form10q.htm
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As filed with the Securities and Exchange Commission on May 10, 2011
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____________ to ______________
Commission File No. 0-19341
BOK FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Oklahoma
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73-1373454
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(State or other jurisdiction
of Incorporation or Organization)
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(IRS Employer
Identification No.)
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Bank of Oklahoma Tower
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P.O. Box 2300
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Tulsa, Oklahoma
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74192
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(Address of Principal Executive Offices)
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(Zip Code)
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(918) 588-6000
(Registrant’s telephone number, including area code)
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 68,438,422 shares of common stock ($.00006 par value) as of March 31, 2011.
BOK Financial Corporation
Form 10-Q
Quarter Ended March 31, 2011
Index
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Part I. Financial Information
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Management’s Discussion and Analysis (Item 2)
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1
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Market Risk (Item 3)
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42
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Controls and Procedures (Item 4)
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44
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Consolidated Financial Statements – Unaudited (Item 1)
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45
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Quarterly Financial Summary – Unaudited (Item 2)
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88
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Quarterly Earnings Trend – Unaudited
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90
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Part II. Other Information
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Item 1. Legal Proceedings
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91
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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91
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Item 6. Exhibits
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91
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Signatures
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92
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Performance Summary
BOK Financial Corporation (“the Company”) reported net income of $64.8 million or $0.94 per diluted share for the first quarter of 2011 compared to $60.1 million or $0.88 per diluted share for the first quarter of 2010 and $58.8 million or $0.86 per diluted share for the fourth quarter of 2010. Net income for the first quarter of 2010 included a $6.5 million or $0.10 per diluted share gain from the purchase of the rights to service $4.2 billion of residential mortgage loans on favorable terms.
Highlights of the first quarter of 2011 included:
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·
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Net interest revenue totaled $170.6 million for the first quarter of 2011 compared to $182.6 million for the first quarter of 2010 and $163.7 million for the fourth quarter of 2010. Net interest margin was 3.46% for the first quarter of 2011, 3.68% for the first quarter of 2010 and 3.19% for the fourth quarter of 2010. The decrease in net interest revenue compared with the first quarter of 2010 was due primarily to the reinvestment of cash flows from the securities portfolio at lower rates. Net interest revenue increased over the fourth quarter as premium amortization of the residential mortgage-backed securities portfolio slowed. Actual and projected prepayment speeds decreased as intermediate and long-term interest rates increased over the extremely low levels experienced in the fourth quarter of 2010.
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·
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Fees and commissions revenue totaled $123.3 million for the first quarter of 2011, compared to $115.3 million for the first quarter of 2010 and $136.0 million for the fourth quarter of 2010. Revenue growth over the first quarter of 2010 was distributed across most of our fee generating businesses. However, deposit service charges and fees decreased $4.3 million due primarily to changes in overdraft fee regulations which became effective in the second half of 2010. The decrease in fees and commissions revenue compared with the previous quarter was due to mortgage banking revenue which decreased $7.8 million from reduced mortgage loan origination volumes.
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·
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Operating expenses, excluding changes in the fair value of mortgage servicing rights, totaled $181.6 million, up $3.9 million over the first quarter of the prior year and down $21.9 million from the prior quarter. Personnel costs were up $3.2 million over the first quarter of 2010. Operating expenses decreased compared to the fourth quarter of 2010 primarily due to personnel costs and mortgage banking expenses.
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·
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Provision for credit losses totaled $6.3 million for the first quarter of 2011 compared to $42.1 million for the first quarter of 2010 and $7.0 million for the fourth quarter of 2010. Net loans charged off continued to improve decreasing to $10.3 million in the first quarter of 2011 from $34.5 million for the first quarter of 2010 and $14.2 million for the fourth quarter of 2010.
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·
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Combined allowance for credit losses totaled $303 million or 2.86% of outstanding loans, down from $307 million or 2.89% of outstanding loans at December 31, 2010. Nonperforming assets totaled $379 million or 3.54% of outstanding loans and repossessed assets at March 31, 2011, down from $394 million or 3.66% of outstanding loans and repossessed assets at December 31, 2010.
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·
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Outstanding loan balances were $10.6 billion at March 31, 2011, down $53 million since December 31, 2010. Commercial loan balances increased $114 million during the first quarter of 2011. Commercial loan growth was offset by a $54 million decrease in construction and land development commercial real estate loans, a $51 million decrease in residential mortgage loans and a $62 million decrease in consumer loans.
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·
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Total period end deposits increased $694 million during the first quarter of 2011 to $17.9 billion. All categories of deposits increased in the first quarter. Deposit growth was largely centered on commercial customers across most of our markets.
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·
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Tangible common equity ratio increased to 9.54% at March 31, 2011 from 9.21% at December 31, 2010 largely due to retained earnings growth. The tangible common equity ratio is a non-GAAP measure of capital strength used by the Company and investors based on shareholders’ equity as defined by generally accepted accounting principles in the United States of America minus intangible assets and equity that does not benefit common shareholders such as preferred equity and equity provided by the U.S. Treasury’s Troubled Asset Relief Program (“TARP”) Capital Purchase Program. BOK Financial chose not to participate in the TARP Capital Purchase Program. The Company’s Tier 1 capital ratios as defined by banking regulations were 12.97% at March 31, 2011 and 12.69% at December 31, 2010.
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·
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The Company paid a cash dividend of $17.1 million or $0.25 per common share during the first quarter of 2011. On April 26, 2011, the board of directors increased the cash dividend to $0.275 per common share payable on or about May 27, 2011 to shareholders of record as of May 13, 2011. This is the sixth consecutive annual increase since we paid our first cash dividend in the second quarter of 2005.
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Results of Operations
Net Interest Revenue and Net Interest Margin
Net interest revenue is the interest earned on debt securities, loans and other interest-earning assets less interest paid for interest-bearing deposits and other borrowings. The net interest margin is calculated by dividing net interest revenue by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest spread due to interest income earned on assets funded by non-interest bearing liabilities such as demand deposits and equity.
Net interest revenue totaled $170.6 million for the first quarter of 2011, down $11.9 million or 7% from the first quarter of 2010 and up $7.0 million over the fourth quarter of 2010. The decrease in net interest revenue from the first quarter of 2010 was due primarily to lower yield on our securities portfolio, partially offset by lower funding costs. The increase in net interest revenue over the fourth quarter of 2010 resulted from improved yield on the securities portfolio.
Net interest margin was 3.46% for the first quarter of 2011, 3.68% for the first quarter of 2010 and 3.19% for the fourth quarter of 2010.
The decrease in net interest margin compared to the first quarter of 2010 was due largely to lower yield on our securities portfolio. The tax-equivalent yield on earning assets was 4.09% for the first quarter of 2011, down 32 basis points from the first quarter of 2010. The securities portfolio yield decreased 53 basis points to 3.25%. Cash flows from our securities portfolio are reinvested at lower current rates. Loan yields decreased 6 basis points to 4.75%. Funding costs were down 7 basis points from the first quarter of 2010. The cost of interest-bearing deposits
decreased 22 basis points.
Net interest margin improved 27 basis points over the fourth quarter of 2010. Yield on average earning assets increased 25 basis points to 4.09%. Yield on the securities portfolio improved by 52 basis points. As intermediate and long-term interest rates increased near the end of the fourth quarter of 2010 and stabilized throughout the first quarter of 2011, premium amortization slowed and reinvestment rates improved. Yield on the loan portfolio decreased by 1 basis point. The cost of interest-bearing liabilities decreased 1 basis point from the previous quarter.
Changes in the average earning asset and average interest-bearing liabilities had little effect on changes in net interest revenue. Average earning assets for the first quarter of 2011 increased less than 1% over the first quarter of 2010. Average available for sale securities, which consist largely of U.S. government agency issued residential mortgage-backed securities, increased $652 million. We purchased these securities to supplement earnings, especially in a period of declining loan demand, and to manage interest rate risk. Average loans, net of allowances for loan losses, decreased $519 million. All major loan categories decreased largely due to reduced customer demand and normal repayment trends.
Average deposits increased $2.3 billion over the first quarter of 2010, including a $1.6 billion increase in average interest-bearing transaction accounts and a $780 million increase in average demand deposits. Average time deposits decreased $155 million compared with the first quarter of 2010. Average borrowed funds decreased $2.8 billion compared to the first quarter of 2010.
Average earning assets for the first quarter of 2011 decreased $491 million compared to the fourth quarter of 2010. Average securities decreased $319 million due to a $239 million decrease in available for sale securities and a $78 million decrease in mortgage trading securities which are used as an economic hedge of our mortgage servicing rights. Average outstanding loans, net of allowance for loan losses, were flat with the previous quarter. Average commercial loan balances increased in the first quarter 2011, offset by lower commercial real estate, residential mortgage and consumer loan balances. Average deposits increased $428 million over the fourth quarter of 2010, including a $307 million increase in average interest-bearing transaction accounts, a $94 million increase in average demand deposits and a $15 million increase in average time deposits. Average borrowed funds decreased $779 million.
Our overall objective is to manage the Company’s balance sheet to be relatively neutral to changes in interest rates as is further described in the Market Risk section of this report. Approximately two-thirds of our commercial and commercial real estate loan portfolios are either variable rate or fixed rate that will re-price within one year. These loans are funded primarily by deposit accounts that are either non-interest bearing, or that re-price more slowly than the loans. The result is a balance sheet that would be asset sensitive, which means that assets generally re-price more quickly than liabilities. Among the strategies that we use to manage toward a relatively rate-neutral position, we purchase fixed-rate residential mortgage-backed securities issued primarily by U.S. government agencies and fund them with market rate sensitive liabilities. The liability-sensitive nature of this strategy provides an offset to the asset-sensitive characteristics of our loan portfolio. We may also use derivative instruments to manage our interest rate risk. Interest rate swaps were used to convert fixed rate liabilities to floating rate based on LIBOR. Net interest revenue increased $437 thousand in the first quarter of 2011, $658 thousand in the first quarter of 2010 and $1.1 million in the fourth quarter of 2010 from periodic settlements of these contracts. This increase in net interest revenue contributed 1 basis point to the net interest margin in the first quarter of 2011, 1 basis point in the first quarter of 2010, and 2 basis points in the fourth quarter of 2010. Derivative contracts are carried on the balance sheet at fair value. Changes in fair value of these contracts are reported in income as derivatives gains or losses in the Consolidated Statements of Earnings. No interest rate swaps used to convert fixed rate liabilities to floating rate based on LIBOR were outstanding at March 31, 2011.
The effectiveness of these strategies is reflected in the overall change in net interest revenue due to changes in interest rates as shown in Table 1 and in the interest rate sensitivity projections as shown in the Market Risk section of this report.
Table 1 – Volume/Rate Analysis
(In thousands)
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Three Months Ended
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March 31, 2011 / 2010
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Change Due To1
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Yield /
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Change
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Volume
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Rate
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Tax-equivalent interest revenue:
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|
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|
|
|
|
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Securities
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$ |
(8,740 |
) |
|
$ |
3,418 |
|
|
$ |
(12,158 |
) |
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Trading securities
|
|
|
(216 |
) |
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|
(105 |
) |
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|
(111 |
) |
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Residential mortgage loans held for sale
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|
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(408 |
) |
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(139 |
) |
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(269 |
) |
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Loans
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|
|
(8,008 |
) |
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|
(6,291 |
) |
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|
(1,717 |
) |
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Funds sold and resell agreements
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|
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(4 |
) |
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|
(3 |
) |
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|
(1 |
) |
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Total
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|
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(17,376 |
) |
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|
(3,120 |
) |
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|
(14,256 |
) |
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Interest expense:
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|
|
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|
|
|
|
|
|
|
|
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Transaction deposits
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|
|
(2,551 |
) |
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|
1,719 |
|
|
|
(4,270 |
) |
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Savings deposits
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|
|
9 |
|
|
|
32 |
|
|
|
(23 |
) |
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Time deposits
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|
|
(1,033 |
) |
|
|
(706 |
) |
|
|
(327 |
) |
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Federal funds purchased
|
|
|
(219 |
) |
|
|
(260 |
) |
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|
41 |
|
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Repurchase agreements
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|
|
(442 |
) |
|
|
8 |
|
|
|
(450 |
) |
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Other borrowings
|
|
|
(1,121 |
) |
|
|
(4,155 |
) |
|
|
3,034 |
|
|
Subordinated debentures
|
|
|
11 |
|
|
|
2 |
|
|
|
9 |
|
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Total
|
|
|
(5,346 |
) |
|
|
(3,360 |
) |
|
|
(1,986 |
) |
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Tax-equivalent net interest revenue
|
|
|
(12,030 |
) |
|
$ |
240 |
|
|
$ |
(12,270 |
) |
|
Change in tax-equivalent adjustment
|
|
|
(95 |
) |
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
(11,935 |
) |
|
|
|
|
|
|
|
|
|
|
1 Changes attributable to both volume and yield/rate are allocated to both volume and yield/rate on an equal basis.
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Other Operating Revenue
Other operating revenue was $117.6 million for the first quarter of 2011 compared to $113.9 million for the first quarter of 2010. Fees and commissions revenue increased $8.0 million or 7%. Net gains on securities, derivatives and other assets decreased $3.9 million. Other-than-temporary impairment charges recognized in earnings in the first quarter of 2011 were $374 thousand greater than charges recognized in the first quarter of 2010.
