-----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, JseONcPwNDBHyEMgIQJhcEdD3eTjVQ/zdkpdx0rpLdeBo7bJPi0Tp75CwYOP/cPU A1yFIB1UxolVVI5YJJP1OQ== 0000875357-96-000004.txt : 19960625 0000875357-96-000004.hdr.sgml : 19960625 ACCESSION NUMBER: 0000875357-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOK FINANCIAL CORP ET AL CENTRAL INDEX KEY: 0000875357 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 731373454 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19341 FILM NUMBER: 96561790 BUSINESS ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: PO BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 BUSINESS PHONE: 9185886000 MAIL ADDRESS: STREET 1: BANK OF OKLAHOMA TOWER STREET 2: P O BOX 2300 CITY: TULSA STATE: OK ZIP: 74192 10-Q 1 As filed with the Securities and Exchange Commission on May 13, 1996 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1996 Commission File No. 0-19341 BOK FINANCIAL CORPORATION Incorporated in the State of Oklahoma I.R.S. Employer Identification No. 73-1373454 Bank of Oklahoma Tower P.O. Box 2300 Tulsa, Oklahoma 74192 Registrant's Telephone Number, Including Area Code (918) 588-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (NONE) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK ($.00006 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 20,440,678 shares of common stock ($.00006 par value) as of April 30, 1996. ================================================================================ BOK Financial Corporation Form 10-Q Quarter Ended March 31, 1996 Index Part I. Financial Information Management's Discussion and Analysis of Financial Condition and Results of Operations 2 Report of Management on Consolidated Financial Statements 12 Consolidated Statements of Earnings 13 Consolidated Balance Sheets 15 Consolidated Statements of Changes in Shareholders' Equity 17 Consolidated Statements of Cash Flows 18 Notes to Consolidated Financial Statements 20 Financial Summaries - Unaudited 21 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 23 Signature 23 MANAGEMENT'S DISCUSSION AND ANALYSIS HIGHLIGHTS BOK Financial Corporation ("BOK Financial") recorded net income of $13.0 million or $0.56 per fully diluted common share for the first quarter of 1996 compared to $12.0 million or $0.52 per fully diluted common share for the first quarter of 1995. Returns on average assets and equity were 1.26% and 16.84%, respectively, for the first quarter of 1996. This is compared to returns on average assets and equity of 1.25% and 19.77%, respectively, for the same period in 1995. RESULTS OF OPERATIONS Net interest revenue on a tax-equivalent basis was $32.7 million for the first quarter of 1996 compared to $30.1 million for the first quarter of 1995, an increase of $2.6 million or 8.5%. Average earning assets increased by $247 million while interest bearing liabilities increased $168 million. Equity and demand deposits funded the growth in average earning assets in excess of interest-bearing liabilities. Concurrently, average loans increased by $320 million or 17.1%. The increase in average earning assets and the improvement in asset mix increased interest income by $5.9 million. This increase was 2 partially offset by $1.1 million due to lower aggregate yields on earning assets. Since the second quarter of 1995, management has taken steps to reduce BOK Financial's reliance on borrowed funds and to increase deposits as a source of funding. Average interest-bearing deposits increased $382 million or 18.6% compared to the first quarter of 1995 while borrowed funds decreased $214 million or 21.6%. This improvement in the mix of interest-bearing liabilities also contributed to the increase in net interest revenue. Additionally, interest rate swaps which hedge against interest rate risk on certain long-term certificates of deposit, reduced interest expense by $226 thousand in the first quarter of 1996 compared to $154 thousand in the first quarter of 1995. - - -------------------------------------------------------------------------------- TABLE 1 - VOLUME/RATE ANALYSIS (In thousands) Three months ended March 31, 1996/1995 ----------------------------- -----Due to----- Yield Change Volume /Rate ---------------------------- Tax-equivalent interest revenue: Securities $(2,156) $(1,265) $ (891) Trading securities 48 47 1 Loans 6,867 7,032 (165) Funds sold 56 58 (2) - - ------------------------------------------------------------------------------- Total 4,815 5,872 (1,057) - - ------------------------------------------------------------------------------- Interest expense: Transaction deposits (664) (650) (14) Money market deposits 1,149 1,270 (121) Savings deposits (226) (16) (62) Time deposits 6,166 4,93 1,243 Other borrowings (3,815) (2,821) (994) Subordinated debenture (341) (341) 0 - - ------------------------------------------------------------------------------- Total 2,269 2,217 52 - - ------------------------------------------------------------------------------- Tax-equivalent net interest revenue 2,546 $ 3,655 $(1,109) Change in tax-equivalent adjustment 147 - - ------------------------------------------------------------------------------- Net interest revenue $ 2,399 =============================================================================== (1) Changes attributable to both volume and yield are allocated to both volume and yield/rate on an equal basis. - - ------------------------------------------------------------------------------- Net interest margin,the ratio of net interest revenue to average earning assets was 3.53% for the first quarter of 1996. This is compared to 3.51% in the same quarter of 1995 and 3.37% for the fourth quarter of 1995. The improvement in net interest margin, particularly when compared to the previous quarter, is due 3 primarily to the change in mix of interest-bearing liabilities. A decrease in market interest rates during the first quarter of 1996 also contributed to the increase in net interest revenue. - - ------------------------------------------------------------------------------ TABLE 2 - OTHER OPERATING REVENUE (In thousands) Three Months Ended ----------------------------------------------------- MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 ----------------------------------------------------- Brokerage and trading revenue $ 2,078 $ 1,518 $ 1,808 $ 1,431 $ 1,289 TransFund network revenue 2,096 1,880 1,867 1,729 1,549 Securities gains (losses), net (18) -- 948 226 -- Trust fees and commissions 5,469 5,014 4,731 4,616 5,002 Service charges and fees on deposit accounts 5,839 5,697 5,205 5,150 5,100 Mortgage banking revenue 5,869 5,905 4,850 5,297 4,284 Other revenue 5,251 3,937 3,776 3,408 4,929 - - ------------------------------------------------------------------------------- Total $ 26,584 $ 23,951 $ 23,185 $ 21,857 $ 22,153 =============================================================================== Other operating revenue increased $4.4 million or 20.0% compared to the same quarter of 1995. Excluding a $1.2 million gain on the sale of branch deposits from the first quarter of 1995 and $758 thousand due to a change in accounting for originated mortgage loan servicing rights from the first quarter of 1996 to improve comparability,other operating revenue from ongoing activities increased $4.8 million or 23.1%. All significant revenue producing activities contributed to this increase. The increased revenue from brokerage and trading activities, TransFund network,trust fees and deposit fees was due primarily to volume gains in each area. Mortgage banking revenue, excluding the change in accounting for originated servicing rights, increased $827 thousand or 19.3% due primarily to servicing fees on loans originated or purchased during 1995. Other revenue for the first quarter of 1996 included a $992 thousand gain on the sale of student loans compared to a gain of $740 thousand on a similar sale in the first quarter of 1995. 4 - - ------------------------------------------------------------------------------- TABLE 3 - OTHER OPERATING EXPENSE (In thousands) Three Months Ended ----------------------------------------------------- MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 ----------------------------------------------------- Personnel $ 17,747 $ 17,097 $ 16,729 $ 16,103 $ 17,369 Business promotion 1,494 1,315 1,658 1,468 1,598 Professional fees/services 1,242 1,307 1,973 1,208 1,410 Net occupancy, equipment and data processing 7,158 7,318 7,106 6,649 6,251 FDIC and other insurance 539 660 519 1,600 1,627 Printing, postage and supplies 1,577 1,771 1,582 1,402 1,585 Net gains and operating expenses on repossessed assets (197) (164) (858) (1,039) (1,037) Amortization of intangible assets 1,465 1,527 1,495 1,477 1,493 Mortgage banking costs 3,745 3,222 3,184 3,231 2,892 Other expense 2,872 2,799 2,294 2,468 1,917 - - ------------------------------------------------------------------------------- Total $ 37,642 $ 36,852 $ 35,682 $ 34,567 $ 35,105 =============================================================================== Operating expenses for the first quarter of 1996 increased $2.5 million or 7.2% compared to the first quarter of 1995. The more significant increases were occupancy, equipment and data processing expenses which increased $907 thousand due primarily to volume-related transaction processing costs and mortgage banking costs which increased $853 thousand due to an increase in amortization expense associated with capitalized loan servicing rights. These increases were partially offset by a $1.1 million decrease in deposit insurance expense. BOK Financial continues to incur deposit insurance expenses on deposits totaling $739 million which are insured by the FDIC's Savings and Loan Insurance Fund ("SAIF"). Legislation is being considered which, if proposed and approved, would require banks and savings associations to pay a one-time assessment on all SAIF-insured deposits. The ultimate amount and timing of this assessment, if any, is subject to the Federal budget reconciliation process. Management will accrue for any resulting assessment once it becomes reasonably estimable. Excluding net repossessed asset gains and other significant or nonrecurring items shown in Table 4, operating expenses increased $3.0 million or 8.8%. Personnel costs increased $1.1 million excluding related significant or non-recurring charges of $738 thousand from the first quarter of 1995. Approximately $678 thousand of this increase is related to incentive compensation plans which vary directly with the increases in revenue. Control over the growth in operating expenses combined with increased tax-equivalent revenue resulted in an efficiency ratio of 63.9%. This represents a significant improvement from the first quarter of 1995's ratio of 69.1%. 5 - - -------------------------------------------------------------------------------- TABLE 4 - OTHER OPERATING EXPENSE, EXCLUDING SIGNIFICANT OR NONRECURRING ITEMS (In thousands) Three Months Ended ----------------------------------------------------- MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 ----------------------------------------------------- Total Other Operating Expense $ 37,642 $ 36,852 $ 35,682 $ 34,567 $ 35,105 FDIC Insurance premium reduction, -- -- -- (1,085) (1,097) Organizational costs for new subsidiary -- -- (500) -- -- Net gains and operating costs from repossessed assets 197 164 858 1,039 1,037 Asset valuation charges and other accruals (500) (500) (350) (605) -- Employee benefits and other related charges -- -- -- 550 (738) - - ------------------------------------------------------------------------------- Total $ 37,339 $ 36,516 $ 35,690 $ 34,466 $ 34,307 =============================================================================== BOK Financial recorded a provision for loan losses of $911 thousand in the first quarter of 1996 compared to no provision in the first quarter of 1995. The factors considered by management in determining that a provision for loan losses was appropriate are discussed subsequently