this Agreement are, at their respective options, subject to the further condition that: Section 8.1. Governmental Approvals. The parties hereto shall have received approval of the Merger as contemplated by this Agreement from all necessary governmental agencies and authorities, including, to the extent required, the Fed, the OCC, the FDIC, the SEC, and such approvals shall not have been contested by any Federal or state governmental authority nor by any other third party by formal proceeding, and none of such approvals or consents shall be subject to any terms or conditions that are unreasonable or unduly burdensome in the opinion of the party hereto which is obliged to discharge or comply with such term or condition, and all applicable regulatory waiting periods have expired. It is understood that if any contest as aforesaid is brought by formal proceedings, BOKF may, but shall not be obligated to, answer and defend such contest. Section 8.2. Documents. Each party hereto shall have received all documents required to be received from the other party on or prior to the Closing Date, including those set forth in Section 9.3 hereof, all in form and substance reasonably satisfactory to the receiving party. Section 8.3. Litigation. No action or proceeding shall have been taken, threatened, or instituted or be pending, and no statute, rule, regulation, or order shall have been promulgated, enacted, entered, enforced, or deemed applicable to the acquisition by any governmental authority or by any court, including the entry of a preliminary or permanent injunction, that would (a) make the Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby, illegal, invalid, or unenforceable, (b) impose material limits in the ability of any party to this Agreement to consummate the Agreement or the transactions contemplated hereby, or (c) subject CNBT or the Bank or any officer, director, shareholder, or employee thereof to criminal or civil liability. Section 8.4. Employee Severance Agreements. All Employee Severance Agreements between employees and CNBT, Delaware, and/or Bank shall have been amended (which amendment CNBT shall use reasonable efforts to obtain) in a manner approved by BOKF (provided such approval is not unreasonably denied, withheld, or delayed), including the subparagraph (1) of the definition of Good Reason. ARTICLE IX CLOSING Section 9.1. Closing. The closing (the "Closing") for the consummation of the transactions contemplated by this Agreement shall take place at the main offices of Bank at 10:00 a.m. Houston time on the Closing Date described in Section 9.2, unless another date or place is agreed to in writing by the parties hereto. Section 9.2. Closing Date; Effective Time. The Closing shall take place on a date (the "Closing Date") mutually agreeable to BOKF and CNBT, which date shall be the later of ten (10) days after the receipt of all necessary regulatory, corporate, and other approvals and the expiration of any mandatory waiting periods and a mutually agreeable date on or after January 3, 2001 and on or prior to January 11, 2001, provided, however, that the Closing Date shall not occur later than January 30, 2001 Subject to the terms and conditions set forth herein, including receipt of all regulatory approvals, the Merger shall be effective upon the later of the filing of, or the date and time specified in, the Certificate of Merger relating to the Merger and filed with the Secretary of State of the State of Texas (the "Effective Time"), and the parties shall use their best efforts to cause the Effective Time to occur on the Closing Date. Section 9.3. Closing Deliveries. (a) At the Closing, CNBT shall deliver to BOKF and BOKSub: (i) a certified copy of the Articles of Incorporation, Certificate of Incorporation, or Articles of Association of CNBT, Delaware, and the Bank; (ii) a certificate, signed by an appropriate officer of CNBT, acting solely in his capacity as an officer of CNBT, stating that (A) each of the representations and warranties contained in Article II is true and correct in all material respects at the time of the Closing with the same force and effect as if such representations and warranties had been made at Closing, and (B) all of the conditions set forth in Article VII have been satisfied or waived as provided therein; (iii) a certified copy of the resolutions of CNBT's Board of Directors and shareholders, as required for valid approval of the execution of this Agreement and the consummation of the Merger and the other transactions contemplated hereby; (iv) good standing and existence certificates, dated a recent date, duly certifying the existence and good standing of CNBT in Texas Delaware in Delaware, and Bank with the OCC; (v) executed employment agreements for B. Ralph Williams in substantially the form as attached hereto as Exhibit "A"; (vii) an opinion of the accounting firm of Mann, Frankfort, Stein & Lipp P.C., or another accounting firm mutually agreed to by CNBT and BOKF, in a form reasonably acceptable to BOKF, opining that no payment, of which such accounting firm has knowledge, to any employee of CNBT, Delaware, or the Bank is an excess parachute payment within the meaning of Section 280G of the Code; and, (viii) a resolution of the Board of Directors of CNBT approving the merger of CNBT's profit sharing plan into the defined contribution plan of BOKF. (b) At the Closing, BOKF shall deliver to CNBT: (i) certified copies of the Articles of Incorporation of BOKF and BOKSub; (ii) a certificate signed by an appropriate officer of BOKF and BOKSub stating that (A) each of the representations and warranties contained in Article III and IV is true and correct in all material respects at the time of the Closing with the same force and effect as if such representations and warranties have been made at Closing and (B) all of the conditions set forth in Article VI have been satisfied; (iii) a certified copy of the resolutions of BOKF's Board of Directors authorizing the execution of this Agreement and the consummation of the transactions contemplated hereby; (iv) a certified copy of the resolutions of BOKSub's Board of Directors and shareholder, as required for valid approval of the execution of this Agreement and the consummation of the transactions contemplated hereby; (v) good standing and existence certificates, dated a recent date, duly certifying the existence and good standing of BOKSub in Texas; (vi) executed employment agreements for B. Ralph Williams in substantially the form as attached hereto as Exhibit "A"; and (viii) evidence of the approval of all regulatory authorities required for the consummation of the Merger and the transactions contemplated by this Agreement. ARTICLE X TERMINATION Section 10.1. Termination. This Agreement may be terminated at any time prior to the Effective Time by: (a) The mutual consent of the respective Boards of Directors of BOKF and CNBT; (b) BOKF if the conditions set forth in Article VI hereof shall not have been met; (c) CNBT if the conditions set forth in Article VII hereof shall not have been met; (d) BOKF if the conditions set forth in Article VIII hereof shall not have been met through no fault of, or reason attributable to, BOKF; (e) CNBT if the conditions set forth in Article VIII hereof shall not have been met through no fault of, or reason attributable to, CNBT, Delaware, or the Bank; (f) CNBT if (i) CNBT receives an offer from a third party (excluding any affiliate of CNBT or any group of which any affiliate of CNBT is a member) with respect to an Acquisition Proposal, and (ii) the board of directors of CNBT determines, in good faith and after consultation with an independent financial advisor, that such proposal constitutes a Superior Proposal and resolves to accept such a Superior Proposal, and (iii) CNBT shall have given BOKF two (2) days' prior written notice of its intention to terminate pursuant to this provision; (g) BOKF if the board of directors of CNBT shall have resolved to accept a Superior Proposal; or (h) CNBT in the event the Closing has not occurred by January 30, 2001 , or such other date as the parties hereto agree in writing. Any party desiring to terminate this Agreement pursuant to any of the foregoing provisions shall give notice of such termination to the other party in accordance with Section 12.2 hereof. Section 10.2. Effect of Termination. Without limiting any other relief to which either party hereto may be entitled for breach of this Agreement, in the event of the termination and abandonment of this Agreement pursuant to the provisions of Section 10.1 hereof, no party to this Agreement shall have any further liability or obligation in respect of this Agreement; provided, however, that the confidentiality provisions of Section 5.1, above, shall survive termination. Any such termination that occurs as a result of a breach of a representation or warranty made in this Agreement that, at the time made, was not known to the party making such representation to be untrue, or any such termination that through no fault of any of the parties to this Agreement shall be without liability to any of the parties hereto, but if such termination results from the willful misrepresentation of a party or the wilful failure of a party to fulfill a condition to the performance of the obligation of the other party to this Agreement, such party shall be fully liable for any and all damages, costs and expenses (including reasonable attorney's fees) sustained or incurred by the other party or parties as a result of such failure or breach. Section 10.3. Waiver and Amendment. Any term or provision of this Agreement, except statutory requirements and requisite approvals of regulatory authorities, may be waived at any time by the party which is entitled to the benefits thereof and this Agreement may be amended or supplemented at any time by the mutual agreement of BOKF, BOKSub, and CNBT through action taken by their respective Boards of Directors. ARTICLE XI ADDITIONAL COVENANTS Section 11.1. No Survival. None of the representations, covenants, warranties, and agreements contained in this Agreement shall survive the Closing and the Effective Time except (i) in accordance with Section 11.2 and (ii) this Agreement shall continue and remain in full force and effect regarding the covenants of BOKF that by their terms are to be performed after the Effective Time (including without limitation the provisions in Section 1.5 concerning payment of the Merger Consideration and Sections 11.2, 11.3, 11.4, and 11.5) for the period of the applicable statute of limitations. Section 11.2 Escrow. At the Effective Time, BOKF shall establish an escrow account ( the "Representation Escrow") with the Escrow Agent. The Representation Escrow shall be governed by an escrow agreement, the form of which is attached hereto as "Exhibit B" (the 'Representation Escrow Agreement:), which shall provide as follows: (a) At the Effective Time, BOKF shall deposit the principal amount of $1,000,000 into the Representation Escrow, which, together with (i) all interest earned thereon, but reduced by (ii) any Representation Allowed Escrow Claim (as hereafter defined) is referred to herein as the Representation Escrow Funds". (b) The Representation Escrow Funds shall be invested in a certificate of deposit at the Bank maturing one year from date, at the rate and on the terms and conditions generally offered by Bank for certificates of deposit of comparable size and duration, and upon maturity as necessary, in three-month certificates of deposit at Bank at the rates and on terms and conditions generally offered by the Bank for certificates of comparable size and duration at each renewal date, provided that any penalty for early withdrawal of such funds will either be waived by Bank or borne by BOKF. (c) The representations, warranties, covenants and agreements of CNBT contained in this Agreement shall survive the Closing, and BOKF shall be indemnified and held harmless from any and all losses, arising from any breach by CNBT of any such representations, warranties, covenants, and agreements (collectively, "Losses"), provided that (i) written notice of such Losses must be given to CNBT on or before March 31, 2002, (ii) the sole remedy available to BOKF for Losses shall be limited solely to a claim against the Representation Escrow Funds, (iii) all payments, if any, to be made in respect of any Losses shall be made solely from the Representation Escrow Funds, (iv) the CNBT shareholders shall have no obligations or liability for any such losses except to the extent of the Representation Escrow Funds, and (v) no claim shall be made for any Losses unless and until the aggregate amount of all Losses shall exceed $25,000. (d) In the event BOKF makes no claim for any Losses on or before March 31, 2002, the Representation Escrow Agreement shall terminate and the Escrow Agent shall, on or before April 15, 2002, distribute the Representation Escrow Funds on a pro rata basis to the holders of the CNBT Common as of the Effective Time. (e) In the event BOKF makes a claim for Losses on or before March 31, 2002, the Escrow Agent shall (i) on or before April 15, 2002, distribute on a pro rata basis to the holders of the CNBT Common as of the Effective Time an amount equal to the Representation Escrow Funds less the amount of all Losses claimed by BOKF, and (ii) continue to hold and invest the remaining Representation Escrow Funds until such claim is resolved by (i) the mutual agreement of a majority of the Agents (as defined below) and BOKF, or (ii) a final adjudication determining the merits of the BOKF claim, at which time the Representation Escrow Agreement shall terminate, the Escrow Agent shall pay the claim of BOKF as mutually agreed or finally adjudicated (an "Representation Escrow Allowed Claim"), and the Escrow Agent shall distribute any remaining Escrow Funds on a pro rata basis to the holders of the CNBT Common as of the Effective Time. (f) The rights of the holders of the CNBT Common in the Representation Escrow and the Representation Escrow Funds shall not be assignable or transferable except by operation of law or by intestacy and will not be evidenced by any certificate or other interest. (g) The persons who are members of the Board of Directors of CNBT immediately prior to the Closing shall collectively serve as agents, acting by majority vote in the same manner as a board of directors acting under the TCBA, for the holders of the CNBT Common as of the Effective Time and shall have full authority to act for and on behalf thereof in the administration of the provisions of this Section (the "Agents"). The actions of the Agents shall be deemed actions taken by them as members of the Board of Directors of CNBT prior to the Closing. (h) BOKF shall pay the fees and costs of the Escrow Agent with respect to the Representation Escrow. Section 11.3. Indemnification; Insurance. (a) From and after the Effective Time, BOKF (the "Indemnifying Party") shall indemnify and hold harmless each present and former director, officer, and employee of CNBT and the Bank determined as of the Effective Time (the "Indemnified Parties") against any costs or expenses (including reasonably attorneys' fees), judgments, fines, losses, claims, damages, or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding, or investigation, whether civil or criminal, administrative, or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time to the fullest extent to which such Indemnified Parties were entitled under the Articles of Incorporation, Certificate of Incorporation, Articles of Association and Bylaws of CNBT, Delaware, and the Bank. (b) Any Indemnified Party wishing to claim indemnification under this section, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the indemnifying Party of any liability it may have to such Indemnified Party if such failure does not materially prejudice the Indemnifying Party. In the event of any such claim, action, suit, proceeding, or investigation (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense thereof and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Party and the Indemnified Parties, the Indemnified Parties may retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefor are received, the reasonable fees and expenses of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest), (ii) the Indemnified Parties will cooperate in the defense of any such matter, and (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent. (c) BOKF shall maintain its existing policy of directors and officers liability insurance (or comparable coverage) for a period of not less than three years after the Effective Time; which policy shall be amended, however, to include the directors and officers of CNBT, Delaware, and the Bank, and which shall be a "claims made" policy providing coverage for (among other things) acts or omissions occurring prior to the Effective Time. (d) In the event that BOKF or any of its respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, the successors and assigns of such entity shall assume the obligations set forth in this Agreement, which obligations are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each director and officer covered hereby. Section 11.4. BOT Director Position. As soon as practicable after the Effective Time, BOKF shall cause (pursuant to a voting agreement with its controlling shareholder or otherwise) the Chief Executive Officer of the Bank to be elected as a member of the Board of Directors of BOT. BOKF shall continue to cause such person to be nominated and elected as a director of BOT for a period of two years after the Effective Time. If for any reason such person cannot or will not serve as a director of BOKF, BOKF and the board of directors of CNBT shall mutually agree to designate another person who was on the Board of Directors of CNBT as of the Effective Time to fill such position for such period of time. Section 11.5. Severance Plan. Prior to the Closing Date, the Bank will enter into a severance policy providing for the payment to any employee who is involuntarily dismissed within the first 180 days after the Closing Date, an amount equal to the greater of (a) one week's pay for each year of service or portion thereof by such employee or (b) two weeks' pay, and BOKF will honor such policy after the Closing with respect to the employees of the Bank as of the Closing Date. Section 11.6. Employee Benefits. BOKF presently intends that, after the Merger, BOKF and CNBT will not make additional contributions to the employee benefit plans of CNBT. Each employee of CNBT or any direct or indirect subsidiary of CNBT who remains an employee of CNBT or BOKF or any direct or indirect subsidiary of CNBT or BOKF immediately after the Effective Time (the "Continuing Employees") will be entitled to participate in the employee benefit plans and programs maintained for employees of BOKF and its affiliates, in accordance with the respective terms of such plans and programs, and BOKF shall take all actions necessary or appropriate to facilitate coverage of the Continuing Employees in such plans and programs from and after the Closing Date, subject to the following: (a) Each Continuing Employee will be entitled to credit for prior service with CNBT for all purposes under the employee welfare benefit plans and other employee benefit plans and programs (other than those described in subsection(b) below and any stock option plans) sponsored by BOKF or its affiliates. Any preexisting condition exclusion applicable to such plans and programs shall be waived with respect to any Continuing Employee. For purposes of determining each Continuing Employee's benefit for the year in which the Merger occurs under the BOKF vacation program, any vacation taken by a Continuing Employee preceding the Closing Date for the year in which the Merger occurs will be deducted from the total BOKF vacation benefit available to such employee for such year. (b) Each Continuing Employee shall be entitled to credit for past service with CNBT or any of its direct or indirect subsidiaries for the purpose of satisfying any eligibility or vesting periods applicable to the BOKF employee pension benefit plans that are subject to Section 401(a) and 501(a) of the Code. Notwithstanding the foregoing, BOKF shall not grant any prior years of service credit to employees of CNBT, with respect to any defined benefit plans sponsored (or contributed to) by BOKF; instead, Continuing Employees shall be treated as newly hired employees of BOKF as of the date following the Closing Date for purposes of determining eligibility, vesting and benefit accruals thereunder. ARTICLE XII MISCELLANEOUS Section 12.1. Entire Agreement. This Agreement contains the entire agreement among BOKF, BOKSub, and CNBT with respect to the Merger, and supersedes all prior agreements and understandings relating to the subject matter of this Agreement. Section 12.2. Brokers. CNBT represents and warrants that except for Alex Shesunoff & Co. Investment Banking, no broker, finder, or investment banker is entitled to any brokerage, finder's, or other fee or commission in connection with the Merger or the transactions contemplated by this Agreement based upon arrangements made by or on behalf of CNBT and that the total of the compensation payable to Alex Shesunoff & Co. not reflected in the Financial Statements and to the entity providing the fairness opinion described in Section 7.5 shall not exceed $600,000. Section 12.3. Notices. All notices or other communications that are required or permitted hereunder shall be in writing and shall be deemed to have been given or made on the date of delivery, in the case of hand delivery, or three (3) business days after deposit in the United States Registered Mail, postage prepaid, or upon receipt if transmitted by facsimile telecopy or any other means, addressed (in any case) as follows: If to BOKF or BOKSub: BOK Financial Corporation P.O. Box 2300 Tulsa, OK 79192 Attention: Mr. James F. Ulrich Telecopy No.: (918) 588-6853 and Bank of Texas, N.A. 5956 Sherry Lane, Suite 1800 Dallas, Texas 75225 Attention: Mr. C. Fred Ball, Jr., President Telecopy No.: (214) 987-8891 With a Copy To: Frederic Dorwart, Lawyers Old City Hall 124 East Fourth Street Tulsa, OK 74103-5010 Attention: Frederic Dorwart, Esq. Telecopy No.: (918) 583-8251 If to CNBT: CNBT Bancshares, Inc. 5320 Bellaire Boulevard Bellaire, TX 77401 Attention B. Ralph Williams, President Telecopy No.: (713) 661-5539 With a Copy To: Thompson Knight Brown Parker & Leahy LLP 1200 Smith Street, Suite 3600 Houston, Texas 77002 Attention: John T. Unger Telecopy No.: 713-654-1871 Section 12.4. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof, including any facsimile copy thereof, shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 12.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. Section 12.6. Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS SHALL BE LITIGATED IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS, AND EACH PARTY HERETO HEREBY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT IN ACCORDANCE WITH THIS SECTION. Section 12.7. Additional Documentation. As soon as practicable after the Effective Time, the parties hereto shall execute and file such documents and take such other actions as may be necessary or appropriate to effect the transactions contemplated by this Agreement. Section 12.8. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, and the application of such provision to persons or circumstances other than those to which it is held invalid and unenforceable, shall not be affected thereby and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. Section 12.9. Expenses. (a) Each party shall bear and pay for all of its own costs and expenses incurred in connection with this Agreement or the Merger, including respective fees and expenses of financial consultants, accountants and counsel. (b) CNBT hereby agrees to , and shall, pay to BOKF $5,000,000 in funds immediately available in Dallas, Texas not later than the second Business Day following termination of this Agreement, (i) if CNBT terminates this Agreement pursuant to clause (f) of Section 10.1, (ii) if BOKF terminates this Agreement pursuant to clause (d) of Section 10.1 due to CNBT's breach of Section 6.2 , or (iii) BOKF terminates this Agreement pursuant to clause (g) of Section 10.1. (c) BOKF hereby agrees to, and shall, pay to CNBT $5,000,000 in funds immediately available in Houston, Texas not later than the second Business Day following termination of this Agreement if CNBT terminates this Agreement pursuant to clause (e) of Section 10.1 solely due to BOKF's breach of Section 7.2. Section 12.10. Exhibits. The exhibits and schedules attached to this agreement, together with all documents incorporated by reference therein, form an integral part of this Agreement and are hereby incorporated into this Agreement wherever reference is made to them to the same extent as if they were set out in full at the point in which the reference is made. Items disclosed on any Exhibit or Schedule to this Agreement shall be deemed to be disclosed on all Exhibits or Schedules hereto and the failure of CNBT to list any item on one or more Exhibits or Schedules shall not give rise to a claim by BOKF or BOKSub. Section 12.11. Costs of Litigation. In any action brought by a party hereto to enforce the obligations of any other party hereto, the prevailing party shall be entitled to collect from the opposing party to such action such party's reasonable litigation costs and attorneys fees and expenses (including court costs, reasonable fees of accountants and experts, and other expenses incidental to the litigation). IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first above written. BOK FINANCIAL CORPORATION By: /s/ James Ulrich ---------------------- James Ulrich, Senior Vice President BOKF MERGER CORPORATION NUMBER TEN By: /s/ James Ulrich ------------------------ James Ulrich, Senior Vice President CNBT BANCSHARES, INC. By: /s/ B. Ralph Williams -------------------------- B. Ralph Williams, President S:\FD Law Files\BOk - 0061\CNBT Bancshares\P&A Agmt Execution 8.18.00(pm).wpd Exhibit A to Agreement and Plan of Merger dated August ____, 2000 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made this ___ day of ______________, 2000 (the "Agreement Date") between the following parties ("Parties"): (a) Citizens National Bank of Texas (the "Bank"); (b) BOK Financial Corporation, an Oklahoma corporation ("BOKF"); and, (c) B. Ralph Williams, an individual residing in Sugar Land, Texas (the "Executive"). The Bank and Executive, in consideration of the promises and covenants set forth herein (the receipt and adequacy of which are hereby acknowledged) and intending to be legally bound hereby, agree as follows: (1) Purpose of This Agreement. The purpose of this agreement is as follows: a The Bank is a national association organized under the National Bank Act. The Bank is engaged in the banking business in Texas. b BOKF is a bank holding company and owns all of the capital stock of Bank of Texas, National Association ("BOT"). BOT is engaged in the banking business in Texas. c The Executive is currently serving as Chief Executive Officer of the Bank. Except for that certain Severance Agreement dated November 3, 1997 (the "Severance Agreement"), the Executive currently has no written agreement of employment with the Bank, but the Executive is currently receiving salary compensation and other benefits from the Bank (collectively, the "Current Benefits"). d Pursuant to an Agreement and Plan of Merger dated August _______, 2000 (the "BHC Merger Agreement") among BOK Financial Corporation ("BOKF"), CNBT Bancshares, Inc. ("CNBT"), and BOKF Merger Corporation Number Ten ("BOKSub"), BOKF is acquiring indirect ownership of the Bank and it is anticipated that at some date in the future the Bank will be merged into BOT (the "Bank Merger"). The Closing (as defined in the BHC Merger Agreement) is hereafter referred to as "the consummation of the Merger Agreement" or the "BHC Merger". Upon and subject to the BHC Merger, the Bank desires to retain the services of Executive and the Executive desires to continue to render services to the Bank. e The purpose of this Agreement is to set forth the terms and conditions (i) on which the Bank shall, subject to consummation of the Merger Agreement, employ the Executive from and after consummation of the BHC Merger Agreement and (ii) on which the Executive agrees not to compete with the Bank. As hereafter used, "Bank" shall mean Citizens National Bank of Texas preceding the Bank Merger and Bank of Texas, National Association following the Bank Merger 2 Employment. The Bank hereby employs the Executive, and the Executive hereby agrees to work for the Bank, on the following terms and conditions: a Executive shall serve as Chief Executive Officer of the Bank until such time as the Bank Merger is consummated and as President, Bank of Texas -- Houston (an unincorporated banking division of the Bank) following consummation of the Bank Merger, subject to the direction of the Chief Executive Officer of the Bank. b. Executive shall devote all time and attention reasonably necessary to the affairs of the Bank and shall serve the Bank diligently, loyally, and to the best of his ability. c. Executive shall serve in such other or additional positions as an officer and/or director of the Bank or any of its affiliates as the Chief Executive Officer of the Bank may request; provided, however, Executive's residence and place of work shall remain in the Houston area. d. Notwithstanding anything herein to the contrary, Executive shall not be precluded from engaging in any charitable, civic, political or community activity or membership in any professional organization. 3. Compensation. Except for any compensation which may become due Executive pursuant to Section 6(b) of that certain Severance Agreement between the Bank and Executive, as the sole, full and complete compensation to the Executive for the performance of all duties of Executive under this Agreement and for all services rendered by Executive to the Bank or to any affiliate of the Bank: a. The Bank shall pay to Executive the sum of $XXX,XXX per year during the first and second years of this Agreement and $XXX,XXX per year during the third year of this Agreement, payable in installments in arrears, less usual and customary payroll deductions for FICA, federal and state withholding, and the like, at the times and in the manner in effect in accordance with the usual and customary payroll policies generally in effect from time to time at the Bank ("Annual Salary"). The Annual Salary may be increased during the Term (as hereafter defined), but shall not be decreased. b. The Bank shall pay and provide to Executive pension, thrift, medical insurance, disability insurance plan benefits, and other fringe benefits, generally in effect for senior executive employees of the Bank and its affiliates (the "Additional Benefits"). Executive shall be credited with his prior service at the Bank in BOKF's 401k plan and in connection with the Additional Benefits (other than in connection with BOKF's pension plan). Executive shall not be credited with prior service in BOKF's pension plan, but shall (i) be able to participate in BOKF's pension plan immediately upon the Closing of the BHC Merger and (ii) in the event Executive is not vested at the time Executive's employment with the Bank is terminated (for whatever reason), the Bank shall pay Executive an amount equal to the pension plan contributions made by the Bank in respect of Executive plus any earnings thereon. c. The Bank may, from time to time in Bank's sole discretion consistent with the practices generally in effect for senior executive employees of BOKF and its affiliates, pay or provide, or agree to pay or provide, Executive a bonus, stock option, or other incentive or performance based compensation. All such bonus, stock option or other incentive or performance based compensation, regardless of its nature (hereinafter called "Performance Compensation") shall not constitute Annual Salary. d. The Bank shall reimburse Executive for reasonable and necessary entertainment, travel and other expenses in accordance with BOKF's standard policies in general effect for senior executive employees of the Bank (which includes dues for lunch clubs, but does not include reimbursement for country club memberships or dues). e. BOKF shall consider Executive for the award of options to acquire shares of BOKF Common Stock in respect of the BOKF stock option plan at the time and on the same terms and conditions as offered generally to the senior executive officers of the Bank. f. The Executive shall be allowed vacation, holidays, and other employee benefits not described above in accordance with the Bank's standard policy in general effect for Bank's senior executive employees. g. Executive hereby agrees to accept the foregoing compensation in lieu of all Current Benefits and as the sole, full and complete compensation to Executive for the performance of all duties of Executive under this Agreement and for all services rendered by Executive to the Bank or any affiliate of the Bank (except for any compensation which may become due Executive pursuant to Section 6(b) of that certain Severance Agreement between the Bank and Executive). 4. Term of this Agreement. The term of this Agreement (the "Term") shall commence (the "Commencement") as of the commencement of the first Bank pay-roll period immediately preceding the effective date of the Closing of the BHC Merger and shall terminate on the third anniversary date of the Commencement; provided, however, either the Bank or Executive may terminate this Agreement effective on the first anniversary date of this Agreement by giving written notice to the other of such termination not later than thirty (30) calendar days preceding such first anniversary date. 5. Termination of This Agreement. Notwithstanding the provisions of paragraph 4 of this Agreement, this Agreement may be terminated on the following terms and conditions: a. Termination by Bank Without Cause. In the event the Bank terminates Executive without cause, (A) the Bank shall forthwith upon such termination pay to Executive his then Annual Salary for the remaining portion of the Term whether or not Executive seeks or obtains other employment and (B) the Executive shall be entitled to receive any benefits, insured or otherwise, that Executive would otherwise be able to receive under any benefit plan of the Bank of which Executive is a beneficiary in accordance with paragraph 3(b). b. Termination by Bank for Cause. The Bank may terminate this Agreement for cause on the following terms and conditions: (i) The Bank shall be deemed to have cause to terminate Executive's employment only in one of the following events: (A) The Executive shall willfully fail to substantially perform his obligations under this Agreement (it being understood that any such failure resulting from Executive's incapacity due to physical or mental illness shall not be deemed willful); (B) The Executive commits any act which is intended by Executive to materially injure the Bank; (C) The Executive commits any criminal act or act involving moral turpitude; (D) The Executive commits any dishonest or fraudulent act; or, (E) Any refusal by Executive to obey written orders or instructions of the Chief Executive Officer of the Bank unless such instructions would require Executive to commit an illegal act, could subject Executive to personal liability, would require Executive to violate the terms of this Agreement, or would otherwise be inconsistent with the duties of an officer of a national banking association. (ii) The Bank shall be deemed to have cause to terminate Executive's employment only when a majority of the members of the Board of Directors of the Bank finds that, in the good faith opinion of such majority, the Executive committed one or more of the acts set forth in clauses (A) through (E) of the preceding subparagraph, such finding to have been made after at least twenty (20) business days' notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before such majority. The determination of such majority, made as set forth above, shall be binding upon the Bank and the Executive. (iii)The effective date of a termination for cause shall be the date of the action of such majority finding the termination was with cause. In the event the Bank terminates this Agreement for cause, (A) the Bank shall pay Executive the Executive's then Annual Salary through, but not beyond, the effective date of the termination and (B) the Executive shall receive those Additional Benefits accrued through but not beyond the effective date of such termination which are thereafter payable under the terms and provisions of benefit plans then in effect in accordance with paragraph 3(b) above. c. Termination By the Executive. The Executive may, at anytime after the first anniversary date of the consummation of the Merger, terminate this Agreement on the following terms and conditions: i. The Executive may give written notice of termination to the Bank. The termination shall be effective on the fifteenth (15th) business day following the notice of termination. ii. Upon termination by the Executive, the Bank shall have no obligation to Executive under this Agreement beyond the effective date of the termination; provided, however, that the Executive shall be entitled to receive any benefits, insured or otherwise, that Executive would otherwise be able to receive under any benefit plan of the Bank of which Executive is a beneficiary in accordance with paragraph 3(b). 6. Provisions Respecting Illness. In the event Executive is unable to perform his duties under this Agreement on a full-time basis for a period of six (6) consecutive months by reason of illness or other physical or mental disability, and at or before the end of such period, Executive does not return to work on a full-time basis, the Bank may terminate this Agreement without further or additional compensation being due the Executive from the Bank except annual salary and benefits accrued through the date of such termination under benefit plans then in effect in accordance with paragraph 3(b) above. 