Other operating revenue increased $5.7 million over the fourth quarter of 2010. Fees and commissions revenue decreased $12.7 million and net gains on securities, derivatives and other assets increased $16.3 million. Other-than-temporary impairment charges recognized in earnings were $2.0 million lower compared with the fourth quarter of 2010.
Table 2 – Other Operating Revenue
(In thousands)
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Three Months Ended
March 31,
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Increase
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|
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% Increase
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Three Months Ended
|
|
|
Increase
|
|
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% Increase
|
|
| |
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Dec. 31, 2010
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Brokerage and trading revenue
|
|
$ |
25,376 |
|
|
$ |
21,035 |
|
|
$ |
4,341 |
|
|
|
21 |
% |
|
$ |
28,610 |
|
|
$ |
(3,234 |
) |
|
|
(11 |
)% |
|
Transaction card revenue
|
|
|
28,445 |
|
|
|
25,687 |
|
|
|
2,758 |
|
|
|
11 |
% |
|
|
29,500 |
|
|
|
(1,055 |
) |
|
|
(4 |
)% |
|
Trust fees and commissions
|
|
|
18,422 |
|
|
|
16,320 |
|
|
|
2,102 |
|
|
|
13 |
% |
|
|
18,145 |
|
|
|
277 |
|
|
|
2 |
% |
|
Deposit service charges and fees
|
|
|
22,480 |
|
|
|
26,792 |
|
|
|
(4,312 |
) |
|
|
(16 |
)% |
|
|
23,732 |
|
|
|
(1,252 |
) |
|
|
(5 |
)% |
|
Mortgage banking revenue
|
|
|
17,356 |
|
|
|
14,871 |
|
|
|
2,485 |
|
|
|
17 |
% |
|
|
25,158 |
|
|
|
(7,802 |
) |
|
|
(31 |
)% |
|
Bank-owned life insurance
|
|
|
2,863 |
|
|
|
2,972 |
|
|
|
(109 |
) |
|
|
(4 |
)% |
|
|
3,182 |
|
|
|
(319 |
) |
|
|
(10 |
)% |
|
Other revenue
|
|
|
8,332 |
|
|
|
7,638 |
|
|
|
694 |
|
|
|
9 |
% |
|
|
7,648 |
|
|
|
684 |
|
|
|
9 |
% |
|
Total fees and commissions revenue
|
|
|
123,274 |
|
|
|
115,315 |
|
|
|
7,959 |
|
|
|
7 |
% |
|
|
135,975 |
|
|
|
(12,701 |
) |
|
|
(9 |
)% |
|
Gain (loss) on other assets
|
|
|
(68 |
) |
|
|
(1,390 |
) |
|
|
1,322 |
|
|
|
N/A |
|
|
|
15 |
|
|
|
(83 |
) |
|
|
N/A |
|
|
Loss on derivatives, net
|
|
|
(2,413 |
) |
|
|
(341 |
) |
|
|
(2,072 |
) |
|
|
N/A |
|
|
|
(7,286 |
) |
|
|
4,873 |
|
|
|
N/A |
|
|
Gain on available for sale securities, net
|
|
|
4,902 |
|
|
|
4,076 |
|
|
|
826 |
|
|
|
N/A |
|
|
|
953 |
|
|
|
3,949 |
|
|
|
N/A |
|
|
Loss on mortgage hedge securities, net
|
|
|
(3,518 |
) |
|
|
448 |
|
|
|
(3,966 |
) |
|
|
N/A |
|
|
|
(11,117 |
) |
|
|
7,599 |
|
|
|
N/A |
|
|
Gain (loss) on securities, net
|
|
|
1,384 |
|
|
|
4,524 |
|
|
|
(3,140 |
) |
|
|
N/A |
|
|
|
(10,164 |
) |
|
|
11,548 |
|
|
|
N/A |
|
|
Total other-than-temporary impairment
|
|
|
– |
|
|
|
(9,708 |
) |
|
|
9,708 |
|
|
|
N/A |
|
|
|
(4,768 |
) |
|
|
4,768 |
|
|
|
N/A |
|
|
Portion of loss recognized in (reclassified from) other comprehensive income
|
|
|
(4,599 |
) |
|
|
5,483 |
|
|
|
(10,082 |
) |
|
|
N/A |
|
|
|
(1,859 |
) |
|
|
(2,740 |
) |
|
|
N/A |
|
|
Net impairment losses recognized in earnings
|
|
|
(4,599 |
) |
|
|
(4,225 |
) |
|
|
(374 |
) |
|
|
N/A |
|
|
|
(6,627 |
) |
|
|
2,028 |
|
|
|
N/A |
|
|
Total other operating revenue
|
|
$ |
117,578 |
|
|
$ |
113,883 |
|
|
$ |
3,695 |
|
|
|
3 |
% |
|
$ |
111,913 |
|
|
$ |
5,665 |
|
|
|
5 |
% |
Certain percentage increases (decreases) in non-fees and commissions revenue are not meaningful for comparison purposes based on the nature of the item.
Fees and commissions revenue
Diversified sources of fees and commission revenue are a significant part of our business strategy and represented 42% of total revenue for the first quarter of 2011, excluding provision for credit losses and gains and losses on asset sales, securities and derivatives. We believe that a variety of fee revenue sources provide an offset to changes in interest rates, values in the equity markets, commodity prices and consumer spending, all of which can be volatile. We expect continued growth in other operating revenue through offering new products and services and by expanding into markets outside of Oklahoma. However, current and future economic conditions, regulatory constraints, increased competition and saturation in our existing markets could affect the rate of future increases.
Brokerage and trading revenue increased $4.3 million or 21% over the first quarter of 2010. Securities trading revenue totaled $14.6 million for the first quarter of 2011, up $3.6 million or 33% compared to the first quarter of 2010 on increased customer activity. Customer hedging revenue totaled $1.1 million for the first quarter of 2011, a $2.2 million decrease from the first quarter of 2010 due primarily to a $2.6 million credit loss on certain mortgage banking customer risk management derivative contracts. This loss was largely offset by a decrease in related accrued incentive compensation expense. Retail brokerage revenue increased $1.4 million over the first quarter of 2010 to $7.1 million and investment banking revenue increased $1.5 million over the first quarter of 2010 to $2.8 million.
Brokerage and trading revenue decreased $3.3 million compared to the fourth quarter of 2010. Investment banking revenue decreased $1.7 million primarily due to decreased loan syndication volume in the first quarter of 2011. Securities trading revenue decreased $573 thousand compared to the fourth quarter of 2010 and customer hedging revenue decreased $1.6 million compared to the fourth quarter of 2010. The $2.6 million credit loss on certain mortgage banking customer risk management derivative contracts was partially offset by increased energy derivative activity over the fourth quarter of 2010. Retail brokerage increased $554 thousand over the fourth quarter of 2010.
Transaction card revenue depends largely on the volume and amount of transactions processed, the number of ATM locations and the number of merchants served. Transaction card revenue totaled $28.4 million for the first quarter of 2011, up $2.8 million or 11% over the first quarter of 2010. Merchant discount fees increased $1.2 million or 18% to $7.9 million on increased transaction volumes. Check card revenue increased $886 thousand or 12% to $8.6
million and ATM network revenue increased $678 thousand or 6% over the first quarter of 2010. Increased ATM transaction volumes were partially offset by a decrease in the average rate charged per transaction. Transaction card revenue decreased $1.1 million compared to the fourth quarter of 2010 primarily due lower ATM network revenue. Merchant discount fees and check card revenue were flat with the prior quarter.
Interchange fee limits proposed by the Federal Reserve Bank as required by the Dodd-Frank Act (the “Act”) would significantly reduce our transaction card revenue. Based on the $0.12 per transaction cap proposed in December 2010 to be effective as of July 21, 2011, we would expect a decline of $12 million to $15 million in our transaction card revenue in 2011. On March 29, 2011, the Federal Reserve Bank announced that it would not be able to issue final interchange fee standards by April 21, 2011 as required by the Act. In addition, legislation that would repeal or delay interchange fee limits is being considered. The ultimate effect of the Act on interchange fees is uncertain.
Trust fees and commissions increased $2.1 million or 13% over the first quarter of 2010 to $18.4 million primarily due to an increase in the fair value of trust assets, partially offset by lower balances in our proprietary mutual funds. We continue to voluntarily waive administration fees on the Cavanal Hill money market funds in order to maintain positive yields on these funds in the current low short-term interest rate environment. Waived fees totaled $1.2 million for the first quarter of 2011, $1.1 million for the fourth quarter of 2010 and $951 thousand for the first quarter of 2010. The fair value of trust assets administered by the Company totaled $32.0 billion compared to $32.8 billion at December 31, 2010 and $30.7 billion compared to March 31, 2010. Trust fees and commissions also increased $277 thousand over the fourth quarter of 2010.
Deposit service charges and fees decreased $4.3 million or 16% compared to the first quarter of 2010. Overdraft fees decreased $4.7 million or 28% to $12.3 million. The decrease in overdraft fees was primarily due to changes in federal regulations concerning overdraft charges that were effective July 1, 2010 and was partially mitigated by a new service charge imposed beginning the second quarter of 2010 on accounts that remain overdrawn for more than five days. Commercial account service charge revenue also decreased $363 thousand or 5% compared to the first quarter of 2010 to $7.3 million. Customers kept larger commercial account balances, which increases the earnings credit, a non-cash method for commercial customers to avoid incurring charges for deposit services based on account balances. Service charges on retail deposit accounts decreased $293 thousand or 21% to $1.1 million. Deposit service charges and fees decreased $1.3 million compared to the prior quarter. The decrease was primarily due to a $1.4 million seasonal decrease in overdraft fees partially offset by a $210 thousand increase in commercial service charges. Overdraft volumes historically are lower in the first quarter of each year.
Mortgage banking revenue was up $2.5 million or 17% over the first quarter of 2010. Revenue from originating and marketing mortgage loans increased $1.0 million over the first quarter of 2010 primarily due to a $69 million increase in mortgage loans funded for sale in the secondary market. Mortgage servicing revenue increased $1.5 million or 18% over the first quarter of 2010 and the outstanding principal balance of mortgage loans serviced for others increased $225 million. Mortgage banking revenue decreased $7.8 million compared to the fourth quarter of 2010, primarily due to a $7.6 million decrease in revenue from originating and marketing mortgage loans. Funding of residential mortgage loans for sale totaled $452 million in the first quarter of 2011 and $822 million in the fourth quarter of 2010.