under the Risk Element heading. Income tax expense increased to $5.8 million or 31% of pre-tax income for the first quarter of 1996 compared to $3.5 million or 23% for the same period of 1995. The expiration of certain tax benefits associated with the acquisition of Bank of Oklahoma, NA ("BOk") and BOk's former parent company by BOK Financial during 1996 resulted in an effective tax rate which is more consistent with statutory tax rates. RISK ELEMENTS The aggregate loan portfolio at March 31, 1996 remained unchanged at $2.2 billion compared to December 31, 1995. Commercial real estate increased $18 million. Residential mortgage loans retained by BOK Financial decreased by $18 million as production of adjustable rate mortgages failed to maintain pace with normal loan payments. However, production of fixed rate mortgage loans caused loans held for sale to increase by $30 million. The decrease in consumer loans was caused by the sale of $25 million of student loans. 6 - - ------------------------------------------------------------------------------- TABLE 5 - LOANS (In thousands) MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 ------------------------------------------------------ Commercial: Energy $ 156,230 $ 159,887 $ 159,430 $ 160,223 $ 143,139 Manufacturing 148,068 136,701 131,465 122,781 113,688 Wholesale/retail 156,261 143,941 139,426 145,141 124,700 Agricultural 89,080 86,733 74,342 75,917 80,861 Loans for purchasing or carrying securities 7,613 7,963 7,491 8,748 7,504 Other commercial and industrial 288,518 325,839 284,590 300,783 321,388 Commercial real estate: Construction and land development 143,476 148,217 126,219 119,794 107,110 Other real estate loans 473,110 450,385 436,929 406,819 369,202 Residential mortgage: Secured by 1-4 family residential property 419,135 436,816 432,565 429,750 414,257 Residential mortgages held for resale 102,836 72,412 79,914 63,165 27,061 Consumer 214,834 225,474 239,184 221,890 214,793 - - ------------------------------------------------------------------------------- Total $2,199,161 $2,194,368 $2,111,555 $2,055,011 $1,923,703 =============================================================================== Substantially all commercial and consumer loans and a large portion of residential mortgage loans (excluding loans held for sale) are to businesses and individuals within Oklahoma or Northwest Arkansas. This geographic concentration subjects the loan portfolio to the general economic conditions within BOK Financial's primary market area. Major segments of the commercial loan portfolio are presented in Table 5. Commercial real estate loans are secured primarily by properties located in the Tulsa or Oklahoma City metropolitan areas. Nonperforming assets totaled $45.3 million at March 31, 1996 compared to $42.1 million at December 31, 1995. The increase in nonperforming assets included $5.4 million of loans which are guaranteed by agencies of the U.S. government. BOK Financial periodically purchases such loans to minimize operating costs of its mortgage banking subsidiary. 7 - - ------------------------------------------------------------------------------- TABLE 6 - NONPERFORMING ASSETS (In thousands) MARCH 31, Dec. 31, Sept. 30, June 30 March 31, 1996 1995 1995 1995 1995 ------------------------------------------------ Nonperforming assets: Nonperforming loans: Nonaccrual loans: Commercial $ 12,399 $ 14,646 $ 15,095 $ 16,221 $ 11,903 Commercial real estate 10,138 10,621 6,412 5,057 7,854 Residential mortgage 3,136 2,794 3,269 3,441 1,998 Consumer 1,178 1,227 1,175 1,020 871 - - ------------------------------------------------------------------------------- Total nonaccrual loans 26,851 29,288 25,951 25,739 22,626 Loans past due (90 days)(1) 15,023 9,379 7,888 7,721 10,257 - - ------------------------------------------------------------------------------- Total nonperforming loans(1) 41,874 38,667 33,839 33,460 32,883 - - ------------------------------------------------------------------------------- Other nonperforming assets: Commercial real estate 2,949 3,023 3,429 3,550 4,239 Other 526 376 344 382 162 - - ------------------------------------------------------------------------------- Total other nonperforming assets 3,475 3,399 3,773 3,932 4,401 - - ------------------------------------------------------------------------------- Total nonperforming assets $ 45,349 $ 42,066 $ 37,612 $ 37,392 $ 37,284 - - ------------------------------------------------------------------------------- Ratios: Reserve for loan losses to nonperforming loans 94.48% 99.02% 112.98% 114.00% 115.62% Nonperforming loans(1) to period-end loans(2) 2.00 1.82 1.67 1.68 1.73 - - ------------------------------------------------------------------------------- (1) Includes 1-4 family loans guaranteed by agencies of the U.S. government $ 12,165 $ 6,754 $ 5,931 $ 7,156 $ 9,272 (2) Excludes residential mortgage loans held for sale =============================================================================== BOK Financial monitors loan performance on a portfolio and individual loan basis. Nonperforming loans are reviewed at least quarterly. The loan review process involves evaluating the credit worthiness of customers and their ability, based upon current and anticipated economic conditions, to meet future principal and interest payments. Loans may be identified which possess more than the normal amount of risk due to deterioration in the financial condition of the borrower or the value of the collateral. Because the borrowers are performing in accordance with the original terms of the loan agreements and no loss of principal or interest is anticipated, such loans are not included in the nonperforming assets totals. These loans are assigned to various risk categories in order to focus management's attention on the loans with higher risk of loss. At March 31, 1996, loans totaling $37 million were assigned to the substandard risk category, and loans totaling $49 million were assigned to 8 the special mention category. These are