7. Agreement Not to Compete. The provisions of this paragraph are hereafter called the "Non-Competition Agreement. a. Executive agrees that, following any termination of this Agreement, for a period of twenty-four months after the termination of Executive's employment by Bank, Executive shall not directly or indirectly (whether as an officer, director, employee, partner, stockholder, creditor or agent, or representative of other persons or entities) except as a shareholder of less than ten percent (10%) of the common stock of a corporation traded on the facilities of a national securities exchange (i) engage in the banking business generally or in any business in which the Bank or any affiliate of the Bank has, as of the date of such termination engaged, in Harris County, Ft. Bend County, any Texas county in which BOT maintains a banking office for which Executive is assigned supervisory authority, or any counties contiguous thereto (the "Trade Area") or (ii) contact or solicit individuals or entities who were at anytime during the Term clients of Bank or Bank's affiliates in the Trade Area for the purpose of providing banking services or contact or solicit employees of Bank or Bank's affiliates to seek employment with any person or entity except the Bank and its affiliates, whether, in either case, such contact or solicitation is made within or without the Trade Area. b. The Bank shall, except in the case of a termination of this Agreement prior to the expiration of the Term pursuant to Paragraph 5(b) or 5(c), pay Executive monthly during such period of non-competition, as follows: i. In the event the Agreement is terminated on the first anniversary date by the Bank or by the Executive pursuant to the proviso to Paragraph 3 of this Agreement, at the rate of _____ Dollars during the first twelve months of such period of non-competition and ____ Dollars per calendar month during the second twelve months of such period of non-competition, commencing with the first calendar month of the period of non-competition: and, ii. In the event this Agreement is terminated pursuant Paragraph 5(a), at the rate of ____ Dollars per calendar month during the twenty-four month period of non-competition, commencing with the first calendar month of the period of non-competition. c. Executive agrees that (i) this Non-Competition Agreement is entered into in connection with the sale to BOKF of the goodwill of the business of the Bank, (ii) Executive is receiving contemporaneously herewith the sum of $1,000 as separate additional consideration for this Non-Competition Agreement which consideration Executive agrees is full and fair consideration for the provisions set forth in this Non-Competition Agreement, (iii) the restrictions imposed upon Executive by this Non-Competition Agreement are essential and necessary to ensure BOKF acquires the goodwill of the Bank, and (iv) all the restrictions (including particularly the time and geographical limitations) set forth in this Non-Competition Agreement are fair and reasonable. d. Executive agrees that (i) any remedy at law for any breach of this Non-Competition Agreement would be inadequate, (ii) in the event of any breach of this Non-Competition Agreement, this Non-Competition Agreement shall constitute uncontrovertible evidence of irreparable injury to the Bank, and (iii) the Bank shall be entitled to both immediate and permanent injunctive relief without the necessity of establishing posting any bond therefor to preclude any such breach (in addition to any remedies of law which the Bank may be entitled). 8. Condition Precedent. The obligations of the Parties under this Agreement shall be subject to the condition precedent that the Closing of the BHC Merger shall have occurred. 9. Obligations of BOKF. BOKF shall be jointly and severally liable for the obligations of the Bank arising under this Agreement. 10. Miscellaneous Provisions. The following miscellaneous provisions shall apply to this Agreement: (a) All notices or advices required or permitted to be given by or pursuant to this Agreement, shall be given in writing. All such notices and advices shall be (i) delivered personally, (ii) delivered by facsimile or delivered by U.S. Registered or Certified Mail, Return Receipt Requested mail, or (iii) delivered for overnight delivery by a nationally recognized overnight courier service. Such notices and advices shall be deemed to have been given (i) the first business day following the date of delivery if delivered personally or by facsimile, (ii) on the third business day following the date of mailing if mailed by U.S. Registered or Certified Mail, Return Receipt Requested, or (iii) on the date of receipt if delivered for overnight delivery by a nationally recognized overnight courier service. All such notices and advices and all other communications related to this Agreement shall be given as follows: If to the Bank or BOKF: BOKF Financial Corporation 7600 West Northwest Highway Dallas, Texas 75225 Attention: C. Fred Ball, Jr. Telephone No: (214) 706-0336 Telecopy No.: (214) 706-0350 With a Copy to: Frederic Dorwart Old City Hall 124 East Fourth Street Tulsa, OK 74103-5010 Telephone No.: (918) 583-9945 Telecopy No.: (918) 583-8251 If to Executive: _____________________________ _____________________________ _____________________________ _____________________________ Telecopy No: _________________ With Copy To: Thompson Knight Brown Parker & Leahy LLP 1200 Smith Street, Suite 3600 Houston, Texas 77002 Attention: John T. Unger Telecopy No.: 713-654-1871 Seyfarth Shaw 700 Louisiana, Suite 3850 Houston, Texas 77002 Linda C. Schoonmaker Telecopy No. 713-225-2340 or to such other address as the party may have furnished to the other parties in accordance herewith, except that notice of change of addresses shall be effective only upon receipt. (b) This Agreement is made and executed in Houston Texas and all actions or proceedings with respect to, arising directly or indirectly in connection with, out of, related to or from this Agreement, shall be litigated in courts having situs in Harris County, Texas.. (c) This Agreement shall be subject to, and interpreted by and in accordance with, the laws of the State of Texas. (d) This Agreement is the entire Agreement of the parties respecting the subject matter hereof. There are no other agreements, representations or warranties, whether oral or written, respecting the subject matter hereof, except as stated in this Agreement. (e) This Agreement, and all the provisions of this Agreement, shall be deemed drafted by all of the parties hereto. (f) This Agreement shall not be interpreted strictly for or against any party, but solely in accordance with the fair meaning of the provisions hereof to effectuate the purposes and interest of this Agreement. (g) Each party hereto has entered into this Agreement based solely upon the agreements, representations and warranties expressly set forth herein and upon his own knowledge and investigation. Neither party has relied upon any representation or warranty of any other party hereto except any such representations or warranties as are expressly set forth herein. (h) Each of the persons signing below on behalf of a party hereto represents and warrants that he or she has full requisite power and authority to execute and deliver this Agreement on behalf of the parties for whom he or she is signing and to bind such party to the terms and conditions of this Agreement. (i) This Agreement may be executed in counterparts, each of which shall be deemed an original. This Agreement shall become effective only when all of the parties hereto shall have executed the original or counterpart hereof. This Agreement may be executed and delivered by a facsimile transmission of a counterpart signature page hereof. (j) In any action brought by a party hereto to enforce the obligations of any other party hereto, the prevailing party shall be entitled to collect from the opposing party to such action such party's reasonable litigation costs and attorneys fees and expenses (including court costs, reasonable fees of accountants and experts, and other expenses incidental to the litigation). (k) This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. (l) This is not a third party beneficiary contract, except BOKF (including each affiliate thereof) shall be a third party beneficiary of this Agreement. No person or entity other than a party signing this Agreement and those designated as a third party beneficiary herein shall have any rights under this Agreement. (m) This Agreement may be amended or modified only in a writing which specifically references this Agreement. (n) A party to this Agreement may decide or fail to require full or timely performance of any obligation arising under this Agreement. The decision or failure of a party hereto to require full or timely performance of any obligation arising under this Agreement (whether on a single occasion or on multiple occasions) shall not be deemed a waiver of any such obligation. No such decisions or failures shall give rise to any claim of estoppel, laches, course of dealing, amendment of this Agreement by course of dealing, or other defense of any nature to any obligation arising hereunder. (o) In the event any provision of this Agreement, or the application of such provision to any person or set of circumstances, shall be determined to be invalid, unlawful, or unenforceable to any extent for any reason, the remainder of this Agreement, and the application of such provision to persons or circumstances other than those as to which it is determined to be invalid, unlawful, or unenforceable, shall not be affected and shall continue to be enforceable to the fullest extent permitted by law. Dated and effective the date first set forth above. CITIZENS NATIONAL BANK OF TEXAS By ____________________________________ BOK FINANCIAL CORPORATION By ____________________________________ ____________________________________ B. Ralph Williams Exhibit B to Agreement and Plan of Merger Dated August ___, 2000 ESCROW AGREEMENT This ESCROW AGREEMENT has been executed as of the ___day of__ _______, 2000, by and between BOK Financial Corporation ("BOKF"), the shareholders of CNBT Bancshares, Inc. (the "Shareholders"), and Bank of Texas Trust Company, National Association (the "Escrow Agent"). BOKF has deposited in escrow with the Escrow Agent $1,000,000 pursuant to that certain Agreement and Plan of Merger dated as of August ____, 2000, among BOKF, BOKF Merger Corporation Number Ten, and CNBT Bancshares, Inc. (the "Merger Agreement"). The parties agree that this escrow shall be administered in accordance with Section 11.2 of the Merger Agreement, a true and correct copy of which is attached hereto and incorporated herein by this reference. BOKF and the Agents (as defined in Section 11.2 of the Merger Agreement) shall jointly provide all notices to the Escrow Agent required by Section 11.2 of the Merger Agreement to fulfil the terms and conditions of the Escrow Account, and the Escrow Agent shall act only pursuant to the joint written instructions of BOKF and the Agents. The parties to this Escrow Agreement agree that the following provisions shall control with respect to the rights duties, liabilities, privileges and immunities of the Escrow Agent. (a) The Escrow Agent is not a party to, and is not bound by, or charged with notice of, any agreement out of which this escrow may arise. (b) The Escrow Agent acts hereunder as a depository only, and is not responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of the subject matter of the escrow, or any part thereof, or for the form or execution thereof, or for the identity or authority of any person executing or depositing it. The Escrow Agent will not render investment advice with respect to the subject matter of this escrow. (c) In the event the Escrow Agent becomes involved in litigation in connection with this escrow, the undersigned jointly and severally agree to indemnify and save the Escrow Agent harmless from all loss, cost, damages, expenses and attorney's fees suffered or incurred by the Escrow Agent as a result thereof. (d) The Escrow Agent shall be protected in acting upon any written notice, request, waiver, consent, certificate, receipt, authorization, power of attorney or other paper or document which the Escrow Agent in good faith believes to be genuine and what it purports to be. (e) The Escrow Agent shall not be liable for anything that it may do or refrain from doing in connection herewith, except its own gross negligence or willful misconduct. (f) The Escrow Agent may consult with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel. (g) In the event of any disagreement between any of the parties to this agreement, or between them or either of any of them and any other person, resulting in adverse claims or demands being made in connection with the subject matter of the escrow, or in the event that the Escrow Agent, in good faith, be in doubt as to what action it should take hereunder, the Escrow Agent may, at its option, refuse to comply with any claims or demands on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists, and in any such event, the Escrow Agent shall not be or become liable in any way or to any person for its failure or refusal to act, and the Escrow Agent shall be entitled to continue so to refrain from acting until (i) the rights of all parties shall have been fully and finally adjudicated by a court of competent jurisdiction, or (ii) all differences shall have been adjusted and all doubt resolved by agreement among all of the interested persons, and the Escrow Agent shall have been notified thereof in writing signed by all such persons. The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise. Executed in Houston, Texas this ___th day of _________, 2001. BOK FINANCIAL CORPORATION By: James Ulrich, Senior Vice President SHAREHOLDERS By: B. Ralph Williams, as President and Director of CNBT Bancshares, Inc. BANK OF TEXAS TRUST COMPANY, NATIONAL ASSOCIATION By: Steve Poole, President Schedule 2.2(a) Outstanding Options Number of Exercise Name of Holder Shares Price B. Ralph Williams 10,000 $ 9.00 Sheila Duffy 12,100 6.20 10,000 9.00 Joseph E. Ives 10,000 9.00 Randall W. Dobbs 10,000 9.00 Mary A. Walker 10,890 2.75 10,000 9.00 John M. James 9,680 5.79 10,000 9.00 Frank G. Cook 10,000 9.00 Robert Kramer 10,000 10.50 Charles Arnold 10,000 12.37 Tammy Scott 2,500 9.00 Jean Fedigan 2,500 9.00 Barbara Guillory 2,500 9.00 Kay Cronover 2,500 9.00 Peggy Cook 2,500 9.00 Clarice Ratliff 2,000 9.00 Judy Williams 2,500 9.00 Total 139,670 Schedule 2.15 Employees The following employees are parties to Executive Severance Agreements: B. Ralph Williams Randall W. Dobbs Joseph E. Ives Mary A. Walker John M. James Sheila J. Scantlin Robert J. Kramer Charles H. Arnold Schedule 2.16 Material Contracts and Commitments 1. Service Agreement between Anytime Access, Inc. and the Bank. 2. Alltel Sugar Land Telephone - telephone service for Sugar Land office's. 3. (a) Deposit System Software License & Updated Agreement dated January 19, 1998, between Bankers Systems, Inc. and the Bank. (b) Lending System Software License & Update Agreement dated May 1, 1998, between Bankers Systems, Inc. and the Bank. (c) Rembrandt Lending System - Invoice dated March 29, 1999. 4. (a) Agreement for Information Technology Services dated October 1, 1999, between Electronic Data Services Corporation ("EDS") and the Bank. (b) EFT Services Agreement dated December 16, 1998, between EDS and the Bank. (c) Visa and MasterCard Participation Agreement dated January 1, 1999, between EDS Employees Federal Credit Union and the Bank. (d) Interactive Transaction Processing Services Addendum dated October 10, 1995, between EDS and the Bank. 5. Memorandum of Agreement dated December 1, 1998, between Brink's Incorporated and the Bank. 6. Chex Systems, Inc. - account verification services. 7. Ground Lease Agreement dated February 25, 1991, between Barbara Roosth and E. Milton Horten and the Bank - main office. 8. Agreement for Purchase of Checks and Related Products dated July 11, 1996, as amended December 4, 1997, between Deluxe Financial Services Texas, L.P. and the Bank. 9. Maintenance Agreements with Diebold, Inc. for automated teller machines. 10. Agreement dated May 2, 2000, between Gulf Coast Presort, Inc. and the Bank. 11. (a) License Agreement dated October 22, 1996, between Kroger Co. and the Bank for Sweetwater & Lexington store location. (b) License Agreement dated July 7, 1992, between Kroger Co. and the Bank for the Highway 6 store location. (c) License Agreement dated July 7, 1992, between Kroger Co. and the Bank for the FM 1092 store location. 12. Purchase Order for equipment dated January 26, 2000, with Lane Bank Equipment Co. - Westheimer branch. [PG NUMBER] 13. Mann Frankfort Stein & Lipp, P.C., certified public accountants - quarterly review for September 30, 2000, and annual audit for year ended December 31, 2000. 14. Addendum to Proposed Agreement dated July 28, 2000, between Marnoble Computer Sales & Service, Inc. and the Bank. 15. Agreement to Provide Architectural and Engineering Services dated July 20, 1999, between McCleary/German Associates, Inc. and the Bank - Westheimer branch. 16. Letter Agreement dated December 16, 1998, between Paul's Delivery Service and the Bank. 17. Cleaning Agreements dated April 14, 1995 (Main office) and November 20, 1995 (Sugar Land office) between Reliant Building Services and the Bank. 18. (a) Bellaire Shopping Center Lease dated December 1, 1999, between Ron Mafridge, Trustee and the Bank. (b) Lease dated March 12, 1999, between Ron Mafridge, Trustee and the Bank. (c) Letter Agreement dated March 31, 1992, as amended March 8, 1999, Between Ron Mafridge, Trustee, and the Bank for use of parking spaces. 19. Com-Tec Equipment Coverage Policy dated January 1, 2000, through Specialty Underwriters. 20. AIA General Conditions of the Construction Contract and Standard Form of Agreement between Owner and Contractor each dated February 21, 2000, between Spectrum Construction Services, Inc. and the Bank - Westheimer branch. 21. Southwestern Bell Telephone Company - telephone services. 22. Driving Advantage Services Agreement dated November 24, 1999, between the Bank and Southwest Business Corporation and Lender Guarded Asset Plan Agreement dated November 25, 1998, between J. Yanan& Associates, Inc. and the Bank. 23. Agreement for Collection of Unpaid Accounts between TRS Financial Corp. and the Bank. 24. Thomas Consulting - compliance audits and monthly accounting services. 25. Executive Severance Agreements identified on Schedule 12.15. EX-13 3 0003.txt 2000 ANNUAL REPORT TO SHAREHOLDER'S BOK FINANCIAL CORPORATION EXHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS Table of Contents Consolidated Selected Financial Data 9 Management's Assessment of Operations and Financial Condition 10 Selected Quarterly Financial Data 16 Report of Management on Financial Statements 25 Report of Independent Auditors 25 Consolidated Financial Statements 26 Notes to Consolidated Financial Statements 31 Annual Financial Summary - Unaudited 56 Quarterly Financial Summary - Unaudited 58 Appendix A 65 Financial Highlights (Dollars In Thousands Except Share Data) 2000 1999 1998(2) ------------------------------------------- For the Years Ended December 31 Net income $ 100,140 $ 89,226 $ 79,611 Earnings per share: Basic 2.01 1.79 1.59 Diluted 1.80 1.60 1.42 Book value per share $ 14.29 $ 11.36 $ 10.76 Return on average assets 1.15% 1.17% 1.34% Return on average shareholders' equity 16.46 16.45 16.38 - ------------------------------------------------------------------------------------------- Tangible operating results4: Tangible net income $ 105,632 $ 94,849 $ 84,942 Tangible net income per diluted share 1.90 1.70 1.52 Tangible return on average assets 1.22% 1.25% 1.43% Tangible return on average shareholders' equity 17.37 17.49 17.48 - ------------------------------------------------------------------------------------------- As of December 31 Loans, net of reserves $5,435,207 $4,567,255 $3,581,177 Assets 9,748,334 8,373,997 7,059,507 Deposits 6,046,005 5,263,184 4,607,727 Shareholders' equity 703,576 557,164 524,793 Nonperforming assets3 43,599 22,943 18,762 - ------------------------------------------------------------------------------------------- Tier 1 capital ratio 8.06% 7.27% 7.93% Total capital ratio 11.23 10.72 12.02 Leverage ratio 6.51 5.92 6.60 Average shareholders' equity to average assets 7.00 7.12 8.17 Reserve for loan losses to nonperforming loans 207.95 391.65 467.70 Reserve for loan losses to loans(1) 1.51 1.66 1.86 Net charge offs to average loans .22 .04 .09 - ------------------------------------------------------------------------------------------- 1 Excludes residential mortgage loans held for sale, which are carried at the lower of aggregate cost or market value. 2 Restated for pooling of interest in 1999. 3 Includes nonaccrual loans, renegotiated loans and assets acquired in satisfaction of loans. Excludes loans past due 90 days or more and still accruing. 4 Operating results excluding the after-tax effect of goodwill amortization.
To Our Shareholders, Customers, Employees and Friends: From start to finish, 2000 was another record setting year. We are proud to report that BOK Financial Corporation reached a notable milestone in 2000. We set a record for our company by surpassing $100 million in earnings. This was a 12 percent increase over 1999, with diluted earnings per share up 13 percent to $1.80. Thanks to the efforts of our experienced bankers and a healthy economy, this marks our seventh consecutive year of record earnings. During that period, our earnings per share have jumped at a compounded annual growth rate of 13 percent. Our expansion is the result of strong internal growth, as well as a strategic acquisition effort. As of December 31, our assets stood at $9.7 billion - more than double what they were in 1996. Our net interest revenue last year grew by 14 percent. Fueled by a 22 percent gain in commercial lending, at year-end the loan portfolio stood at $5.5 billion. Our loan portfolio outside of Oklahoma grew by $419 million to $1.6 billion. Deposits grew as well - by 15 percent - and we will continue emphasizing deposit growth to bring it more in balance with loan growth. Fee-income lines comprised 42 percent of the total revenue for 2000 and included gains of 19 percent in transaction card revenue, and 12 percent in trust fees. Our growth strategy outside of Oklahoma continues to be successful. In August we announced our intent to acquire CNBT Bancshares Inc., providing us an entry into the Houston market with seven attractive locations. While these are our first physical branches in Houston, neither the territory nor the approach is new. Because of ties in the energy industry, we have served Houston customers for some time. The move into Houston closely resembles our entry into Dallas in 1997, when we started acquiring small, well-managed banks, then added the strength of our larger lending capabilities, a broader array of products and highly experienced local talent. The strategy has proven highly successful, and we look forward to implementing the same business plan in Houston. Our strategy is working in other markets as well. New Mexico, home to our 2-year-old Bank of Albuquerque, grew loans by 55 percent in 2000 and now makes up 11 percent of our total assets. Loans at Bank of Arkansas, based in Fayetteville, grew by 12 percent, and in Oklahoma, where we spent most of the '90s solidifying our position of market leadership, loans were up 13 percent. We continue making great strides in improving processes and controlling expenses, while also improving our service quality. The most visible step toward this goal is our recent move in Tulsa to the new BOK Technology Center, which allows us to quicken the pace of workflow, improve communications, and provide a more cost effective production environment. We also have a team dedicated to process improvement, looking for more effective and cost-efficient ways to serve our customers, while also increasing profitability. As we enter 2001 amidst forecasts of a softening economy, we believe our loss ratios will remain within acceptable levels. Our credit team is led by experienced professionals who worked through the last economic downturn. And, while our regional economy has diversified considerably over the last 20 years, we still have strong ties and experience in the counter-cyclical energy industry. We look forward to continued success in every line of business, and in every market we serve. As always, we appreciate your business and your interest in our company. George B. Kaiser Stanley A. Lybarger Chairman President and Chief Executive Officer Going the Distance TAKING THE LEAD One of our key objectives for the last several years has been to concentrate on expanding our business in high-growth markets in the states surrounding Oklahoma. As is evident in the results, our game plan is working. Loans saw double-digit increases in all the states where we have banking operations - Arkansas, New Mexico, Oklahoma and Texas - while a substantial portion of our growth continues to come from new markets. Our newest growth market is the Houston metropolitan area. In August we announced plans to acquire CNBT Bancshares Inc. The acquisition was completed in January 2001. Our strategic plan is to build the Houston franchise in a manner similar to our other Texas operations - by maintaining the bank's strong service culture and local management, and over time adding our larger lending capabilities and a broader array of products. Our other Texas operations continue their strong internal growth as well. Loans grew by 34 percent during 2000, led by a 91 percent gain in the energy portfolio. Bank of Texas also increased deposits by 44 percent, to $901 million. During the period, income from all non-interest sources grew from $4.9 million to $12.1 million. With the Houston addition, our assets in Texas now top $1.8 billion. RAISING THE BAR Our Bank of Albuquerque franchise, which we acquired in December 1998, continues to thrive. Business is growing, our product line-up is expanding and our position in local leadership is gaining. New Mexico is setting the pace in lending, having grown by 55 percent in 2000. At year-end our loan portfolio stood at $395 million - nearly triple the size of the original portfolio we purchased in 1998. At least partial credit goes to the addition of several new officers in trust, mortgage, brokerage and lending. The results in commercial lending, in particular, have been extraordinary as we have successfully moved market share to Bank of Albuquerque from other local banks. New Mexico now accounts for 11 percent of our total assets, at $1.1 billion. STRETCHING OUT Pushed by continued success in commercial lending, loans in Arkansas grew by 12 percent. Net interest revenue grew by 12 percent, while non-interest revenue grew by 22 percent. Bank of Arkansas also developed several sizable commercial relationships in Fort Smith and northwest Arkansas, primarily as a result of the bank's superior capabilities in 401(k) plans, treasury services and international services, all of which give Bank of Arkansas a competitive advantage. Our market leadership continues in our home state as well. Loans grew by 13 percent in Oklahoma, and we have Oklahoma's largest mortgage operation, trust company and securities firm. Passing the Test of Endurance ON YOUR MARK BOK Financial's 105-branch network continued broadening its products, services and delivery methods during 2000. For the last several years, BOK Financial has differentiated itself by offering a product and services line-up to rival our big-bank competitors, but delivered with the personalized service and responsiveness of a community bank. Last year was no exception as we continued emphasizing convenience and accessibility, giving our customers numerous choices for when, where and how they wish to do their banking. ExpressBank, our 24-hour live call center, had a landmark year, exceeding more than 1million incoming calls in 2000. Our in-store branches continue growing in popularity as well. Loans and deposits in our in-store branches grew by 20 percent and 14 percent, respectively, and Bank of Oklahoma opened its 28th in-store location. Our network of traditional branches also continues growing. We acquired land to build a new branch in the fast-growing Oklahoma City suburb of Edmond, added a branch in east Richardson, Texas, on the north side of Dallas, and in January 2001 opened a branch north of the Dallas-Fort Worth Airport in Grapevine. GAINING SPEED Internet banking is still our fastest-growing delivery method. Our four interactive banking web sites - www.bankofalbuquerque.com, www.bankofarkansas.com, www.bankofoklahoma.com and www.bankoftexas.com - collectively grew their number of registered users by 57 percent last year. More than 16 percent of our consumer banking customers are now signed up for Internet banking. We continued adding and redesigning Internet-based services, allowing us more flexibility in promoting our own products. Microbanker, a banking technology information portal, took notice and named our family of web sites one of the top six bank Internet sites in the country. At the end of 2000, our trust division's self-directed 401(k) went online, allowing participants to trade at rates competitive with retail online brokers. Many loan payments and other transactions are now handled online, and our online offerings to large and small businesses continue to grow. CONSISTENT PERFORMANCE BOK Financial also continued its track record as a leading commercial lender. Overall in 2000, commercial loans grew by 22 percent, and revenue from international trade set a new record, growing by 20 percent. Cash management revenues grew by 13 percent during the year, and in 2001 we will be actively expanding service delivery to customers in Texas, New Mexico and Arkansas. Our company remains the largest provider of retail remittance services in Oklahoma. We processed more than 4 million automated items per month, and installed a new imaging system as a way of enhancing customers' ability to store and retrieve transactions and documents. MARK OF A CHAMPION One of the hallmarks of BOK Financial is the high level of income that is generated from non-interest products and services. In 2000, despite market conditions that essentially kept brokerage and mortgage services flat, fee-income lines accounted for 42 percent of our total revenue. This far outpaces our peer banks, which average about 28 percent of income from non-credit sources. Included is TransFund, our fast-growing electronic funds transfer network, the 17th largest in the country. With more than 1,100 ATMs in an eight-state area, TransFund provides services for more than 280 financial institutions and 1.2 million cardholders. Revenues increased by 19 percent in 2000, while the TransFund Check Card was used to make 38 million purchases - an increase of 23 percent over 1999. The number of ATM and purchase transactions processed by TransFund has more than doubled since 1996, reaching 78.3 million transactions in 2000. VAULTING OVER THE COMPETITION Our trust division manages $18 billion in assets. Related fee income grew by 12 percent last year. More significantly, however, our trust services continue expanding into new fields. We introduced our successful Private Financial Services concept in Texas, in which teams of financial consultants, led by a relationship manager, coordinate financial services for high net-worth individuals. We also gained new fee income in Arkansas and Albuquerque after adding institutional and employee benefits trust professionals in those offices. Our self-directed 401(k) product continued prospering as well, adding another national law firm to a client list that includes major firms in Chicago, Los Angeles, Baltimore and Dallas. As one of the top five mineral management firms in the country, our trust group developed a unique oil and gas web site - www.bokproperties.com - to act as a nationwide clearinghouse for unleased mineral interests. The site links universities and other organizations that have been granted property or mineral rights with oil and gas producers, to provide a common vehicle for buying and selling the properties. BOK Financial then helps facilitate transactions by gathering title information, obtaining property insurance, inspecting the property and maintaining taxes. Our family of mutual funds, the American Performance Funds, continued its string of success. The funds reached $2 billion in assets for the first time in their 10-year history, and generated $8.9 million in fee-based revenue. Even more impressively, every one of our nine American Performance Funds ranked by Lipper outperformed the average of its peer group for the five-year period ending December 31, 2000. Oppenheim, the public finance arm of our securities division, BOSC Inc., continued as Oklahoma's dominant underwriter and financial advisor. Oppenheim was the lead banker for the $100 million expansion of the Oklahoma City airport, and was the investment banker for the new $15 million research facility of the Oklahoma Medical Research Foundation. Our mortgage division is one of the largest in the region, with a $6.9 billion servicing portfolio of 93,000 loans. Our Oklahoma City and Tulsa production offices have been the No. 1 originator of mortgage loans in their respective counties each month since May 1991 - more than 115 consecutive months, a marathon achievement. Clearing Hurdles POWER AND SPEED We continue making progress in technology and efficiency. In fact, after several years of concentrated effort, we have now reached the point where technology has become a key enabler for customer service, revenue generation and cost control. The investments we have made in the past three years are reflected in our improved efficiency and customer satisfaction. Internally, our intranet has become the way we do business. Annual benefits enrollment, customer-service monitoring, some training and database management, policy manuals and employee news are handled online - all with much more speed and ease than in previous years. And finally, a major service and technology project that has been in the works since the summer of 1999 came to fruition last year when we began moving our operations group in Tulsa to a new state-of-the-art technology center. The move was completed in February 2001. In reconfiguring the floor plan to optimize workflow and efficiency, we have seen the turnaround time of some of our work processes cut in half. The 184,000 square-foot center is now occupied by some 800 employees and is designed to accommodate future growth. THE FINISH LINE At BOK Financial Corporation, we're proud of our track record. At the same time, we know it's a race that has no finish line. Our ongoing goal is to be the premier financial services provider in every line of business, in every market we serve. We provide nationally competitive products with world-class service. Although we face able competitors, we have a team of talented bankers who relish the race and are proven winners. Table 1 Consolidated Selected Financial Data (Dollars In Thousands Except Share Data) December 31, ------------------------------------------------------------------- 2000 1999 19982 19972 19962 ------------------------------------------------------------------- Selected Financial Data For the year: Interest revenue $ 638,730 $ 500,274 $ 402,832 $ 357,074 $ 300,930 Interest expense 369,843 264,150 212,406 194,842 167,610 Net interest revenue 268,887 236,124 190,426 162,232 133,320 Provision for loan losses 17,204 10,365 14,591 9,256 4,419 Net income 100,140 89,226 79,611 68,155 56,263 Period-end: Loans, net of reserve 5,435,207 4,567,255 3,581,177 2,801,977 2,424,337 Assets 9,748,334 8,373,997 7,059,507 5,613,233 4,764,191 Deposits 6,046,005 5,263,184 4,607,727 3,924,405 3,384,874 Subordinated debenture 148,816 148,642 146,921 148,356 - Shareholders' equity 703,576 557,164 524,793 451,880 373,272 Nonperforming assets3 43,599 22,943 18,762 25,249 24,584 Profitability Statistics Earnings per share (based on average equivalent shares): Basic $ 2.01 $ 1.79 $ 1.59 $ 1.36 $ 1.12 Diluted 1.80 1.60 1.42 1.22 1.02 Percentages (based on daily averages): Return on average assets 1.15% 1.17% 1.34% 1.29% 1.27% Return on average shareholders' equity 16.46 16.45 16.38 16.78 16.89 Average shareholders' equity to average assets 7.00 7.12 8.17 7.71 7.49 Common Stock Performance Per Share: Book Value $ 14.29 $ 11.36 $ 10.76 $ 9.80 $ 8.38 Market price: December 31 close 21.25 20.19 23.38 19.40 13.50 Market range - High trade 21.25 25.94 25.63 22.00 14.00 - Low trade 15.31 18.94 19.50 13.88 9.62 Selected Balance Sheet Statistics Period-end: Tier 1 capital ratio (see Note 14) 8.06% 7.27% 7.93% 9.87% 10.57% Total capital ratio (see Note 14) 11.23 10.72 12.02 14.95 11.82 Leverage ratio (see Note 14) 6.51 5.92 6.60 7.06 7.48 Reserve for loan losses to nonperforming loans 207.95 391.65 467.70 270.65 229.95 Reserve for loan losses to loans1 1.51 1.66 1.86 1.95 1.93 Miscellaneous (at December 31) Number of employees (FTE) 3,003 3,101 2,850 2,404 2,179 Number of banking locations 105 100 91 76 72 Number of TransFund locations 1,111 1,020 998 785 638 Mortgage loan servicing portfolio $6,874,995 $7,028,247 $6,375,239 $6,981,744 $5,948,187 - ------------------------------------------------------------------------------------------------------------------------- 1 Excludes residential mortgage loans held for sale, which are carried at the lower of aggregate cost or market value. 2 Restated for pooling of interest in 1999. 3 Includes nonaccrual loans, renegotiated loans and assets acquired in satisfaction of loans. Excludes loans past due 90 days or more and still accruing.