Table 3 – Mortgage Banking Revenue
(In thousands)
| |
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
| |
|
2011
|
|
|
2010
|
|
|
Increase
|
|
|
%
Increase
|
|
|
Dec. 31, 2010
|
|
|
Increase (Decrease)
|
|
|
% Increase (Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originating and marketing revenue
|
|
$ |
7,529 |
|
|
$ |
6,522 |
|
|
$ |
1,007 |
|
|
|
15 |
% |
|
$ |
15,083 |
|
|
$ |
(7,554 |
) |
|
|
(50 |
)% |
|
Servicing revenue
|
|
|
9,827 |
|
|
|
8,349 |
|
|
|
1,478 |
|
|
|
18 |
% |
|
|
10,075 |
|
|
|
(248 |
) |
|
|
(2 |
)% |
|
Total mortgage revenue
|
|
$ |
17,356 |
|
|
$ |
14,871 |
|
|
$ |
2,485 |
|
|
|
17 |
% |
|
$ |
25,158 |
|
|
$ |
(7,802 |
) |
|
|
(31 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans funded for sale during the quarter
|
|
$ |
451,821 |
|
|
$ |
383,293 |
|
|
$ |
68,528 |
|
|
|
18 |
% |
|
$ |
821,921 |
|
|
$ |
(370,100 |
) |
|
|
(45 |
)% |
|
Mortgage loan refinances to total funded
|
|
|
49 |
% |
|
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
72 |
% |
|
|
|
|
|
|
|
|
| |
|
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2011
|
|
|
2010
|
|
|
Increase
|
|
|
%
Increase
|
|
|
Dec. 31, 2010
|
|
|
Increase (Decrease)
|
|
|
% Increase (Decrease)
|
|
|
Outstanding principal balance of mortgage loans serviced for others
|
|
$ |
11,202,626 |
|
|
$ |
10,977,336 |
|
|
$ |
225,290 |
|
|
|
2 |
% |
|
$ |
11,263,130 |
|
|
$ |
(60,504 |
) |
|
|
(1 |
)% |
Net gains on securities, derivatives and other assets
We recognized $4.9 million of net gains on sales of $793 million of available for sale securities in the first quarter of 2011, excluding securities held as an economic hedge of mortgage servicing rights. Securities were sold either because they had reached their expected maximum potential return or to mitigate exposure from rising interest rates. We recognized net gains of $953 thousand on sales of $536 million of available for sale securities in the fourth quarter of 2010 and $4.1 million on sales of $286 million of available for sale securities in the first quarter of 2010.
We also maintain a portfolio of securities and derivative contracts designated as an economic hedge of the changes in the fair value of our mortgage servicing rights. The fair value of our mortgage servicing rights fluctuate due to changes in prepayment speeds and other assumptions as more fully described in Note 5 to the Consolidated Financial Statements. As benchmark mortgage interest rates increase, prepayment speeds slow and the value of our mortgage servicing rights increase. As benchmark mortgage interest rates fall, prepayment speeds increase and the value of our mortgage servicing rights decrease.
Table 4 – Gain (Loss) on Mortgage Servicing Rights, Net of Economic Hedge
(In thousands)
| |
|
Three Months Ended
|
|
| |
|
March 31,
2011
|
|
|
December 31,
2010
|
|
|
March 31,
2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
Loss on mortgage hedge derivative contracts
|
|
$ |
(2,419 |
) |
|
$ |
(7,392 |
) |
|
$ |
(659 |
) |
|
Gain (loss) on mortgage trading securities
|
|
|
(3,518 |
) |
|
|
(11,117 |
) |
|
|
448 |
|
|
Net loss on financial instruments held as an economic hedge of mortgage servicing rights
|
|
|
(5,937 |
) |
|
|
(18,509 |
) |
|
|
(211 |
) |
|
Gain on change in fair value of mortgage servicing rights
|
|
|
3,129 |
|
|
|
25,111 |
|
|
|
2,100 |
|
|
Gain (loss) on changes in fair value of mortgage servicing rights, net of gain on financial instruments held as an economic hedge
|
|
$ |
(2,808 |
) |
|
$ |
6,602 |
|
|
$ |
1,889 |
1 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest revenue on mortgage trading securities
|
|
$ |
3,058 |
|
|
$ |
4,232 |
|
|
$ |
4,237 |
|
|
1
|
Excludes $11.8 million day-one pre-tax gain on the purchase of mortgage servicing rights in the first quarter of 2010.
|
As more fully discussed in Note 2 to the Consolidated Financial Statements, we recognized other-than-temporary impairment losses on certain private-label residential mortgage-backed securities of $4.6 million in earnings during the first quarter of 2011 related to additional declines in projected cash flows as a result of increased delinquencies and foreclosures. We recognized other-than-temporary impairment losses in earnings of $6.6 million and $4.2 million in the fourth and first quarter of 2010, respectively.
Other Operating Expense
Other operating expense for the first quarter of 2011 totaled $178.4 million, up $14.7 million or 9% over the first quarter of 2010. Changes in the fair value of mortgage servicing rights decreased other operating expenses by $3.1 million in the first quarter of 2011 and decreased other operating expenses by $13.9 million in the first quarter of 2010. Excluding changes in the fair value of mortgage servicing rights, other operating expenses increased $3.9 million or 2% over the first quarter of 2010. Personnel expenses increased $3.2 million or 3% and non-personnel expenses increased $744 thousand or 1%.
Excluding the change in the fair value of mortgage servicing rights, other operating expenses decreased $21.9 million compared to the fourth quarter of 2010. Personnel expenses decreased $6.8 million and non-personnel expenses decreased $15.1 million.
During the first quarter of 2010, the Company purchased the rights to service more than 34 thousand residential mortgage loans with unpaid principal balances of $4.2 billion. The loans to be serviced are primarily concentrated in the New Mexico market and predominately held by Fannie Mae, Freddie Mac and Ginnie Mae. The cash purchase price for these servicing rights was approximately $32 million. The day-one fair value of the servicing rights purchased, based on independent valuation analyses, which were further supported by assumptions and models we regularly use to value our portfolio of servicing rights, was $11.8 million higher than the purchase price. This amount is included in the change in fair value of mortgage servicing rights for the first quarter of 2010. The discounted purchase price can be directly attributed to the distressed financial condition of the seller, which was subsequently closed by federal banking regulators.
Table 5 – Other Operating Expense
(In thousands)
| |
|
Three Months
|
|
|
|
|
|
%
|
|
|
Three Months
|
|
|
|
|
|
%
|
|
| |
|
Ended March 31,
|
|
|
Increase
|
|
|
Increase
|
|
|
Ended
|
|
|
Increase
|
|
|
Increase
|
|
| |
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Dec 31, 2010
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular compensation
|
|
$ |
60,804 |
|
|
$ |
57,760 |
|
|
$ |
3,044 |
|
|
|
5 |
% |
|
$ |
61,659 |
|
|
$ |
(855 |
) |
|
|
(1 |
)% |
|
Incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash-based
|
|
|
19,555 |
|
|
|
18,677 |
|
|
|
878 |
|
|
|
5 |
% |
|
|
26,453 |
|
|
|
(6,898 |
) |
|
|
(26 |
)% |
|
Stock-based
|
|
|
3,431 |
|
|
|
4,484 |
|
|
|
(1,053 |
) |
|
|
(23 |
)% |
|
|
4,994 |
|
|
|
(1,563 |
) |
|
|
(31 |
)% |
|
Total incentive compensation
|
|
|
22,986 |
|
|
|
23,161 |
|
|
|
(175 |
) |
|
|
(1 |
)% |
|
|
31,447 |
|
|
|
(8,461 |
) |
|
|
(27 |
)% |
|
Employee benefits
|
|
|
16,204 |
|
|
|
15,903 |
|
|
|
301 |
|
|
|
2 |
% |
|
|
13,664 |
|
|
|
2,540 |
|
|
|
19 |
% |
|
Total personnel expense
|
|
|
99,994 |
|
|
|
96,824 |
|
|
|
3,170 |
|
|
|
3 |
% |
|
|
106,770 |
|
|
|
(6,776 |
) |
|
|
(6 |
)% |
|
Business promotion
|
|
|
4,624 |
|
|
|
3,978 |
|
|
|
646 |
|
|
|
16 |
% |
|
|
4,377 |
|
|
|
247 |
|
|
|
6 |
% |
|
Professional fees and services
|
|
|
7,458 |
|
|
|
6,401 |
|
|
|
1,057 |
|
|
|
17 |
% |
|
|
9,527 |
|
|
|
(2,069 |
) |
|
|
(22 |
)% |
|
Net occupancy and equipment
|
|
|
15,604 |
|
|
|
15,511 |
|
|
|
93 |
|
|
|
1 |
% |
|
|
16,331 |
|
|
|
(727 |
) |
|
|
(4 |
)% |
|
Insurance
|
|
|
6,186 |
|
|
|
6,533 |
|
|
|
(347 |
) |
|
|
(5 |
)% |
|
|
6,139 |
|
|
|
47 |
|
|
|
1 |
% |
|
Data processing & communications
|
|
|
22,503 |
|
|
|
20,309 |
|
|
|
2,194 |
|
|
|
11 |
% |
|
|
23,902 |
|
|
|
(1,399 |
) |
|
|
(6 |
)% |
|
Printing, postage and supplies
|
|
|
3,082 |
|
|
|
3,322 |
|
|
|
(240 |
) |
|
|
(7 |
)% |
|
|
3,170 |
|
|
|
(88 |
) |
|
|
(3 |
)% |
|
Net losses & operating expenses of repossessed assets
|
|
|
6,015 |
|
|
|
7,220 |
|
|
|
(1,205 |
) |
|
|
(17 |
)% |
|
|
6,966 |
|
|
|
(951 |
) |
|
|
(14 |
)% |
|
Amortization of intangible assets
|
|
|
896 |
|
|
|
1,324 |
|
|
|
(428 |
) |
|
|
(32 |
)% |
|
|
1,365 |
|
|
|
(469 |
) |
|
|
(34 |
)% |
|
Mortgage banking costs
|
|
|
6,471 |
|
|
|
9,267 |
|
|
|
(2,796 |
) |
|
|
(30 |
)% |
|
|
11,999 |
|
|
|
(5,528 |
) |
|
|
(46 |
)% |
|
Change in fair value of mortgage servicing rights
|
|
|
(3,129 |
) |
|
|
(13,932 |
) |
|
|
10,803 |
|
|
|
N/A |
|
|
|
(25,111 |
) |
|
|
21,982 |
|
|
|
N/A |
|
|
Visa retrospective responsibility obligation
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
|
(1,103 |
) |
|
|
1,103 |
|
|
|
N/A |
|
|
Other expense
|
|
|
8,745 |
|
|
|
6,975 |
|
|
|
1,770 |
|
|
|
25 |
% |
|
|
14,029 |
|
|
|
(5,284 |
) |
|
|
(38 |
)% |
|
Total other operating expense
|
|
$ |
178,449 |
|
|
$ |
163,732 |
|
|
$ |
14,717 |
|
|
|
9 |
% |
|
$ |
178,361 |
|
|
$ |
88 |
|
|
|
– |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees at end of period (full-time equivalent)
|
|
|
4,533 |
|
|
|
4,425 |
|
|
|
108 |
|
|
|
2 |
% |
|
|
4,432 |
|
|
|
101 |
|
|
|
2 |
% |
Certain percentage increases (decreases) are not meaningful for comparison purposes.
Personnel expense
Regular compensation, which consists of salaries and wages, overtime pay and temporary personnel costs increased $3.0 million or 5% over the first quarter of 2010 primarily due to increased average headcount and standard annual merit increases which were effective in the second quarter of 2010. The Company generally awards annual merit increases effective April 1st for a majority of its staff.
Incentive compensation was $1.1 million or 23% lower compared to the first quarter of 2010. Cash-based incentive compensation plans are either intended to provide current rewards to employees who generate long-term business opportunities to the Company based on growth in loans, deposits, customer relationships and other measurable metrics or are intended to compensate employees with commissions on completed transactions. Total cash-based incentive compensation increased $878 thousand over the first quarter of 2010 including a $422 thousand decrease in commissions related to brokerage and trading revenue offset by a $1.3 million increase in cash-based incentive compensation for other business lines.
The Company also provides stock-based incentive compensation plans. Stock-based compensation plans include both equity and liability awards. Compensation expense related to liability awards decreased $1.6 million compared with the first quarter of 2010 due to changes in the market value of BOK Financial common stock and other investments. The market value of BOK Financial common stock decreased $1.72 per share in the first quarter of 2011 and increased $4.91 per share in the first quarter of 2010. Compensation expense for equity awards increased $595 thousand compared with the first quarter of 2010. Expense for equity awards is based on the grant-date fair value of the awards and is unaffected by subsequent changes in fair value.