compared to $42 million and $40 million, respectively, at December 31, 1995. The allowance for loan losses, which is available to absorb losses inherent in the loan portfolio, totaled $40 million at March 31, 1996 compared to $38 million at December 31 1995 or 1.89% and 1.80%, respectively, of total loans, excluding loans held for sale. Losses on loans held for sale, principally residential 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 7 presents statistical information regarding the reserve for loan losses. - - ------------------------------------------------------------------------------- TABLE 7 - SUMMARY OF LOAN LOSS EXPERIENCE (In thousands) Three months ended -------------------------------------------------- MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 -------------------------------------------------- Beginning balance $ 38,287 $ 38,232 $ 38,143 $ 38,020 $ 38,271 Loans charged-off: Commercial 397 135 96 180 342 Commercial real estate 82 155 -- -- 16 Residential mortgage 14 153 2 24 11 Consumer 735 696 647 641 890 - - ------------------------------------------------------------------------------- Total 1,228 1,139 745 845 1,259 - - ------------------------------------------------------------------------------- Recoveries of loans previously charged-off: Commercial 807 428 318 410 423 Commercial real estate 463 119 259 269 340 Residential mortgage 130 302 19 27 25 Consumer 191 169 223 222 220 - - ------------------------------------------------------------------------------- Total 1,591 1,018 819 928 1,008 - - ------------------------------------------------------------------------------- Net loans charged-off (recoveries) (363) 121 (74) (83) 251 Provision for loan losses 911 176 15 40 -- - - ------------------------------------------------------------------------------- Ending balance $ 39,561 $ 38,287 $ 38,232 $ 38,143 $ 38,020 - - ------------------------------------------------------------------------------- Reserve to loans outstanding at period-end(1) 1.89 1.80 1.88 1.91 2.00 Net loan losses (recoveries) (annualized) to average loans(1) (.07) .02 (.01) (.02) .05 - - ------------------------------------------------------------------------------- (1) Excludes residential mortgage loans held for sale =============================================================================== 9 The adequacy of the allowance for loan losses is assessed by management based upon an evaluation of the current risk characteristics of the loan portfolio including current economic conditions, historical experience, collateral valuation, changes in the composition of the portfolio and other relevant factors. A provision for loan losses is charges against earnings in amounts necessary to maintain the adequacy of the allowance for loan losses. These provisions totaled $911 thousand for the first quarter of 1996 compared to no provision for the first quarter of 1995. Management believes that the allowance for loan losses is adequate for each period presented based upon the evaluation criteria and information available at that time. INTEREST RATE SENSITIVITY AND LIQUIDITY BOK Financial's asset/liability management policy addresses several complementary goals: assuring adequate liquidity, maintaining an appropriate balance between interest sensitive assets and liabilities, and maximizing net interest revenue. The responsibility for attaining these goals rests with the Asset/Liability Committee. Interest rate sensitivity, the risk associated with changes in interest rates, is of primary importance within the banking industry. Management has established strategies and procedures to protect net interest revenue against significant changes in interest rates. Generally, these strategies are designed to achieve an acceptable level of net interest revenue based upon management's projections of future changes in interest rates. Management simulates the potential effect of changes in interest rates through computer modeling which incorporates both the current gap position and the expected magnitude of the repricing of specific types of assets and liabilities. This modeling is performed assuming expected interest rates over the next twelve months based on both a "most likely" rate scenario and a "shock test" rate scenario assuming a 200 basis point increase over the next twelve months. An independent source is used to determine the most likely interest rates for the next year. At March 31, 1996, this modeling indicated that under both the most likely interest rate forecast and the shock test, net interest revenue for 1996 could increase by approximately 7% to 8% compared to 1995. These simulations are based on numerous assumptions regarding the timing and extent of repricing characteristics. Actual results may differ significantly. BOK Financial uses interest rate swaps, a form of off-balance sheet derivative product, in managing its interest rate sensitivity. These swaps are used to more closely match the interest paid on certain long-term, fixed rate certificates of deposit with earning assets. Swaps allow BOK Financial to offer these deposits to its customers without altering the desired repricing characteristics. BOK Financial accrues and periodically receives a fixed amount from the counter parties to these swaps and accrues and periodically makes a variable payment to the counter parties.Credit risk from these swaps is closely monitored and counter parties to these contracts are selected on the basis of their credit worthiness among other factors. Derivative products are not used for speculative purposes. 