MANAGEMENT'S ASSESSMENT OF OPERATIONS AND FINANCIAL CONDITION BOK Financial Corporation ("BOK Financial") is a financial holding company that offers full service banking in Oklahoma, Northwest Arkansas, North Texas and New Mexico. BOK Financial's principal subsidiaries are Bank of Oklahoma, N.A., ("BOk"), Bank of Texas, N.A., Bank of Albuquerque, N.A., and Bank of Arkansas, N.A. Other subsidiaries include BOSC, Inc., a broker/dealer that engages in retail and institutional securities sales and municipal underwriting. On January 11, 2001, BOK Financial acquired CNBT Bancshares, Inc. This acquisition added seven branches in the Houston, Texas area and total assets of $498 million to Bank of Texas. ASSESSMENT OF OPERATIONS SUMMARY OF PERFORMANCE BOK Financial recorded net income of $100.1 million or $1.80 per diluted share for 2000 compared to $89.2 million or $1.60 per diluted share for 1999. Returns on average assets and average equity were 1.15% and 16.46%, respectively, for 2000 compared to 1.17% and 16.45%, respectively, for 1999. The increase in net income for 2000 was due to increases of $32.8 million or 14% in net interest revenue and $13.1 million or 7% in fees and commissions. These increases were partially offset by an increase of $22.3 million or 8% in operating expenses. The provision for loan losses increased by $6.8 million during 2000. Net income for the fourth quarter of 2000 was $25.5 million or $0.46 per diluted common share, an increase of 10% over the same period of 1999. The primary sources of increased quarterly earnings included net interest revenue, which increased $4.0 million or 6%, and fees and commissions, which increased $5.2 million or 11%. These increases were partially offset by a $5.1 million increase in operating expenses and a $3.7 million increase in the provision for loan losses. Net income for 1998 was $79.6 million or $1.42 per diluted common share. Returns on average assets and equity were 1.34% and 16.38%, respectively. NET INTEREST REVENUE Tax equivalent net interest revenue totaled $276.7 million for 2000 compared to $244.5 million for 1999. The increase in net interest revenue was primarily due to an increase in average earning assets. Average earning assets increased by $1.0 billion during 2000. Additionally, the mix of earning assets improved during 2000. Average loans, which generally have higher yields than other types of earning assets, increased to 63% of earning assets in 2000 compared to 60% in 1999. These volume factors contributed $87.9million to the increase in net interest revenue. Average interest bearing liabilities increased by $1.1 billion during 2000, including $376 million from borrowed funds and $674 million from deposits. The increase in average interest bearing liabilities decreased net interest revenue by $55.3 million. The change in net interest revenue due to net changes in interest rates was minimal for 2000. Table 2 Volume/Rate Analysis (In Thousands) 2000/1999 1999/1998 -------------------------------- ------------------------------ Change Due To(1) Change Due To(1) ---------------------- --------------------- Change Volume Yield/Rate Change Volume Yield/Rate --------------------------------------------------------------- Tax-equivalent interest revenue: Securities $ 20,384 $11,444 $ 8,940 $25,746 $ 27,741 $ (1,995) Trading securities (841) (1,683) 842 1,245 990 255 Loans 117,643 77,933 39,710 72,768 82,821 (10,053) Funds sold and resell agreements 743 164 579 (102) 122 (224) - ---------------------------------------- --------------------------------------------------------------- Total 137,929 87,858 50,071 99,657 111,674 (12,017) - ---------------------------------------- --------------------------------------------------------------- Interest expense: Transaction deposits 8,509 4,847 3,662 9,362 14,438 (5,076) Savings deposits (268) (174) (94) (866) 188 (1,054) Time deposits 49,387 28,452 20,935 4,121 10,323 (6,202) Borrowed funds 46,962 22,154 24,808 39,486 44,438 (4,952) Subordinated debenture 1,103 15 1,088 (359) 7 (366) - ---------------------------------------- --------------------------------------------------------------- Total 105,693 55,294 50,399 51,744 69,394 (17,650) - ---------------------------------------- ---------- --------- ---------------------- --------------------- Tax-equivalent net interest revenue 32,236 $32,564 $ (328) 47,913 $ 42,280 $ 5,633 ---------------------- --------------------- Change in nonrecurring foregone interest - (3,262) Decrease in tax-equivalent adjustment 527 1,047 - ---------------------------------------- ---------- --------- Net interest revenue $ 32,763 $45,698 - ---------------------------------------- ---------- --------- 1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
4th Qtr 2000/4th Qtr 1999 ------------------------------------ Change Due To(1) ------------------------ Change Volume Yield/Rate ----------- ------------ ----------- Tax-equivalent interest revenue: Securities $ 5,480 $ 3,461 $ 2,019 Trading securities 15 13 2 Loans 28,291 17,783 10,508 Funds sold and resell agreements 236 122 114 - ------------------------------------------ ----------- ------------ ----------- Total 34,022 21,379 12,643 - ------------------------------------------ ----------- ------------ ----------- Interest expense: Transaction deposits 3,007 161 2,846 Savings deposits (48) (72) 24 Time deposits 14,128 6,771 7,357 Borrowed funds 12,365 6,679 5,686 Subordinated debenture 280 (1) 281 - ------------------------------------------ ----------- ------------ ----------- - ------------------------------------------ ----------- ------------ ----------- Total 29,732 13,538 16,194 - ------------------------------------------ ----------- ------------ ----------- Tax-equivalent net interest revenue 4,290 $ 7,841 $(3,551) ------------ ----------- Increase in tax-equivalent adjustment (241) - ------------------------------------------ ----------- Net interest revenue $ 4,049 - ------------------------------------------ ----------- 1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis. Net interest margin, the ratio of net interest revenue to average earning assets, decreased from 3.63% in 1999 to 3.56% in 2000. This decrease was due primarily to growth in borrowed funds used to support the investment portfolio. Since inception in 1990, BOK Financial has followed a strategy of fully utilizing its capital resources by borrowing funds in the capital markets to supplement deposit growth and to invest in securities. Although this strategy frequently results in a net interest margin that falls below those normally seen in the commercial banking industry, it provides positive net interest revenue. Management estimates that this strategy resulted in an 83 basis point decrease in net interest margin in 2000 and a 59 basis point decrease in net interest margin in 1999 and 1998. Net interest margins, excluding this strategy, were 4.39% for 2000, 4.22% for 1999, and 4.31% for 1998. However, this strategy contributed $4.3 million, $13.2 million, and $8.4 million to net interest revenue for 2000, 1999, and 1998, respectively. As more fully discussed in the subsequent Market Risk Section, management employs various techniques to control, within established parameters, the interest rate and liquidity risk inherent in this strategy. Tax-equivalent net interest revenue for the fourth quarter of 2000 was $71.3 million compared to $67.0 million for the fourth quarter of 1999. This increase was due to the growth in average earning assets, which increased $1.0 billion or 14%. Net interest margin decreased 23 basis points to 3.47% due to an increase in funding costs. The average cost of deposits increased 105 basis points from the fourth quarter of 1999 to the fourth quarter of 2000. Yields on earning assets increased by 71 basis points for these same periods. Tax-equivalent net interest revenue, totaled $244.5 million for 1999 compared to $199.9 million in 1998. The increase in net interest revenue was due to improvements in the mix of loans to total earning assets and lower rates paid on interest bearing liabilities. Loans, which generally have a higher yield, comprised 60% of earning assets in 1999 compared to 58% in 1998. This improvement in asset mix limited the decrease in yields on average earning assets to 19 bases points. The cost of interest-bearing liabilities decreased 35 bases points during this period due to falling interest rates. These factors combined to increase net interest revenue. The financial service environment in BOK Financial's primary markets is highly competitive due to a large number of commercial banks, thrifts, credit unions and brokerage firms. Additionally, many customers already have access to national and regional financial institutions for many products and services. Management expects that BOK Financial will continue to be able to successfully compete with these financial institutions by delivering the loan and deposit products and other financial services traditionally associated with a large bank with the responsiveness of a smaller, community bank. Other Operating Revenue Table 3 Other Operating Revenue (In Thousands) Years ended December 31, ------------------------------------------------------ 2000 1999 1998 1997 1996 ----------- ------------------------------------------ Brokerage and trading revenue $ 16,074 $ 16,233 $ 15,301 $ 9,556 $ 7,896 Transaction card revenue 38,753 32,648 24,426 19,339 14,298 Trust fees and commissions 39,316 35,127 29,956 24,072 21,652 Service charges and fees on deposit accounts 42,932 41,067 33,920 30,181 25,363 Mortgage banking revenue 37,179 36,986 41,733 32,235 26,234 Leasing revenue 4,244 3,725 7,111 5,861 2,236 Other revenue 17,965 17,589 11,688 10,330 11,201 - ------------------------------------------------------- ------------------------------------------ Total fees and commissions 196,463 183,375 164,135 131,574 108,880 - ------------------------------------------------------- ------------------------------------------ Gain on student loan sale 529 600 1,548 1,311 1,069 Loss on branch sales - - - - (325) Gain on loan securitization - 270 - - - Gain (loss) on sale of other assets (148) 4,626 - - - Gain (loss) on securities 2,059 (419) 9,337 (1,329) (2,604) - ------------------------------------------------------- ------------------------------------------ Total other operating revenue $198,903 $188,452 $175,020 $131,556 $107,020 - ------------------------------------------------------- ------------------------------------------
Other operating revenue increased $10.5 million or 6% compared to 1999. Fees and commissions, which are included in other operating revenue, increased $13.1 million or 7% while net gains on sales of securities and other assets decreased $2.6 million. Fees and commissions continue to represent a significant portion of BOK Financial's total revenue. Revenue generated by card-based transactions such as the TransFund ATM network, bankcards, and related merchant discounts increased by 19% to $38.8 million. These increases are generally due to a higher volume of transactions processed in 2000. Other revenue included $4.5 million of private placement and underwriting fees. Other operating revenue for the fourth quarter of 2000 totaled $54.9 million compared to $46.7 million for the fourth quarter of 1999. The fourth quarter of 2000 included securities gains of $3.3 million compared to $80 thousand in the fourth quarter of 1999. Net securities gains from the portion of the available for sale portfolio, which serves as an economic hedge of mortgage servicing rights, totaled $5.2 million while net securities losses on the remaining available for sale portfolio totaled $1.9 million. Changes in the components of other revenue during the fourth quarter were consistent with the year to date changes. Transaction card revenue increased by $1.3 million. Mortgage banking revenue increased by $1.5 million. Other operating revenue for 1999 increased $13.4 million or 8% compared to 1998. Approximately $9.8 million of this increase was due to the net change in gains on securities sold. Additionally, BOK Financial recognized a gain of $3.6 million on the sale of interests in several leasing partnerships during the second quarter of 1999. Fee and commission income increased $19.2 million. Deposit fees increased $7.1 million, including $4.9 million from acquired banks. Transaction card fees increased $8.2 million due primarily to increased volume of transactions processed. Many of BOK Financial's fee generating activities, such as brokerage and trading activities, trust fees, and mortgage servicing revenue, are indirectly affected by changes in interest rates. Significant increases in interest rates may tend to decrease the volume of trading activities, and may lower the value of trust assets managed, which is the basis of certain fees, but would tend to decrease the incidence of mortgage loan prepayments. Similarly, a decrease in economic activity would decrease ATM, bankcard and related revenue. While management expects continued growth in other operating revenue, the future rate of increase could be affected by increased competition from national and regional financial institutions and from market saturation. Continued growth may require BOK Financial to introduce new products or to enter new markets. This growth introduces additional demands on capital and managerial resources. Lines of Business BOK Financial operates four principal lines of business under its Bank of Oklahoma franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth principal line of business, regional banks, which includes banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Other lines of business include the TransFund ATM network and BOSC, Inc. Corporate Banking The Corporate Banking Division provides loan and lease financing and treasury and cash management services to businesses throughout Oklahoma and seven surrounding states. In addition to serving the banking needs of small businesses, middle market and larger customers, the Corporate Banking Division has specialized groups which serve customers in the energy, agriculture, healthcare and banking/finance industries. The Corporate Banking Division contributed 52% of consolidated net income for 2000 compared to 58% of consolidated net income for 1999. Total revenue for this division increased 7% primarily due to a 15% increase in outstanding loans. This increase in revenue was partially offset by increases in internal funding rates charged to the Corporate Banking Division. Operating expense for this division increased 8%. Net loans charged off for the Corporate Banking Division were $4.0 million in 2000 compared to net recoveries of $1.1 million in 1999. Table 4 Corporate Banking (In Thousands) Years ended December 31, ---------------------------------------- 2000 1999 1998 ---------------------------------------- Revenue (interest expense) from external sources $ 262,857 $ 218,917 $ 182,595 Revenue (interest expense)from internal sources (121,430) (86,972) (68,539) Operating expense 52,666 48,943 51,190 Net income 51,815 51,390 38,373 Average assets $3,801,209 $3,381,502 $2,718,472 Average equity 411,214 352,396 271,420 Return on assets 1.36% 1.52% 1.41% Return on equity 12.60% 14.58% 14.14% Efficiency ratio 37.24% 37.09% 44.88% Consumer Banking The Consumer Banking Division provides its customers throughout Oklahoma with a full line of deposit, loan and fee-based services through four major distribution channels: traditional branches, supermarket branches, the 24-hour ExpressBank call center, and the Internet. Additionally, the division is a significant referral source for the Bank of Oklahoma Mortgage Division ("BOk Mortgage") and BOSC's Retail Brokerage division. The Consumer Banking Division contributed 17% of consolidated net income for 2000 and 13% of consolidated net income for 1999. Total revenue, which consists primarily of intercompany credit for funds provided to other divisions within BOK Financial and fees generated by various services, increased 18% during 2000. Increases in short-term interest rates during 2000 increased the internal rates paid to the Consumer Banking Division for funds they provided to BOK Financial. Operating expenses increased 7% during 2000. The result is an improvement in returns on average assets and equity for the division and a lower efficiency ratio. Table 5 Consumer Banking (In Thousands) Years ended December 31, ----------------------------------------- 2000 1999 1998 ------------- ------------ -------------- Revenue (interest expense)from external sources $ (8,603) $ (5,871) $ (12,984) Revenue (interest expense)from internal sources 85,329 70,665 75,445 Operating expense 45,606 42,562 47,368 Net income 16,917 11,722 7,937 Average assets $1,813,303 $1,728,209 $1,785,025 Average equity 54,706 46,098 43,640 Return on assets 0.93% 0.68% 0.44% Return on equity 30.92% 25.43% 18.19% Efficiency ratio 59.44% 65.69% 75.84% Mortgage Banking BOK Financial engages in mortgage banking activities through BOk Mortgage. These activities include the origination, marketing and servicing of mortgage loans. BOk Mortgage contributed 3% to consolidated net income in 2000 compared to 2% in 1999. Total revenue from BOk Mortgage decreased $1.7 million during 2000. Total mortgage loan production decreased to $531 million for 2000 from $688 million in 1999 due to higher interest rates during much of 2000. However, revenue provided by origination and marketing activities in 2000 increased $711 thousand or 20% compared to 1999 due to improved pricing of loans sold. Commitments to originate mortgage loans create both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, and interest rate risk is partially hedged through forward sales contracts. All fixed rate mortgage loans are generally sold in the secondary market pursuant to forward sales contracts. BOk Mortgage currently does not securitize pools of mortgage loans either for sale or retention. Mortgage loan servicing revenue totaled $32.9 million for 2000 compared to $33.4 million for 1999. Mortgage loans serviced by BOk Mortgage totaled $6.9 billion at December 31, 2000 compared to $7.0 billion at the end of 1999. These amounts include loans serviced for BOk of $167 million for 2000 and $107 million for 1999. Capitalized mortgage servicing rights, which totaled $111 million at December 31, 2000 and $114 million at December 31, 1999 represent mortgage loans serviced for others carried at the lower of amortized cost or fair value. Fair value is based on the present value of projected net servicing revenue over the estimated life of the mortgage loans serviced. This estimated life and the value of the servicing rights are very sensitive to changes in interest rates and loan prepayment assumptions. Rising interest rates tend to decrease loan prepayments and increase the value of mortgage servicing rights while falling interest rates have the opposite effect. A valuation allowance is provided for the excess of the carrying value of the servicing rights over their fair values. BOK Financial acquires mortgage-backed and principal only securities as an economic hedge against the impairment in the mortgage servicing portfolio. Additional discussion about the sensitivity of the mortgage servicing portfolio to changes in interest rates and this hedging strategy is in the Market Risk section. Table 6 Mortgage Banking (In Thousands) Years ended December 31, ------------------------------------- 2000 1999 1998 ------------------------------------- Revenue (interest expense)from external sources $ 56,175 $ 51,160 $ 60,512 Revenue (interest expense)from internal sources (15,006) (8,296) (10,456) Operating expense 38,028 39,754 41,926 Provision for impairment of mortgage servicing rights 2,900 - (2,290) Gains (losses) on sales of 5,257 - - securities Net income 3,325 1,850 6,288 Average assets $412,218 $355,888 $367,934 Average equity 32,333 32,010 30,229 Return on assets 0.81% 0.52% 1.71% Return on equity 10.28% 5.78% 20.80% Efficiency ratio 92.37% 92.74% 83.76% Trust Services BOK Financial provides a wide range of trust services, including institutional, investment and retirement products and services to affluent individuals and businesses, to not-for-profit organizations and governmental agencies through the Bank of Oklahoma Trust Division and Bank of Texas Trust Company. Trust services are primarily provided to clients in Oklahoma, Texas, Arkansas and New Mexico. Additionally, trust services include a nationally competitive self-directed 401-k program with clients in Dallas, Chicago, New York and Los Angeles. At December 31, 2000, trust assets with an aggregate market value of $18 billion were subject to various fiduciary arrangements, compared to $17 billion at December 31, 1999. Trust services contributed 10% to consolidated net income for 2000 compared to 9% for 1999. Total revenue from trust services increased $5.1 million or 11% during 2000 while operating expenses increased $2.2 million or 6%. Table 7 Trust Services (In Thousands) Years ended December 31, -------------------------------------- 2000 1999 1998 ------------- ----------- ------------ Revenue (interest expense)from external sources $ 43,692 $ 40,394 $ 33,398 Revenue (interest expense)from internal sources 8,968 7,208 6,468 Operating expense 36,277 34,065 30,985 Net income 10,008 8,228 5,351 Average assets $355,585 $332,839 $292,175 Average equity 38,756 34,300 27,243 Return on assets 2.81% 2.47% 1.83% Return on equity 25.82% 23.99% 19.64% Efficiency ratio 68.89% 71.56% 77.72% Regional Banks Regional banks include Bank of Texas, Bank of Arkansas, and Bank of Albuquerque. Each of these banks provides a full range of corporate and consumer banking, treasury services and retail investments in their respective markets. Small businesses and middle-market corporations are the regional banks' primary customer focus. Regional banks contributed $13.9 million or 14% to consolidated net income in 2000 compared to $7.4 million or 8% in 1999. Total revenue for 2000 increased $21.0 million compared to 1999 while operating expenses increased $7.6 million. The increase in operating expenses included a $3.7 million increase in intangible amortization expense. Average equity assigned to the regional banks included both an amount based on management's assessment of risk and an additional amount based upon BOK Financial's investment in these entities. Management excludes the amortization of all intangible assets when evaluating the performance of the regional banks on a tangible return basis. Table 8 Regional Banks (In Thousands) Years ended December 31, ----------------------------------------- 2000 1999 1998 ------------------------------------------- Revenue (interest expense)from external sources $ 110,468 $ 78,517 $ 33,670 Revenue (interest expense)from internal sources (18,250) (7,596) (1,673) Operating expense 63,894 56,249 21,562 Gains (losses) on sales of securities (356) (53) 613 Net income 13,868 7,405 5,742 Tangible net income 24,095 14,355 10,793 Average assets $2,381,886 $1,807,963 $644,235 Average equity 269,762 206,336 85,205 Tangible return on assets 1.01% 0.79% 1.68% Tangible return on equity 8.93% 6.96% 12.67% Efficiency ratio 69.29% 79.31% 67.39% OTHER OPERATING EXPENSE Other operating expense totaled $302.8 million for 2000 compared to $280.5 million in 1999, an increase of 8%. Personnel costs and occupancy, equipment and data processing comprised most of the increase. Personnel costs increased $10.2 million or 8%. Regular compensation (including overtime and temporary assistance) and benefits increased $6.1 million or 6%. Average staffing on a full time equivalent ("FTE") basis increased by 77 employees or 3% while average compensation expense per FTE increased by 5%. Incentive compensation increased by $3.4 million or 20% compared to 1999 due to growth in revenue over pre-determined targets and growth in the number of business units covered by incentive plans. Net occupancy, equipment and data processing expense for 2000 increased $7.7 million or 13%. Equipment expense increased by $3.1 million due primarily to depreciation of computer equipment purchased in 1998 and 1999. Data processing costs increased $3.0 million or 11% due primarily to a $1.6 million increase in processing charges. Other operating expenses for the fourth quarter of 2000 totaled $79.3 million compared to $74.3 million for the fourth quarter of 1999. The fourth quarter of 2000 included a $2.9 million provision for impairment of mortgage servicing rights compared to no impairment expense in the fourth quarter of 1999. Excluding the effects of this impairment charge, operating expenses for the fourth quarter of 2000 increased by 3% due to higher personnel costs. Other operating expense totaled $280.5 million for 1999 compared to $234.0 million in 1998, an increase of 20%. Approximately $30.2 million of this increase was related to acquisitions. Operating expenses for acquisitions increased personnel costs by $11.5 million, occupancy, equipment and data processing expenses by $5.5 million and amortization of intangible assets by $6.8 million. Excluding the effects of acquisitions, other operating expense increased $16.3 million or 7%. Personnel costs increased $26.6 million or 24% due to a 333 increase in the number of average FTE employees and a 9% increase in average compensation per employee. Additionally, incentive compensation increased by $5.4 million or 46% compared to 1998 due to growth in revenue over pre-determined targets and growth in the number of business units covered by incentive plans. Net occupancy, equipment and data processing expense for 1999 increased $14.5 million or 33%. Net occupancy expense increased by $4.4 million, including $2.5 million due to acquisitions. The remaining increase was due to additional locations in Oklahoma and Texas. Data processing expenses increased $5.9 million or 28%, including $1.2 million from acquisitions. Amortization and maintenance costs increased $1.3 million during 1999 to $3.3 million due primarily to various systems implemented over the past two years. The remaining increase was due to a higher volume of transactions processed. Table 9 Other Operating Expense (In Thousands) Years ended December 31, ------------------------------------------------- 2000 1999 1998 1997 1996 ------------------- ----------------------------- Personnel expense $146,215 $136,010 $109,437 $ 90,625 $ 74,460 Business promotion 8,395 9,077 8,220 8,886 6,552 Contribution of stock to BOk Charitable Foundation - - 2,257 3,638 - Professional fees and services 9,618 9,584 9,781 6,906 5,508 Net occupancy, equipment and data processing expense 65,718 58,024 43,519 36,265 31,460 FDIC and other insurance 1,569 1,356 1,368 1,380 1,812 Special deposit insurance assessment - - - - 3,820 Printing, postage and supplies 11,260 11,599 9,524 8,067 7,042 Net gains and operating expenses on repossessed assets (1,283) (3,473) (474) (3,831) (4,496) Amortization of intangible assets 15,478 15,823 9,515 8,968 5,555 Write-off of core deposit intangible assets related to SAIF-insured deposits - - - - 3,821 Mortgage banking costs 22,274 23,932 25,949 19,968 15,473 Provision for impairment of mortgage servicing rights 2,900 - (2,290) 4,100 361 Other expense 20,671 18,584 17,189 14,882 11,837 - -------------------------------------------------------------------------- ----------------------------- Total $302,815 $280,516 $233,995 $199,854 $163,205 - -------------------------------------------------------------------------- -----------------------------
INCOME TAXES Income tax expense was $47.6 million, $44.5 million and $37.2 million for 2000, 1999 and 1998, respectively, representing 32%, 33% and 32%, respectively, of book taxable income. Tax expense currently payable totaled $38.4 million in 2000 compared to $43.8 million in 1999 and $46.4 million in 1998. The Internal Revenue Service closed its examination of 1996 during 2000. As a result of the outcome of this examination, BOK Financial reduced its tax accrual by $3.0 million. Income tax expense for 2000 was 34% of pre-tax book income excluding the reversal of this accrual. During 1998 and 1999, Internal Revenue Service examinations for 1994 and 1995, respectively, were closed with no significant adjustments. Table 10 Selected Quarterly Financial Data (In Thousands Except Per Share Data) Fourth Third Second First ------------ ------------ ------------ ------------ 2000 --------------------------------------------------- Interest revenue $173,495 $163,577 $156,314 $145,344 Interest expense 104,303 95,430 88,444 81,666 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Net interest revenue 69,192 68,147 67,870 63,678 Provision for loan losses 6,000 5,031 3,534 2,639 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Net interest revenue after provision for loan losses 63,192 63,116 64,336 61,039 Other operating revenue 51,628 50,378 48,030 46,808 Securities gains (losses), net 3,296 (538) (682) (17) Other operating expense 79,318 73,964 74,917 74,616 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Income before taxes 38,798 38,992 36,767 33,214 Income tax expense 13,302 13,355 12,573 8,401 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Net income $ 25,496 $ 25,637 $ 24,194 $ 24,813 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Earnings per share: Basic .51 .51 .48 .50 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Diluted .46 .46 .43 .45 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Average shares: Basic 49,158 49,081 49,170 49,165 - -------------------------------------------------------- ------------ ------------ ------------ ------------ Diluted 55,630 55,553 55,629 55,639 - -------------------------------------------------------- ------------ ------------ ------------ ------------
1999 ---------------------------------------------------- Interest revenue $139,714 $131,734 $118,256 $110,570 Interest expense 74,571 69,347 61,673 58,559 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Net interest revenue 65,143 62,387 56,583 52,011 Provision for loan losses 2,255 2,142 2,538 3,430 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Net interest revenue after provision for loan losses 62,888 60,245 54,045 48,581 Other operating revenue 46,641 45,320 49,719 47,191 Securities gains (losses), net 80 (485) (288) 274 Other operating expense 74,257 70,755 70,678 64,826 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Income before taxes 35,352 34,325 32,798 31,220 Income tax expense 12,155 11,589 10,742 9,983 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Net income $ 23,197 $ 22,736 $ 22,056 $ 21,237 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Earnings per share: Basic .46 .46 .44 .43 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Diluted .42 .41 .39 .38 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Average shares: Basic 49,144 49,091 49,019 48,974 - -------------------------------------------------------- ------------ ------------ ------------ ------------- Diluted 55,809 55,867 55,915 55,866 - -------------------------------------------------------- ------------ ------------ ------------ -------------
ASSESSMENT OF FINANCIAL CONDITION SECURITIES PORTFOLIO Securities are identified as either investment or available for sale based upon various factors, including asset/liability management strategies, liquidity and profitability objectives, and regulatory requirements. Investment securities are carried at cost, adjusted for amortization of premiums or accretion of discounts. Amortization or accretion of mortgage-backed securities is periodically adjusted for estimated prepayments. Available for sale securities are those that may be sold prior to maturity based upon asset/liability management decisions. Securities identified as available for sale are carried at fair value. Unrealized gains or losses on available for sale securities, less applicable deferred taxes, are recorded as accumulated other comprehensive income in Shareholders' Equity. During 2000, BOK Financial increased its securities portfolio by $119 million. Most notably, mortgage-backed securities increased by $145 million while U.S. Treasury securities decreased by $27 million. Mortgage backed securities with an amortized cost of $203 million and a fair value of $210 million have been designated by management as an economic hedge portfolio against possible impairment in the mortgage servicing portfolio. The value of these securities is expected to increase during periods of falling interest rates to offset the decline of value in the mortgage servicing portfolio. Gains on sales of these securities may be recognized periodically to offset either the economic loss in the servicing portfolio or the impairment charges required by generally accepted accounting principles. BOK Financial's total securities portfolio value changed from an unrealized loss of $73 million at December 31, 1999 to an unrealized gain of $6 million at December 31, 2000 due to a decrease in market interest rates. The average expected life of the mortgage-backed securities was 2.9 years at December 31, 2000 compared to 4.4 years at December 31, 1999. The effect of changes in interest rates on BOK Financial's earnings and equity is discussed in the Market Risk section of this report. Table 11 presents the book values and fair values of BOK Financial's securities portfolio at December 31, 2000, 1999 and 1998. Additional information regarding the securities portfolio is presented in Note 3 to the Consolidated Financial Statements. Table 11 Securities (In Thousands) December 31, ----------------------------------------------------------------------------- 2000 1999 1998 ------------------------- ------------------------- ------------------------- Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value ------------ ------------ ------------ ------------ ------------ ------------ Investment: U.S. Treasury $ - $ - $ 196 $ 198 $ 600 $ 600 Municipal and other tax-exempt 207,177 207,641 186,177 184,748 184,988 184,521 Mortgage-backed U.S. agency securities 11,541 11,567 18,051 17,926 30,385 30,829 Other debt securities 14,653 14,659 8,756 8,752 11,804 11,804 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Total $ 233,371 $ 233,867 $ 213,180 $ 211,624 $ 227,777 $ 227,754 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Available for sale: U.S. Treasury $ 85,656 $ 85,564 $ 112,902 $ 111,860 $ 170,862 $ 171,707 Municipal and other tax-exempt 14,492 14,552 13,086 13,094 92,082 93,131 Mortgage-backed securities: U.S. agencies 2,050,100 2,046,318 2,174,916 2,106,094 1,902,568 1,913,869 Other 478,065 486,170 202,229 200,558 1,772 1,762 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Total mortgage-backed securities 2,528,165 2,532,488 2,377,145 2,306,652 1,904,340 1,915,631 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Other debt securities 242 245 353 353 456 462 Equity securities and mutual funds 129,823 130,971 156,476 156,745 142,460 148,444 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Total $2,758,378 $2,763,820 $2,659,962 $2,588,704 $2,310,200 $2,329,375 - ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------