Employee benefit expense increased $301 thousand or 2% over the first quarter of 2010 primarily due to increased expenses related to employee retirement plans, payroll taxes, employee training expenses and other benefits costs, partially offset by medical insurance costs. Medical insurance costs were $1.2 million or 22% lower compared to the first quarter of 2010. The Company self-insures a portion of its employee health care coverage and these costs may be volatile.
Personnel expense decreased $6.8 million compared with the fourth quarter of 2010 primarily due to reduced incentive compensation partially offset by a seasonal increase in payroll taxes. Incentive compensation decreased $8.5 million, including a $6.9 million decrease in cash-based incentive compensation and a $1.6 million decrease in stock-based compensation expense. Stock-based compensation decreased in the first quarter primarily due to changes in the market value of BOK Financial common stock and other investments during the first quarter of 2011.
Non-personnel operating expenses
Non-personnel operating expenses, excluding changes in the fair value of mortgage servicing rights, increased $744 thousand or 1% over the first quarter of 2010. Increase data processing costs, professional fees and other expenses were primarily offset by lower mortgage banking costs and net losses and operating expenses related to repossessed assets.
Non-personnel operating expenses, excluding changes in the fair value of mortgage servicing rights, decreased $15.1 million compared to the fourth quarter of 2010. Mortgage banking expenses decreased $5.5 million primarily due to lower provisions for losses on loans sold with recourse and foreclosure costs on loans serviced for others. Other expenses decreased $5.3 million due largely to a reduction in depreciation expenses on equipment used in our leasing business. All other non-personnel expenses decreased by $4.3 million primarily due to decreases in professional fees, data processing costs and net losses and expenses on repossessed assets.
Income Taxes
Income tax expense was $38.8 million or 37% of book taxable income for the first quarter of 2011 compared with $30.3 million or 33% of book taxable income for the first quarter of 2010 and $31.1 million or 34% of book taxable income for the fourth quarter of 2010. Income tax expense increased largely due to increased book taxable income and lower recognition of federal and state tax credits in the first quarter of 2011.
BOK Financial operates in numerous jurisdictions, which requires judgment regarding the allocation of income, expense and earnings under various laws and regulations of each of these taxing jurisdictions. Each jurisdiction may
audit our tax returns and may take different positions with respect to these allocations. The reserve for uncertain tax positions was $14 million at March 31, 2011 and $12 million at December 31, 2010.
Lines of Business
We operate three principal lines of business: commercial banking, consumer banking and wealth management. Commercial banking includes lending, treasury and cash management services and customer risk management products to small businesses, middle market and larger commercial customers. Commercial banking also includes the TransFund network. Consumer banking includes retail lending and deposit services and all mortgage banking activities. Wealth management provides fiduciary services, brokerage and trading, private bank services and investment advisory services in all markets. Wealth management also originates loans for high net worth clients.
In addition to our lines of business, we have a funds management unit. The primary purpose of this unit is to manage our overall liquidity needs and interest rate risk. Each line of business borrows funds from and provides funds to the funds management unit as needed to support their operations. Operating results for funds management and other include the effect of interest rate risk positions and risk management activities, securities gains and losses including impairment charges, the provision for credit losses in excess of net loans charged off to the business lines, tax planning strategies and certain executive compensation costs that are not attributed to the lines of business.
We allocate resources and evaluate the performance of our lines of business after allocation of funds, certain indirect expenses, taxes based on statutory rates, actual net credit losses and capital costs. The cost of funds borrowed from the funds management unit by the operating lines of business is transfer priced at rates that approximate market for funds with similar duration. Market is generally based on the applicable LIBOR or interest rate swap rates, adjusted for prepayment risk. This method of transfer-pricing funds that support assets of the operating lines of business tends to insulate them from interest rate risk.
The value of funds provided by the operating lines of business to the funds management unit is also based on rates which approximate the wholesale market for funds with similar duration and repricing characteristics. Market is generally based on LIBOR or interest rate swap rates. The funds credit formula applied to deposit products with indeterminate maturities is established based on their repricing characteristics reflected in a combination of the short-term LIBOR rate and a moving average of an intermediate term swap rate, with an appropriate spread applied to both. Shorter duration products are weighted towards the short term LIBOR rate and longer duration products are weighted towards the intermediate term swap rates. The expected duration ranges from 30 days for certain rate-sensitive deposits to five years.
Economic capital is assigned to the business units by a capital allocation model that reflects management’s assessment of risk. This model assigns capital based upon credit, operating, interest rate and market risk inherent in our business lines and recognizes the diversification benefits among the units. The level of assigned economic capital is a combination of the risk taken by each business line, based on its actual exposures and calibrated to its own loss history where possible. Average invested capital includes economic capital and amounts we have invested in the lines of business.
As shown in Table 6, net income attributable to our lines of business increased $7.4 million over the first quarter of 2010. Excluding the day-one gain from the purchase of mortgage servicing rights on favorable terms in the first quarter of 2010, net income for the first quarter of 2011 attributed to our lines of business was up $13.9 million or 54% over the first quarter of 2010. The gain on mortgage servicing rights was attributed to the consumer banking line of business in the Oklahoma geographic market. The increase in net income attributed to our lines of business was due primarily to a decrease in net loans charged off and an increase in other operating revenue compared to the first quarter of 2010, partially offset by a decrease in net interest revenue. Net income attributed to funds management and other decreased compared to the first quarter of 2010 primarily due to an increase in the provision for income taxes. The decline in net interest revenue earned by funds management and other was primarily offset by a decrease in the loan loss provision in excess of charge-offs to the business lines.
Table 6 – Net Income by Line of Business
(In thousands)
| |
|
Three Months Ended March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Commercial banking
|
|
$ |
29,593 |
|
|
$ |
11,591 |
|
|
Consumer banking
|
|
|
5,930 |
|
|
|
17,396 |
|
|
Wealth management
|
|
|
3,982 |
|
|
|
3,136 |
|
|
Subtotal
|
|
|
39,505 |
|
|
|
32,123 |
|
|
Funds management and other
|
|
|
25,269 |
|
|
|
28,010 |
|
|
Total
|
|
$ |
64,774 |
|
|
$ |
60,133 |
|
Commercial Banking
Commercial banking contributed $29.6 million to consolidated net income in the first quarter of 2011, up $18.0 million over the first quarter of 2010. The increase in commercial banking net income was primarily due a $21.6 million decrease in net loans charged off and increased net interest revenue and other operating revenue.
Table 7 – Commercial Banking
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
| |
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
NIR (expense) from external sources
|
|
$ |
84,854 |
|
|
$ |
84,897 |
|
|
$ |
(43 |
) |
|
NIR (expense) from internal sources
|
|
|
(9,045 |
) |
|
|
(12,382 |
) |
|
|
3,337 |
|
|
Total net interest revenue
|
|
|
75,809 |
|
|
|
72,515 |
|
|
|
3,294 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
35,506 |
|
|
|
29,681 |
|
|
|
5,825 |
|
|
Operating expense
|
|
|
52,518 |
|
|
|
49,823 |
|
|
|
2,695 |
|
|
Net loans charged off
|
|
|
6,778 |
|
|
|
28,379 |
|
|
|
(21,601 |
) |
|
Loss on repossessed assets, net
|
|
|
(3,585 |
) |
|
|
(5,023 |
) |
|
|
1,438 |
|
|
Income before taxes
|
|
|
48,434 |
|
|
|
18,971 |
|
|
|
29,463 |
|
|
Federal and state income tax
|
|
|
18,841 |
|
|
|
7,380 |
|
|
|
11,461 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,593 |
|
|
$ |
11,591 |
|
|
$ |
18,002 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
9,171,363 |
|
|
$ |
9,175,488 |
|
|
$ |
(4,125 |
) |
|
Average loans
|
|
|
8,140,560 |
|
|
|
8,374,205 |
|
|
|
(233,645 |
) |
|
Average deposits
|
|
|
7,666,641 |
|
|
|
5,689,178 |
|
|
|
1,977,463 |
|
|
Average invested capital
|
|
|
861,980 |
|
|
|
927,953 |
|
|
|
(65,973 |
) |
|
Return on average assets
|
|
|
1.31 |
% |
|
|
0.51 |
% |
|
|
80 |
bp |
|
Return on invested capital
|
|
|
13.92 |
% |
|
|
5.07 |
% |
|
|
886 |
bp |
|
Efficiency ratio
|
|
|
47.18 |
% |
|
|
48.75 |
% |
|
|
(157 |
) bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.34 |
% |
|
|
1.37 |
% |
|
|
(104 |
) bp |
Net interest revenue increased $3.3 million or 5% over the first quarter of 2010 primarily due to a $2.0 billion increase in average deposits attributed to our commercial banking unit. Improving loan yield was partially offset by a $234 million decrease in average loan balances compared to the first quarter of 2010.
Other operating revenue increased $5.8 million or 20% over the first quarter of 2010. Most categories of other operating revenue increased including a $1.8 million increase in transaction card revenues on increased customer activity. Energy derivative trading revenue, loan syndication fees, lease financing fees and service charges on commercial deposit accounts all increased over the prior year.
Operating expenses increased $2.7 million or 5% over the first quarter of 2010 primarily due to increased data processing costs related to higher transaction card volumes, increased personnel costs as a result of annual merit
increases and increased deposit insurance expenses related to the increase in average deposit balances.
The average outstanding balance of loans attributed to commercial banking was $8.1 billion for the first quarter of 2011, down $234 million or 3% compared to the first quarter of 2010. See Loans section following for additional discussion of changes in commercial and commercial real estate loans which are primarily attributed to the commercial banking segment. Net commercial banking loans charged off decreased $21.6 million compared to the first quarter of 2010 to $6.8 million or 0.34% of average loans attributed to this line of business on an annualized basis. The decrease in net loans charged off was primarily due to a decrease in losses on commercial real estate loans.
Average deposits attributed to commercial banking were $7.7 billion for the first quarter of 2011, up $2.0 billion or 35% over the first quarter of 2010. Average deposit balances attributed to our commercial & industrial customers increased $841 million or 43% and average treasury services deposit balances increased $671 million or 46%. Average deposit balances attributable to our small business customers increased $287 million or 27% and average balances attributed to our energy customers increased $109 million or 17%. We believe that commercial customers are building cash reserves due to continued economic uncertainty.
Consumer Banking
Consumer banking services are provided through four primary distribution channels: traditional branches, supermarket branches, the 24-hour ExpressBank call center, internet banking and mobile banking.
Consumer banking contributed $5.9 million to consolidated net income for the first quarter of 2011, down $11.5 million compared to the first quarter of 2010. Net income attributed to the consumer banking unit for the first quarter of 2010 included the $6.5 million day-one gain from the purchase of rights to service $4.2 billion of residential mortgage loans on favorable terms. Excluding the impact of this gain, net income attributed to consumer banking decreased $4.9 million compared to the first quarter of 2010 primarily due to decreased net interest revenue and deposit service charges, partially offset by increased mortgage banking revenue.