10 - - ------------------------------------------------------------------------------- TABLE 8 - INTEREST RATE SWAPS (In thousands) Notional Pay Receive Amount Rate Rate ---------------------------------------------------- Expiration: 1998 $70,000 5.25 - 7.03% (1) 5.8125 - 7.96% 1999 15,000 5.2578 (1) 7.68 - - ------------------------------------------------------------------------------- (1) Rates are variable based on LIBOR and reset quarterly or semiannually. =============================================================================== The best measure of liquidity is the ability to obtain funds to meet cash requirements. Liquidity is achieved through maturities of earning assets, securities available for sale and loans held for sale. On the liability side, liquidity depends on the availability of deposits and short-term borrowings in both the local and national markets. BOK Financial obtains 73% of its funding through deposits and 7% through equity. Cash used by operating activities in the first quarter of 1996 totaled $11 million. Excluding an increase in mortgage loans held for sale, operating activities provided $19 million. This compares to cash provided by operating activities of $32 million, or $19 million excluding the decrease in mortgage loans held for sale, in the first quarter of 1995. Investing activities used $7 million in the first quarter of 1996, primarily for the net purchase of securities totaling $30 million, partially offset by the proceeds of the student loan sale. This is compared to $169 million used by investing activities in the first quarter of 1995 for both securities and loan growth. Financing activities provided $13 million during the first quarter of 1996. Certificates of deposit provided $229 million and other deposit accounts provided $27 million, which offset $243 million which was used to reduce borrowed funds. - - ------------------------------------------------------------------------------- TABLE 9 - CAPITAL RATIOS MARCH 31, Dec. 31, Sept. 30, June 30, March 31, 1996 1995 1995 1995 1995 ------------------------------------------------ Risk-based capital Tier 1 capital 10.08% 9.91% 9.75% 9.44% 9.34% Total capital 11.33 11.17 11.01 10.70 11.36 Leverage 6.80 6.55 6.27 5.92 5.79 =============================================================================== 11 REPORT OF MANAGEMENT ON CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the consolidated financial statements which have been prepared in accordance with generally accepted accounting principles. In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial condition, results of operations and cash flows of BOK Financial and its subsidiaries at the dates and for the periods presented. The financial information included in this interim report has been prepared by management without audit by independent public accountants and should be read in conjunction with BOK Financial's 1995 Form 10-K to the Securities and Exchange Commission which contains audited financial statements. 12 - - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS (In Thousands Except Share Data) Three months ended March 31, ----------------------- 1996 1995 ----------------------- INTEREST REVENUE Loans $ 47,866 $ 40,999 Taxable securities 20,251 19,864 Tax-exempt securities 2,002 4,692 - - ------------------------------------------------------------------------------- Total securities 22,253 24,556 - - ------------------------------------------------------------------------------- Trading securities 95 47 Funds sold 402 346 - - ------------------------------------------------------------------------------- Total interest revenue 70,616 65,948 - - ------------------------------------------------------------------------------- INTEREST EXPENSE Deposits 28,821 22,396 Other borrowings 10,993 14,808 Subordinated debenture -- 341 - - ------------------------------------------------------------------------------- Total interest expense 39,814 37,545 - - ------------------------------------------------------------------------------- NET INTEREST REVENUE 30,802 28,403 PROVISION FOR LOAN LOSSES 911 -- - - ------------------------------------------------------------------------------- NET INTEREST REVENUE AFTER PROVISION FOR LOAN LOSSES 29,891 28,403 - - ------------------------------------------------------------------------------- OTHER OPERATING REVENUE Brokerage and trading revenue 2,078 1,289 TransFund network revenue 2,096 1,549 Securities gains (losses), net (18) -- Trust fees and commissions 5,469 5,002 Service charges and fees on deposit accounts 5,839 5,100 Mortgage banking revenue, net 5,869 4,284 Other revenue 5,251 4,929 - - ------------------------------------------------------------------------------- Total other operating revenue 26,584 22,153 - - ------------------------------------------------------------------------------- 13 CONSOLIDATED STATEMENT OF EARNINGS, (CONTINUED) (In Thousands Except Share Data) Three months ended March 31, ----------------------- 1996 1995 ----------------------- OTHER OPERATING EXPENSE Personnel $ 17,747 17,369 Business promotion 1,494 1,598 Professional fees and services 1,242 1,410 Net occupancy, equipment and data processing 7,158 6,251 FDIC and other insurance 539 1,627 Printing postage and supplies 1,577 1,585 Net gains and operating expenses on repossessed assets (197) (1,037) Amortization of intangible assets 1,465 1,493 Mortgage banking costs 3,745 2,892 Other expense 2,872 1,917 - - ------------------------------------------------------------------------------- Total other operating expense 37,642 35,105 - - ------------------------------------------------------------------------------- INCOME BEFORE TAXES 18,833 15,451 Federal and state income tax 5,838 3,484 - - ------------------------------------------------------------------------------- NET INCOME $ 12,995 $ 11,967 =============================================================================== EARNINGS PER SHARE: Net income Primary $ .62 $ .57 - - ------------------------------------------------------------------------------- Fully diluted $ .56 $ .52 - - ------------------------------------------------------------------------------- AVERAGE SHARES USED IN COMPUTATION: Primary 20,500,669 20,487,814 - - ------------------------------------------------------------------------------- Fully diluted 23,248,818 23,221,119 =============================================================================== See accompanying notes