LOANS Loans increased $874 million or 19% during 2000. Commercial loans increased by $583 million or 22% over 1999. This continues a trend of strong growth in commercial loans. All identified segments of commercial loans grew by more than 10% except agriculture. Commercial loans now comprise 59% of total loans compared to 57% at December 31, 1999. Energy loans increased by $231 million or 38% during 2000 and totaled $837 million or 15% of the loan portfolio at year-end. Commercial loans to service entities increased by $156 million or 19% during 2000. Total commercial real estate loans grew by $176 million or 16% during 2000. Construction and land development loans, which consist primarily of single-family construction loans, increased by 25% during 2000. Management plans to decrease the rate of loan growth in 2001 through a selective tightening of credit standards. The primary focus will be on commercial lending activities that have an opportunity to provide other banking services to the customer. Table 12 Loans (In Thousands) December 31, ----------------------------------------------------------- 2000 1999 1998 1997 1996 ---------------------------------------------- ------------ Commercial: Energy $ 837,223 $ 606,561 $ 468,700 $ 333,988 $ 290,162 Manufacturing 421,046 344,175 245,268 205,836 147,931 Wholesale/retail 499,017 407,785 279,265 264,029 242,859 Agriculture 185,407 173,653 160,241 155,868 129,202 Services 963,171 807,184 635,585 482,476 340,956 Other commercial and industrial 342,169 325,343 200,214 107,260 128,158 Commercial real estate: Construction and land development 311,700 249,160 174,059 104,322 69,265 Multifamily 271,459 257,187 181,525 103,218 150,457 Other real estate loans 687,335 588,195 404,985 284,220 221,499 Residential mortgage: Secured by 1-4 family residential properties 638,044 531,058 500,690 435,753 403,958 Residential mortgages held for sale 48,901 57,057 100,269 79,779 96,789 Consumer 312,390 296,131 296,298 299,272 249,008 - --------------------------------------------------------------------------------------------- ------------ Total $5,517,862 $4,643,489 $3,647,099 $2,856,021 $2,470,244 - --------------------------------------------------------------------------------------------- ------------
While BOK Financial continues to increase geographic diversification through expansion into Texas and New Mexico, geographic concentration subjects the loan portfolio to the general economic conditions in Oklahoma. Notable loan concentrations by the primary industry of the borrowers are presented in Table 12. Agriculture includes loans totaling $147 million to the cattle industry. Services include loans totaling $132 million to the healthcare industry, $124 million to nursing homes and $65 million to the hotel industry. Approximately 41% of commercial real estate loans are secured by property located in Oklahoma, primarily in the Tulsa or Oklahoma City metropolitan areas. An additional 30% of commercial real estate loans are secured by property located in Texas. The major components of other real estate loans are office buildings, $240 million and retail facilities, $205 million. Table 13 Loan Maturity and Interest Rate Sensitivity at December 31, 2000 (In Thousands) Remaining Maturities of Selected Loans ------------------------------------- Total Within 1 Year 1-5 Years After 5 Years ------------------------ ----------- ------------ Loan maturity: Commercial $3,248,033 $1,369,971 $1,500,478 $377,584 Commercial real estate 1,270,494 479,599 592,626 198,269 - ---------------------------------------- ------------------------ ----------- ------------ Total $4,518,527 $1,849,570 $2,093,104 $575,853 - ---------------------------------------- ------------------------ ----------- ------------ Interest rate sensitivity for selected loans with: Predetermined interest rates $ 855,142 $ 116,016 $ 488,736 $250,390 Floating or adjustable interest rates 3,663,385 1,733,554 1,604,368 325,463 - ---------------------------------------- ------------------------ ----------- ------------ Total $4,518,527 $1,849,570 $2,093,104 $575,853 - ---------------------------------------- ------------------------ ----------- ------------
SUMMARY OF LOAN LOSS EXPERIENCE The reserve for loan losses, which is available to absorb losses inherent in the loan portfolio, totaled $83 million at December 31, 2000, compared to $76 million at December 31, 1999. This represents 1.51% and 1.66% of total loans, excluding loans held for sale, at December 31, 2000 and 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 14 presents statistical information regarding the reserve for loan losses for the past five years. Table 14 Summary of Loan Loss Experience (Dollars In Thousands) Years ended December 31, --------------------------------------------------------------- 2000 1999 1998 1997 1996 --------------------------------------------------------------- Beginning balance $76,234 $65,922 $54,044 $45,907 $39,116 Loans charged-off: Commercial 7,747 2,136 3,219 3,350 2,469 Commercial real estate 1,176 35 175 698 529 Residential mortgage 285 617 202 440 240 Consumer 5,593 4,560 4,000 4,791 3,515 - ---------------------------------------------------------------------------------------------------------------- Total 14,801 7,348 7,596 9,279 6,753 - ---------------------------------------------------------------------------------------------------------------- Recoveries of loans previously charged-off: Commercial 1,126 3,110 1,487 2,543 3,748 Commercial real estate 428 487 1,398 957 4,113 Residential mortgage 157 17 162 557 262 Consumer 2,307 2,156 1,836 1,578 1,002 - ---------------------------------------------------------------------------------------------------------------- Total 4,018 5,770 4,883 5,635 9,125 - ---------------------------------------------------------------------------------------------------------------- Net loans charged-off (recoveries) 10,783 1,578 2,713 3,644 (2,372) Provision for loan losses 17,204 10,365 14,591 9,256 4,419 Additions due to acquisitions - 1,525 - 2,525 - - ---------------------------------------------------------------------------------------------------------------- Ending balance $82,655 $76,234 $65,922 $54,044 $45,907 - ---------------------------------------------------------------------------------------------------------------- Reserve for loan losses to loans outstanding at 1.51% 1.66% 1.86% 1.95% 1.93% year-end(1) Net charge-offs (recoveries) to average loans .22 .04 .09 .14 (.10) Provision for loan losses to average loans .35 .26 .48 .35 .19 Recoveries to gross charge-offs 27.15 78.52 64.28 60.73 135.13 Reserve as a multiple of net charge-offs 7.67x 48.31x 24.30x 14.83x (19.35)x (recoveries) - ---------------------------------------------------------------------------------------------------------------- Problem Loans - ---------------------------------------------------------------------------------------------------------------- Loans past due (90 days) $15,467 $11,336 $ 9,553 $10,710 $ 9,729 Nonaccrual(2) 39,661 19,465 14,095 19,761 19,964 Renegotiated 87 - - 207 - - ---------------------------------------------------------------------------------------------------------------- Total $55,215 $30,801 $23,648 $ 30,678 $ 29,693 - ---------------------------------------------------------------------------------------------------------------- Foregone interest on nonaccrual loans(2) $ 3,803 $ 2,321 $ 2,271 $ 2,981 $ 3,088 - ---------------------------------------------------------------------------------------------------------------- 1 Excludes residential mortgage loans held for sale, which are carried at the lower of aggregate cost or market value. 2 Interest collected and recognized on nonaccrual loans was $3.3 million in 1998 and was not significant in 2000 and previous years disclosed.
The adequacy of the reserve for loan losses is assessed by management based upon an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, and includes probable losses on both outstanding loans and unused commitments to provide financing. A consistent methodology has been developed that includes reserves assigned to specific criticized loans, general reserves that are based upon a statistical migration analysis for each category of loans, and a nonspecific allowance that is 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 December 31, 2000 specific impairment reserves totaled $8.0 million on loans that totaled $38 million. The adequacy of general loan loss reserves is determined primarily through an internally developed migration analysis model. Management uses an eight-quarter aggregate accumulation of net loan losses as the basis for this model. Greater emphasis is placed on net loan losses in the more recent periods. This model is used to assign general loan loss reserves to commercial loans and leases, residential mortgage loans and consumer loans. All loans, leases and letters of credit are allocated a migration factor by this model. Management can override the general allocation only by utilizing a specific allocation based on a measure of impairment of the loan. A nonspecific allowance for loan losses is maintained for risks beyond those factors specific to a particular loan or those identified by the migration analysis. These factors include trends in general economic conditions in BOK Financial's primary lending areas, duration of the business cycle, specific conditions in industries where BOK Financial has a concentration of loans, overall growth in the loan portfolio, bank regulatory examination results, error potential in either the migration analysis model or in the underlying data, and other relevant factors. A range of potential losses is then determined for each factor identified. At December 31, 2000, the loss potential ranges for the more significant factors are: Concentration of large loans - $1.2 million to $2.3 million Loan portfolio growth and expansion into new markets - $1.2 million to $2.4 million A provision for loan losses is charged against earnings in amounts necessary to maintain an adequate allowance for loan losses. These provisions totaled $17.2 million for 2000, $10.4 million for 1999 and $14.6 million for 1998. The provision for 2000 reflected management's assessment of changes in the risk of loan losses due primarily to an increase in net loans charged-off during the year and increased levels of nonperforming and potential problem loans. Table 15 Loan Loss Reserve Allocation (Dollars in Thousands) December 31, ---------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------------------------------------------------- ------------------- ------------------ % of % of % of % of % of Reserve(3) Loans(1)Reserve(3) Loans(1)Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3)Loans(1) --------- ---------------- ------------------ --------- --------- --------- --------- -------- Loan category: Commercial(2) $55,187 59.39% $47,261 58.10% $37,570 56.09% $35,009 55.81% $26,741 53.91% Commercial real estate 12,393 23.23 11,216 23.86 7,949 21.44 3,236 17.71 3,907 18.59 Residential mortgage 2,019 11.67 2,137 11.58 1,807 14.12 1,783 15.70 1,659 17.01 Consumer 6,407 5.71 6,721 6.46 6,689 8.35 5,763 10.78 5,174 10.49 Nonspecific allowance 6,649 - 8,899 - 11,907 - 8,253 - 8,426 - - ----------------------------------- ---------------- ------------------ --------- --------- --------- --------- -------- Total $82,655 100.00 $76,234 100.00 $65,922 100.00 $54,044 100.00 $45,907 100.00 - ----------------------------------- ---------------- ------------------ --------- --------- --------- --------- -------- 1 Excludes residential mortgage loans held for sale, which are carried at the lower of aggregate cost or market value. 2 Specific allocation for Year 2000 risks were $2.0 million in 1999, $3.6 million in 1998 and $4.8 million in 1997. 3 Specific allocation for the loan concentration risks are included in the appropriate category: Energy, Agriculture and Hotel/Motel.
NONPERFORMING ASSETS Information regarding nonperforming assets, which were $44 million at December 31, 2000 and $23 million at December 31, 1999 is presented in Table 16. Nonperforming loans include nonaccrual loans and renegotiated loans and exclude loans 90 days or more past due. The increase in nonaccrual loans since December 31, 1999 has generally been due to circumstances unique to two borrowers. One borrower filed for bankruptcy protection after its previously issued audited financial statements had to be restated due to improper accounting. The second borrower experienced operating problems due to a change in demand from its major customer. The specific impairment reserve for loan losses reflects losses that may be incurred on these loans. Excluding these two loans, the ratio of nonaccrual commercial loans to total commercial loans was .71%, .48% and .42% at December 31, 2000, 1999 and 1998. 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 various risk categories in order to focus management's attention on the loans with higher risk of loss. At December 31, 2000, loans totaling $127 million were assigned to the substandard risk category and loans totaling $89 million were assigned to the special mention risk category, compared to $67 million and $29 million, respectively, at December 31, 1999. The increase in special mention and substandard loans generally reflects loans for business acquisitions or expansions that were either adversely affected by market conditions or ineffectively managed by the borrowers. Further deterioration of the borrowers' performance may occur and a more severe classification including additional loans classified as nonaccrual and charge-offs may be required before improvement is demonstrated. The growth in nonaccrual loans and potential problem loans was not concentrated in any particular segment of the commercial loan portfolio. Table 16 Nonperforming Assets (Dollars in Thousands) December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 ------------------- ------------------------------ Nonperforming loans Nonaccrual loans: Commercial $37,146 $12,686 $ 8,394 $12,745 $13,495 Commercial real estate 161 2,046 1,950 3,276 2,813 Residential mortgage 1,855 3,383 2,583 2,985 3,070 Consumer 499 1,350 1,168 755 586 - ------------------------------------------------------------------------------ ------------------------------ Total nonaccrual loans 39,661 19,465 14,095 19,761 19,964 Renegotiated loans 87 - - 207 - - ------------------------------------------------------------------------------ ------------------------------ Total nonperforming loans 39,748 19,465 14,095 19,968 19,964 Other nonperforming assets 3,851 3,478 4,667 5,281 4,620 - ------------------------------------------------------------------------------ ------------------------------ Total nonperforming assets $43,599 $22,943 $18,762 $25,249 $24,584 - ------------------------------------------------------------------------------ ------------------------------ Ratios: Reserve for loan losses to nonperforming loans 207.95% 391.65% 467.70% 270.65% 229.95% Nonperforming loans to period-end loans(2) .73 .42 .40 .72 .84 - ------------------------------------------------------------------------------ ------------------------------ Loans past due (90 days)(1) $15,467 $11,336 $ 9,553 $10,710 $ 9,729 - ------------------------------------------------------------------------------ ------------------------------ 1 Includes residential mortgages guaranteed by agencies of the U.S. Government. $ 7,616 $ 8,538 $ 8,122 $ 7,072 $ 4,755 Excludes residential mortgages guaranteed by agencies of the U.S. Government in foreclosure. 5,630 8,310 6,953 7,396 9,177 2 Excludes residential mortgage loans held for sale.
LEASING BOK Financial expanded its equipment leasing activities during 2000 to include a much greater range of equipment financing than the natural gas compressors that were the focus of BOK Financial's previous leasing activities. Other assets included $37 million of equipment held for various operating leases at December 31, 2000, compared to $14 million at December 31, 1999. Capital leasing which totaled $37 million at December 31, 2000 and $14 million at December 31, 1999 are included in commercial loans. These activities introduce unique credit, collateral valuation, and transaction structure risk. All leases are subject to the same approval process as commercial loans and are reviewed regularly by the Credit Administration Department to mitigate these risks. DEPOSITS Average deposits for 2000 increased $655 million compared to 1999. Interest-bearing transaction accounts and time deposits increased by $172 million and $511 million, respectively. The average cost of these deposits has increased during 2000 due to higher market interest rates and management decisions to increase the amount of asset growth funded by deposits. Average core deposits increased $138 million to $3 billion. This represented 60% of average deposits in 2000 compared to 65% in 1999. Concurrently, uninsured deposits increased to 33% of total deposits for 2000 compared to 27% for 1999. Average uninsured deposits included approximately $352 million of brokered deposits. Uninsured deposits as used in this presentation is based on a simple analysis of account balances and does not reflect combined ownership and other account styling that would determine insurance based on FDIC regulations. Table 17 Deposit Analysis (In Thousands) Average Balances ---------------------------- 2000 1999 ---------------------------- Core deposits $3,293,456 $3,155,930 Public funds 400,467 383,329 Uninsured deposits 1,823,192 1,322,679 - ------------------------------------------------------------ Total $5,517,115 $4,861,938 - ------------------------------------------------------------ BOK Financial competes for deposits by offering a broad range of products and services to its customers. While this includes offering competitive interest rates and fees, the primary means of competing for deposits is convenience and service to the customers. BOk offers banking convenience to its customers through 74 locations including 26 locations with extended hours in local supermarkets and a 24-hour ExpressBank call center. During 2000, BOk opened four supermarket branches to further enhance customer convenience. Bank of Texas has 13 locations in the Dallas metropolitan area. Bank of Albuquerque has 15 banking locations in Albuquerque, New Mexico and Bank of Arkansas has 3 locations in northwest Arkansas. Table 18 Maturity of Domestic CDs and Public Funds in Amounts of $100,000 or More (In Thousands) December 31, --------------------------- 2000 1999 --------------------------- Months to maturity: 3 or less $ 534,960 $ 461,647 Over 3 through 6 395,537 274,456 Over 6 through 12 303,260 285,010 Over 12 210,107 167,670 - ------------------------------------------------------------ Total $ 1,443,864 $ 1,188,783 - ------------------------------------------------------------ BORROWINGS AND CAPITAL BOK Financial and its subsidiary banks use several borrowing sources to supplement deposits as a source of funds to support loan and securities growth. Primarily these sources include federal funds purchased and securities repurchase agreements, advances from the Federal Home Loan Bank, and borrowings from lines of credit through commercial banks. Average borrowed funds increased $376 million or 19% over 1999 and represented 29% of all funds for 2000 compared to 28% for 1999. Interest rates and maturity dates for the various sources of funds are matched with specific types of assets in the asset/liability management process. During 1999, BOK Financial negotiated a $125 million variable rate, unsecured line of credit which matures in November 2002. The outstanding balance of this line was $95 million at December 31, 2000. The proceeds of this line were primarily used to pay off bank debt that had been incurred to fund acquisitions. Interest on amounts outstanding under this line is based on either the London InterBank Offering Rate ("LIBOR") or a base rate, plus a defined margin which is determined by the amount of principal outstanding and BOK Financial's debt rating. The base rate is defined as the greater of either the daily federal funds rate or the prime rate. Equity capital for BOK Financial averaged $608 million and $542 million for 2000 and 1999, respectively. The $66 million increase resulted primarily from 2000 earnings. See Note 14 to the Consolidated Financial Statements for additional information regarding the capital adequacy of BOK Financial and its subsidiary banks. Management has identified capital and funding needs totaling approximately $113 million for anticipated growth in 2001, including the acquisition of CNBT Bancshares, Inc. Resources available to meet these needs include dividends from BOK Financial's subsidiary banks and subordinated borrowings from BOK Financial's principal shareholder. Management currently believes that its funding needs can be met by these resources. However, the timing and extent of future growth plans will be evaluated based upon available resources. MARKET RISK Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices, or equity prices. Additionally, the financial instruments subject to market risk can be classified either as held for trading or held for purposes other than trading. BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its portfolio of assets held for purposes other than trading and trading assets. The effect of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. The responsibility for managing market risk rests with the Asset/Liability Committee that operates under policy guidelines established by the Board of Directors. The negative acceptable variation in net interest revenue and economic value of equity due to a 200 basis point increase or decrease in interest rates is generally limited by these guidelines to +/- 10%. These guidelines also establish maximum levels for short-term borrowings, short-term assets, and public and brokered deposits, and establish minimum levels for unpledged assets, among other things. Compliance with these guidelines is reviewed monthly. Interest Rate Risk Management (Other than Trading) BOK Financial performs a sensitivity analysis to identify more dynamic interest rate risk exposures, including embedded option positions on net interest revenue, net income and economic value of equity. A simulation model is used to estimate the effect of changes in interest rates over the next twelve months based on three interest rate scenarios. These are a "most likely" rate scenario and two "shock test" scenarios, the first assuming a sustained parallel 200 basis point increase and the second a sustained parallel 200 basis point decrease in interest rates. An independent source is used to determine the most likely interest rates for the next year. The Federal Reserve Bank's discount rate affects short-term borrowings, the prime lending rate and the LIBOR. These rates in turn are the basis for much of the variable-rate loan pricing. Additionally, the 30-year mortgage rate 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. Sensitivity of fee income to market interest rate levels, such as those related to cash management services and mortgage servicing are also included. The model incorporates assumptions regarding the level of interest rate or balance changes on indeterminable maturity deposits (demand deposits, interest-bearing transaction accounts and savings accounts) for a given level of market rate changes. The assumptions have been developed through a combination of historical analysis and future expected pricing behavior. Interest rate swaps on all products are included to the extent that they are effective in the 12-month simulation period. Changes in prepayment behavior of mortgage-backed securities, residential mortgage loans and mortgage servicing in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. The impact of planned growth and new business activities is factored into the simulation model. At December 31, 2000 and 1999, this modeling indicated interest rate sensitivity as follows: Table 19 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 $ (199) $ (3,936) $ 2,269 $3,406 $ 3,837 $ (413) (0.1)% (1.4)% 0.7% 1.2% 1.3% (0.1)% - ---------------------------------------------------------------------------------------------------------------- Net income $ (124) $ (2,440) $ 1,418 $2,112 $ 2,398 $ (256) (0.1)% (2.4)% 1.3% 2.1% 2.1% (0.3)% - ---------------------------------------------------------------------------------------------------------------- Economic value of equity $ (32,142) $ (36,214) $ (10,113) $1,669 $ 33,255 $ (4,943) (2.8)% (3.2)% (0.9)% 0.1% 2.9% (0.4)% - ----------------------------------------------------------------------------------------------------------------
The estimated changes in interest rates on net interest revenue, net income, and economic value of equity is within guidelines established by the Board of Directors for all interest rate scenarios. BOK Financial 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 recognize gains when necessary to offset losses on the mortgage servicing rights. At December 31, 2000, securities with a fair value of $210 million and an aggregate unrealized gain of $7 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 December 31, 2000, the pre-tax results of this modeling were: Table 20 Mortgage Servicing Interest Rate Sensitivity (In Thousands) 2000 ------------------- 50 bp 50 bp Increase Decrease ------------------- Anticipated change in: Mortgage servicing rights $ 3,845 $(15,955) Hedging instruments (8,424) 20,347 - ------------------------------------------------------- Net $(4,579)$ 4,392 - ------------------------------------------------------- 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 more closely match interest paid on certain fixed rate loans, long-term certificates of deposit and subordinated debt with earning assets. During 2000, income from these swaps exceeded the cost of the swaps by $2.2 million. Credit risk from these swaps is closely monitored and counterparties to these contracts are selected on the basis of their credit worthiness, among other factors. Derivative products are not used for speculative purposes. See Note 13 to the Consolidated Financial Statements for additional information. During 2000, management terminated interest rate swaps with a notional amount of $270 million at a gain of $3.2 million. This gain was deferred and will be amortized over the lives of the hedged assets. TRADING ACTIVITIES BOK Financial enters into trading account activities both as an intermediary for customers and for its own account. As an intermediary, BOK Financial will take positions in securities, generally mortgage-backed securities, government agency securities, and municipal bonds. These securities are purchased for resale to customers, which include individuals, corporations, foundations, and financial institutions. BOK Financial will also take trading positions in U.S. Treasury securities, mortgage-backed securities, municipal securities, and financial futures for its own account either through BOk or BOSC, Inc. These positions are taken with the objective of generating trading profits. Both of these activities involve interest rate risk. A variety of methods are used to manage the interest rate risk of trading activities. These methods include daily marking of all positions to market value, independent verification of inventory pricing, and position limits for each trading activity. Hedges in either the futures or cash markets may be used to reduce the risk associated with some trading programs. The Risk Management Department monitors trading activity daily and reports to senior management and the Risk Oversight and Audit Committee of the BOK Financial Board of Directors any exceptions to trading position limits and risk management policy exceptions. BOK Financial uses a Value at Risk ("VAR") methodology to measure the market risk inherent in its trading activities. VAR is calculated based upon historical simulations over the past five years. It represents an amount of market loss that is likely to be exceeded only one out of every 100 two-week periods. Trading positions are managed within guidelines approved by the Board of Directors. These guidelines limit the nominal aggregate trading positions to $360 million, the VAR to $6.5 million. At December 31, 2000, the nominal aggregate trading positions was $7.5 million, the VAR was $45 thousand. The greatest value at risk during 2000 was $482 thousand. NEW ACCOUNTING STANDARDS During 1998, the Financial Accounting Standards Board adopted Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), subsequently amended by Statements No. 137 and 138. BOK Financial adopted FAS 133 effective January 1, 2001. FAS 133 requires the recognition of all derivatives on the balance sheet at fair value. Derivatives that do not qualify for special hedge accounting treatment must be adjusted to fair value through income. See Note 1 for additional information. BOK Financial recorded a one-time after-tax transition adjustment that will increase income in the first quarter of 2001 by less than $500 thousand for the adoption of FAS 133. The ongoing effect of FAS 133 may significantly increase earnings volatility in future periods. In 1999, the Financial Accounting Standards Board issued a proposed statement of financial accounting standards for business combinations and intangible assets. This standard would eliminate the pooling of interests method of accounting for business combinations. All business combinations initiated after the issuance date of this statement would be accounted for by the purchase method. In 2001, the Financial Accounting Standards Board issued a limited revision to this proposed standard that addresses accounting for goodwill. This revision would eliminate the requirement to amortize goodwill over an arbitrary period. Goodwill would be carried as an asset and would be tested for impairment at the reporting unit level when certain circumstances indicate that the goodwill might be impaired. Other identifiable intangible assets that have finite lives will continue to be amortized. The pro forma effect of this proposed standard on previously reported earnings are (dollars in thousands, except per share data): Years ended December 31, ------------------------------------ 2000 1999 1998 -------------------------------------- Net income $105,632 $94,849 $84,942 Diluted earnings per share 1.90 1.70 1.52 Return on average equity 17.37% 17.49% 17.48% Return on average assets 1.22 1.25 1.43 FORWARD-LOOKING STATEMENTS This Annual Report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry, and the economy in general. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "plans," "projects," variations of such words, and similar expressions are intended to identify such forward-looking statements. Management judgments relating to, and discussion of the provision and reserve for loan losses involve judgments as to future events and are inherently forward-looking statements. Assessments that BOK Financial's acquisitions and other growth endeavors will be profitable are necessary statements of belief as to the outcome of future events, based in part on information provided by others which BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions which are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to, (1) the ability to fully realize expected cost savings from mergers within the expected time frames, (2) the ability of other companies on which BOK Financial relies to provide goods and services in a timely and accurate manner, (3) changes in interest rates and interest rate relationships, (4) demand for products and services, (5) the degree of competition by traditional and nontraditional competitors, (6) changes in banking regulations, tax laws, prices, levies, and assessments, (7) the impact of technological advances, and (8) trends in customer behavior as well as their ability to repay loans. BOK Financial and its affiliates undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. REPORT OF MANAGEMENT ON 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 consolidated financial statements present fairly the financial conditions, results of operations and cash flows of BOK Financial and its subsidiaries at the dates and for the periods indicated. BOK Financial and its subsidiaries maintain a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with management's general or specific authorization, and are recorded as necessary to maintain accountability for assets and to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States. This system includes written policies and procedures, a corporate code of conduct, an internal audit program and standards for the hiring and training of qualified personnel. The Board of Directors of BOK Financial maintains a Risk Oversight and Audit Committee consisting of outside directors that meet periodically with management and BOK Financial's internal and independent auditors. The Committee considers the audit and nonaudit services to be performed by the independent auditors, makes arrangements for the internal and independent audits and recommends BOK Financial's selection of independent auditors. The Committee also reviews the results of the internal and independent audits, considers and approves certain of BOK Financial's accounting principles and practices, and reviews various shareholder reports and other reports and filings. Ernst & Young LLP, certified public accountants, have been engaged to audit the consolidated financial statements of BOK Financial and its subsidiaries. Their audit is conducted in accordance with auditing standards generally accepted in the United States and their report on BOK Financial's consolidated financial statements is set forth below. REPORT OF INDEPENDENT AUDITORS We have audited the accompanying consolidated balance sheets of BOK Financial Corporation as of December 31, 2000 and 1999, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BOK Financial Corporation at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Tulsa, Oklahoma January 23, 2001 BOK FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (In Thousands Except Per Share Data) 2000 1999 1998(1) ---------------------------------------- Interest Revenue Loans $454,077 $336,630 $267,458 Taxable securities 167,493 144,901 115,733 Tax-exempt securities 12,782 14,233 16,274 - ----------------------------------------------------------------------------------------------- Total securities 180,275 159,134 132,007 - ----------------------------------------------------------------------------------------------- Trading securities 1,416 2,291 1,046 Funds sold and resell agreements 2,962 2,219 2,321 - ----------------------------------------------------------------------------------------------- Total interest revenue 638,730 500,274 402,832 - ----------------------------------------------------------------------------------------------- Interest Expense Deposits 208,249 150,621 138,004 Borrowed funds 151,157 104,195 64,709 Subordinated debenture 10,437 9,334 9,693 - ----------------------------------------------------------------------------------------------- Total interest expense 369,843 264,150 212,406 - ----------------------------------------------------------------------------------------------- Net Interest Revenue 268,887 236,124 190,426 Provision for Loan Losses 17,204 10,365 14,591 - ----------------------------------------------------------------------------------------------- Net Interest Revenue After Provision for Loan Losses 251,683 225,759 175,835 - ----------------------------------------------------------------------------------------------- Other Operating Revenue Brokerage and trading revenue 16,074 16,233 15,301 Transaction card revenue 38,753 32,648 24,426 Trust fees and commissions 39,316 35,127 29,956 Service charges and fees on deposit accounts 42,932 41,067 33,920 Mortgage banking revenue 37,179 36,986 41,733 Leasing revenue 4,244 3,725 7,111 Other revenue 17,965 17,589 