Table 8 – Consumer Banking
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
NIR (expense) from external sources
|
|
$ |
18,664 |
|
|
$ |
19,496 |
|
|
$ |
(832 |
) |
|
NIR (expense) from internal sources
|
|
|
9,363 |
|
|
|
11,879 |
|
|
|
(2,516 |
) |
|
Total net interest revenue
|
|
|
28,027 |
|
|
|
31,375 |
|
|
$ |
(3,348 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
43,419 |
|
|
|
43,221 |
|
|
|
198 |
|
|
Operating expense
|
|
|
55,139 |
|
|
|
56,169 |
|
|
|
(1,030 |
) |
|
Net loans charged off
|
|
|
3,601 |
|
|
|
3,708 |
|
|
|
(107 |
) |
|
Increase in fair value of mortgage service rights
|
|
|
3,129 |
|
|
|
13,932 |
|
|
|
(10,803 |
) |
|
Loss on financial instruments, net
|
|
|
(5,937 |
) |
|
|
(211 |
) |
|
|
(5,726 |
) |
|
Gain (loss) on repossessed assets, net
|
|
|
(192 |
) |
|
|
31 |
|
|
|
(223 |
) |
|
Income before taxes
|
|
|
9,706 |
|
|
|
28,471 |
|
|
|
(18,765 |
) |
|
Federal and state income tax
|
|
|
3,776 |
|
|
|
11,075 |
|
|
|
(7,299 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
5,930 |
|
|
$ |
17,396 |
|
|
$ |
(11,466 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
6,062,395 |
|
|
$ |
6,159,190 |
|
|
$ |
(96,795 |
) |
|
Average loans
|
|
|
1,995,150 |
|
|
|
2,133,943 |
|
|
|
(138,793 |
) |
|
Average deposits
|
|
|
5,938,691 |
|
|
|
6,064,687 |
|
|
|
(125,996 |
) |
|
Average invested capital
|
|
|
271,192 |
|
|
|
314,193 |
|
|
|
(43,001 |
) |
|
Return on average assets
|
|
|
0.40 |
% |
|
|
1.15 |
% |
|
|
(75 |
) bp |
|
Return on invested capital
|
|
|
8.87 |
% |
|
|
22.45 |
% |
|
|
(1,359 |
) bp |
|
Efficiency ratio
|
|
|
77.18 |
% |
|
|
75.30 |
% |
|
|
188 |
bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.73 |
% |
|
|
0.70 |
% |
|
|
3 |
bp |
|
Mortgage loans funded for resale
|
|
$ |
451,821 |
|
|
$ |
383,293 |
|
|
$ |
68,528 |
|
| |
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
Increase
(Decrease)
|
|
|
Branch locations
|
|
|
208 |
|
|
|
202 |
|
|
|
6 |
|
|
Mortgage loan servicing portfolio1
|
|
$ |
12,075,328 |
|
|
$ |
11,760,761 |
|
|
$ |
314,567 |
|
1 Includes outstanding principal for loans serviced for affiliates
Net interest revenue from consumer banking activities decreased $3.3 million or 11% compared to the first quarter of 2010 primarily due to a decrease in interest earned on securities held as an economic hedge of our mortgage servicing rights and a $139 million decrease in average loan balances. Average loan balances declined due to a decrease in average residential mortgage balances as well as the continued paydown of indirect automobile loans. The Company previously disclosed its decision to exit the indirect automobile loan business in the first quarter of 2009. Net interest revenue also decreased due to a reduction in average balances sold to the funds management unit.
Other operating revenue was flat compared to the first quarter of 2010. Deposits service charges decreased $4.2 million primarily due to lower overdraft fees as a result of changes in banking regulations that became effective in the third quarter of 2010, offset by a $2.5 million increase in mortgage banking revenue and a $953 thousand increase in transaction card revenues.
Operating expenses decreased $1.0 million or 2% compared to the first quarter of 2010. Mortgage banking expenses decreased due to lower provisions for losses on loans sold with recourse and foreclosure costs on loans serviced for others. Corporate expenses allocated to the consumer banking division also decreased, partially offset by increased personnel costs related to increased mortgage activity.
Net loans charged off by the consumer banking unit decreased $107 thousand or 3% compared to the first quarter of 2010. Net consumer banking charge-offs include residential mortgage loans, indirect automobile loans, overdrawn deposit accounts and other direct consumer loans.
Average consumer deposits decreased $126 million or 2% compared to the first quarter of 2010. Average balances of higher-costing time deposits decreased $262 million or 11%, partially offset by a $102 million or 4% increase in average interest-bearing transaction accounts balances and a $10 million or 1% increase in average demand deposit account balances over the first quarter of 2010. Movement of funds among the various types of consumer deposits was largely based on interest rates and product features offered.
Our Consumer Banking division originates, markets and services conventional and government-sponsored mortgage loans for all of our geographical markets. During the first quarter of 2011, a total of $457 million of mortgage loans were funded compared to $432 million funded in the first quarter of 2010. These amounts include loans funded for sale in the secondary market and loans funded for retention by the Company. Approximately 43% of our mortgage loans funded were in the Oklahoma market, 12% in the Texas market, 16% in New Mexico and 14% in the Colorado market. In addition to the $11.2 billion of mortgage loans serviced for others, the Consumer Banking division also services $892 million of loans for affiliated entities. Approximately 97% of the mortgage loans serviced was to borrowers in our primary geographical market areas. Mortgage servicing revenue increased to $9.9 million in the first quarter of 2011 compared to $8.3 million in the first quarter of 2010, primarily due to mortgage servicing rights purchased in the first quarter of 2010.
Changes in the fair value of our mortgage loan servicing rights, net of economic hedge, decreased Consumer Banking pre-tax net income by $2.8 million in the first quarter of 2011. Excluding the $11.8 million pre-tax day-one gain on the purchase of mortgage servicing rights during the first quarter, changes in fair value of our mortgage loan servicing rights, net of economic hedge, increased consumer banking net income by $1.2 million in the first quarter of 2010. Changes in the fair value of mortgage servicing rights and securities held as an economic hedge are due to movements in interest rates, actual and anticipated loan prepayment speeds and related factors. Net interest revenue on mortgage trading securities totaled $3.1 million for the first quarter of 2011 compared to $4.2 million for the first quarter of 2010.
Wealth Management
Wealth Management contributed consolidated net income of $4.0 million in the first quarter of 2011 compared to $3.1 million in the first quarter of 2010.
Table 9 – Wealth Management
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
| |
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
NIR (expense) from external sources
|
|
$ |
7,529 |
|
|
$ |
8,629 |
|
|
$ |
(1,100 |
) |
|
NIR (expense) from internal sources
|
|
|
2,743 |
|
|
|
3,021 |
|
|
|
(278 |
) |
|
Total net interest revenue
|
|
|
10,272 |
|
|
|
11,650 |
|
|
|
(1,378 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
39,859 |
|
|
|
37,320 |
|
|
|
2,539 |
|
|
Operating expense
|
|
|
43,187 |
|
|
|
41,072 |
|
|
|
2,115 |
|
|
Net loans charged off
|
|
|
445 |
|
|
|
2,765 |
|
|
|
(2,320 |
) |
|
Gain on financial instruments, net
|
|
|
18 |
|
|
|
– |
|
|
|
18 |
|
|
Income before taxes
|
|
|
6,517 |
|
|
|
5,133 |
|
|
|
1,384 |
|
|
Federal and state income tax
|
|
|
2,535 |
|
|
|
1,997 |
|
|
|
538 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
3,982 |
|
|
$ |
3,136 |
|
|
$ |
846 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
3,627,198 |
|
|
$ |
3,288,173 |
|
|
$ |
339,025 |
|
|
Average loans
|
|
|
985,721 |
|
|
|
1,085,092 |
|
|
|
(99,371 |
) |
|
Average deposits
|
|
|
3,537,854 |
|
|
|
3,209,866 |
|
|
|
327,988 |
|
|
Average invested capital
|
|
|
175,478 |
|
|
|
166,455 |
|
|
|
9,023 |
|
|
Return on assets
|
|
|
0.45 |
% |
|
|
0.39 |
% |
|
|
6 |
bp |
|
Return on invested capital
|
|
|
9.20 |
% |
|
|
7.64 |
% |
|
|
156 |
bp |
|
Efficiency ratio
|
|
|
86.15 |
% |
|
|
83.87 |
% |
|
|
228 |
bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.18 |
% |
|
|
1.03 |
% |
|
|
(85 |
) bp |
| |
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
Increase
(Decrease)
|
|
|
Trust assets
|
|
$ |
32,013,487 |
|
|
$ |
30,739,254 |
|
|
$ |
1,274,233 |
|
|
Trust assets for which BOKF has sole or joint discretionary authority
|
|
|
9,570,725 |
|
|
|
8,307,404 |
|
|
|
1,263,321 |
|
|
Non-managed trust assets
|
|
|
12,279,752 |
|
|
|
12,679,508 |
|
|
|
(399,756 |
) |
|
Assets held in safekeeping
|
|
|
10,163,010 |
|
|
|
9,752,342 |
|
|
|
410,668 |
|
Net interest revenue for the first quarter of 2011 decreased $1.4 million or 12% compared to the first quarter of 2010 primarily due to a decrease in the yield and average balances of securities and loans, partially offset by a $328 million increase in average deposit balances.
Other operating revenue increased $2.5 million or 7% over the first quarter of 2010 primarily due to a $2.1 million or 13% increase in trust fees and commission primarily due to increases in the fair value of trust assets. Brokerage and trading revenue increased primarily offset by a decrease in other revenues.
Other operating revenue includes fees earned from state and municipal bond underwriting and financial advisory services, primarily in the Oklahoma and Texas markets. In the first quarter of 2011, the wealth management unit participated in 35 underwritings that totaled $773 million. Our interest in these underwritings totaled approximately $212 million. In the first quarter of 2010, the wealth management unit participated in 32 underwritings that totaled $1.3 billion. Our interest in those underwriting totaled approximately $114 million.
Operating expenses increased $2.1 million or 5% over the first quarter of 2010. Personnel expenses increased $1.1 million primarily due to increased headcount. Non-personnel expenses increased $1.0 million over the first quarter of 2010 due to increased professional fees, deposit insurance expense, net occupancy and equipment costs and other expenses.
Growth in average assets was largely due to funds sold to the funds management unit. Average deposits attributed to the wealth management unit increased $328 million of 10% over the first quarter of 2010 including a $255 million increase in interest bearing transaction accounts and an $87 million increase in average demand deposit accounts, partially offset by a $15 million decrease in average time deposit balances.
Geographical Market Distribution
The Company also secondarily evaluates performance by primary geographical market. Loans are generally attributed to geographical markets based on the location of the customer and may not reflect the location of the underlying collateral. Brokered deposits and other wholesale funds are not attributed to a geographical market. Funds management and other also include insignificant results of operations in locations outside our primary geographic regions.
Table 10 – Net Income by Geographic Market
(In thousands)
| |
|
Three Months Ended March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Oklahoma
|
|
$ |
25,743 |
|
|
$ |
32,699 |
|
|
Texas
|
|
|
10,554 |
|
|
|
5,770 |
|
|
New Mexico
|
|
|
2,720 |
|
|
|
257 |
|
|
Arkansas
|
|
|
818 |
|
|
|
319 |
|
|
Colorado
|
|
|
2,352 |
|
|
|
1,052 |
|
|
Arizona
|
|
|
(3,065 |
) |
|
|
(8,349 |
) |
|
Kansas / Missouri
|
|
|
550 |
|
|
|
717 |
|
|
Subtotal
|
|
|
39,672 |
|
|
|
32,465 |
|
|
Funds management and other
|
|
|
25,102 |
|
|
|
27,668 |
|
|
Total
|
|
$ |
64,774 |
|
|
$ |
60,133 |
|
Oklahoma Market
Our Oklahoma offices are located primarily in the Tulsa and Oklahoma City metropolitan areas. Oklahoma is a significant market to the Company, representing 49% of our average loans, 53% of our average deposits and 40% of our consolidated net income in the first quarter of 2011. In addition, all of our mortgage servicing activity and 74% of our trust assets are attributed to the Oklahoma market.
Table 11 – Oklahoma
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
55,156 |
|
|
$ |
58,761 |
|
|
$ |
(3,605 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
75,589 |
|
|
|
70,743 |
|
|
|
4,846 |
|
|
Operating expense
|
|
|
79,058 |
|
|
|
79,507 |
|
|
|
(449 |
) |
|
Net loans charged off
|
|
|
6,125 |
|
|
|
10,778 |
|
|
|
(4,653 |
) |
|
Increase in fair value of mortgage servicing rights
|
|
|
3,129 |
|
|
|
13,932 |
|
|
|
(10,803 |
) |
|
Loss on financial instruments, net
|
|
|
(5,920 |
) |
|
|
(211 |
) |
|
|
(5,709 |
) |
|
Gain (loss) on repossessed assets, net
|
|
|
(639 |
) |
|
|
578 |
|
|
|
(1,217 |
) |
|
Income before taxes
|
|
|
42,132 |
|
|
|
53,518 |
|
|
|
(11,386 |
) |
|
Federal and state income tax
|
|
|
16,389 |
|
|
|
20,819 |
|
|
|
(4,430 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
25,743 |
|
|
$ |
32,699 |
|
|
$ |
(6,956 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
10,379,787 |
|
|
$ |
9,252,465 |
|
|
$ |
1,127,322 |
|
|
Average loans
|
|
|
5,188,424 |
|
|
|
5,537,376 |
|
|
|
(348,952 |
) |
|
Average deposits
|
|
|
9,461,918 |
|
|
|
8,323,646 |
|
|
|
1,138,272 |
|
|
Average invested capital
|
|
|
531,392 |
|
|
|
590,628 |
|
|
|
(59,236 |
) |
|
Return on average assets
|
|
|
1.01 |
% |
|
|
1.43 |
% |
|
|
(42 |
) bp |
|
Return on invested capital
|
|
|
19.65 |
% |
|
|
22.45 |
% |
|
|
(280 |
) bp |
|
Efficiency ratio
|
|
|
60.47 |
% |
|
|
61.39 |
% |
|
|
(92 |
) bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.48 |
% |
|
|
0.79 |
% |
|
|
(31 |
) bp |
Net income generated in the Oklahoma market in the first quarter of 2011 decreased $7.0 million or 21% compared to the first quarter of 2010. Excluding the impact of the $6.5 million day-one gain from the rights to service $4.2 billion of residential mortgage loans on favorable terms in the first quarter of 2010, net income generated in the Oklahoma market would have been down $424 thousand or 2% compared to the first quarter of 2010.