to consolidated financial statements 14 - - ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data) MARCH 31, December 31, March 31, 1996 1995 1995 ------------------------------------------- ASSETS Cash and due from banks $ 270,364 $ 303,499 $ 217,553 Funds sold 36,000 8,440 17,465 Trading securities 6,753 7,777 3,531 Securities: Available for sale 1,367,894 1,366,661 690,960 Investment (fair value: March 31, 1996 - $192,572; December 31, 1995 - $181,786; March 31, 1995 - $912,562) 192,481 179,121 955,439 - - ------------------------------------------------------------------------------- Total securities 1,560,375 1,545,782 1,646,399 - - ------------------------------------------------------------------------------- Loans 2,199,161 2,194,368 1,923,703 Less reserve for loan losses 39,561 38,287 38,020 - - ------------------------------------------------------------------------------- Net loans 2,159,600 2,156,081 1,885,683 - - ------------------------------------------------------------------------------- Premises and equipment, net 48,032 47,673 43,837 Accrued revenue receivable 45,324 41,121 38,425 Excess cost over fair value of net assets acquired and core deposit premiums (net of accumulated amortization: March 31, 1996 - $22,991; December 31, 1995 - $21,526; March 31, 1995 - $17,026) 36,043 37,134 41,603 Mortgage servicing rights 50,895 50,634 44,958 Real estate and other repossessed assets 3,475 3,399 4,401 Other assets 22,854 20,378 17,133 - - ------------------------------------------------------------------------------- Total assets $ 4,239,715 $ 4,221,918 $3,960,988 =============================================================================== 15 CONSOLIDATED BALANCE SHEETS, (CONTINUED) (In Thousands Except Share Data) MARCH 31, December 31, March 31, 1996 1995 1995 ------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand deposits $ 632,720 $ 651,134 $ 593,825 Interest-bearing deposits: Transaction 98,740 411,861 391,689 Money market 728,125 369,344 353,655 Savings 104,176 104,726 129,098 Time 1,629,254 1,400,644 1,200,633 - - ------------------------------------------------------------------------------- Total deposits 3,193,015 2,937,709 2,668,900 - - ------------------------------------------------------------------------------- Funds purchased and repurchase agreements 522,108 697,497 920,704 Other borrowings 182,831 250,309 54,888 Accrued interest, taxes and expense 24,467 25,107 25,681 Other liabilities 11,325 9,731 11,423 Subordinated debenture -- -- 23,000 - - ------------------------------------------------------------------------------- Total liabilities 3,933,746 3,920,353 3,704,596 - - ------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 23 23 13 Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: March 31, 1996 - 20,436,431; December 31, 1995 - 20,415,504; March 31, 1995 - 19,758,145) 1 1 1 Capital surplus 157,844 157,395 143,223 Retained earnings 159,347 146,727 123,470 Unrealized loss on securities available for sale (11,102) (2,427) (10,071) Less notes receivable from exercise of stock options (144) (154) (244) - - ------------------------------------------------------------------------------- Total shareholders' equity 305,969 301,565 256,392 - - ------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 4,239,715 $ 4,221,918 $ 3,960,988 =============================================================================== See accompanying notes to consolidated financial statements 16 - - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (in thousands) Preferred Stock Common Stock Capital Retained Unrealized Notes Shares Amount Shares Amount Surplus Earnings Gain(Loss) Receivable Total -------------------------------------------------------------------------------------- Balances at December 31, 1994 250,000 $ 13 19,735 $1 $142,718 $111,878 $(17,423) $(285) $236,902 Net income -- -- -- -- -- 11,967 -- -- 11,967 Issuance of common stock to Thrift Plan -- -- 3 -- 70 -- -- -- 70 Exercise of stock options -- -- -- -- 21 -- -- -- 21 Payments on stock option notes receivable -- -- -- -- -- -- -- 41 41 Preferred dividends paid in shares of common stock -- -- 18 -- 375 (375) -- -- -- Director retainer shares -- -- 2 -- 39 -- -- -- 39 Change in unrealized net gain(loss) on securities available for sale -- -- -- -- -- -- 7,352 -- 7,352 - - ------------------------------------------------------------------------------------------------------------------ Balances at March 31, 1995 250,000 $ 13 19,758 $1 $143,223 $123,470 $(10,071) $(244) $256,392 ================================================================================================================== Balances at December 31, 1995 250,102 $ 23 20,416 $1 $157,395 $146,727 $ (2,427) $(154) $301,565 Net income -- -- -- -- -- 12,995 -- -- 12,995 Issuance of common stock to Thrift Plan -- -- -- -- -- -- -- -- -- Exercise of stock options -- -- 2 -- 34 -- -- -- 34 Payments on stock option notes receivable -- -- -- -- -- -- -- 10 10 Preferred dividends paid in shares of common stock -- -- 16 -- 375 (375) -- -- -- Director retainer shares -- -- 2 -- 40 -- -- -- 40 Change in unrealized net gain(loss) on securities available for sale -- -- -- -- -- -- (8,675) -- (8,675) - - ------------------------------------------------------------------------------------------------------------------- Balances at March 31, 1996 250,102 $ 23 20,436 $1 $157,844 $159,347 $(11,102) $(144) $305,969 =================================================================================================================== See accompanying notes to consolidated financial statements.