11,688 - ----------------------------------------------------------------------------------------------- Total fees and commissions 196,463 183,375 164,135 - ----------------------------------------------------------------------------------------------- Gain on student loan sales 529 600 1,548 Gain on loan securitization - 270 - Gain (loss) on sale of other assets (148) 4,626 - Gain (loss) on securities 2,059 (419) 9,337 - ----------------------------------------------------------------------------------------------- Total other operating revenue 198,903 188,452 175,020 - ----------------------------------------------------------------------------------------------- Other Operating Expense Personnel expense 146,215 136,010 109,437 Business promotion 8,395 9,077 8,220 Contribution of stock to BOk Charitable Foundation - - 2,257 Professional fees and services 9,618 9,584 9,781 Net occupancy, equipment and data processing expense 65,718 58,024 43,519 FDIC and other insurance 1,569 1,356 1,368 Printing, postage and supplies 11,260 11,599 9,524 Net gains and operating expenses on repossessed assets (1,283) (3,473) (474) Amortization on intangible assets 15,478 15,823 9,515 Mortgage banking costs 22,274 23,932 25,949 Provision for impairment of mortgage servicing rights 2,900 - (2,290) Other expense 20,671 18,584 17,189 - ----------------------------------------------------------------------------------------------- Total other operating expense 302,815 280,516 233,995 - ----------------------------------------------------------------------------------------------- Income Before Taxes 147,771 133,695 116,860 Federal and state income tax 47,631 44,469 37,249 - ----------------------------------------------------------------------------------------------- Net Income $100,140 $ 89,226 $ 79,611 - ----------------------------------------------------------------------------------------------- Earnings Per Share: Basic: Net income $2.01 $1.79 $1.59 - ----------------------------------------------------------------------------------------------- Diluted: Net income 1.80 1.60 1.42 - ----------------------------------------------------------------------------------------------- Average Shares Used in Computation: Basic 49,120 49,055 48,977 Diluted 55,589 55,852 55,883 - ----------------------------------------------------------------------------------------------- 1 Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data) December 31, ------------------------------ 2000 1999 -------------- --------------- Assets Cash and due from banks $ 701,424 $ 397,895 Funds sold and resell agreements 49,305 28,960 Trading securities 39,865 14,452 Securities: Available for sale 2,105,619 2,219,488 Available for sale securities pledged to creditors 658,201 369,216 Investment (fair value: 2000 - $233,867; 1999 - $211,624) 233,371 213,180 - ----------------------------------------------------------------------------------------- --------------- Total securities 2,997,191 2,801,884 - ----------------------------------------------------------------------------------------- --------------- Loans 5,517,862 4,643,489 Less reserve for loan losses 82,655 76,234 - ----------------------------------------------------------------------------------------- --------------- Net loans 5,435,207 4,567,255 - ----------------------------------------------------------------------------------------- --------------- Premises and equipment, net 132,066 119,239 Accrued revenue receivable 74,981 67,640 Excess cost over fair value of net assets acquired and core deposit premiums (net of accumulated amortization: 2000 - $80,770; 1999 - $65,292) 109,045 125,011 Mortgage servicing rights, net 110,791 114,134 Real estate and other repossessed assets 3,851 3,478 Bankers' acceptances 6,925 6,801 Other assets 87,683 127,248 - ----------------------------------------------------------------------------------------- --------------- Total assets $9,748,334 $8,373,997 - ----------------------------------------------------------------------------------------- --------------- Liabilities and Shareholders' Equity Noninterest-bearing demand deposits $1,243,766 $1,020,996 Interest-bearing deposits: Transaction 1,985,670 1,866,499 Savings 143,381 155,839 Time 2,673,188 2,219,850 - ----------------------------------------------------------------------------------------- --------------- Total deposits 6,046,005 5,263,184 - ----------------------------------------------------------------------------------------- --------------- Funds purchased and repurchase agreements 1,853,073 1,345,683 Other borrowings 882,204 938,020 Subordinated debenture 148,816 148,642 Accrued interest, taxes and expense 77,860 62,431 Bankers' acceptances 6,925 6,801 Other liabilities 29,875 52,072 - ----------------------------------------------------------------------------------------- --------------- Total liabilities 9,044,758 7,816,833 - ----------------------------------------------------------------------------------------- --------------- Shareholders' equity: Preferred stock 25 25 Common stock ($.00006 par value; 2,500,000,000 shares authorized; issued: 2000 - 49,706,055; 1999 - 49,382,262) 3 3 Capital surplus 278,882 274,980 Retained earnings 431,390 332,751 Treasury stock (shares at cost: 2000 - 487,553; 1999 - 316,325) (10,044) (7,018) Accumulated other comprehensive income (loss) 3,320 (43,577) - ----------------------------------------------------------------------------------------- --------------- Total shareholders' equity 703,576 557,164 - ----------------------------------------------------------------------------------------- --------------- Total liabilities and shareholders' equity $9,748,334 $8,373,997 - ----------------------------------------------------------------------------------------- ---------------
See accompanying notes to consolidated financial statements. BOK FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands) Preferred Stock(3) Common Stock(3) ---------------------------------- Shares Amount Shares Amount ---------------------------------- December 31, 1997 250,000 $ 23 47,002 $3 Comprehensive income: Net income - - - - Other comprehensive income, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 12 - Issue preferred stock - 2 - - Treasury stock purchase - - - - Issuance of common stock to Thrift Plan - - - - Exercise of stock options - - 234 - Tax benefit on exercise of stock options - - - - Payments on stock options notes receivable - - - - Common stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 69 - Common stock - - 795 - - ------------------------------------------------------------------------------- December 31, 1998 250,000 25 48,112 3 Comprehensive income: - - - - Net income Other comprehensive loss, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 9 - Treasury stock purchase - - - - Cancel treasury stock - - (725) - Issuance of common stock to Thrift Plan - - 17 - Exercise of stock options - - 480 - Tax benefit on exercise of stock options - - - - Common stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 57 - Common stock - - 1,432 - - ------------------------------------------------------------------------------- December 31, 1999 250,000 25 49,382 3 Comprehensive income: Net income - - - - Other comprehensive loss, net of tax: Unrealized gain on securities available for sale - - - - Total comprehensive income Director retainer shares - - 4 - Treasury stock purchase - - - - Exercise of stock options - - 294 - Tax benefit on exercise of stock options - - - - Preferred stock dividend - - - - Dividends paid in shares of common stock: Preferred stock - - 26 - - ------------------------------------------------------------------------------- December 31, 2000 250,000 $25 49,706 $3 - ------------------------------------------------------------------------------- (1) December 31, -------------------------- 2000 1999 1998 -------------------------- Reclassification adjustment: Unrealized gains (losses) on available for sale securities $78,759 $(90,852) $10,117 Tax (expense) benefit on unrealized gains (losses) on available for sale securities (30,467) 34,697 (3,332) Reclassification adjustment for (gains) losses realized and included in net income (2,059) 419 (9,337) Reclassification adjustment for tax expense (benefit) on realized (gains) losses 664 (138) 3,180 --------------------------- Net unrealized gains on securities $46,897 $(55,874) $ 628 -------------------------- 2 Notes receivable from exercise of stock options. 3 Restated for pooling of interest in 1999. See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued) (In Thousands) Accumulated Other Comprehensive Capital Retained Treasury Stock(3) Notes ------------------ Income(Loss)(1,3) Surplus(3)Earnings(3) Shares Amount Receivable(2,3)Total(3) - -------------------------------------------------------------------------------- $ 11,669 $211,883 $232,620 881 $ (4,314) $(4) $451,880 - - 79,611 - - - 79,611 628 - - - - - 628 --------- 80,239 --------- - 292 - - - - 292 - - - - - - 2 - - - 386 (9,138) - (9,138) - 94 - (56) 1,204 - 1,298 - 2,923 - 55 (1,355) - 1,568 - 1,014 - - - - 1,014 - - - - - 4 4 - - (2,344) - - - (2,344) - 1,500 (1,500) - - - - - 19,020 (30,022) (517) 10,980 - (22) - -------------------------------------------------------------------------------- 12,297 236,726 278,365 749 (2,623) - 524,793 - - 89,226 - - - 89,226 (55,874) - - - - - (55,874) --------- 33,352 --------- - 294 - - - - 294 - - - 74 (1,574) - (1,574) - (2,062) - (725) 2,062 - - - 406 - (1) 36 - 442 - 4,286 - 215 (4,823) - (537) - 3,138 - - - - 3,138 - - (2,734) - (2,734) - 1,500 (1,500) - - - 30,692 (30,606) 4 (96) - (10) - -------------------------------------------------------------------------------- (43,577) 274,980 332,751 316 (7,018) - 557,164 - - 100,140 - - - 100,140 46,897 - - - - - 46,897 --------- 147,037 --------- - 50 - (13) 263 - 313 - - - 151 (2,633) - (2,633) - 2,554 - 97 (1,868) - 686 - 1,010 - - - - 1,010 - (1) - - - (1) - 288 (1,500) (63) 1,212 - - - -------------------------------------------------------------------------------- $ 3,320 $278,882 $431,390 488 $(10,044) $ - $703,576 - -------------------------------------------------------------------------------- BOK FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) 2000 1999 19981 ------------ ------------ ------------- Cash Flows From Operating Activities: Net income $ 100,140 $ 89,226 $ 79,611 Adjustments to reconcile net income to net cash provided by operating activities: Provisions for loan losses 17,204 10,365 14,591 Provisions for mortgage servicing rights 2,900 - (2,290) Depreciation and amortization 54,444 41,088 39,962 Tax benefit on exercise of stock options 1,010 3,138 1,014 Tax accrual reversal 3,000 - - Net amortization of securities discounts and premiums (4,975) 1,413 701 Net gain on sale of assets (11,694) (15,039) (23,209) Contribution of stock to BOk Charitable Foundation - - 2,257 Mortgage loans originated for resale (531,471) (687,857) (922,585) Proceeds from sale of mortgage loans held for resale 547,140 738,109 913,700 (Increase) decrease in trading securities (25,132) 34,734 (36,139) (Increase) decrease in accrued revenue receivable (7,341) 21 (11,999) (Increase) decrease in other assets 73,177 (65,824) (14,971) Increase (decrease) in accrued interest, taxes and expense (18,393) 24,151 14,533 Increase (decrease) in other liabilities (15,992) 29,806 3,139 - ------------------------------------------------------------------------------- ------------ ------------- Net cash provided by operating activities 184,017 203,331 58,315 - ------------------------------------------------------------------------------- ------------ ------------- Cash Flows From Investing Activities: Proceeds from sales of investment securities 175 - - Proceeds from sales of available for sale securities 1,677,078 1,397,956 1,816,796 Proceeds from maturities of investment securities 41,764 59,684 33,163 Proceeds from maturities of available for sale securities 445,384 634,527 511,690 Purchases of investment securities (62,334) (45,330) (48,791) Purchases of available for sale securities (2,227,911) (2,223,829) (2,795,309) Loans originated or acquired net of principal collected (937,424) (1,045,516) (684,389) Proceeds from sales of assets 69,201 190,673 60,505 Purchases of assets (98,822) (93,755) (45,028) Cash and cash equivalents of subsidiaries and branches acquired and sold, net (14) 25,584 311,977 - ------------------------------------------------------------------------------- ------------ ------------- Net cash used by investing activities (1,092,903) (1,100,006) (839,386) - ------------------------------------------------------------------------------- ------------ ------------- Cash Flows From Financing Activities: Net increase (decrease) in demand deposits, transaction deposits, and savings accounts 329,483 (20,535) 118,411 Net increase in certificates of deposit 453,338 321,702 68,730 Net increase in other borrowings 451,574 554,433 675,128 Repurchase of subordinated debt - - (1,538) Issuance of preferred, common and treasury stock, net 999 823 3,138 Purchase of treasury stock (2,633) (1,574) (9,138) Dividends paid (1) (2,744) (2,344) Payments on notes receivable - - 4 - ------------------------------------------------------------------------------- ------------ ------------- Net cash provided by financing activities 1,232,760 852,105 852,391 - ------------------------------------------------------------------------------- ------------ ------------- Net increase (decrease) in cash and cash equivalents 323,874 (44,570) 71,320 Cash and cash equivalents at beginning of period 426,855 471,425 400,105 - ------------------------------------------------------------------------------- ------------ ------------- Cash and cash equivalents at end of period $ 750,729 $ 426,855 $ 471,425 - ------------------------------------------------------------------------------- ------------ ------------- Cash paid for interest $ 361,645 $ 265,548 $ 182,143 - ------------------------------------------------------------------------------- ------------ ------------- Cash paid for taxes 51,669 43,664 29,569 - ------------------------------------------------------------------------------- ------------ ------------- Net loans transferred to repossessed real estate 2,226 1,857 2,945 - ------------------------------------------------------------------------------- ------------ ------------- Payment of dividends in common stock 1,500 32,192 31,500 - ------------------------------------------------------------------------------- ------------ ------------- 1 Restated for pooling of interest in 1999.
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Consolidated Financial Statements of BOK Financial Corporation ("BOK Financial") have been prepared in conformity with accounting principles generally accepted in the United States, including general practices of the banking industry. The consolidated financial statements include the accounts of BOK Financial and its subsidiaries, principally Bank of Oklahoma, N.A. and its subsidiaries ("BOk"), Bank of Texas, N.A., Bank of Arkansas, N.A., Bank of Albuquerque, N.A. and BOSC, Inc. Certain prior year amounts have been reclassified to conform to current year classifications. Nature of Operations BOK Financial, through its subsidiaries, provides a wide range of financial services to commercial and industrial customers, other financial institutions and consumers throughout Oklahoma, Northwest Arkansas, North Texas and New Mexico. These services include depository and cash management; lending and lease financing; mortgage banking; securities brokerage, trading and underwriting; and personal and corporate trust. Use of Estimates Preparation of BOK Financial's consolidated financial statements requires management to make estimates of future economic activities, including interest rates, loan collectibility and prepayments and cash flows from customer accounts. These estimates are based upon current conditions and information available to management. Actual results may differ significantly from these estimates. Acquisitions Assets and liabilities acquired by purchase are recorded at fair values on the acquisition dates. Intangible assets are amortized using straight-line and accelerated methods over the estimated benefit periods. These periods range from 7 to 25 years for goodwill and 7 to 10 years for core deposit intangibles. The net book values of intangible assets are evaluated for impairment when economic conditions indicate an impairment may exist. These conditions would include an ongoing performance history and a forecast of anticipated performance that is significantly below management's expectations for acquired entities. Impairment would be determined by a comparison of the fair value of assets and liabilities of the acquired entity plus an estimate of current market premiums paid for similar entities. The Consolidated Statements of Earnings include the results of purchases from the dates of acquisition. The financial statements of companies acquired in pooling-of-interests transactions are combined with the Consolidated Financial Statements of BOK Financial at historical cost as if the mergers occurred at the beginning of the earliest period presented. Cash Equivalents Due from banks, funds sold (generally federal funds sold for one-day periods) and resell agreements (which generally mature within one to 30 days) are considered cash equivalents. Securities Securities are identified as trading, investment (held to maturity) or available for sale at the time of purchase based upon the intent of management, liquidity and capital requirements, regulatory limitations and other relevant factors. Trading securities, which are acquired for profit through resale, are carried at market value with unrealized gains and losses included in current period earnings. Investment securities are carried at amortized cost. Amortization is computed by methods which approximate level yield and is adjusted for changes in prepayment estimates. Investment securities may be sold or transferred to trading or available for sale classification in certain limited circumstances specified in generally accepted accounting principles. Securities identified as available for sale are carried at fair value. Unrealized gains and losses are recorded, net of deferred income taxes, as accumulated other comprehensive income (loss) in shareholders' equity. Realized gains and losses on sales of securities are based upon the amortized cost of the specific security sold. Available for sale securities are separately identified as pledged to creditors if the creditor has the right to sell or repledge the collateral. Loans Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower's difficulties, which may arise from any number of factors including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures. Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccrual status when, in the opinion of management, full collection of principal or interest is uncertain, generally when the collection of principal or interest is 90 days or more past due. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccrual status. Payments on nonaccrual loans are applied to principal or reported as interest income, according to management's judgment as to the collectibility of principal. Loan origination and commitment fees, and direct loan origination costs when significant, are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable. Mortgage loans held for sale are carried at the lower of aggregate cost or market value, including estimated losses on unfunded commitments and gains or losses on related forward sales contracts. Reserve for Loan Losses The adequacy of the reserve for loan losses is assessed by management based upon an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, and includes probable losses on both outstanding loans and unused commitments to provide financing. A consistent methodology has been developed that includes reserves assigned to specific criticized loans, general reserves that are based upon a statistical migration analysis for each category of loans, and a nonspecific allowance that is based upon an analysis of current economic conditions, loan concentrations, portfolio growth, and other relevant factors. The reserve for loan losses related to loans that are identified for evaluation in accordance with Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114"), is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreement. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. In accordance with the provisions of FAS 114, management has excluded small balance, homogeneous loans from the impairment evaluation specified in FAS 114. Such loans include 1-4 family mortgage loans, consumer loans, and commercial loans with committed amounts less than $1 million. The adequacy of the reserve for loan losses applicable to these loans is evaluated in accordance with generally accepted accounting principles and standards established by the banking regulatory authorities and adopted as policy by BOK Financial. A provision for loan losses is charged against earnings in amounts necessary to maintain an adequate reserve for loan losses. Loans are charged off when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value. Loans are evaluated quarterly and charge offs are taken in the quarter in which the loss is identified. Additionally, all unsecured or under-secured loans which are past due by 180 days or more are charged off within 30 days. Recoveries of loans previously charged off are added to the reserve. Asset Securitization BOK Financial periodically securitizes and sells pools of assets. These transactions are designed to comply with the requirements of Statement of Financial Accounting Standard No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," ("FAS 125") for treatment as a sale. As part of these sales, BOK Financial may retain the right to service the assets and a residual interest in excess cash flows generated by the assets. The fair value of these retained assets is determined by a discounting of expected future net cash to be received using assumed market interest rates for these instruments. Residual interests are carried at fair value. Changes in fair values are recorded in income. Servicing rights are carried at the lower of amortized cost or fair value. A valuation allowance is provided when amortized cost of servicing rights exceeds fair value. Real Estate and Other Repossessed Assets Real estate and other repossessed assets are assets acquired in partial or total forgiveness of debt. These assets are carried at the lower of cost, which is determined by fair value at date of foreclosure, or current fair value less estimated selling costs. Income generated by these assets is recognized as received, and operating expenses are recognized as incurred. Premises and Equipment Premises and equipment are carried at cost including capitalized interest, when appropriate, less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the estimated useful lives or remaining lease terms. Repair and maintenance costs are charged to expense as incurred. Mortgage Servicing Rights Capitalized mortgage servicing rights are carried at the lower of amortized cost, adjusted for the effect of hedging activities, or fair value. Amortization is determined in proportion to the projected cash flows over the estimated lives of the servicing portfolios. The actual cash flows are dependent upon the prepayment of the mortgage loans and may differ significantly from the estimates. Fair value is determined by discounting the estimated cash flows of servicing revenue, less projected servicing costs, using risk-adjusted rates, which is the assumed market rate for these instruments. Prepayment assumptions are based on industry consensus provided by independent reporting sources. Changes in current interest rates may significantly affect these assumptions by changing loan refinancing activity. Amortized cost and fair value are stratified by interest rate and loan type. A valuation allowance is provided when the net amortized cost of each strata exceeds the calculated fair value. Originated mortgage servicing rights are recognized when either mortgage loans are originated pursuant to an existing plan for sale or, if no such plan exists, when the mortgage loans are sold. Substantially all fixed rate mortgage loans originated by BOK Financial are sold under existing commitments. The fair value of the originated servicing rights is determined at closing based upon current market rates. Hedging of Mortgage Servicing Rights During 1998 through the first quarter of 2000, BOK Financial entered into futures contracts and call and put options on futures contracts to hedge against the risk of loss on mortgage servicing rights due to accelerated loan prepayments during periods of falling interest rates. Contracts on underlying securities which were expected to have a similar duration to the mortgage servicing portfolio, such as ten-year U.S. Treasury notes, were used for these hedges. The combination of contracts selected was expected to achieve a high degree of correlation between changes in the fair value of the mortgage servicing rights and changes in the market value of the contracts. These contracts were designated as hedges on the trade date. Both unrealized and realized gains and losses on futures contracts and option contracts were deferred as part of the capitalized mortgage servicing rights. These deferred gains and losses are amortized over the estimated life of the loan servicing portfolio. This derivatives-based hedging program was replaced in 2000. BOK Financial currently 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 recognize gains when necessary to offset losses on the mortgage servicing rights. Interest Rate Swaps and Forward Commitments Interest rate swaps and forward sales contracts are used as part of an interest rate risk management strategy. Interest rate swaps are used primarily to modify the interest expense of certain long-term, fixed rate assets and liabilities. Amounts payable to or receivable from the counterparties are reported in interest expense using the accrual method. Gains or losses realized from the early termination of interest rate swaps are deferred and amortized over the remaining life of the hedged asset or liability. In the event of the early redemption of hedged obligations, any realized or unrealized gain or loss from the swaps is recognized in income coincident with the redemption. The fair value of the swap agreements and changes in the fair value due to changes in market interest rates are not recognized in the financial statements. Forward sales contracts are used to hedge existing and anticipated loans in conjunction with mortgage banking activities. The fair value of these instruments is included in determining the adjustment of the loan held for sale portfolio to the lower of cost or market. Gains or losses on closed contracts are recognized when the underlying assets are disposed. The cost of terminating these contracts prior to their expiration dates is expensed when incurred. Federal and State Income Taxes BOK Financial utilizes the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the financial statement and their related tax basis using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. As changes in tax law or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. BOK Financial and its subsidiaries file consolidated tax returns. The subsidiaries provide for income taxes on a separate return basis, and remit to BOK Financial amounts determined to be currently payable. Employee Benefit Plans BOK Financial sponsors various plans, including a defined benefit pension plan ("Pension Plan"), qualified profit sharing plans ("Thrift Plans"), and employee healthcare plans. Employer contributions to the Thrift Plans, which match employee contributions subject to percentage and years of service limits, are expensed when incurred. Pension Plan costs, which are based upon actuarial computations of current costs, are expensed annually. Unrecognized prior service cost and net gains or losses are amortized on a straight-line basis over the estimated remaining lives of the participants. BOK Financial recognizes the expense of health care benefits on the accrual method. Employer contributions to the Pension Plan and various health care plans are in accordance with Federal income tax regulations. Executive Benefit Plans BOK Financial has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25") and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of employee stock options equals the market price of the underlying stock options on the date of grant, no compensation expense is recorded. BOK Financial has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("FAS 123"), included in Note 11. Fiduciary Services Fees and commissions on approximately $18 billion of assets managed by BOK Financial under various fiduciary arrangements are recognized on the accrual method. Effect of Pending Statements of Financial Accounting Standards During 1998, the Financial Accounting Standards Board adopted Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), subsequently amended by Statements No. 137 and 138. The effective date for FAS 133 was deferred until fiscal years beginning after June 15, 2000. BOK Financial adopted FAS 133 effective January 1, 2001. FAS 133 requires the recognition of all derivatives on the balance sheet at fair value. Derivatives that do not qualify for special hedge accounting treatment must be adjusted to fair value through income. If the derivative qualifies for hedge accounting, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against changes in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. BOK Financial recorded a one-time after-tax transition adjustment that will increase income in the first quarter of 2001 by less than $500 thousand for the adoption of FAS 133. The ongoing effect of FAS 133 may significantly increase earnings volatility in future periods. (2) ACQUISITIONS On May 14, 1999, BOK Financial paid $27 million to acquire all outstanding common shares of Chaparral Bancshares, Inc. and its subsidiaries, including Canyon Creek National Bank, (collectively "Canyon Creek"). On June 2, 1999, BOK Financial paid $17 million to acquire all outstanding stock of Mid-Cities Bancshares, Inc. and its subsidiaries (collectively "Mid-Cities"). On June 15, 1999, BOK Financial paid $32 million to acquire all outstanding stock of Swiss Avenue State Bank ("Swiss"). On December 4, 1998, BOK Financial, through Bank of Albuquerque, paid a premium of $34 million to Bank of America to assume the deposits and to acquire the premises and equipment and certain loans at 17 branches, primarily in Albuquerque, New Mexico. The above transactions were accounted for by the purchase method of accounting. Aggregate allocation of the purchase price to the net assets acquired in 1999 and 1998 were as follows (in thousands): Aggregate Acquisitions ------------------------ 1999 1998 ------------ ----------- Cash and cash equivalents $103,215 $ 9,029 Securities 146,402 - Loans 147,697 144,209 Less reserve for loan losses 1,525 - ------------ ----------- Loans, net 146,172 144,209 Premises and equipment 16,066 11,205 Core deposit premium 12,521 13,495 Other assets 5,574 233 ------------ ----------- Total assets acquired 429,950 178,171 Deposits: Noninterest bearing 51,835 47,361 Interest bearing 302,457 418,490 ------------ ----------- Total deposits 354,292 465,851 Borrowed funds 28,426 - Other liabilities 2,234 9 ------------ ----------- Net assets acquired 44,998 (287,689) Less purchase price 75,756 (267,189) ------------ ----------- Goodwill $ 30,758 $ 20,500 ------------ ----------- On June 30, 1999, BOK Financial issued 2,371,809 common shares to acquire First Muskogee Bancshares, Inc. and its subsidiary, First National Bank and Trust Company of Muskogee (collectively "First Muskogee") in a pooling of interests. Financial statements of BOK Financial for 1998 have been restated to reflect this merger. The following unaudited condensed consolidated pro forma statements of earnings for BOK Financial presents the effects on income had all of the purchase acquisitions described above occurred at the beginning of 1998: Condensed Consolidated Pro Forma Statements of Earnings For the Years ended December 31, 1999 and 1998 (In Thousands) (Unaudited) 1999 1998 ------------ ----------- Net interest revenue $240,796 $217,278 Provision for loan losses 10,397 17,551 - ------------------------------------ ------------ ----------- Net interest revenue after provision for loan losses 230,399 199,727 Other operating revenue 189,111 182,901 Other operating expense 284,332 260,058 - ------------------------------------ ------------ ----------- Income before taxes 135,178 122,570 Federal and state income tax 44,969 39,102 - ------------------------------------ ------------ ----------- Net income $ 90,209 $ 83,468 - ------------------------------------ ------------ ----------- Earnings per share: Basic net income $ 1.81 $ 1.67 Diluted net income 1.62 1.49 - ------------------------------------ ------------ ----------- Average shares: Basic 49,055 48,977 Diluted 55,852 55,883 - ------------------------------------ ------------ ----------- In 1999, BOK Financial acquired a mortgage bank office in the Kansas City area for $1.3 million. In 1998, BOK Financial completed the acquisitions of Leo Oppenheim & Co., a public finance firm, and a branch office in Bartlesville, Oklahoma which provided net cash of $36 million and deposits of $30 million. These acquisitions were not material to BOK Financial's financial position or results of operations. On January 11, 2001, BOK Financial paid $91 million to acquire CNBT Bancshares, Inc. and its subsidiary Citizen National Bank of Texas in Houston, Texas. Total consolidated assets and net assets of CNBT Bancshares, Inc. were $443 million and $36 million, respectively, at December 31, 2000. The acquisition will be accounted for as a purchase. (3) SECURITIES Investment Securities The amortized cost and fair values of investment securities are as follows (in thousands): December 31, --------------------------------------- --------------------------------------- 2000 1999 --------------------------------------- --------------------------------------- Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized Cost Value Gain Loss Cost Value Gain Loss --------------------------------------- --------------------------------------- U.S. Treasury $ - $ - $ - $ - $ 196 $ 198 $ 2 $ - Municipal and other tax exempt 207,177 207,641 1,847 (1,383) 186,177 184,748 696 (2,125) Mortgage-backed U.S. agency securities 11,541 11,567 64 (38) 18,051 17,926 70 (195) Other debt securities 14,653 14,659 6 - 8,756 8,752 1 (5) --------------------------------------- --------------------------------------- Total $233,371 $233,867 $1,917 $(1,421) $213,180 $211,624 $769 $(2,325) --------------------------------------- --------------------------------------