Net interest revenue decreased $3.6 million or 6% compared to the first quarter of 2010. Net interest revenue decreased primarily due to a $349 million decrease in average loan balances and a decrease in the yield on funds sold to the funds management unit, partially offset by a $1.1 billion increase in average deposit balances.
Other operating revenue increased $4.8 million or 7% compared to the first quarter of 2010. Mortgage banking revenue increased $2.5 million and all other operating revenues were up $5.2 million including increases in transaction card revenues, brokerage and trading revenue, trust fees and commissions and other revenues. Deposit service charges and fees decreased $2.8 million due to lower overdraft fees as a result of changes in banking regulations that became effective in the third quarter of 2010.
Other operating expenses decreased $449 thousand or 1% compared to the first quarter of 2010. Personnel expenses increased $1.6 million offset by a $1.9 million decrease in non-personnel expenses primarily due to lower data processing costs and decreased corporate expense allocations.
Average deposits in the Oklahoma market for the first quarter of 2011 increased $1.1 billion over the first quarter of 2010. The increase came primarily from the commercial and wealth management units, including trust,
broker/dealer and private banking. The increase was partially offset by a decrease in deposits attributable to consumer banking.
Texas Market
Our Texas offices are located primarily in the Dallas, Fort Worth and Houston metropolitan areas. Texas is our second largest market with 31% of our average loans, 25% of our average deposits and contributing 16% of our consolidated net income in the first quarter of 2011.
Table 12 – Texas
(In thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
34,086 |
|
|
$ |
32,993 |
|
|
$ |
1,093 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
15,404 |
|
|
|
14,495 |
|
|
|
909 |
|
|
Operating expense
|
|
|
32,287 |
|
|
|
31,511 |
|
|
|
776 |
|
|
Net loans charged off
|
|
|
1,245 |
|
|
|
6,536 |
|
|
|
(5,291 |
) |
|
Gain (loss) on repossessed assets, net
|
|
|
532 |
|
|
|
(425 |
) |
|
|
957 |
|
|
Income before taxes
|
|
|
16,490 |
|
|
|
9,016 |
|
|
|
7,474 |
|
|
Federal and state income tax
|
|
|
5,936 |
|
|
|
3,246 |
|
|
|
2,690 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
10,554 |
|
|
$ |
5,770 |
|
|
$ |
4,784 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
4,942,289 |
|
|
$ |
4,327,161 |
|
|
$ |
615,128 |
|
|
Average loans
|
|
|
3,262,960 |
|
|
|
3,332,841 |
|
|
|
(69,881 |
) |
|
Average deposits
|
|
|
4,356,711 |
|
|
|
3,747,668 |
|
|
|
609,043 |
|
|
Average invested capital
|
|
|
465,208 |
|
|
|
489,542 |
|
|
|
(24,334 |
) |
|
Return on average assets
|
|
|
0.87 |
% |
|
|
0.54 |
% |
|
|
33 |
bp |
|
Return on invested capital
|
|
|
9.20 |
% |
|
|
4.78 |
% |
|
|
442 |
bp |
|
Efficiency ratio
|
|
|
65.24 |
% |
|
|
66.36 |
% |
|
|
(112 |
) bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.15 |
% |
|
|
0.80 |
% |
|
|
(65 |
) bp |
Net income in the Texas market increased $4.8 million or 83% over the first quarter of 2010 primarily due to a decrease in net loans charged off.
Net interest revenue increased $1.1 million or 3% over the first quarter of 2010. Average assets increased $615 million due primarily to a $609 million or 16% increase in deposits which were sold to the funds management unit. Average outstanding loans decreased $70 million or 2% compared to the first quarter of 2010.
Other operating revenue increased $909 thousand or 6% over the first quarter of 2010 primarily due to increased trust fees and commissions, transaction card revenue and trading and brokerage fees. Deposit service charges decreased primarily due to lower overdraft fees as a result of changes in banking regulations that became effective in the third quarter of 2010. Mortgage banking revenue also decreased due to lower mortgage origination volume.
Operating expenses increased $776 thousand or 2% over the first quarter of 2010. Higher corporate expenses allocated to the Texas market and personnel costs were partially offset by decreased non-personnel expenses.
Net loans charged off improved to $1.2 million or 0.15% of average loans for the first quarter of 2011 on an annualized basis compared to $6.5 million or 0.80% of average loans for the first quarter of 2010 on an annualized basis.
Other Markets
Net income attributable to our New Mexico market increased $2.5 million over the first quarter of 2010 to $2.7 million and represented 4% of consolidated net income for the first quarter of 2011 compared to contributing less than 1% of consolidated net income in the first quarter of 2010. Net interest income increased $472 thousand or 6% over the first quarter of 2010. Average deposits increased $58 million. Net interest revenue earned on those deposits and improved loan yields were partially offset by a decrease in average loan balances attributed to the New Mexico market and lower yields earned on funds sold to the funds management unit. Operating revenue increased over the first quarter of 2010 primarily due to increased mortgage banking and transaction card revenues partially offset by lower overdraft fees and trading and brokerage revenue. Net charge-offs improved to $608 thousand or 0.35% of average loans on an annualized basis in the first quarter of 2011 from $2.8 million or 1.55% of average loans on an annualized basis in the first quarter of 2010.
Net income in the Arkansas market increased $499 thousand over the first quarter of 2010. Net interest revenue decreased $644 thousand primarily due to a $77 million decrease in average loans. Average deposits in our Arkansas market were up $48 million or 27% over the first quarter of 2010 due primarily to increased commercial banking deposits, partially offset by decreases in consumer and wealth management deposits. Other operating revenue decreased compared to the first quarter of 2010 primarily due to lower brokerage and trading revenue and decreased mortgage banking revenue. Other operating expenses were flat with the prior year. Net loans charged off improved to $336 thousand or 0.47% of average loans on an annualized basis compared to $2.0 million or 2.22% on an annualized basis in the first quarter of 2010.
Net income in the Colorado market increased $1.3 million over the first quarter of 2010 primarily due to a $2.7 million decrease in net loans charged off. The Colorado market experienced a net recovery of $44 thousand in the first quarter of 2011 compared to a net charge-off of $2.7 million or 1.32% of average loans on an annualized basis for the first quarter of 2010. Net interest income decreased $435 thousand primarily due to a $50 million decrease in average outstanding loan balances attributed to the Colorado market. Other operating revenues increased primarily due to increased trust fees and commission and brokerage and trading revenue partially offset by decreased mortgage banking revenue and overdraft charges. Operating expenses increased primarily due to increased personnel expenses. Average deposits attributed to the Colorado market increased $97 million over the first quarter of 2010 primarily related to an increase in commercial and wealth management deposits, partially offset by a decrease in consumer deposit balances.
The net loss attributed to the Arizona market totaled $3.1 million in the first quarter of 2011 down from $8.3 million in the first quarter of 2010. Net loans charged off during the first quarter of 2011 improved to $1.9 million or 1.39% of average loans on an annualized basis compared to $10.1 million or 7.98% of average loans on an annualized basis in the first quarter of 2010. First quarter of 2011 performance included losses of $3.2 million on repossessed assets, up $2.9 million from the first quarter of 2010. Average loan balances increased $40 million over the first quarter of 2010 and average deposits increased $39 million over the first quarter of 2010 primarily due to commercial deposit growth. Period end commercial loans increased $42 million, residential mortgage loans increased $21 million and commercial real estate loans increased by $11 compared to period end balances at March 31, 2010.
We continue to focus on growth in commercial and small business lending in the Arizona market and have significantly scaled back commercial real estate lending activities which were not contemplated in our initial expansion into this market. Loan and repossessed asset losses are largely due to commercial real estate lending. Assets attributable to the Arizona market included $16 million of goodwill that may be impaired in future periods if our commercial and small business lending growth plans are unsuccessful.
Net income attributed to the Kansas/Missouri market decreased $167 thousand compared to the first quarter of 2010. Net loans charged off increased to $908 thousand or 1.02% of average loans on an annualized basis for the first quarter of 2011 compared to a net recovery of $54 thousand in the first quarter of 2010. Net interest revenue increased $751 thousand or 36%. Total average loan balances increased $72 million or 25% over the first quarter of 2010 and average deposits balances increased $190 million. Operating revenue increased $584 thousand over the first quarter of 2010 primarily due to increased mortgage banking revenue, trust fees and commission and transaction card revenues, partially offset by a decrease in brokerage and trading revenue and overdraft charges. Operating expenses increased $647 thousand primarily due to increased personnel expenses, repossession expenses and corporate expense allocations.