17 - - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands Except Share Data) Three Months Ended March 31, -------------------- 1996 1995 -------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 12,995 $ 11,967 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan and repossessed real estate losses 912 -- Depreciation and amortization 5,583 4,395 Net amortization of investment security discounts and premiums 697 405 Net gain on sale of assets (1,862) (1,302) Mortgage loans originated for resale (194,294) (70,065) Proceeds from sale of mortgage loans held for resale 164,483 82,944 (Increase) decrease in trading securities 1,024 (996) (Increase) decrease in accrued revenue receivable (4,203) 2,973 Increase in other assets (2,476) (2,854) Increase in accrued interest, taxes and expense 4,922 3,571 Increase in other liabilities 1,370 1,226 - - ------------------------------------------------------------------------------- Net cash provided (used) by operating activities (10,849) 32,264 - - ------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities 6,959 15,329 Proceeds from maturities of available for sale securities 107,179 27,908 Purchases of investment securities (20,404) (13,895) Purchases of available for sale securities (159,472) (76,306) Proceeds from sales of available for sale securities 36,193 -- Loans originated or acquired net or principal collected 975 (94,950) Proceeds from sales of assets 26,334 1,452 Purchases of assets (4,813) (9,274) Cash and cash equivalents of branches & subsidiaries acquired and sold, net (200) (19,371) - - ------------------------------------------------------------------------------- Net cash used by investing activities (7,249) (169,107) - - ------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in demand deposits, transaction deposits, money market deposits, and savings accounts 26,696 (56,756) Net increase in certificates of deposit 228,610 118,089 Net increase (decrease) in other borrowings (242,867) 1,258 Issuance of preferred, common and treasury stock, net 74 130 Payments on stock option notes receivable 10 41 - - ------------------------------------------------------------------------------- Net cash provided by financing activities 12,523 62,762 - - ------------------------------------------------------------------------------- 18 CONSOLIDATED STATEMENT OF CASH FLOWS, (CONTINUED) (In Thousands Except Share Data) Three Months Ended March 31, -------------------- 1996 1995 -------------------- Net decrease in cash and cash equivalents $ (5,575)$ (74,081) Cash and cash equivalents at beginning of period 311,939 309,099 - - ------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 306,364 $ 235,018 =============================================================================== CASH PAID FOR INTEREST $ 38,876 $ 33,281 =============================================================================== CASH PAID FOR TAXES $ 253 $ 2,645 =============================================================================== NET LOANS TRANSFERRED TO REPOSSESSED REAL ESTATE AND OTHER ASSETS $ 223 $ 651 =============================================================================== PAYMENT OF PREFERRED STOCK DIVIDENDS IN COMMON STOCK $ 375 $ 375 =============================================================================== See accompanying notes to consolidated financial statements. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accounting and reporting policies of BOK Financial Corporation conform to generally accepted accounting principles and to generally accepted practices within the banking industry. The Consolidated Financial Statements of BOK Financial include the accounts of BOK Financial and its banking subsidiaries, Bank of Oklahoma, N.A. and Citizens Bank of Northwest Arkansas. Certain prior period balances have been reclassified to conform with the current period presentation. (2) 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. 20 - - -------------------------------------------------------------------------------- QUARTERLY FINANCIAL SUMMARY - UNAUDITED Consolidated Daily Average Balances, Average Yields and Rates (In Thousands Except Share Data) For Three months ended --------------------------------------------------- MARCH 31, 1996 December 31, 1995 --------------------------------------------------- Average Revenue/ Yield Average Revenue/Yield Balance Expense /Rate Balance Expense /Rate --------------------------------------------------- ASSETS Taxable securities $1,274,853 $19,095 6.02% $1,285,158 $19,337 5.97% Tax-exempt securities(1) 269,115 5,032 7.52 256,599 4,824 7.46 - - ------------------------------------------------------------------------------- Total securities 1,543,968 24,127 6.28 1,541,757 24,161 6.22 - - ------------------------------------------------------------------------------- Trading securities 6,005 95 6.36 3,787 72 7.54 Funds sold 27,409 402 5.90 19,197 288 5.95 Loans(2) 2,189,423 47,866 8.79 2,145,558 47,838 8.85 Less reserve for loan losses 38,966 38,378 - - ------------------------------------------------------------------------------- Loans, net of reserve 2,150,457 47,866 8.95 2,107,180 47,838 9.01 - - ------------------------------------------------------------------------------- Total earning assets 3,727,839 72,490 7.82 3,671,921 72,359 7.82 - - ------------------------------------------------------------------------------- Cash and other assets 432,081 431,982 - - ------------------------------------------------------------------------------- Total assets $4,159,920 $4,103,903 =============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Transaction deposits $ 298,442 2,051 2.76 $ 385,302 2,714 2.79 Money market deposits 506,281 4,336 3.44 374,618 3,891 4.12 Savings deposits 103,931 629 2.43 106,633 654 2.43 Other time deposits 1,533,143 21,805 5.72 1,338,106 19,416 5.76 - - ------------------------------------------------------------------------------- Total interest-bearing deposits 2,441,797 28,821 4.75 2,204,659 26,675 4.80 - - ------------------------------------------------------------------------------- Other borrowings 778,343 10,993 5.68 973,914 14,457 5.89 Subordinated debenture -- -- -- -- -- -- - - ------------------------------------------------------------------------------- Total interest-bearing liabilities 3,220,140 39,814 4.97 3,178,573 41,132 5.13 - - ------------------------------------------------------------------------------- Demand