The amortized cost and fair values of investment securities at December 31, 2000, by contractual maturity, are as shown in the following table (dollars in thousands): Weighted Less than One to Five to Over Average One Year Five Years Ten Years Ten Years Total Maturity(4) ------------ -------------- ------------- ------------------------- ------------- Municipal and other tax exempt: Amortized cost $41,070 $123,546 $40,310 $2,251 $207,177 3.10 Fair value 40,888 123,873 40,662 2,218 207,641 Nominal yield (1) 6.75% 7.37% 7.87% 9.18% 7.36% Other debt securities: Amortized cost $ 9,531 $ 4,922 $ 125 $ 75 $ 14,653 1.53 Fair value 9,532 4,923 128 76 14,659 Nominal yield 6.32% 6.85% 7.00% 7.00% 6.50% ------------ -------------- ------------- ------------------------- ------------- Total fixed maturity securities: Amortized cost $50,601 $128,468 $40,435 $2,326 $221,830 3.00 Fair value 50,420 128,796 40,790 2,294 222,300 Nominal yield 6.67% 7.35% 7.87% 9.11% 7.31% ------------ -------------- ------------- ------------- Mortgage-backed securities: Amortized cost $ 11,541 -2 Fair value 11,567 Nominal yield (3) 6.89% ------------ Total investment securities: Amortized cost $233,371 Fair value 233,867 Nominal yield 7.29% ------------ 1 Calculated on a taxable equivalent basis using a 39% effective tax rate. 2 The average expected lives of mortgage-backed securities were 0.6 years based upon current prepayment assumptions. 3 The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. 4 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
During 2000, BOK Financial sold a mortgage-backed security with an amortized cost of $175 thousand. The acquisition cost of this security was $4.9 million. Therefore, this sale was permitted under the sales deemed to be at maturity provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Available for Sale Securities The amortized cost and fair value of available for sale securities are as follows (in thousands): December 31, ------------------------------------------------------------------------------------------ 2000 1999 --------------------------------------------- -------------------------------------------- Amortized Fair Gross Unrealized Amortized Fair Gross Unrealized Cost Value Gain Loss Cost Value Gain Loss ------------------------------------------------------------------------------------------ U.S. Treasury $ 85,656 $ 85,564 $ 71 $ (163) $ 112,902 $ 111,860 $ 10 $ (1,052) Municipal and other tax exempt 14,492 14,552 90 (30) 13,086 13,094 75 (67) Mortgage-backed securities: U. S. agencies 2,050,100 2,046,318 9,340 (13,122) 2,174,916 2,106,094 290 (69,112) Other 478,065 486,170 8,183 (78) 202,229 200,558 1 (1,672) - -------------------------------------------------------------------------------------------------------------------------- Total mortgage-backed securities 2,528,165 2,532,488 17,523 (13,200) 2,377,145 2,306,652 291 (70,784) - ----------------------------------------------------------------------------- -------------------------------------------- Other debt securities 242 245 3 - 353 353 2 (2) Equity securities and mutual funds 129,823 130,971 2,884 (1,736) 156,476 156,745 1,104 (835) - -------------------------------------------------------------------------------------------------------------------------- Total $2,758,378 $2,763,820 $20,571 $(15,129) $2,659,962 $2,588,704 $1,482 $(72,740) - --------------------------------------------------------------------------------------------------------------------------
The amortized cost and fair values of available for sale securities at December 31, 2000, by contractual maturity, are as shown in the following table (dollars in thousands): Weighted Less than One to Five to Over Average One Year Five Years Ten Years Ten Years Total Maturity(5) ------------------------- ---------------------------------------------- U.S. Treasuries: Amortized cost $66,297 $19,359 $ - $ - $ 85,656 0.56 Fair value 66,308 19,256 - - 85,564 Nominal yield 5.93% 5.12% - - 5.74% Municipal and other tax exempt: Amortized cost $ 8,511 $ 3,953 $2,028 $ - $ 14,492 2.02 Fair value 8,501 3,969 2,082 - 14,552 Nominal yield(1) 7.00% 7.21% 8.52% - 7.27% Other debt securities: Amortized cost $ 1 $ - $ 129 $112 $ 242 9.43 Fair value 1 - 130 114 245 Nominal yield(1) - - 8.42% 7.76% 8.01% ------------------------- ---------------------------------------------- Total fixed maturity securities: Amortized cost $74,809 $23,312 $2,157 $112 $ 100,390 0.82 Fair value 74,810 23,225 2,212 114 100,361 Nominal yield 6.05% 5.47% 8.51% 7.76% 5.97% ------------------------- ----------------------- Mortgage-backed securities: Amortized cost $2,528,165 -(2) Fair value 2,532,488 Nominal yield(4) 6.45% ------------ Equity securities and mutual funds: Amortized cost $ 129,823 -(3) Fair value 130,971 Nominal yield 5.32% ------------ Total available-for-sale securities: Amortized cost $2,758,378 Fair value 2,763,820 Nominal yield 6.38% ------------ 1 Calculated on a taxable equivalent basis using a 39% effective tax rate. 2 The average expected lives of mortgage-backed securities were 2.9 years based upon current prepayment assumptions. 3 Primarily common stock and preferred stock of U.S. Government agencies with no stated maturity. 4 The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. 5 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
Sales of available for sale securities resulted in gains and losses as follows (in thousands): 2000 1999 1998 ----------- ----------- ---------- Proceeds 1,677,078 $1,397,956 $1,816,796 Gross realized gains 6,969 4,069 15,508 Gross realized losses 4,910 4,488 6,171 Related federal and state income tax expense 664 (138) 3,180 (benefit) In addition to securities that have been reclassified as pledged to creditors, securities with an amortized cost of $1.7 billion at December 31, 2000 and 1999 have been pledged as collateral for repurchase agreements, public and trust funds on deposit and for other purposes as required by law. The secured parties do not have the right to sell or repledge these securities. (4) LOANS Significant components of the loan portfolio are as follows (in thousands): December 31, --------------------------------------------------------------------------------------------- 2000 1999 ------------------------------------------------ -------------------------------------------- Fixed Variable Non- Fixed Variable Non- Rate Rate accrual Total Rate Rate accrual Total ------------------------------------------------ -------------------------------------------- Commercial $ 510,427 $2,700,460 $37,146 $3,248,033 $ 489,545 $2,162,470 $12,686 $2,664,701 Commercial real estate 331,585 938,748 161 1,270,494 305,208 787,288 2,046 1,094,542 Residential mortgage 458,562 177,627 1,855 638,044 369,860 157,815 3,383 531,058 Residential mortgage - held 48,901 - - 48,901 57,057 - - 57,057 for sale Consumer 192,428 119,463 499 312,390 221,399 73,382 1,350 296,131 - ---------------------------------------------------------------------------------------------------------------------------- Total $1,541,903 $3,936,298 $39,661 $5,517,862 $1,443,069 $3,180,955 $19,465 $4,643,489 - ---------------------------------------------------------------------------------------------------------------------------- Foregone interest on nonaccrual loans $ 3,803 $ 2,321 - ----------------------------------------------------------------------------------------------------------------------------
The majority of the commercial and consumer loan portfolios and approximately 58% of the residential mortgage loan portfolio (excluding loans held for sale) are loans to businesses and individuals in Oklahoma. This geographic concentration subjects the loan portfolio to the general economic conditions within this area. Within the commercial loan classification, loans to energy-related businesses total $837 million, or 15% of total loans. Other notable segments include wholesale/ retail, $499 million; manufacturing, $421 million; agriculture, $185 million, which includes $147 million loans to the cattle industry; and services, $963 million, which include nursing homes of $124 million, hotels of $65 million and healthcare of $132 million. Approximately 41% of commercial real estate loans are secured by properties located in Oklahoma, primarily in the Tulsa or Oklahoma City metropolitan areas. An additional 30% of commercial real estate loans are secured by property located in Texas. The major components of these properties are multifamily residences, $271 million; construction and land development, $312 million; retail facilities, $205 million; and office buildings, $240 million. Included in loans at December 31 are loans to executive officers, directors or principal shareholders of BOK Financial, as defined in Regulation S-X of the Securities and Exchange Commission. Such loans have been made on substantially the same terms as those prevailing at the time for loans to other customers in comparable transactions. Information relating to loans to executive officers, directors or principal shareholders is summarized as follows (in thousands): 2000 1999 ------------ ------------ Beginning balance $94,861 $63,098 Advances 4,040 46,820 Payments (1,395) (11,205) Adjustments (885) (3,852) ------------------------------- ------------ ------------ Ending balance $96,621 $94,861 ------------------------------- ------------ ------------ Adjustments are primarily due to certain individuals being included for the first time or no longer being included as an executive officer or director of BOK Financial. The activity in the reserve for loan losses is summarized as follows (in thousands): 2000 1999 1998 -------------------------------- Beginning balance $76,234 $65,922 $54,044 Provision for loan losses 17,204 10,365 14,591 Loans charged off (14,801) (7,348) (7,596) Recoveries 4,018 5,770 4,883 Addition due to acquisitions - 1,525 - ----------------------------------------------------------- Ending balance $82,655 $76,234 $65,922 ----------------------------------------------------------- Investments in loans considered to be impaired under FAS 114 were as follows (in thousands): December 31, -------------------------------- 2000 1999 1998 -------------------------------- Investment in loans impaired under FAS 114 (all of which were on a nonaccrual basis) $37,822 $15,600 $11,320 Loans with specific reserves for loss 19,789 9,084 2,689 Specific reserve balance 7,991 2,468 1,437 No specific related reserve for loss 18,033 6,516 8,631 Average recorded investment in impaired loans 27,750 15,300 13,810 Interest income recognized on impaired loans during 2000, 1999 and 1998 was not significant. During 1999, BOK Financial sold approximately $100 million of automobile loans and retained the right to service the loans and a residual interest in certain excess cash flows generated by the loans. The proceeds of the sale were provided by the issuance of debt certificates that totaled $96 million by an independent special purpose entity. A spread account is maintained by a trustee to hold excess cash received. Funds are released from the spread account to BOK Financial as certain criteria are met. At December 31, 2000, the carrying values of the servicing rights asset and residual interest were $143 thousand and $5.2 million, respectively. The carrying value of the residual interest would be reduced to $5.0 million assuming a 250 basis point increase in the discount rate and a 25% increase in the assumed default rate on the underlying loans. Significant information and assumptions used to determine the value of these assets were: December 31, 2000 1999 --------------- ------------ Current outstanding loan principal $27,796 $56,661 Average interest rate on loans sold 11.26% 11.44% Current outstanding debt certificates $23,907 $52,605 Interest rate on debt certificates 6.07% 6.07% Current spread account balance $1,112 $4,587 Estimated remaining life including prepayments 18 Months 30 Months Discount rates: Servicing rights 10.00% 10.00% Residual interest 12.15% 12.00% Delinquency rate 1.81% 4.41% Net charge-offs $ 854 $ 656 Cash distributed to BOK Financial: Servicing fees $ 419 $ 723 Return on residual interest $5,741 $ - (5) PREMISES AND EQUIPMENT Premises and equipment at December 31 are summarized as follows (in thousands): December 31, ------------------------ 2000 1999 ----------- ------------ Land $ 22,838 $ 22,474 Buildings and improvements 82,646 65,646 Software 13,422 10,674 Furniture and equipment 92,566 82,714 - ---------------------------------- ----------- ------------ Subtotal 211,472 181,508 - ---------------------------------- ----------- ------------ Less accumulated depreciation 79,406 62,269 - ---------------------------------- ----------- ------------ Total $132,066 $119,239 - ---------------------------------- ----------- ------------ Depreciation expense of premises was $17.3 million, $13.3 million and $8.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. (6) MORTGAGE BANKING ACTIVITIES BOK Financial engages in mortgage-banking activities through the BOk Mortgage Division of BOk. Residential mortgage loans held for sale totaled $49 million and $57 million and outstanding mortgage loan commitments totaled $123 million at December 31, 2000 and 1999. Mortgage loan commitments are generally outstanding for 60 to 90 days and are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest rate fluctuations is partially hedged through the use of mortgage-backed securities forward sales contracts. These contracts set the price for loans which will be delivered in the next 60 to 90 days. At December 31, 2000, forward sales contracts totaled $57 million. Mortgage loans held for sale are carried at the lower of aggregate cost or market value, including estimated losses on unfunded commitments and gains or losses on forward sales contracts. At December 31, 2000, BOk owned the rights to service 93,299 mortgage loans with outstanding principal balances of $6.9 billion, including $167 million serviced for BOk, and held related funds for investors and borrowers of $79 million. The weighted average interest rate and remaining term was 7.47% and 271 months, respectively. Mortgage loans sold with recourse totaled $3.4 million at December 31, 2000. At December 31, 1999, BOk owned the rights to service mortgage loans with outstanding principal balances of $7.0 billion and held related funds for investors and borrowers of $94 million. The portfolio of mortgage servicing rights exposes BOk to interest rate risk. During periods of falling interest rates, mortgage loan prepayments increase. This reduces the value of the mortgage servicing rights. During 1998 through the first quarter of 2000, BOk used a combination of futures contracts and options related to 10-year U.S. Treasury securities to hedge this risk. The value of these derivative instruments moves inversely to the value of the mortgage servicing rights. See Note 1 for specific accounting policies for mortgage servicing rights and the related hedges. Activity in capitalized mortgage servicing rights and related valuation allowance during 2000, 1999 and 1998 are as follows (in thousands): Capitalized Mortgage Servicing Rights ----------------------------------Valuation Hedging Purchased Originated Total Allowance (Gain)/Loss Net ------------------------------------------------------------------- Balance at December 31, 1997 $78,961 $ 9,929 $ 88,890 $(5,000) $ - $ 83,890 Additions 9,443 14,355 23,798 - - 23,798 Amortization expense (15,185) (3,085) (18,270) - 739 (17,531) Provision for impairment - - - 2,290 - 2,290 Impairment charge-off (2,710) - (2,710) 2,710 - - Realized hedge gains - - - - (22,705) (22,705) Unrealized hedge gains - - - - (518) (518) - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 70,509 21,199 91,708 - (22,484) 69,224 Additions 16,509 11,073 27,582 - - 27,582 Amortization expense (12,106) (3,457) (15,563) - 734 (14,829) Realized hedge losses - - - 28,293 28,293 Unrealized hedge losses - - - 3,864 3,864 - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 74,912 28,815 103,727 - 10,407 114,134 Additions 4,518 9,198 13,716 - - 13,716 Amortization expense (10,192) (3,565) (13,757) - (1,445) (15,202) Provision for impairment - - - (2,900) - (2,900) Realized hedge losses - - - - 4,389 4,389 Unrealized hedge gains - - - - (3,346) (3,346) - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $69,238 $34,448 $103,686 $(2,900) $10,005 $110,791 - ------------------------------------------------------------------------------------------------------------- Estimated fair value of mortgage servicing rights at: December 31, 19981 $66,663 $23,527 $ 90,190 $ 90,190 December 31, 19991 $83,279 $37,547 $120,826 $120,826 December 31, 20001 $74,400 $42,125 $116,525 $116,525 - ------------------------------------------------------------------------------------------------------------- 1 Excludes approximately, $9 million, $8 million and $7 million at December 31, 1998, 1999 and 2000, respectively, of loan servicing rights on mortgage loans originated prior to the adoption of FAS 122.
Fair value is determined by discounting the projected net cash flows. Significant assumptions are: Discount rate - Risk adjusted rates by loan product, ranging from 9.00% to 20.00%. Prepayment rate - Industry consensus annual prepayment estimates ranging from 6.78% to 122.34% from an independent reporting source based upon loan interest rate, original term and loan type. Loan servicing costs - $40 to $50 per loan based upon loan type. Stratification of the mortgage loan servicing portfolio, outstanding principal of loans serviced, and related hedging information by interest rate at December 31, 2000 follows (in thousands): Less than 6.50% 6.50% - 7.49% 7.50% - 8.49% => 8.50% Total -------------------------------------------------------------------- Cost less accumulated amortization $ 9,622 $ 58,027 $ 33,299 $ 2,738 $ 103,686 Deferred hedge losses - 8,193 1,812 - 10,005 - ------------------------------------------------------------------------------------------------------------- Adjusted cost $ 9,622 $ 66,220 $ 35,111 $ 2,738 $ 113,691 - ------------------------------------------------------------------------------------------------------------- Fair value $ 11,002 $ 67,701 $ 33,702 $ 4,120 $ 116,525 - ------------------------------------------------------------------------------------------------------------- Impairment(2) $ 300 $ - $ 2,600 $ - $ 2,900 - ------------------------------------------------------------------------------------------------------------- Outstanding principal of loans serviced(1) $606,400 $3,574,100 $2,007,000 $262,500 $6,450,000 - ------------------------------------------------------------------------------------------------------------- 1 Excludes outstanding principal of $425 million for loans serviced by BOk for which there are no capitalized mortgage servicing rights. 2 Impairment is determined by both an interest rate and loan type stratification.
(7) DEPOSITS Interest expense on deposits is summarized as follows (in thousands): 2000 1999 1998 ----------------------------------- Transaction deposits $ 55,019 $ 46,510 $ 37,148 Savings 2,703 2,971 3,837 Time: Certificates of deposits under 56,570 41,418 43,789 $100,000 Certificates of deposits $100,000 81,721 49,166 42,110 and over Other time deposits 12,236 10,556 11,120 - ------------------------------------------------------------- Total time 150,527 101,140 97,019 - ------------------------------------------------------------- Total $208,249 $150,621 $138,004 - ------------------------------------------------------------- The aggregate amounts of time deposits in denominations of $100,000 or more at December 31, 2000 and 1999 were $1.4 billion and $1.2 billion, respectively. Time deposit maturities are as follows: 2001 - $2 billion, 2002 - $446 million, 2003 - $95 million, 2004 - $84 million, 2005 - $2 million, and $449 thousand thereafter. Interest expense on time deposits during 2000 and 1999 was reduced by net income from interest rate swaps of $876 thousand and $79 thousand, respectively. (8) OTHER BORROWINGS Information relating to other borrowings is summarized as follows (dollars in thousands): Daily average Rate at Maximum out- Period-End ---------------- end of standing at Balance Balance Rate year any month-end ----------------------------------------------------- 2000: Funds purchased and repurchase agreements $1,853,073 $1,444,830 6.33% 7.03% $1,853,073 Other 1,031,020 1,038,647 6.75 5.61 1,153,444 - ------------------------------------------------------ Total $2,884,093 $2,483,477 6.51 6.53 2,884,093 - -------------------------------------------------------------------------------- 1999: Funds purchased and repurchase agreements $1,345,683 $1,146,918 5.12% 6.58% $1,384,596 Other 1,086,662 960,606 5.71 5.91 1,086,662 - ------------------------------------------------------ Total $2,432,345 $2,107,524 5.39 6.28 2,432,345 - -------------------------------------------------------------------------------- 1998: Funds purchased and repurchase agreements $1,040,683 $ 733,031 5.38% 4.98% $1,040,683 Other 807,268 563,188 6.20 5.98 807,268 - ------------------------------------------------------ Total $1,847,951 $1,296,219 5.74 5.41 1,847,951 - -------------------------------------------------------------------------------- Other borrowings at December 31, 2000 included $759 million in advances from the Federal Home Loan Bank. These advances, which are used for funding purposes, include term funds of $419 million bearing interest from 5.81% - 7.80%. Of these term funds, $312 million mature in 2001, $24 million mature in 2002, $14 million mature in 2003, $840 thousand mature in 2004, and $70 million mature in 2005. In accordance with policies of the Federal Home Loan Bank, BOK Financial has granted a blanket pledge of eligible assets (generally unencumbered U.S. Treasury and mortgage-backed securities, 1-4 family loans and multifamily loans) as collateral for these advances. The unused credit available to BOK Financial at December 31, 2000 pursuant to the Federal Home Loan Bank's collateral policies is $309 million. BOK Financial has a revolving, unsecured credit agreement from certain banks at December 31, 2000 with available credit of $125 million that expires in November 2002; $95 million was outstanding at year-end. Interest is based on either LIBOR or a base rate, plus a defined margin which is determined by the amount of principal outstanding and BOK Financial's debt rating. The base rate is defined as the greater of either the daily federal funds rate or the prime rate. Interest is paid quarterly. Facility fees are paid quarterly on the average daily undrawn commitment at a rate of 0.20% - 0.30% as determined by BOK Financial's current debt rating. This credit agreement also includes, among other things, certain restrictive covenants relative to additional borrowings, capital levels, maintenance of certain net worth ratios and dividends on capital stock. BOK Financial filed a shelf registration statement with the Securities and Exchange Commission for the issuance of up to $250 million of senior debt securities during the fourth quarter of 1998. These securities are direct, unsecured obligations, and are not insured by the Federal Deposit Insurance Corporation or guaranteed by any governmental agency. None of this debt has been issued at December 31, 2000. BOk issued $150 million of subordinated debentures in 1997 at a discounted cost of 7.2%, which had a balance at December 31, 2000 of $149 million and will mature in 2007. Interest expense on the subordinated debenture was reduced by net income from interest rate swaps of $428 thousand during 2000. Funds purchased generally mature within one to 90 days from the transaction date. At December 31, 2000, securities sold under agreements to repurchase totaled $984 million with related accrued interest payable of $4.1 million. Additional information relating to repurchase agreements at December 31, 2000 is as follows (dollars in thousands): Carrying Market Repurchase Average Security Sold/Maturity Value Value Liability1 Rate - -------------------------------------------------------------------------------- U.S. Agency Securities: Overnight $ 487,775 $ 488,193 $ 357,434 6.44% Term of up to 30 days 20,264 20,009 611 5.85 Term of 30 to 90 days 658,079 658,201 629,576 6.62 - -------------------------------------------------------------------- Total Agency Securities $1,166,118 $1,166,403 $987,621 6.56 - -------------------------------------------------------------------- 1 BOK Financial maintains control over the securities underlying overnight repurchase agreements and generally transfers control over securities underlying longer-term dealer repurchase agreements to the respective counterparty. (9) FEDERAL AND STATE INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands): December 31, ---------------------- 2000 1999 ---------------------- Deferred tax liabilities: Available for sale securities mark-to-market $ 4,000 $ 400 Pension contributions in excess of book expense 4,500 3,800 Securities valuation adjustments 9,300 4,200 Mortgage servicing 20,400 14,800 Other 5,300 3,400 - ------------------------------------------------------------- Total deferred tax liabilities 43,500 26,600 - ------------------------------------------------------------- Deferred tax assets: Available for sale securities mark-to-market 1,800 28,000 Loan loss reserve 31,600 28,800 Valuation adjustments 9,700 15,400 Book expense in excess of tax 3,600 4,200 Deferred book income 6,500 3,000 Other 8,400 4,300 - ------------------------------------------------------------- Total deferred tax assets 61,600 83,700 - ------------------------------------------------------------- Deferred tax assets in excess of deferred tax liabilities $18,100 $57,100 - ------------------------------------------------------------- The reconciliations of income attributable to continuing operations computed at the U.S. federal statutory tax rates to income tax expense are as follows (in thousands): Years ended December 31, ------------------------------- 2000 1999 1998 ------------------------------- Amount: Federal statutory tax $51,720 $46,793 $40,901 Tax exempt revenue (3,250) (3,715) (4,110) Effect of state income taxes, net of federal benefit 2,540 3,050 3,533 Goodwill amortization 3,144 2,987 2,296 Utilization of tax credits (600) (786) (750) Reduction of tax accrual (3,000) - - Income taxed at shareholder level - (1,026) (1,713) Other, net (2,923) (2,834) (2,908) - ------------------------------------------------------------- Total $47,631 $44,469 $37,249 - ------------------------------------------------------------- The Internal Revenue Service closed its examination for 1994 and 1995 during 1998 and 1999, respectively, with no material impact on the financial statements. In addition, the Internal Revenue Service closed its examination of 1996 during the first quarter of 2000. As a result of the outcome of this examination, BOK Financial reduced its federal income tax expense by $3.0 million. At December 31, 2000, BOK Financial has a capital loss carryforward of $3.9 million for income tax purposes that expires in years 2004 and 2005. The carryforward results from the hedging losses incurred related to the mortgage servicing portfolio. A valuation allowance has not been established since it is more likely than not that this benefit will be realized. The significant components of the provision for income taxes attributable to continuing operations for BOK Financial are shown below (in thousands): Years ended December 31, ----------------------------------- 2000 1999 1998 ----------------------------------- Current: Federal $37,258 $40,860 $41,415 State 1,112 2,948 4,937 - ------------------------------------------------------------ Total current 38,370 43,808 46,352 - ------------------------------------------------------------ Deferred: Federal 7,833 559 (7,699) State 1,428 102 (1,404) - ------------------------------------------------------------ Total deferred 9,261 661 (9,103) - ------------------------------------------------------------ Total income tax $47,631 $44,469 $37,249 - ------------------------------------------------------------ Years ended December 31, ------------------------------- 2000 1999 1998 ------------------------------- Percent of pretax income: Federal statutory rate 35% 35% 35% Tax-exempt revenue (2) (3) (4) Effect of state income taxes, net of federal benefit 2 3 3 Goodwill amortization 2 2 2 Utilization of tax credits (1) (1) (1) Reduction of tax accrual (2) - - Income taxed at shareholder level - (1) (1) Other, net (2) (2) (2) - -------------------------------------------------------------- Total 32% 33% 32% - -------------------------------------------------------------- (10) EMPLOYEE BENEFIT BOK Financial sponsors a defined benefit Pension Plan for all employees who satisfy certain age and service requirements. The following table presents information regarding this plan (dollars in thousands): December 31, -------------------------- 2000 1999 -------------------------- Change in projected benefit obligation: Projected benefit obligation, at beginning of year$ 16,892 $ 15,622 Service cost 3,245 2,908 Interest cost 1,291 1,041 Actuarial (gain) loss 326 (612) Benefits paid (1,917) (2,067) - ------------------------------------------------------------------------------ Projected benefit obligation at end of year $ 19,837 $ 16,892 - ------------------------------------------------------------------------------ Change in plan assets: Plan assets at fair value, at beginning of year $ 25,403 $ 20,419 Actual return on plan assets (1,063) 1,848 Company contributions 3,661 5,203 Benefits paid (1,917) (2,067) - ------------------------------------------------------------------------------ Plan assets at fair value at end of year $ 26,084 $ 25,403 - ------------------------------------------------------------------------------ Reconciliation of prepaid (accrued) and total amount recognized: Benefit obligation $(19,837) $(16,892) Fair value of assets 26,084 25,403 - ------------------------------------------------------------------------------ Funded status of the plan 6,247 8,511 Unrecognized net loss 4,412 464 Unrecognized prior service cost 681 741 - ------------------------------------------------------------------------------ Prepaid pension costs $ 11,340 $ 9,716 - ------------------------------------------------------------------------------ Components of net periodic benefit costs: Service cost $ 3,245 $ 2,908 Interest cost 1,291 1,041 Expected return on plan assets (2,559) (1,850) Amortization of unrecognized amounts: Net loss - 81 Prior service cost 60 60 - ------------------------------------------------------------------------------ Net periodic pension cost $ 2,037 $ 2,240 - ------------------------------------------------------------------------------ Weighted-average assumptions as of December 31: Discount rate 8.00% 8.00% Expected return on plan assets 10.00% 10.00% Rate of compensation increase 5.25% 5.25% Assets of the Pension Plan consist primarily of shares in cash management funds, common stock and bond funds, and guaranteed investment contract funds. Benefits are based on the employee's age and length of service. Employee contributions to the Thrift Plans, defined contribution plans, are matched by BOK Financial up to 5% of base compensation, based upon years of service. Participants may direct the investment of their accounts in a variety of options, including BOK Financial Common Stock. Employer contributions vest over five years. Expenses incurred by BOK Financial for the Thrift Plans totaled $2.3 million, $2.4 million and $1.9 million for 2000, 1999 and 1998, respectively. BOK Financial also sponsors a defined benefit post-retirement employee medical plan which pays 50 percent of annual medical insurance premiums for retirees who meet certain age and service requirements. Assets of the retiree medical plan consist primarily of shares in a cash management fund. Eligibility for the post-retirement plan is limited to current retirees and certain employees currently age 60 or older. Under various performance incentive plans, participating employees may be granted awards based on defined formulas or other criteria. Earnings were charged $22.2 million in 2000, $19.3 million in 1999 and $14.9 million in 1998, for such awards. (11) EXECUTIVE BENEFIT PLANS The Board of Directors of BOK Financial has approved various stock option plans. The number of options awarded and the employees to receive the options are determined by the Chairman of the Board and the President, subject to approval of the Board of Directors or a committee thereof. Options awarded under these plans are subject to vesting requirements. Generally, one-seventh of the options awarded vest annually and expire three years after vesting. The following table presents options outstanding during 1999 and 2000 under these plans: Weighted- Average Exercise Number Price ---------------------- Options outstanding at December 31, 1997 2,706,701 11.45 Options awarded 684,067 18.19 Options exercised (245,717) 8.94 Options forfeited (170,650) 12.02 Options expired (980) 8.98 - --------------------------------------------------------- Options outstanding at December 31, 1998 2,973,421 13.87 Options awarded 536,475 21.41 Options exercised (434,865) 9.37 Options forfeited (115,249) 15.20 Options expired (585) 9.27 - --------------------------------------------------------- Options outstanding at December 31, 1999 2,959,197 15.68 Options awarded 584,325 20.64 Options exercised (222,713) 9.16 Options forfeited (163,732) 16.72 Options expired (822) 8.06 - --------------------------------------------------------- Options outstanding at December 31, 2000 3,156,255 16.81 - --------------------------------------------------------- Options vested at December 31, 2000 1,082,680 13.77 - --------------------------------------------------------- The following table summarizes information concerning currently outstanding and vested options: Options Outstanding Options Vested - ------------------------------------------ ------------------------ Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life(years) Price Vested Price - ------------------------------------------------------------------- $ 6.10 75,510 1.42 $ 6.10 75,510 $ 6.10 9.06 - 10.91 872,012 2.81 9.87 543,245 9.75 18.19 545,578 3.85 18.19 223,245 18.19 19.55 - 21.41 1,663,155 5.32 20.49 240,680 21.14 Under APB 25 no compensation expense is recognized at the date of grant since the exercise price of BOK Financial's employee stock option equals the market price of the underlying stock on the date of grant. FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires disclosure of pro forma information regarding net income and earnings per share as if BOK Financial accounted for employee stock options granted subsequent to December 31, 1994 under the fair value method of the Statement. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: 2000 1999 1998 --------- --------- --------- Average risk-free interest rate 5.99% 6.12% 4.71% Dividend yield None None None Volatility factors .194 .192 .198 Weighted-average expected life 7 years 7 years 7 years The weighted-average fair value of options granted during 2000, 1999 and 1998 was $6.09, $6.16 and $6.36, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because BOK Financial's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The following table represents the required pro forma disclosures for options granted subsequent to December 31, 1994 (in thousands, except per share data: 20001 19991 19981 ------------------------------- Pro forma net income $98,665 $87,736 $78,504 Pro forma earnings per share: Basic $ 1.98 $ 1.76 $ 1.58 Diluted 1.77 1.57 1.41 1 Because Statement 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until 2003. (12) COMMITMENTS AND CONTINGENT LIABILITIES In the ordinary course of business, BOK Financial and its subsidiaries are subject to legal actions and complaints. Management believes, based upon the opinion of counsel, that the actions and liability or loss, if any, resulting from the final outcomes of the proceedings, will not be material in the aggregate. BOk is obligated under a long-term lease for its bank premises located in downtown Tulsa. The lease term, which began November 1, 1976, is for fifty-seven years with options to terminate at the end of the thirty-seventh and forty-seventh years. Annual base rent is $3.3 million. BOk subleases portions of its space for annual rents of $193 thousand in years 2001 through 2003, $175 thousand for 2004 and $171 thousand in 2005. Net rent expense on this lease was $3.1 million in 2000, $2.8 million in 1999, and $2.7 million in 1998. Total rent expense for BOK Financial was $10.5 million in 2000, $10.2 million in 1999 and $9.0 million in 1998. At December 31, 2000, the future minimum lease payments for equipment and premises under operating leases were as follows: $10 million in 2001, $9 million in 2002, $7 million in 2003, $6 million in 2004, $5 million in 2005 and a total of $98 million thereafter. BOk and Williams Companies, Inc. guaranteed 30 percent and 70 percent, respectively, of the $14 million debt, which matures May 15, 2007, and operating deficit of two parking facilities operated by the Tulsa Parking Authority. Total expenditures related to this guarantee were $319 thousand in 2000, $273 thousand in 1999 and $281 thousand in 1998. The Federal Reserve Bank requires member banks to maintain certain minimum average cash balances. These balances were approximately $231 million for 2000 and $165 million for 1999. (13) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK BOK Financial is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to manage interest rate risk. Those financial instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in BOK Financial's Consolidated Balance Sheets. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the notional amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2000, outstanding commitments totaled $2.2 billion. Since some of the commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the borrower. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Since the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. At December 31, 2000, outstanding standby letters of credit totaled $167 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At December 31, 2000, outstanding commercial letters of credit totaled $6 million. BOK Financial uses interest rate swaps in managing its interest rate risk. At December 31, 2000, the notional amount of BOK Financial's interest rate swaps totaled $497 million with related credit exposure, represented by the fair value of the contracts, of $8 million. During 2000 and 1999, income from the swaps exceeded costs by $2.2 million and $1.4 million, respectively, which increased net interest revenue. Scheduled repricing periods for the swaps are as follows (notional value in thousands): 31-90 91-365 Over days days 1 year Total -------------------------------------------- Pay floating $(438,400) $(28,000) $ - $(466,400) Receive fixed - - 466,400 466,400 Pay fixed - (4,114) (26,500) (30,614) Receive floating 30,614 - - 30,614 - ------------------------------------------------------------ Total $(407,786) $(32,114) $439,900 $ - - ------------------------------------------------------------ The expiration dates of the swap contracts are designed to match the estimated maturity dates of the underlying assets and liabilities and matures as follows: $4 million in 2001, $204 million in 2002, $52 million in 2003, $60 million in 2004, $17 million in 2006, and $160 million in 2007. BOK Financial utilizes securities forward sales contracts associated with its mortgage banking activities as described in Note 6. BOK Financial has commitments to purchase $85 million of "to be issued" mortgage-backed securities in March 2001. (14) SHAREHOLDERS' EQUITY Preferred Stock One billion shares of preferred stock with a par value of $0.00005 per share are authorized. A single series of 250,000,000 shares designated as Series A Preferred Stock ("Series A Preferred Stock") is currently issued and outstanding. The Series A Preferred Stock has no voting rights except as otherwise provided by Oklahoma corporate law and may be converted into one share of Common Stock for each 41 shares of Series A Preferred Stock at the option of the holder. Dividends are cumulative at an annual rate of ten percent of the $0.06 per share liquidation preference value when declared and are payable in cash. Aggregate liquidation preference is $15 million. During 2000, 1999 and 1998, 88,628 shares, 57,340 shares and 68,765 shares, respectively, of BOK Financial common stock were issued in payment of dividends on the Series A Preferred Stock in lieu of cash by mutual agreement of BOK Financial and the holders of the Series A Preferred Stock. Kaiser owns substantially all Series A Preferred Stock. These shares were valued at $1.5 million in 2000, 1999 and 1998, based on average market price, as defined, for a 65 business day period preceding declaration. Various officers own 125 nonvoting units in an entity owned by BOk. These units are eligible for an annual, cumulative distribution of $8 per unit and have a preferred value upon liquidation of $100 per unit. Common Stock Common stock consists of 2.5 billion authorized shares, $0.00006 par value. Holders of common shares are entitled to one vote per share at the election of the Board of Directors and on any question arising at any shareholders' meeting and to receive dividends when and as declared. No common stock dividends can be paid unless all accrued dividends on the Series A Preferred Stock have been paid. The present policy of BOK Financial is to retain earnings for capital and future growth, and management has no current plans to recommend payment of cash dividends on common stock. Additionally, regulations restrict the ability of national banks and bank holding companies to pay dividends and BOK Financial's credit agreement restricts the payment of dividends by the holding company. During 1999 and 1998, 3% dividends payable in shares of BOK Financial common stock were declared and paid. The shares issued were valued at $31 million and $30 million, respectively, based on the average closing bid/ask prices on the day preceding declaration. No dividends were paid in 2000. All share and per share amounts for years previous to 1999 have been retroactively adjusted for a two-for-one stock split effected in the form of a stock dividend declared January 26, 1999 for stockholders of record on February 8, 1999. Subsidiary Banks The amounts of dividends which BOK Financial's subsidiary banks can declare and the amounts of loans the subsidiary banks can extend to affiliates are limited by various federal and state banking regulations. Generally, dividends declared during a calendar year are limited to net profits, as defined, for the year plus retained profits for the preceding two years. The amounts of dividends are further restricted by minimum capital requirements. Pursuant to the most restrictive of the regulations at December 31, 2000, BOK Financial's subsidiary banks could declare dividends up to $92 million without prior regulatory approval. The subsidiary banks declared and paid dividends of $8 million in 2000, $63 million in 1999 and $26 million in 1998. Loans to a single affiliate may not exceed 10.0% and loans to all affiliates may not exceed 20.0% of unimpaired capital and surplus, as defined. Additionally, loans to affiliates must be fully secured. As of December 31, 2000 and 1999, these loans totaled $27 million and $35 million, respectively, including $9 million to consolidated entities in 1999. Total loan commitments to affiliates at December 31, 2000 were $82 million. Regulatory Capital BOK Financial and its banking subsidiaries are subject to various capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that could have a material effect on BOK Financial's operations. These capital requirements include quantitative measures of assets, liabilities, and certain off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. For a banking institution to qualify as well capitalized, its Tier I, Total and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. Tier I capital consists primarily of common stockholders' equity, excluding unrealized gains or losses on available for sale securities, less goodwill, core deposit premiums, and certain other intangible assets. Total capital consists primarily of Tier I capital plus preferred stock, subordinated debt and reserves for loan losses, subject to certain limitations. All of BOK Financial's banking subsidiaries exceeded the regulatory definition of well capitalized. December 31, --------------------------------------- 2000 1999 --------------------------------------- Amount Ratio Amount Ratio --------------------------------------- (Dollars in thousands) Total Capital (to Risk Weighted Assets): Consolidated $823,063 11.23% $700,875 10.72% BOk 700,380 11.43 594,182 10.80 Bank of Texas 105,188 11.66 87,299 12.41 Bank of Albuquerque 60,182 13.23 57,451 16.04 Bank of Arkansas 12,442 15.76 11,569 15.73 Tier I Capital (to Risk Weighted Assets): Consolidated $591,185 8.06% $475,687 7.27% BOk 485,492 7.93 383,255 6.96 Bank of Texas 93,899 10.41 78,382 11.15 Bank of Albuquerque 57,560 12.66 56,075 15.65 Bank of Arkansas 11,454 14.51 10,639 14.47 Tier I Capital (to Average Assets): Consolidated $591,185 6.51% $475,687 5.92% BOk 485,492 6.59 383,255 5.88 Bank of Texas 93,899 8.58 78,382 8.19 Bank of Albuquerque 57,560 6.32 56,075 6.78 Bank of Arkansas 11,454 8.05 10,639 9.86 (15) EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per share (dollars in thousands except share data): Years ended December 31, -------------------------------------------- 2000 1999 1998 -------------------------------------------- Numerator: Net income $100,140 $89,226 $79,611 Preferred stock dividends (1,500) (1,500) (1,500) - --------------------------------------------------------------------------------------------------------- Numerator for basic earnings per share - income available to common stockholders 98,640 87,726 78,111 - --------------------------------------------------------------------------------------------------------- Effect of dilutive securities: Preferred stock dividends 1,500 1,500 1,500 - --------------------------------------------------------------------------------------------------------- Numerator for diluted earnings per share - income available to common stockholders after assumed conversion $100,140 $89,226 $79,611 - --------------------------------------------------------------------------------------------------------- Denominator: Denominator for basic earnings per share - weighted average shares 49,119,790 49,054,573 48,977,283 Effect of dilutive securities: Employee stock options(1) 319,946 647,633 756,662 Convertible preferred stock 6,149,365 6,149,365 6,149,365 - --------------------------------------------------------------------------------------------------------- Dilutive potential common shares 6,469,311 6,796,998 6,906,027 - --------------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 55,589,101 55,851,571 55,883,310 - --------------------------------------------------------------------------------------------------------- Basic earnings per share $2.01 $1.79 $1.59 - --------------------------------------------------------------------------------------------------------- Diluted earnings per share $1.80 $1.60 $1.42 - --------------------------------------------------------------------------------------------------------- 1 Excludes employee stock options with exercise price 1,660,657 611,974 - greater than current market price
(16) REPORTABLE SEGMENTS BOK Financial operates four principal lines of business under its Bank of Oklahoma franchise: corporate banking, consumer banking, mortgage banking and trust services. It also operates a fifth principal line of business, regional banks, which includes all banking functions for Bank of Albuquerque, Bank of Arkansas and Bank of Texas. These five principal lines of business combined account for approximately 87% of total revenue. Other lines of business include the TransFund ATM network and BOSC, Inc. The Corporate Banking segment consists of eight operating units that provide credit and lease financing, deposit and cash management, and international collection services to commercial and industrial customers and to other financial institutions in Oklahoma and surrounding states. The Consumer Banking segment consists of two operating units which provide direct and indirect consumer loans and deposit services to individuals primarily within Oklahoma. The Mortgage Banking segment consists of two operating units that originate a full range of mortgage products from federally sponsored programs to "jumbo loans" on higher priced homes in BOK Financial's primary market areas. The Mortgage Banking segment also services mortgage loans acquired from throughout the United States. The Trust Services segment consists of one operating unit that provides financial services to both individual and corporate clients. Individual financial services include personal trust management, administration of estates and management of investment and custodial accounts. Individual financial services also include lending and investment services to select individuals. Corporate financial services include administration of employee benefit plans, transfer and paying agent services and investment advisory services. Regional Banks include Bank of Arkansas, Bank of Albuquerque and Bank of Texas. BOK Financial identifies reportable segments by type of service provided for the Mortgage Banking and the Trust Services segments and by type of customer for the Corporate Banking and Consumer Banking segments. Regional Banks are identified by legal entity. Operating results are adjusted for intercompany loan participations and allocated service costs and management fees. BOK Financial evaluates performance and allocates resources based upon a measurement of performance after the allocation of certain indirect expenses, taxes and capital cost. Capital is assigned to the lines of business based on an internal allocation method that reflects management's assessment of risk. An additional amount of capital is assigned to the regional banks based upon BOK Financial's investment in these entities. The accounting policies of the reportable segments generally follow those described in the summary of significant account policies except interest income is reported on a fully tax-equivalent basis, loan losses are based on actual net amounts charged off and the amortization of intangible assets is generally excluded. The cost of funds provided from one segment to another is transfer-priced at rates that approximate market for funds with similar duration. Assessment of performance is based on net interest revenue after internal funds transfer pricing. Nonreportable business segments include TransFund ATM networks and BOSC, Inc. The sources of revenue in these segments include interest, commissions earned on securities transactions, securities trading gains or losses, and fees earned on various banking activities, including merchant discounts and interchange fees. BOK Financial has not made any significant investments in long-term assets other than financial instruments, including core deposit intangible assets and purchased mortgage servicing rights. Substantially all revenue is from domestic customers. No single external customer accounts for more than 10% of total revenue. All Corporate Consumer Mortgage Trust Regional Other/ Banking Banking Banking Services Banks Eliminations Total ----------------------------------------------------------------------------------------------- Year ended December 31, 2000 Net interest revenue/(expense) from external sources $ 235,014 $ (33,260) $ 16,435 $ 3,429 $ 97,261 $(49,992) $ 268,887 Net interest revenue/(expense) from internal sources (121,430) 85,329 (15,006) 8,968 (18,250) 60,389 - - ---------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 113,584 52,069 1,429 12,397 79,011 10,397 268,887 Provision for loan losses 3,957 3,432 57 3 3,533 6,222 17,204 Operating revenue 27,843 24,657 39,740 40,263 13,207 51,134 196,844 Securities gains/(losses) - - 5,257 - (356) (2,842) 2,059 Operating expense 52,666 45,606 38,028 36,277 63,894 63,444 299,915 Provision for impairment of mortgage servicing rights - - 2,900 - - - 2,900 Income taxes 32,989 10,771 2,116 6,372 10,567 (15,184) 47,631 - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 51,815 $ 16,917 $ 3,325 $ 10,008 $ 13,868 $ 4,207 $ 100,140 - ---------------------------------------------------------------------------------------------------------------------------- Average assets $3,801,209 $1,813,303 $412,218 $355,585 $2,381,886 $(72,697) $8,691,504 Average equity 411,214 54,706 32,333 38,756 269,762 (198,529) 608,242 Performance measurements: Return on assets 1.36% 0.93% 0.81% 2.81% 0.58% - 1.15% Return on equity 12.60% 30.92% 10.28% 25.82% 5.14% - 16.46% Efficiency ratio 37.24% 59.44% 92.37% 68.89% 69.29% - 64.40%
Reconciliation to Consolidated Financial Statements Other Other Net Interest Operating Operating Average Revenue Revenue Expense Assets -------------------------------------------------- Total reportable segments $258,490 $150,611 $239,371 $8,764,201 Total nonreportable segments 722 49,660 37,408 28,975 Unallocated items: Tax-equivalent adjustment 7,853 - - - Funds management 23,047 (1,929) 10,780 178,860 All others (including eliminations), net (21,225) 561 15,256 (280,532) - -------------------------------------------------------------------------------- BOK Financial consolidated $268,887 $198,903 $302,815 $8,691,504 - -------------------------------------------------------------------------------- All Corporate Consumer Mortgage Trust Regional Other/ Banking Banking Banking Services Banks Eliminations Total -------------------------------------------------------------------------------------------------- Year ended December 31, 1999 Net interest revenue/(expense) from external sources $ 188,417 $ (29,279) $ 11,627 $ 3,625 $ 67,055 $ (5,321) $ 236,124 Net interest revenue/(expense) from internal sources (86,972) 70,665 (8,296) 7,208 (7,596) 24,991 - - -------------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 101,445 41,386 3,331 10,833 59,459 19,670 236,124 Provision for loan losses (1,106) 3,047 82 70 36 8,236 10,365 Operating revenue 30,500 23,408 39,533 36,769 11,462 47,199 188,871 Securities gains/(losses) - - - - (53) (366) (419) Operating expense 48,943 42,562 39,754 34,065 56,249 58,943 280,516 Income taxes 32,718 7,463 1,178 5,239 7,178 (9,307) 44,469 - -------------------------------------------------------------------------------------------------------------------------------- Net income $ 51,390 $ 11,722 $ 1,850 $ 8,228 $ 7,405 $ 8,631 $ 89,226 - -------------------------------------------------------------------------------------------------------------------------------- Average assets $3,381,502 $1,728,209 $355,888 $332,839 $1,807,963 $ 6,649 $7,613,050 Average equity 352,396 46,098 32,010 34,300 206,336 (128,748) 542,392 Performance measurements: Return on assets 1.52% 0.68% 0.52% 2.47% 0.41% - 1.17% Return on equity 14.58% 25.43% 5.78% 23.99% 3.59% - 16.45% Efficiency ratio 37.09% 65.69% 92.74% 71.56% 79.31% - 66.00%
Reconciliation to Consolidated Financial Statements Other Other Net Interest Operating Operating Average Revenue Revenue Expense Assets -------------------------------------------------- Total reportable segments $216,454 $141,619 $221,573 $7,606,401 Total nonreportable segments 1,210 44,537 35,696 59,503 Unallocated items: Tax-equivalent adjustment 8,380 - - - Funds management 28,979 598 8,637 122,407 All others (including eliminations), net (18,899) 1,698 14,610 (175,261) - -------------------------------------------------------------------------------- BOK Financial consolidated $236,124 $188,452 $280,516 $7,613,050 - -------------------------------------------------------------------------------- All Corporate Consumer Mortgage Trust Regional Other/ Banking Banking Banking Services Banks Eliminations Total -------------------------------------------------------------------------------------------------- Year ended December 31, 1998 Net interest revenue/(expense) from external sources $ 154,757 $ (35,355) $ 16,133 $ 1,831 $ 29,457 $ 23,603 $ 190,426 Net interest revenue/(expense) from internal sources (68,539) 75,445 (10,456) 6,468 (1,673) (1,245) - - ------------------------------------------------------------------------------------------------------------------------------- Total net interest revenue 86,218 40,090 5,677 8,299 27,784 22,358 190,426 Provision for loan losses 62 2,103 129 124 188 11,985 14,591 Operating revenue 27,838 22,371 44,379 31,567 4,213 35,315 165,683 Securities gains/(losses) - - - - 613 8,724 9,337 Operating expense 51,190 47,368 41,926 30,985 21,562 43,254 236,285 Provision for impairment of mortgage servicing rights - - (2,290) - - - (2,290) Income taxes 24,431 5,053 4,003 3,406 5,118 (4,762) 37,249 - ------------------------------------------------------------------------------------------------------------------------------- Net income $ 38,373 $ 7,937 $ 6,288 $ 5,351 $ 5,742 $ 15,920 $ 79,611 - ------------------------------------------------------------------------------------------------------------------------------- Average assets $2,718,472 $1,785,025 $367,934 $292,175 $644,235 $138,173 $5,946,014 Average equity 271,420 43,640 30,229 27,243 85,205 28,142 485,879 Performance measurements: Return on assets 1.41% 0.44% 1.71% 1.83% 0.89% - 1.34% Return on equity 14.14% 18.19% 20.80% 19.64% 6.74% - 16.38% Efficiency ratio 44.88% 75.84% 83.76% 77.72% 67.39% - 66.35%
Reconciliation to Consolidated Financial Statements Other Other Net Interest Operating Operating Average Revenue Revenue Expense Assets --------------------------------------------------- Total reportable segments $168,068 $130,981 $190,741 $5,807,841 Total nonreportable segments 886 33,566 26,695 37,826 Unallocated items: Tax-equivalent adjustment 9,427 - - - Funds management 31,097 12,095 10,692 138,191 All others (including eliminations), net (19,052) (1,622) 5,867 (37,844) - -------------------------------------------------------------------------------- BOK Financial consolidated $190,426 $175,020 $233,995 $5,946,014 - -------------------------------------------------------------------------------- (17) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying values and estimated fair values of financial instruments as of December 31, 2000 and 1999 (dollars in thousands): Range of Average Estimated Carrying Contractual Repricing Discount Fair Value Yields (in years) Rate Value ------------------------------------------------------------------- 2000: Cash and cash equivalents $ 750,729 $ 750,729 Securities 3,037,056 3,037,552 Loans: Commercial 3,248,033 4.50 - 17.63% 0.43 6.20 - 9.15% 3,321,380 Commercial real estate 1,270,494 7.00 - 14.00 1.26 8.89 - 9.08 1,262,690 Residential mortgage 638,044 3.81 - 13.40 1.61 7.41 - 7.58 612,616 Residential mortgage - held for sale 48,901 - - - 48,901 Consumer 312,390 4.00 - 21.00 2.35 8.10 - 14.00 302,230 - ------------------------------------------------------------------------------------------------------------- Total loans 5,517,862 5,547,817 Reserve for loan losses (82,655) - - ------------------------------------------------------------------------------------------------------------- Net loans 5,435,207 5,547,817 Deposits with no stated maturity 3,372,817 - - - 3,372,817 Time deposits 2,673,188 2.00 - 7.40 0.54 3.55 - 6.49 2,685,773 Other borrowings 2,735,277 5.94 - 9.89 0.14 5.62 - 7.35 2,722,214 Subordinated debt 148,816 7.03 6.27 5.94 165,946 - ------------------------------------------------------------------------------------------------------------- 1999: Cash and cash equivalents $ 426,855 - - - $ 426,855 Securities 2,816,336 - - - 2,814,780 Loans: Commercial 2,664,701 4.50 - 17.00% .56 5.70 - 8.65% 2,662,515 Commercial real estate 1,094,542 5.34 - 13.00 1.41 8.39 - 8.58 1,091,407 Residential mortgage 531,058 3.81 - 14.25 2.21 6.02 - 8.47 520,643 Residential mortgage - held for sale 57,057 - - - 57,057 Consumer 296,131 6.51 - 18.25 2.27 7.96 - 13.50 288,402 - ------------------------------------------------------------------------------------------------------------- Total loans 4,643,489 4,620,024 Reserve for loan losses (76,234) - - ------------------------------------------------------------------------------------------------------------- Net loans 4,567,255 4,620,024 Deposits with no stated maturity 3,043,334 - - - 3,043,334 Time deposits 2,219,850 2.18 - 6.71 .62 5.45 - 6.40 2,206,447 Other borrowings 2,283,703 4.94 - 8.35 .19 4.74 - 7.44 2,263,433 Subordinated debt 148,642 6.29 7.46 7.24 139,267 - -------------------------------------------------------------------------------------------------------------
The preceding table presents the estimated fair values of financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involved significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, BOK Financial does not know whether the fair values shown above represent values at which the respective financial instruments could be sold individually or in the aggregate. The following methods and assumptions were used in estimating the fair value of these financial instruments: Cash and Cash Equivalents The book value reported in the consolidated balance sheet for cash and short-term instruments approximates those assets' fair values. Securities The fair values of securities are based on quoted market prices or dealer quotes, when available. If quotes are not available, fair values are based on quoted prices of comparable instruments. Loans The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates currently being offered for loans with similar remaining terms to maturity and credit risk, adjusted for the impact of interest rate floors and ceilings. The fair values of classified loans were estimated to approximate their carrying values less loan loss reserves allocated to these loans of $26 million and $12 million at December 31, 2000 and 1999, respectively. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments and hedging transactions. Deposits The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions. Statement of Financial Accounting Standard No. 107, "Disclosures about Fair Value of Financial Instruments," ("FAS 107") defines the estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, to equal the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, FAS 107 prohibits adjusting fair value for the expected benefit of these deposits. Accordingly, the positive effect of such deposits is not included in this table. Other Borrowings and Subordinated Debenture The fair values of these instruments are based upon discounted cash flow analyses using interest rates currently being offered on similar instruments. Off-Balance-Sheet Instruments The fair values of commercial loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of these off-balance-sheet instruments were not significant at December 31, 2000 and 1999. Residential mortgage loan commitments are included in determining the fair value of the mortgage loans held for sale. The fair values of interest rate swaps are based on pricing models using current assumptions to arrive at replacement cost. The estimated fair value of interest rate swaps were $8.3 million and $9.2 million at December 31, 2000 and 1999, respectively. (18) PARENT COMPANY ONLY FINANCIAL STATEMENTS Summarized financial information for BOK Financial - Parent Company Only follows: Balance Sheets (In Thousands) December 31, ---------------------------- 2000 1999 ---------------------------- Assets Cash and cash equivalents $ 9,755 $ 12,489 Securities - available for sale 12,016 9,459 Investment in subsidiaries 777,231 638,850 Other assets 1,795 3,034 - -------------------------------------------------------------------------------- Total assets $800,797 $663,832 - -------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Other borrowings $ 95,132 $105,132 Other liabilities 2,089 1,536 - -------------------------------------------------------------------------------- Total liabilities 97,221 106,668 - -------------------------------------------------------------------------------- Preferred stock 25 25 Common stock 3 3 Capital surplus 278,882 274,980 Retained earnings 431,390 332,751 Treasury stock (10,044) (7,018) Accumulated other comprehensive income (loss) 3,320 (43,577) - -------------------------------------------------------------------------------- Total shareholders' equity 703,576 557,164 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $800,797 $663,832 - -------------------------------------------------------------------------------- Statements of Earnings (In Thousands) 2000 1999 1998 ------------------------------ Dividends, interest and fees received from $ 8,082 $63,556 $30,861 subsidiaries Other operating revenue 637 2,327 1,717 - -------------------------------------------------------------------------------- Total revenue 8,719 65,883 32,578 - -------------------------------------------------------------------------------- Interest expense 7,551 6,225 2,469 Personnel expense - 9 579 Professional fees and services 728 600 670 Contribution of stock to BOk Charitable Foundation - - 2,257 Other operating expense 45 80 116 - -------------------------------------------------------------------------------- Total expense 8,324 6,914 6,091 - -------------------------------------------------------------------------------- Income before taxes and equity in undistributed income of subsidiaries 395 58,969 26,487 Federal and state income tax credit (3,520) (3,243) (3,093) - -------------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries 3,915 62,212 29,580 Equity in undistributed income of subsidiaries 96,225 27,014 50,031 - -------------------------------------------------------------------------------- Net income $100,140 $89,226 $79,611 - -------------------------------------------------------------------------------- Statements of Cash Flows (In Thousands) 2000 1999 1998 ---------------------------- Cash flows from operating activities: Net income $100,140 $89,226 $79,611 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed loss of subsidiaries (96,225) (27,014) (50,030) Tax benefit on exercise of stock options 1,010 3,138 1,014 Contribution of stock to BOk Charitable Foundation - - 2,257 (Increase) decrease in other assets 1,239 1,036 (373) Increase (decrease) in other liabilities (44) (1,980) 2,593 - -------------------------------------------------------------------------------- Net cash provided by operating activities 6,120 64,406 35,072 - -------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from maturities of available for sale - 9,881 - securities Purchases of available for sale securities (1,019) - - Investment in subsidiaries 3,800 (72,293) (85,842) - -------------------------------------------------------------------------------- Net cash provided (used) by investing activities 2,781 (62,412) (85,842) - -------------------------------------------------------------------------------- Cash flows from financing activities: Increase (decrease) in short-term borrowings (10,000) 13,228 59,245 Issuance of preferred, common and treasury stock, net 999 823 3,138 Purchase treasury stock (2,633) (1,574) (9,138) Cash dividends (1) (2,744) (2,344) Payments on notes receivable - - 4 - -------------------------------------------------------------------------------- Net cash provided (used) by financing activities (11,635) 9,733 50,905 - -------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (2,734) 11,727 135 Cash and cash equivalents at beginning of period 12,489 762 627 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 9,755 $12,489 762 - -------------------------------------------------------------------------------- Payment of dividends in common stock $ 1,500 $32,192 $31,500 - -------------------------------------------------------------------------------- Cash paid for interest $ 7,741 $ 5,933 $ 2,364 - -------------------------------------------------------------------------------- BOK FINANCIAL CORPORATION Annual Financial Summary - Unaudited Consolidated Daily Average Balances, Average Yields and Rates (Dollars in Thousands Except Per Share Data) 2000 --------------------------------- Average Revenue/ Yield/ Balance Expense(1) Rate --------------------------------- Assets Taxable securities $2,587,183 $167,493 6.47% Tax-exempt securities(1) 269,731 19,577 7.26 - --------------------------------------------------------------------------------------- Total securities 2,856,914 187,070 6.55 - --------------------------------------------------------------------------------------- Trading securities 15,633 1,450 9.28 Funds sold and resell agreements 46,219 2,962 6.41 Loans(2) 4,934,462 455,101 9.22 Less reserve for loan losses 80,447 - --------------------------------------------------------------------------------------- Loans, net of reserve 4,854,015 455,101 9.38 - --------------------------------------------------------------------------------------- Total earning assets 7,772,781 646,583 8.32 - --------------------------------------------------------------------------------------- Cash and other assets 918,723 - --------------------------------------------------------------------------------------- Total assets $8,691,504 - --------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Transaction deposits $1,889,806 $ 55,019 2.91% Savings deposits 151,870 2,703 1.78 Time deposits 2,495,038 150,527 6.03 - --------------------------------------------------------------------------------------- Total interest-bearing deposits 4,536,714 208,249 4.59 - --------------------------------------------------------------------------------------- Other borrowings 2,334,749 151,157 6.47 Subordinated debenture 148,728 10,437 7.02 - --------------------------------------------------------------------------------------- Total interest-bearing liabilities 7,020,191 369,843 5.27 - --------------------------------------------------------------------------------------- Demand deposits 980,401 Other liabilities 82,670 Shareholders' equity 608,242 - --------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $8,691,504 - --------------------------------------------------------------------------------------- Tax-equivalent Net Interest Revenue $276,740 3.05% Tax-equivalent Net Interest Revenue to Earning Assets 3.56 Less tax-equivalent adjustment 7,853 - --------------------------------------------------------------------------------------- Net Interest Revenue 268,887 Provision for loan losses 17,204 Other operating revenue 198,903 Other operating expense 302,815 - --------------------------------------------------------------------------------------- Income before taxes 147,771 Federal and state income tax 47,631 - --------------------------------------------------------------------------------------- Net Income $100,140 - --------------------------------------------------------------------------------------- 1 Tax equivalent at the statutory federal and state rates of 38.9% for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. 2 The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income. See Note 1 of Notes to the Consolidated Financial Statements for a description of income recognition policy. 3 Excludes $3,262 of nonrecurring foregone interest in 1998.