Table 13 – New Mexico
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
8,207 |
|
|
$ |
7,735 |
|
|
$ |
472 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
6,746 |
|
|
|
5,818 |
|
|
|
928 |
|
|
Operating expense
|
|
|
9,498 |
|
|
|
8,221 |
|
|
|
1,277 |
|
|
Net loans charged off
|
|
|
608 |
|
|
|
2,831 |
|
|
|
(2,223 |
) |
|
Loss on repossessed assets, net
|
|
|
(396 |
) |
|
|
(2,081 |
) |
|
|
1,685 |
|
|
Income before taxes
|
|
|
4,451 |
|
|
|
420 |
|
|
|
4,031 |
|
|
Federal and state income tax
|
|
|
1,731 |
|
|
|
163 |
|
|
|
1,568 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
2,720 |
|
|
$ |
257 |
|
|
$ |
2,463 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
1,376,750 |
|
|
$ |
1,273,166 |
|
|
$ |
103,584 |
|
|
Average loans
|
|
|
702,943 |
|
|
|
739,922 |
|
|
|
(36,979 |
) |
|
Average deposits
|
|
|
1,255,773 |
|
|
|
1,198,249 |
|
|
|
57,524 |
|
|
Average invested capital
|
|
|
81,776 |
|
|
|
84,764 |
|
|
|
(2,988 |
) |
|
Return on average assets
|
|
|
0.80 |
% |
|
|
0.08 |
% |
|
|
72 |
bp |
|
Return on invested capital
|
|
|
13.49 |
% |
|
|
1.23 |
% |
|
|
1,226 |
bp |
|
Efficiency ratio
|
|
|
63.52 |
% |
|
|
60.66 |
% |
|
|
286 |
bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.35 |
% |
|
|
1.55 |
% |
|
|
(120 |
) bp |
Table 14 –Arkansas
(In thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
2,273 |
|
|
$ |
2,917 |
|
|
$ |
(644 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
8,298 |
|
|
|
8,613 |
|
|
|
(315 |
) |
|
Operating expense
|
|
|
8,883 |
|
|
|
8,907 |
|
|
|
(24 |
) |
|
Net loans charged off
|
|
|
336 |
|
|
|
1,999 |
|
|
|
(1,663 |
) |
|
Loss on repossessed assets, net
|
|
|
(14 |
) |
|
|
(102 |
) |
|
|
88 |
|
|
Income before taxes
|
|
|
1,338 |
|
|
|
522 |
|
|
|
816 |
|
|
Federal and state income tax
|
|
|
520 |
|
|
|
203 |
|
|
|
317 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
818 |
|
|
$ |
319 |
|
|
$ |
499 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
303,346 |
|
|
$ |
383,512 |
|
|
$ |
(80,166 |
) |
|
Average loans
|
|
|
287,813 |
|
|
|
365,270 |
|
|
|
(77,457 |
) |
|
Average deposits
|
|
|
228,226 |
|
|
|
180,185 |
|
|
|
48,041 |
|
|
Average invested capital
|
|
|
22,571 |
|
|
|
24,071 |
|
|
|
(1,500 |
) |
|
Return on average assets
|
|
|
1.09 |
% |
|
|
0.34 |
% |
|
|
76 |
bp |
|
Return on invested capital
|
|
|
14.70 |
% |
|
|
5.37 |
% |
|
|
932 |
bp |
|
Efficiency ratio
|
|
|
84.03 |
% |
|
|
77.25 |
% |
|
|
678 |
bp |
|
Net charge-offs (annualized) to average loans
|
|
|
0.47 |
% |
|
|
2.22 |
% |
|
|
(175 |
) bp |
Table 15 – Colorado
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
7,983 |
|
|
$ |
8,418 |
|
|
$ |
(435 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
5,216 |
|
|
|
5,138 |
|
|
|
78 |
|
|
Operating expense
|
|
|
9,337 |
|
|
|
9,180 |
|
|
|
157 |
|
|
Net loans charged off (recovered)
|
|
|
(44 |
) |
|
|
2,655 |
|
|
|
(2,699 |
) |
|
Loss on repossessed assets, net
|
|
|
(56 |
) |
|
|
– |
|
|
|
(56 |
) |
|
Income before taxes
|
|
|
3,850 |
|
|
|
1,721 |
|
|
|
2,129 |
|
|
Federal and state income tax
|
|
|
1,498 |
|
|
|
669 |
|
|
|
829 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
2,352 |
|
|
$ |
1,052 |
|
|
$ |
1,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
1,299,938 |
|
|
$ |
1,206,094 |
|
|
$ |
93,844 |
|
|
Average loans
|
|
|
765,464 |
|
|
|
815,817 |
|
|
|
(50,353 |
) |
|
Average deposits
|
|
|
1,232,873 |
|
|
|
1,135,920 |
|
|
|
96,953 |
|
|
Average invested capital
|
|
|
117,244 |
|
|
|
129,783 |
|
|
|
(12,539 |
) |
|
Return on average assets
|
|
|
0.73 |
% |
|
|
0.35 |
% |
|
|
38 |
bp |
|
Return on invested capital
|
|
|
8.14 |
% |
|
|
3.29 |
% |
|
|
485 |
bp |
|
Efficiency ratio
|
|
|
70.74 |
% |
|
|
67.72 |
% |
|
|
302 |
bp |
|
Net charge-offs (recoveries) to average loans (annualized)
|
|
|
(0.02 |
)% |
|
|
1.32 |
% |
|
|
(134 |
) bp |
Table 16 – Arizona
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
3,577 |
|
|
$ |
2,623 |
|
|
$ |
954 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
1,477 |
|
|
|
1,156 |
|
|
|
321 |
|
|
Operating expense
|
|
|
4,972 |
|
|
|
4,377 |
|
|
|
595 |
|
|
Net loans charged off
|
|
|
1,895 |
|
|
|
10,105 |
|
|
|
(8,210 |
) |
|
Losses on repossessed assets, net
|
|
|
(3,204 |
) |
|
|
(2,961 |
) |
|
|
(243 |
) |
|
Net loss before taxes
|
|
|
(5,017 |
) |
|
|
(13,664 |
) |
|
|
8,647 |
|
|
Federal and state income tax
|
|
|
(1,952 |
) |
|
|
(5,315 |
) |
|
|
3,363 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,065 |
) |
|
$ |
(8,349 |
) |
|
$ |
5,284 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
620,793 |
|
|
$ |
593,346 |
|
|
$ |
27,447 |
|
|
Average loans
|
|
|
553,309 |
|
|
|
513,390 |
|
|
|
39,919 |
|
|
Average deposits
|
|
|
238,561 |
|
|
|
199,348 |
|
|
|
39,213 |
|
|
Average invested capital
|
|
|
64,688 |
|
|
|
66,687 |
|
|
|
(1,999 |
) |
|
Return on average assets
|
|
|
(2.00 |
)% |
|
|
(5.71 |
)% |
|
|
371 |
bp |
|
Return on invested capital
|
|
|
(19.22 |
)% |
|
|
(50.77 |
)% |
|
|
3,155 |
bp |
|
Efficiency ratio
|
|
|
98.38 |
% |
|
|
115.82 |
% |
|
|
(1,744 |
) bp |
|
Net charge-offs (annualized) to average loans
|
|
|
1.39 |
% |
|
|
7.98 |
% |
|
|
(659 |
) bp |
|
Table 17 – Kansas / Missouri
|
(Dollars in thousands)
| |
|
Three Months Ended
March 31,
|
|
|
Increase
|
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net interest revenue
|
|
$ |
2,843 |
|
|
$ |
2,092 |
|
|
$ |
751 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
4,580 |
|
|
|
3,996 |
|
|
|
584 |
|
|
Operating expense
|
|
|
5,615 |
|
|
|
4,968 |
|
|
|
647 |
|
|
Net loans charged off (recovered)
|
|
|
908 |
|
|
|
(54 |
) |
|
|
962 |
|
|
Income before taxes
|
|
|
900 |
|
|
|
1,174 |
|
|
|
(274 |
) |
|
Federal and state income tax
|
|
|
350 |
|
|
|
457 |
|
|
|
(107 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
550 |
|
|
$ |
717 |
|
|
$ |
(167 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
370,773 |
|
|
$ |
298,030 |
|
|
$ |
72,743 |
|
|
Average loans
|
|
|
360,517 |
|
|
|
288,624 |
|
|
|
71,893 |
|
|
Average deposits
|
|
|
369,124 |
|
|
|
178,714 |
|
|
|
190,410 |
|
|
Average invested capital
|
|
|
25,321 |
|
|
|
22,758 |
|
|
|
2,563 |
|
|
Return on average assets
|
|
|
0.60 |
% |
|
|
0.98 |
% |
|
|
(38 |
) bp |
|
Return on invested capital
|
|
|
8.81 |
% |
|
|
12.78 |
% |
|
|
(397 |
) bp |
|
Efficiency ratio
|
|
|
75.64 |
% |
|
|
81.60 |
% |
|
|
(596 |
) bp |
|
Net charge-offs (annualized) to average loans
|
|
|
1.02 |
% |
|
|
(0.08 |
)% |
|
|
110 |
bp |
Financial Condition
Securities
We maintain a securities portfolio to enhance profitability, support interest rate risk management strategies, provide liquidity and comply with regulatory requirements. Securities are classified as held for investment, available for sale or trading. See Note 2 to the consolidated financial statements for the composition of the securities portfolio as of March 31, 2011.
Investment (held-to-maturity) securities consist primarily of long-term, fixed-rate Oklahoma municipal bonds and Texas school construction bonds. Substantially all of these bonds are general obligations of the issuer. Approximately, $92 million of the Texas school construction bonds are also guaranteed by the Texas Permanent School Fund Guarantee Program. At March 31, 2011, investment securities were carried at $343 million and had a fair value of $355 million.
Available for sale securities, which may be sold prior to maturity, are carried at fair value. Unrealized gains or losses, less deferred taxes, are recorded as accumulated other comprehensive income in shareholders’ equity. The amortized cost of available for sale securities totaled $9.5 billion at March 31, 2011, up $395 million over December 31, 2010. At March 31, 2011, residential mortgage-backed securities represented 98% of total available for sale securities.
A primary risk of holding mortgage-backed securities comes from extension during periods of rising interest rates or prepayment during periods of falling interest rates. We evaluate this risk through extensive modeling of risk both before making an investment and throughout the life of the security. Current interest rates are historically low and prices for residential mortgage-backed securities are historically high resulting in very low effective durations. Our best estimate of the duration of the residential mortgage-backed securities portfolio at March 31, 2011 is 2.6 years. Management estimates that the expected duration would extend to approximately 3.5 years assuming an immediate 200 basis point upward rate shock. The estimated duration contracts to 1.1 years assuming a 50 basis point decline in the current low rate environment.
Residential mortgage-backed securities also have credit risk from delinquency or default of the underlying loans. We mitigate this risk by primarily investing in securities issued by U.S. government agencies. Principal and interest payments on the underlying loans are either partially or fully guaranteed. At March 31, 2011, approximately $8.7 billion of the amortized costs of the Company’s residential mortgage-backed securities were issued by U.S. government agencies. The fair value of these mortgage-backed securities totaled $8.9 billion at March 31, 2011.
We also hold amortized cost of $630 million in residential mortgage-backed securities privately issued by publicly-owned financial institutions, a decline of $85 million from December 31, 2010. The decline was primarily due to $80 million of cash received and $4.6 million of other-than-temporary losses charged against earnings during the first quarter of 2011. The fair value of our portfolio of privately issued residential mortgage-backed securities totaled $573 million at March 31, 2011. The net unrealized loss on the below investment grade residential mortgage-backed securities decreased for the ninth consecutive quarter to $57 million at March 31, 2011 from $70 million at December 31, 2010.
The amortized cost of our portfolio of privately issued residential mortgage-backed securities included $421 million of Jumbo-A residential mortgage loans and $209 million of Alt-A residential mortgage loans. Jumbo-A residential mortgage loans generally meet government underwriting standards, but have loan balances that exceed agency maximums. Alt-A residential mortgage loans generally do not have sufficient documentation to meet government agency underwriting standards. Credit risk on securities backed by Alt-A loans is mitigated by investment in senior tranches with additional collateral support. None of these securities are backed by sub-prime mortgage loans, collateralized debt obligations or collateralized loan obligations. Approximately 94% of our Alt-A residential mortgage-backed securities were issued with credit support from additional layers of loss-absorbing subordinated tranches including 100% of our Alt-A residential mortgage-backed securities originated in 2007 and 2006. The weighted average original credit enhancement of the Alt-A residential mortgage backed securities was 10.3% and currently stands at 6.4%. The Jumbo-A residential mortgage backed securities had original credit enhancement of 8.5% and the current level is 8.8%. Approximately 82% of our Alt-A mortgage-backed securities represents pools of fixed-rate mortgage loans. None of the adjustable rate mortgages are payment option adjustable rate mortgages (“ARMs”). Approximately 75% of our Jumbo-A residential mortgage backed securities represent pools of fixed rate residential mortgage loans and none of the adjustable rate mortgages are payment option ARMs.
Privately issued residential mortgage-backed securities with a total amortized cost of $498 million were rated below investment grade at March 31, 2011 by at least one of the nationally-recognized rating agencies. Net unrealized losses on the below investment grade residential mortgage-backed securities totaled $51 million at March 31, 2011. The net unrealized loss on these securities decreased $11 million during the first quarter of 2011.
The aggregate gross amount of unrealized losses on available for sale securities totaled $75 million at March 31, 2011. On a quarterly basis, we perform separate evaluations on debt and equity securities to determine if the unrealized losses are temporary as more fully described in Note 2 of the Consolidated Financial Statements. Other-than-temporary impairment charges of $4.6 million were recognized in earnings in the first quarter of 2011 on certain privately issued residential mortgage backed securities we do not intend to sell.
Certain government agency issued residential mortgage-backed securities, identified as mortgage trading securities, have been designated as economic hedges of mortgage servicing rights. These securities are carried at fair value with changes in fair value recognized in current period income. These securities are held with the intent that gains or losses will offset changes in the fair value of mortgage servicing rights.
We also maintain a separate trading portfolio with the intent to sell at a profit for the Company that is also carried at fair value with changes in fair value recognized in current period income.