deposits 588,624 584,748 Other liabilities 40,865 43,465 Shareholders' equity 310,291 297,117 - - ------------------------------------------------------------------------------- Total liabilities and shareholders' equity $4,159,920 $4,103,903 =============================================================================== TAX-EQUIVALENT NET INTEREST REVENUE(1) 32,676 2.85 31,227 2.69 TAX-EQUIVALENT NET INTEREST REVENUE(1) TO EARNING ASSETS 3.53 3.37 Less tax-equivalent adjustment(1) 1,874 1,780 - - ------------------------------------------------------------------------------- NET INTEREST REVENUE 30,802 29,447 Provision for loan losses 911 176 Other operating revenue 26,584 23,951 Other operating expense 37,642 36,852 - - ------------------------------------------------------------------------------- INCOME BEFORE TAXES 18,833 16,370 Federal and state income tax 5,838 3,707 - - ------------------------------------------------------------------------------- NET INCOME $12,995 $12,663 =============================================================================== EARNINGS PER SHARE: NET INCOME Primary $ .62 $ .60 - - ------------------------------------------------------------------------------- Fully Diluted $ .56 $ .54 =============================================================================== (1) Tax-equivalent at the statutory federal and state rates for all periods presented. The taxable equivalent adjustments shown above are for comparative purposes. (2) The loan averages include loans on which the accrual of interest has been discounted and are stated net of unearned income. - - ------------------------------------------------------------------------------- 21 For Three months ended - - ------------------------------------------------------------------------------- September 30, 1995 June 30, 1995 March 31, 1995 - - ------------------------------------------------------------------------------- Average Revenue/ Yield Average Revenue/ Yield Average Revenue/Yield Balance Expense /Rate Balance Expense /Rate Balance Expense /Rate - - ------------------------------------------------------------------------------- $1,336,474 $20,243 6.01% $1,425,922 $21,905 6.16% $1,373,411 $21,591 6.38% 255,688 4,798 7.44 253,770 4,799 7.59 249,725 4,692 7.62 - - ------------------------------------------------------------------------------- 1,592,162 25,041 6.24 1,679,692 26,704 6.38 1,623,136 26,283 6.57 - - ------------------------------------------------------------------------------- 3,323 51 6.09 4,565 72 6.33 3,010 47 6.33 9,826 149 6.02 13,670 213 6.25 23,463 346 5.98 2,073,088 46,216 8.84 1,958,467 43,999 9.01 1,869,484 40,999 8.89 38,372 38,218 38,302 - - ------------------------------------------------------------------------------- 2,034,716 46,216 9.01 1,920,249 43,999 9.19 1,831,182 40,999 9.08 - - ------------------------------------------------------------------------------- 3,640,027 71,457 7.79 3,618,176 70,988 7.87 3,480,791 67,675 7.88 - - ------------------------------------------------------------------------------- 418,656 424,687 406,957 - - ------------------------------------------------------------------------------- $4,058,683 $ 4,042,863 $3,887,748 =============================================================================== $ 387,039 2,713 2.78 $ 393,141 2,739 2.79 $ 392,266 2,715 2.81 378,298 3,802 3.99 362,817 3,515 3.89 360,745 3,187 3.58 115,312 710 2.44 123,169 738 2.40 129,834 855 2.67 1,208,924 17,454 5.73 1,193,816 16,997 5.71 1,176,686 15,639 5.39 - - ------------------------------------------------------------------------------- 2,089,573 24,679 4.69 2,072,943 23,989 4.64 2,059,531 22,396 4.41 - - ------------------------------------------------------------------------------- 1,060,864 15,952 5.97 1,090,359 16,868 6.21 969,528 14,808 6.19 -- -- -- 506 12 9.00 23,000 341 6.00 - - ------------------------------------------------------------------------------- 3,150,437 40,631 5.12 3,163,808 40,869 5.18 3,052,059 37,545 4.99 - - ------------------------------------------------------------------------------- 586,340 576,761 551,114 39,746 38,268 39,118 282,160 264,025 245,457 - - ------------------------------------------------------------------------------- $4,058,683 $4,042,862 $3,887,748 =============================================================================== 30,826 2.67 30,119 2.69 30,130 2.89 3.36 3.34 3.51 1,771 1,760 1,727 - - ------------------------------------------------------------------------------- 29,055 28,359 28,403 15 40 -- 23,185 21,857 22,153 35,682 34,567 35,105 - - ------------------------------------------------------------------------------- 16,543 15,609 15,451 4,050 3,527 3,484 - - ------------------------------------------------------------------------------- $12,493 $12,082 $11,967 =============================================================================== $ .59 $ .57 $ .57 - - ------------------------------------------------------------------------------- $ .54 $ .52 $ .52 =============================================================================== 22 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (A) Exhibits: No. 27 Financial Data Schedule filed herewith electronically. (B) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOK FINANCIAL CORPORATION ------------------------- (Registrant) Date May 13, 1996 /s/ James A. White ----------------- ------------------- James A. White Executive Vice President and Chief Financial Officer 23 EX-27 2 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the BOK Financial Corporation's 10-Q for the period ended March 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1996 MAR-31-1996 46,238 0 36,000 6,753 1,367,894 192,481 192,572 2,199,161 39,561 4,239,715 3,193,015 658,560 35,792 46,379 0 23 1 305,945 4,239,715 47,866 22,253 497 70,616 28,821 39,814 30,802 911 (18) 37,642 18,833 18,833 0 0 12,995 0.62 0.56 3.53 26,851 15,023 0 36,653 38,287 1,228 1,591 39,561 39,561 0 0
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