Annual Financial Summary - Unaudited, (continued) Consolidated Daily Average Balances, Average Yields and Rates 1999 1998 - -------------------------------------------------------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense(1) Rate Balance Expense(1) Rate - ----------------------------------------- -------------------------------------- $2,383,198 $144,901 6.08% $1,877,515 $115,733 6.16% 288,094 21,785 7.56 330,576 25,207 7.63 - -------------------------------------------------------------------------------- 2,671,292 166,686 6.24 2,208,091 140,940 6.38 - -------------------------------------------------------------------------------- 37,508 2,291 6.11 20,038 1,046 5.22 43,373 2,219 5.12 41,109 2,321 5.65 4,046,920 337,458 8.34 3,070,245 267,952 8.623 72,306 59,480 - -------------------------------------------------------------------------------- 3,974,614 337,458 8.49 3,010,765 267,952 8.793 - -------------------------------------------------------------------------------- 6,726,787 508,654 7.56 5,280,003 412,259 7.753 - -------------------------------------------------------------------------------- 886,263 666,011 - -------------------------------------------------------------------------------- $7,613,050 $5,946,014 - -------------------------------------------------------------------------------- $1,717,314 $ 46,510 2.71% $1,216,230 $ 37,148 3.05% 161,484 2,971 1.84 152,830 3,837 2.51 1,983,829 101,140 5.10 1,787,668 97,019 5.43 - -------------------------------------------------------------------------------- 3,862,627 150,621 3.90 3,156,728 138,004 4.37 - -------------------------------------------------------------------------------- 1,959,015 104,195 5.32 1,147,815 64,709 5.64 148,509 9,334 6.29 148,404 9,693 6.53 - -------------------------------------------------------------------------------- 5,970,151 264,150 4.42 4,452,947 212,406 4.77 - -------------------------------------------------------------------------------- 999,311 933,927 101,196 73,261 542,392 485,879 - -------------------------------------------------------------------------------- $7,613,050 $5,946,014 - -------------------------------------------------------------------------------- $244,504 3.14% $199,853 2.98%3 3.63 3.723 8,380 9,427 - -------------------------------------------------------------------------------- 236,124 190,426 10,365 14,591 188,452 175,020 280,516 233,995 - -------------------------------------------------------------------------------- 133,695 116,860 44,469 37,249 - -------------------------------------------------------------------------------- $ 89,226 $ 79,611 - -------------------------------------------------------------------------------- BOK FINANCIAL CORPORATION Quarterly Financial Summary - Unaudited Consolidated Daily Average Balances, Average Yields and Rates (Dollars in Thousands Except Per Share Data) Three Months Ended --------------------------------------------------------------------- December 31, 2000 September 30, 2000 ---------------------------------- ---------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense(1) Rate Balance Expense(1) Rate ---------------------------------- ---------------------------------- Assets Taxable securities $2,654,996 $ 43,345 6.49% $2,520,917 $ 41,135 6.49% Tax-exempt securities(1) 276,478 5,172 7.44 274,402 4,692 6.80 -------------------------------------------------------------------------------------- ---------------------------------- Total securities 2,931,474 48,517 6.58 2,795,319 45,827 6.52 -------------------------------------------------------------------------------------- ---------------------------------- Trading securities 18,458 405 8.73 16,873 370 8.72 Funds sold 45,310 788 6.92 47,053 791 6.69 Loans(2) 5,265,300 125,854 9.51 5,020,994 118,523 9.39 Less reserve for loan losses 83,246 81,194 -------------------------------------------------------------------------------------- ---------------------------------- Loans, net of reserve 5,182,054 125,854 9.66 4,939,800 118,523 9.55 -------------------------------------------------------------------------------------- ---------------------------------- Total earning assets 8,177,296 175,564 8.54 7,799,045 165,511 8.44 -------------------------------------------------------------------------------------- ---------------------------------- Cash and other assets 955,024 910,737 -------------------------------------------------------------------------------------- ---------------------------------- Total assets $9,132,320 $8,709,782 -------------------------------------------------------------------------------------- ---------------------------------- Liabilities and Shareholders' Equity Transaction deposits $1,910,167 $ 15,646 3.26% $1,916,712 $ 13,684 2.84% Savings deposits 143,969 673 1.86 151,385 700 1.84 Other time deposits 2,671,285 43,237 6.44 2,510,655 39,475 6.26 -------------------------------------------------------------------------------------- ---------------------------------- Total interest-bearing deposits 4,725,421 59,556 5.01 4,578,752 53,859 4.68 -------------------------------------------------------------------------------------- ---------------------------------- Other borrowings 2,503,706 42,080 6.69 2,299,155 38,867 6.73 Subordinated debenture 148,794 2,667 7.13 148,750 2,704 7.23 -------------------------------------------------------------------------------------- ---------------------------------- Total interest-bearing liabilities 7,377,921 104,303 5.62 7,026,657 95,430 5.40 -------------------------------------------------------------------------------------- ---------------------------------- Demand deposits 1,002,969 974,478 Other liabilities 86,403 87,439 Shareholders' equity 665,027 621,208 -------------------------------------------------------------------------------------- ---------------------------------- Total liabilities and shareholders' equity $9,132,320 $8,709,782 -------------------------------------------------------------------------------------- ---------------------------------- Tax-equivalent Net Interest Revenue1 $ 71,261 2.92% $ 70,081 3.04% Tax-equivalent Net Interest Revenue1 to Earning Assets 3.47 3.57 Less tax-equivalent adjustment1 2,069 1,934 -------------------------------------------------------------------------------------- ---------------------------------- Net Interest Revenue 69,192 68,147 Provision for loan losses 6,000 5,031 Other operating revenue 54,924 49,840 Other operating expense 79,318 73,964 -------------------------------------------------------------------------------------- ---------------------------------- Income before taxes 38,798 38,992 Federal and state income tax 13,302 13,355 -------------------------------------------------------------------------------------- ---------------------------------- Net Income $ 25,496 $ 25,637 -------------------------------------------------------------------------------------- ---------------------------------- Earnings Per Average Common Share Equivalent: Net income: Basic $0.51 $0.51 -------------------------------------------------------------------------------------- --------------------------------- Diluted $0.46 $0.46 -------------------------------------------------------------------------------------- --------------------------------- 1 Tax equivalent at the statutory federal and state rates of 38.9% for the periods presented. The taxable equivalent adjustments shown are for comparative purposes. 2 The loan averages included loans on which the accrual of interest has been discounted and are stated net of unearned income. See Note 1 of Notes to the Consolidated Financial Statements for a description of income recognition policy.
Quarterly Financial Summary - Unaudited, (continued) Consolidated Daily Average Balances, Average Yields and Rates Three Months Ended - ------------------------------------------------------------------------------------------------------ June 30, 2000 March 31, 2000 December 31, 1999 - --------------------------------- ----------------------------------- -------------------------------- Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense(1) Rate - --------------------------------- ----------------------------------- -------------------------------- $2,625,306 $42,738 6.55% $2,547,499 $40,275 6.36% $2,453,800 $38,381 6.21% 267,320 5,111 7.69 260,593 4,602 7.10 259,760 4,656 7.11 - --------------------------------- ----------------------------------- -------------------------------- 2,892,626 47,849 6.65 2,808,092 44,877 6.43 2,713,560 43,037 6.29 - --------------------------------- ----------------------------------- -------------------------------- 12,562 315 10.09 14,593 360 9.92 17,845 390 8.67 44,731 680 6.11 47,782 703 5.92 37,650 552 5.82 4,796,948 109,453 9.18 4,650,020 101,271 8.76 4,480,283 97,563 8.64 79,503 77,808 76,166 - --------------------------------- ----------------------------------- -------------------------------- 4,717,445 109,453 9.33 4,572,212 101,271 8.91 4,404,117 97,563 8.79 - --------------------------------- ----------------------------------- -------------------------------- 7,667,364 158,297 8.30 7,442,679 147,211 7.96 7,173,172 141,542 7.83 - --------------------------------- ----------------------------------- -------------------------------- 920,169 909,666 922,100 - --------------------------------- ----------------------------------- -------------------------------- $8,587,533 $8,352,345 $8,095,272 - --------------------------------- ----------------------------------- -------------------------------- $1,875,180 $12,888 2.76% $1,856,644 $12,801 2.77% $1,885,730 $ 12,639 2.66% 156,369 658 1.69 155,848 672 1.73 159,442 721 1.79 2,431,978 35,252 5.83 2,364,126 32,563 5.54 2,206,956 29,109 5.23 - --------------------------------- ----------------------------------- -------------------------------- 4,463,527 48,798 4.40 4,376,618 46,036 4.23 4,252,128 42,469 3.96 - --------------------------------- ----------------------------------- -------------------------------- 2,318,426 37,094 6.44 2,216,244 33,116 6.01 2,071,787 29,715 5.69 148,705 2,552 6.90 148,663 2,514 6.80 148,620 2,387 6.37 - --------------------------------- ----------------------------------- -------------------------------- 6,930,658 88,444 5.13 6,741,525 81,666 4.87 6,472,535 74,571 4.57 - --------------------------------- ----------------------------------- -------------------------------- 989,716 954,307 977,825 82,438 95,268 91,489 584,721 561,245 553,423 - --------------------------------- ----------------------------------- -------------------------------- $8,587,533 $8,352,345 $8,095,272 - --------------------------------- ----------------------------------- -------------------------------- $69,853 3.17% $65,545 3.08% $66,971 3.26% 3.66 3.54 3.70 1,983 1,867 1,828 - --------------------------------- ----------------------------------- -------------------------------- 67,870 63,678 65,143 3,534 2,639 2,255 47,348 46,791 46,721 74,917 74,616 74,257 - --------------------------------- ----------------------------------- -------------------------------- 36,767 33,214 35,352 12,573 8,401 12,155 - --------------------------------- ----------------------------------- -------------------------------- $24,194 $24,813 $23,197 - --------------------------------- ----------------------------------- -------------------------------- $0.48 $0.50 $0.46 - --------------------------------- ----------------------------------- -------------------------------- $0.43 $0.45 $0.42 - --------------------------------- ----------------------------------- --------------------------------
BOK Financial Corporation Board of Directors W. Wayne Allen 1 Retired Chairman of the Board Phillips Petroleum Company C. Fred Ball, Jr. 3 President & CEO Bank of Texas, N.A. James E. Barnes Retired Chairman, President & CEO MAPCO, Inc. Sharon J. Bell 1 Managing Partner Rogers & Bell Peter C. Boylan, III 1 President & COO TV Guide, Inc. Luke R. Corbett Chairman & CEO Kerr-McGee Corporation Dr. Robert H. Donaldson 1 Trustees Professor of Political Science University of Tulsa William E. Durrett Senior Chairman American Fidelity Corp. James O. Goodwin 1 Chief Executive Officer The Oklahoma Eagle Publishing Company, Inc. LLC V. Burns Hargis 1 Vice Chairman BOK Financial Corporation and Bank of Oklahoma, N.A. Eugene A. Harris 2 Executive Vice President BOK Financial Corporation and Bank of Oklahoma, N.A. Howard E. Janzen 1 President & CEO Williams Communications E. Carey Joullian, IV 1 President Mustang Fuel Corporation George B. Kaiser 1 Chairman BOK Financial Corporation and Bank of Oklahoma, N.A. Robert J. LaFortune Personal Investments Philip C. Lauinger, Jr. Chairman & CEO Lauinger Publishing Co. John C. Lopez 1 Chief Executive Officer Lopez Foods, Inc. Stanley A. Lybarger 1,3 President & CEO BOK Financial Corporation and Bank of Oklahoma, N.A. Frank A. McPherson 1 Retired Chairman & CEO Kerr-McGee Corporation Steven E. Moore Chairman, President & CEO OGE Energy Corp. J. Larry Nichols 1 President & CEO Devon Energy Corporation Ronald J. Norick 1 Controlling Manager Norick Investment Company, LLC Robert L. Parker, Sr. Chairman of the Board Parker Drilling Company James W. Pielsticker 1 President Arrow Trucking Company James A. Robinson Personal Investments L. Francis Rooney, III 1 Chairman and CEO Manhattan Construction Company Scott F. Zarrow 1,4 President Foreman Investment Capital LLC 1 Director of BOK Financial Corp. and Bank of Oklahoma, N.A. 2 Director of Bank of Oklahoma, N.A. 3 Director of BOK Financial Corp. and Bank of Texas, N.A. 4 Advisory pending election at shareholders meeting April 24 Executive Officers George B. Kaiser Chaiman of the Board Stanley A. Lybarger President, Chief Executive Officer V. Burns Hargis Vice Chairman Steven E. Nell Executive Vice President Chief Financial Officer Eugene A. Harris Executive Vice President Chief Credit Officer Frederic Dorwart Secretary James A. Dietz Senior Vice President Director, Risk Management John C. Morrow Senior Vice President Director of Financial Accounting & Reporting Valerie Toalson Senior Vice President Corporate Controller Bank of Albuquerque, N.A. Gregory K. Symons Chairman & CEO Paul A. Sowards President Bank of Arkansas, N.A. Jeffrey R. Dunn Chairman, President & CEO Bank of Oklahoma, N.A. Steven G. Bradshaw Executive Vice President Consumer Banking Chairman, BOSC, Inc. Paul M. Elvir Executive Vice President Operations & Technology Mark W. Funke President, Oklahoma City H. James Holloman Executive Vice President Trust Division David L. Laughlin President BOK Mortgage W. Jeffrey Pickryl Executive Vice President Commercial Banking Charles D. Williamson Executive Vice President Capital Markets Bank of Texas, N.A. C. Fred Ball, Jr. Chairman, President & CEO Steven D. Poole President Bank of Texas Trust Company Director Private Financial Services Bank of Albuquerque, N.A. Board of Directors Susan Barker-Kalangis, Esq. Partner, Modrall, Sperling, Roehl, Harris and Sisk P.A. Steven G. Bradshaw Executive Vice President Bank of Oklahoma, N.A. Douglas M. Brown President & CEO Tuition Plan, Inc. Rudy A. Davolos Athletic Director University of New Mexico William E. Garcia Manager, Public Affairs Intel Corporation Thomas D. Growney President Tom Growney Equipment, Inc. Eugene A. Harris Executive Vice President BOK Financial Corporation and Bank of Oklahoma, N.A. W. Jeffrey Pickryl Executive Vice President Bank of Oklahoma, N.A. Doreen Rast Senior Vice President Bank of Albuquerque, N.A. Michael D. Sivage Chief Executive Officer Sivage-Thomas Homes, Inc. Paul A. Sowards President Bank of Albuquerque, N.A. David L. Sutter Senior Vice President Bank of Oklahoma, N. A. Gregory K. Symons Chairman & CEO Bank of Albuquerque, N.A. Bank of Arkansas, N.A. Board of Directors John W. Anderson Senior Vice President Bank of Oklahoma, N.A. Steven G. Bradshaw Executive Vice President Bank of Oklahoma, N.A. Jeffrey R. Dunn Chairman, President & CEO Bank of Arkansas, N.A. George C. Faucette, Jr. President Coldwell Banker Faucette Real Estate Mark W. Funke President Bank of Oklahoma- Oklahoma City Gerald Jones President Jones Motorcars, Inc. Jerry D. Sweetser Sweetser Properties, Inc. Bank of Texas, N.A. Board of Directors C. Thomas Abbott Vice Chairman Bank of Texas, N. A. Charles A. Angel, Jr. Vice Chairman Bank of Texas, N. A. C. Fred Ball, Jr. 2 President & CEO Bank of Texas, N. A. C. Huston Bell President The Vantage Companies Edward O. Boshell, Jr. Columbia General Investments, L. P. Ben R. Briggs Owner, Ben R. Briggs Investments R. Neal Bright Managing Partner Bright & Bright, L.L.P. Dudley Chambers Partner, Jackson & Walker, L.L.P. H. Lynn Craft President & CEO Baptist Foundation of Texas Edward F. Doran, Sr. Charles W. Eisemann Investments James J. Ellis Managing Partner Ellis/Roiser Associates R. William Gribble, Jr. President Gribble Oil Company J. T. Hairston, Jr. Investments Douglas D. Hawthorne President & CEO Texas Health Resources Noble Hurley Investments Jerry Lastelick Attorney Lastelick, Anderson and Arneson Stanley A. Lybarger 2 President and CEO BOK Financial Corp. Michael A. McBee Owner McBee Operating Co. Jon L. Mosle, Jr. 1 Investments Steven Nell1 Chief Financial Officer BOK Financial Corp. Robert F. Sanford, Jr. Investments Mrs. Jere W. Thompson Community Leader Tom E. Turner 2 Chairman Bank of Texas, N. A. John C. Vogt Investments 1 Park Cities Bancshares, Inc. only 2 Park Cities Bancshares, Inc./ Bank of Texas, N. A. Major Customer Service Offices Business Banking Centers Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8432 Dallas 2650 Royal Lane (972) 443-2809 Fayetteville 3500 N. College (501) 973-2660 Oklahoma City Commerce Center 9520 N. May (405) 936-3700 South Office 7701 S. Western (405) 616-7500 Richardson 333 W. Campbell Rd. (214) 575-1972 Sherman 307 W. Washington (903) 891-8100 Tulsa Brookside Business Center 3237 S. Peoria (918) 746-7400 Consumer Banking Albuquerque 3900 Vassar, NE (505) 855-0834 Oklahoma City Windsor Hills 2601 N. Meridian (405) 272-2000 Richardson 333 W. Campbell Rd. (214) 575-1987 Tulsa Bank of Oklahoma Tower One Williams Center, 16th Fl. (918) 588-6000 Corporate Banking Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8438 Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8880 Fayetteville 3500 N. College (501) 973-2660 Oklahoma City Bank of Oklahoma Plaza 201 Robert S. Kerr (405) 272-2000 Tulsa Bank of Oklahoma Tower One Williams Center, 8th Fl. (918) 588-6127 BOSC, Inc. (800) 364-1818 Dallas 8255 Walnut Hill (214) 378-0148 Little Rock 2200 N. Rodney Parham Rd., Suite 215 (800) 817-2580 Oklahoma City 201 Robert S. Kerr, 4th Fl. (405) 272-2000 9520 N. May (405) 936-3900 Tulsa One Williams Center, 9th Fl. (918) 588-6555 3045 S. Harvard, Suite 101 (918) 746-5614 BOSC Oppenheim Division Bank of Oklahoma Plaza 201 Robert S. Kerr Oklahoma City (800) 725-2663 BancAlbuquerque Investment Center 2500 Louisiana Blvd., NE, Suite 100 Albuquerque (505) 837-4122 BancArkansas Investment Center 3500 N. College, Fayetteville (800) 817-2580 BancOklahoma Investment Center 3045 S. Harvard, Tulsa (918) 746-5614 BancTexas Investment Center 5956 Sherry Lane, Suite 1100 (214) 987-8838 Private Financial Services Albuquerque 2500 Louisiana Blvd., NE, Suite 208 (505) 837-4272 Dallas 7600 West Northwest Highway (214) 706-0309 6701 Preston Road (214) 525-7600 Oklahoma City Commerce Center 9520 N. May, 2nd Floor (405) 936-3900 Downtown - OKC 201 Robert S. Kerr (405) 272-2232 Tulsa Brookside 3237 S. Peoria (918) 746-7487 Downtown 320 S. Boston (918) 588-6214 Midtown 2021 S. Lewis, Suite 200 (918) 748-7257 61st & Yale 6036 S. Yale (918) 493-5210 Oklahoma Community Banking Bartlesville 3815 S.E. Frank Phillips Blvd. (918) 335-5300 Enid 2308 N. Van Buren (580) 548-8500 Eufaula 219 S. Main (918) 689-2567 Grove 201 S. Main (918) 787-2700 McAlester One E. Choctaw (918) 426-1100 Muskogee 215 S. State (918) 686-5900 Sand Springs 401 E. Broadway (918) 241-8000 Trust Services Bank of Oklahoma Trust Division Oklahoma City Commerce Center 9520 N. May, 2nd Floor (405) 936-3900 Tulsa Bank of Oklahoma Tower One Williams Center, 10th Floor (918) 588-6437 Southwest Trust Company Oklahoma City Commerce Center 9520 N. May, 2nd Floor (405) 936-3970 Bank of Texas Trust Division Dallas 7600 West Northwest Hwy. (214) 706-0309 Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8852 Sherman 2009 Independence Dr. (903) 813-5100 Bank of Albuquerque Trust Division Albuquerque 2500 Louisiana Blvd., NE, Suite 208 (505) 837-4133 Bank of Arkansas Trust Division Fayetteville 3500 N. College (501) 973-2660 Mortgage Services BOk Mortgage Edmond 1515 S. Broadway (405) 272-2307 Enid 2308 N. Van Buren (580) 548-8528 Lawton 2602 W. Gore Blvd. (580) 250-0070 Muskogee 215 S. State (918) 686-5959 Norman 3550 W. Main (405) 366-3618 Oklahoma City 5015 N. Pennsylvania (405) 879-8700 Oklahoma City 7701 S. Western (405) 879-8700 Owasso 413 E. 2nd Ave. (918) 588-8650 Tulsa Copper Oaks 7060 S. Yale, Suite 100 (918) 488-7140 Pine & Lewis 1604 N. Lewis (918) 588-8608 Bank of Albuquerque Mortgage Group Albuquerque 2500 Louisiana Blvd., NE, Suite 220 (505) 837-4111 Bank of Arkansas Mortgage Group Bentonville 1706 S.E. Walton Blvd., Suite C (501) 271-6800 Fayetteville 3500 N. College (501) 973-2600 Bank of Texas Mortgage Group Dallas 6209 Hillcrest Ave. (214) 525-5052 First Mortgage Investment Company Lee's Summit, Missouri 987 N.E. Rice Rd. (816) 246-7000 Lenexa, Kansas 15220 W. 87th St. Parkway (913) 307-1600 Operating Subsidiaries Bank of Albuquerque, N.A. Albuquerque 201 Third St., NW, Suite 1400 (505) 222-8469 Bank of Arkansas, N.A. Fayetteville 3500 N. College (501) 973-2660 Bank of Oklahoma, N.A. Oklahoma City Bank of Oklahoma Plaza Robinson at Robert S. Kerr (405) 272-2000 Tulsa Bank of Oklahoma Tower One Williams Center (918) 588-6000 Bank of Texas, N.A. Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8880 Houston 5320 Bellaire Blvd. Bellaire, Texas (713) 661-4444 Leasing Services BOKF Equipment Finance, Inc. Dallas 5956 Sherry Lane, Suite 1100 (214) 987-8864 Shareholder Information Corporate Headquarters Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 (918) 588-6000 Independent Auditors Ernst & Young LLP 3900 One Williams Center Tulsa, Oklahoma 74172 (918) 560-3600 Legal Counsel Frederic Dorwart Lawyers Old City Hall 124 E. Fourth St. Tulsa, Oklahoma 74103-5010 (918) 583-9922 Common Shares: Traded NASDAQ National Market NASDAQ Symbol: BOKF Number of common shareholders of record at December 31, 2000: 1,152 Market Makers: CIBC World Markets Corp. Herzog, Heine, Geduld, Inc. Howe Barnes Investments Keefe Bruyette & Woods Knight Securities LP Salomon Smith Barney Schwab Capital Markets Sherwood Securities Southwest Securities, Inc. Spear, Leeds & Kellogg Stephens, Inc. Transfer Agent and Registrar The Bank of New York (800) 524-4458 Address Shareholders Inquiries to: Shareholder Relations Department-11E P.O. Box 11258 Church Street Station New York, NY 10286 E-Mail Address: Shareowner-svcs@email.bony.com Send Certificates for Transfer and Address Changes to: Receive and Deliver Department - 11W P.O. Box 11002 Church Street Station New York, NY 10286 Copies of BOK Financial Corporation's Annual Report to Shareholders, Quarterly Reports and Form 10-K to the Securities and Exchange Commission are available without charge upon written request. Analysts, shareholders and other investors seeking financial information about BOK Financial Corporation are invited to contact James F. Ulrich, Senior Vice President, Investor Relations, (918) 588-6752. Information about BOK Financial is also readily available at our website: www.bokf.com BOK Financial Corporation Appendix A Graph I Description Percentage Composition - ------------------------------------------------ ------------- Service charges and fees on deposit accounts 22% - ------------------------------------------------ ------------- Mortgage banking 19% - ------------------------------------------------ ------------- Trust fees and commissions 20% - ------------------------------------------------ ------------- Transaction card 20% - ------------------------------------------------ ------------- Other 11% - ------------------------------------------------ ------------- Brokerage and trading 8% - ------------------------------------------------ ------------ EX-21 4 0004.txt BOK FINANCIAL SUBSIDIARIES BOK FINANCIAL CORPORATION EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Banking Subsidiaries Bank of Albuquerque, National Association Bank of Arkansas, National Association Bank of Oklahoma, National Association Bank of Texas, National Association Other subsidiaries of BOK Financial Corporation BOK Capital Services Corporation BOK Plaza Holding Corporation BOSC, Inc. Chaparral Bancshares, Inc. Chaparral Delaware, Inc. First of Muskogee Insurance Corporation Merger Corporation Number Seven Park Cities Bancshares, Inc. Park Cities Corporation Subsidiaries of Bank of Oklahoma, N.A. -------------------------------------- Affiliated BancServices, Inc. Affiliated Financial Holding Company Affiliated Financial Insurance Agency, Inc. Affiliated Financial Life Insurance Company BancOklahoma Agri-Service Corporation BancOklahoma Mortgage Corporation BOK Auto Receivable Corporation BOK Delaware, Inc. BOK Equipment Finance, Inc. BOK Real Estate Trust BOSC Agency, Inc. (Oklahoma) BOSC Agency, Inc. (New Mexico) BOSC Agency, Inc. (Texas) CVV Management, Inc. CVV Partnership, an Oklahoma General Partnership Cottonwood Valley Ventures, Inc. Investment Concepts, Inc. Pacesetter Leasing Company Southwest Trust Company Subsidiaries of Bank of Texas, N.A. Bank of Texas Trust Company, National Association All subsidiaries are incorporated in Oklahoma, with the exception of Bank of Oklahoma, National Association, Bank of Arkansas, National Association, Bank of Texas, National Association, Bank of Texas Trust Company, National Association, and Bank of Albuquerque, National Association which are chartered by the United States of America; Affiliated Financial Life Insurance Company, which is incorporated in Arizona; Chaparral Bancshares, Inc., Park Cities Bancshares, Inc., Swiss Avenue State Bank, BOSC Agency, Inc. (Texas) and BOK Real Estate Trust, which are incorporated in Texas; BOK Delaware, Inc. and Chaparral Delaware which are incorporated in Delaware; BOSC Agency, Inc. (New Mexico) which is incorporated in New Mexico; and Park Cities Corporation, which is incorporated in Nevada. EX-23 5 0005.txt CONSENT OF INDEPENDENT AUDITORS BOK FINANCIAL CORPORATION Exhibit 23.0 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference of our report dated January 23, 2001, with respect to the consolidated financial statements of BOK Financial Corporation incorporated by reference in the annual report (Form 10-K) for the year ended December 31, 2000, in the following registration statements: * Registration Statement (Form S-8, No. 33-44121) pertaining to the Reoffer Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust Agreement. * Registration Statement (Form S-8, No. 33-44122) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1991 Special Stock Option Plan. * Registration Statement (Form S-8, No. 33-55312) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1992 Stock Option Plan. * Registration Statement (Form S-8, No. 33-70102) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1993 Stock Option Plan. * Registration Statement (Form S-8, No. 33-79834) pertaining to the Reoffer Prospectus of the BOK Financial Corporation 1994 Stock Option Plan. * Registration Statement (Form S-8, No. 33-79836) pertaining to the Reoffer Prospectus of the BOK Financial Corporation Directors' Stock Compensation Plan. * Registration Statement (Form S-8, No. 333-32649) pertaining to the Reoffer Prospectus of BOK Financial Corporation 1997 Stock Option Plan. * Registration Statement (Form S-8, No. 333-93957) pertaining to the Reoffer Prospectus of BOK Financial Corporation 2000 Stock Option Plan. * Registration Statement (Form S-8, No. 333-40280 ) pertaining to the Reoffer Prospectus of the BOK Financial Corporation Thrift Plan for Hourly Employees. /s/ Ernst & Young LLP Tulsa, Oklahoma March 27, 2001 EX-27 6 0006.txt FDS 12/31/00
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BOK FINANCIAL CORPORATION'S 10-K FOR THE PERIOD ENDED DECEMBER 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000875357 BOK FINANCIAL CORPORATION 1,000 Year DEC-31-2000 DEC-31-2000 701,424 0 49,305 39,865 2,763,820 233,371 233,867 5,517,862 82,655 9,748,334 6,046,005 2,427,738 114,660 456,355 13 12 3 703,548 9,748,334 454,077 180,275 4,378 638,730 208,249 369,843 268,887 17,204 2,059 302,815 147,771 0 0 0 100,140 2.01 1.80 3.56 39,661 15,467 87 126,893 76,234 14,801 4,018 82,655 82,655 0 6,649
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