Bank-Owned Life Insurance
We have approximately $258 million of bank-owned life insurance at March 31, 2011. This investment is expected to provide a long-term source of earnings to support existing employee benefit programs. Approximately $226 million is held in separate accounts. Our separate account holdings are invested in diversified portfolios of investment-grade fixed income securities and cash equivalents, including U.S. Treasury and Agency securities, residential mortgage-backed securities, corporate debt, asset-backed and commercial mortgage-backed securities. The portfolios are managed by unaffiliated professional managers within parameters established in the portfolio’s investment guidelines. The cash surrender value of certain life insurance policies is further supported by a stable
value wrap, which protects against changes in the fair value of the investments. At March 31, 2011, the cash surrender value represented by the underlying fair value of investments held in separate accounts was approximately $238 million. As the underlying fair value of the investments held in a separate account at March 31, 2011 exceeded the net book value of the investments, no cash surrender value was supported by the stable value wrap. The stable value wrap is provided by a highly-rated, domestic financial institution. The remaining cash surrender value of $32 million primarily represented the cash surrender value of policies held in general accounts and other amounts due from various insurance companies.
Loans
The aggregate loan portfolio before allowance for loan losses totaled $10.6 billion at March 31, 2011, a $53 million decrease since December 31, 2010.
Table 18 – Loans
(In thousands)
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
1,759,452 |
|
|
$ |
1,711,409 |
|
|
$ |
1,761,926 |
|
|
$ |
1,844,643 |
|
|
$ |
1,892,306 |
|
|
Services
|
|
|
1,586,785 |
|
|
|
1,580,921 |
|
|
|
1,594,215 |
|
|
|
1,669,069 |
|
|
|
1,741,924 |
|
|
Wholesale/retail
|
|
|
984,273 |
|
|
|
1,010,246 |
|
|
|
1,041,004 |
|
|
|
964,440 |
|
|
|
873,170 |
|
|
Manufacturing
|
|
|
380,043 |
|
|
|
325,191 |
|
|
|
347,478 |
|
|
|
357,671 |
|
|
|
395,964 |
|
|
Healthcare
|
|
|
840,809 |
|
|
|
809,625 |
|
|
|
814,456 |
|
|
|
805,619 |
|
|
|
777,668 |
|
|
Integrated food services
|
|
|
211,637 |
|
|
|
204,283 |
|
|
|
169,956 |
|
|
|
147,700 |
|
|
|
155,410 |
|
|
Other commercial and industrial
|
|
|
285,258 |
|
|
|
292,321 |
|
|
|
242,973 |
|
|
|
222,386 |
|
|
|
178,297 |
|
|
Total commercial
|
|
|
6,048,257 |
|
|
|
5,933,996 |
|
|
|
5,972,008 |
|
|
|
6,011,528 |
|
|
|
6,014,739 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
394,337 |
|
|
|
447,864 |
|
|
|
502,465 |
|
|
|
545,659 |
|
|
|
605,667 |
|
|
Retail
|
|
|
420,193 |
|
|
|
405,540 |
|
|
|
399,500 |
|
|
|
392,910 |
|
|
|
408,936 |
|
|
Office
|
|
|
488,515 |
|
|
|
457,450 |
|
|
|
490,429 |
|
|
|
466,939 |
|
|
|
463,995 |
|
|
Multifamily
|
|
|
355,240 |
|
|
|
369,242 |
|
|
|
352,200 |
|
|
|
346,460 |
|
|
|
377,673 |
|
|
Industrial
|
|
|
177,807 |
|
|
|
182,093 |
|
|
|
176,594 |
|
|
|
176,535 |
|
|
|
181,117 |
|
|
Other real estate loans
|
|
|
386,890 |
|
|
|
415,161 |
|
|
|
401,934 |
|
|
|
412,406 |
|
|
|
406,460 |
|
|
Total commercial real estate
|
|
|
2,222,982 |
|
|
|
2,277,350 |
|
|
|
2,323,122 |
|
|
|
2,340,909 |
|
|
|
2,443,848 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
1,216,821 |
|
|
|
1,274,944 |
|
|
|
1,356,269 |
|
|
|
1,320,408 |
|
|
|
1,303,589 |
|
|
Home equity
|
|
|
560,500 |
|
|
|
553,304 |
|
|
|
527,639 |
|
|
|
513,838 |
|
|
|
494,122 |
|
|
Total residential mortgage
|
|
|
1,777,321 |
|
|
|
1,828,248 |
|
|
|
1,883,908 |
|
|
|
1,834,246 |
|
|
|
1,797,711 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
198,663 |
|
|
|
239,576 |
|
|
|
284,920 |
|
|
|
338,147 |
|
|
|
396,280 |
|
|
Other consumer
|
|
|
342,612 |
|
|
|
363,866 |
|
|
|
341,886 |
|
|
|
357,887 |
|
|
|
318,646 |
|
|
Total consumer
|
|
|
541,275 |
|
|
|
603,442 |
|
|
|
626,806 |
|
|
|
696,034 |
|
|
|
714,926 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,589,835 |
|
|
$ |
10,643,036 |
|
|
$ |
10,805,844 |
|
|
$ |
10,882,717 |
|
|
$ |
10,971,224 |
|
Commercial loan balances were up $114 million over December 31, 2010, primarily in the manufacturing, energy and healthcare sectors. Construction and land development loans decreased $54 million, residential mortgage loans decreased $51 million and consumer decreased $62 million. A breakdown by geographical market follows on Table 19 along with discussion of changes in the balance by portfolio and geography.
Table 19 –Loans by Principal Market
(In thousands)
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Oklahoma:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
2,618,045 |
|
|
$ |
2,581,082 |
|
|
$ |
2,662,347 |
|
|
$ |
2,704,460 |
|
|
$ |
2,616,086 |
|
|
Commercial real estate
|
|
|
661,254 |
|
|
|
726,409 |
|
|
|
748,501 |
|
|
|
784,549 |
|
|
|
787,543 |
|
|
Residential mortgage
|
|
|
1,219,237 |
|
|
|
1,253,466 |
|
|
|
1,293,334 |
|
|
|
1,257,497 |
|
|
|
1,235,788 |
|
|
Consumer
|
|
|
291,412 |
|
|
|
336,492 |
|
|
|
349,720 |
|
|
|
395,274 |
|
|
|
404,570 |
|
|
Total Oklahoma
|
|
|
4,789,948 |
|
|
|
4,897,449 |
|
|
|
5,053,902 |
|
|
|
5,141,780 |
|
|
|
5,043,987 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,916,270 |
|
|
|
1,888,635 |
|
|
|
1,876,994 |
|
|
|
1,902,934 |
|
|
|
1,935,819 |
|
|
Commercial real estate
|
|
|
687,817 |
|
|
|
686,956 |
|
|
|
715,859 |
|
|
|
731,399 |
|
|
|
769,682 |
|
|
Residential mortgage
|
|
|
283,925 |
|
|
|
297,027 |
|
|
|
309,815 |
|
|
|
308,496 |
|
|
|
307,643 |
|
|
Consumer
|
|
|
141,199 |
|
|
|
146,986 |
|
|
|
151,434 |
|
|
|
160,377 |
|
|
|
160,449 |
|
|
Total Texas
|
|
|
3,029,211 |
|
|
|
3,019,604 |
|
|
|
3,054,102 |
|
|
|
3,103,206 |
|
|
|
3,173,593 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Mexico:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
262,597 |
|
|
|
279,432 |
|
|
|
289,368 |
|
|
|
286,555 |
|
|
|
326,203 |
|
|
Commercial real estate
|
|
|
326,104 |
|
|
|
314,781 |
|
|
|
314,957 |
|
|
|
294,425 |
|
|
|
298,197 |
|
|
Residential mortgage
|
|
|
90,466 |
|
|
|
88,392 |
|
|
|
87,851 |
|
|
|
87,549 |
|
|
|
85,629 |
|
|
Consumer
|
|
|
19,242 |
|
|
|
19,583 |
|
|
|
20,153 |
|
|
|
20,542 |
|
|
|
16,713 |
|
|
Total New Mexico
|
|
|
698,409 |
|
|
|
702,188 |
|
|
|
712,329 |
|
|
|
689,071 |
|
|
|
726,742 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arkansas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
75,889 |
|
|
|
84,775 |
|
|
|
91,752 |
|
|
|
89,376 |
|
|
|
86,566 |
|
|
Commercial real estate
|
|
|
124,875 |
|
|
|
116,989 |
|
|
|
117,137 |
|
|
|
114,576 |
|
|
|
129,125 |
|
|
Residential mortgage
|
|
|
14,114 |
|
|
|
13,155 |
|
|
|
14,937 |
|
|
|
15,823 |
|
|
|
17,071 |
|
|
Consumer
|
|
|
61,746 |
|
|
|
72,787 |
|
|
|
84,869 |
|
|
|
96,189 |
|
|
|
110,123 |
|
|
Total Arkansas
|
|
|
276,624 |
|
|
|
287,706 |
|
|
|
308,695 |
|
|
|
315,964 |
|
|
|
342,885 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
514,100 |
|
|
|
470,500 |
|
|
|
457,421 |
|
|
|
484,188 |
|
|
|
495,916 |
|
|
Commercial real estate
|
|
|
172,416 |
|
|
|
197,180 |
|
|
|
203,866 |
|
|
|
225,758 |
|
|
|
228,998 |
|
|
Residential mortgage
|
|
|
67,975 |
|
|
|
72,310 |
|
|
|
75,152 |
|
|
|
69,325 |
|
|
|
68,049 |
|
|
Consumer
|
|
|
20,145 |
|
|
|
21,409 |
|
|
|
15,402 |
|
|
|
18,548 |
|
|
|
17,991 |
|
|
Total Colorado
|
|
|
774,636 |
|
|
|
761,399 |
|
|
|
751,841 |
|
|
|
797,819 |
|
|
|
810,954 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
251,390 |
|
|
|
231,117 |
|
|
|
234,739 |
|
|
|
204,326 |
|
|
|
209,019 |
|
|
Commercial real estate
|
|
|
213,442 |
|
|
|
201,018 |
|
|
|
188,943 |
|
|
|
163,374 |
|
|
|
202,192 |
|
|
Residential mortgage
|
|
|
89,384 |
|
|
|
89,245 |
|
|
|
85,184 |
|
|
|
78,890 |
|
|
|
68,015 |
|
|
Consumer
|
|
|
5,266 |
|
|
|
3,445 |
|
|
|
3,061 |
|
|
|
2,971 |
|
|
|
3,068 |
|
|
Total Arizona
|
|
|
559,482 |
|
|
|
524,825 |
|
|
|
511,927 |
|
|
|
449,561 |
|
|
|
482,294 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kansas / Missouri:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
409,966 |
|
|
|
398,455 |
|
|
|
359,387 |
|
|
|
339,689 |
|
|
|
345,130 |
|
|
Commercial real estate
|
|
|
37,074 |
|
|
|
34,017 |
|
|
|
33,859 |
|
|
|
26,828 |
|
|
|
28,111 |
|
|
Residential mortgage
|
|
|
12,220 |
|
|
|
14,653 |
|
|
|
17,635 |
|
|
|
16,666 |
|
|
|
15,516 |
|
|
Consumer
|
|
|
2,265 |
|
|
|
2,740 |
|
|
|
2,167 |
|
|
|
2,133 |
|
|
|
2,012 |
|
|
Total Kansas / Missouri
|
|
|
461,525 |
|
|
|
449,865 |
|
|
|
413,048 |
|
|
|
385,316 |
|
|
|
390,769 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total BOK Financial loans
|
|
$ |
10,589,835 |
|
|
$ |
10,643,036 |
|
|
$ |
10,805,844 |
|
|
$ |
10,882,717 |
|
|
$ |
10,971,224 |
|
Commercial
Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten individually and represent on-going relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interests in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer’s business. Inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.
The commercial loan portfolio grew to $6.0 billion at March 31, 2011. Manufacturing sector loans increased $55 million, energy sector loans increased $48 million and healthcare sector loans increased $31 million. Wholesale / retail sector loans decreased $26 million from December 31, 2010.
The commercial sector of our loan portfolio is distributed as follows in Table 20.
Table 20 – Commercial Loans by Principal Market
(In thousands)
| |
|
Oklahoma
|
|
|
Texas
|
|
|
New Mexico
|
|
|
Arkansas
|
|
|
Colorado
|
|
|
Arizona
|
|
|
Kansas/
Missouri
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
945,543 |
|
|
$ |
578,838 |
|
|
$ |
– |
|
|
$ |
279 |
|
|
$ |
234,792 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,759,452 |
|
|
Services
|
|
|
466,862 |
|
|
|
511,256 |
|
|
|
158,699 |
|
|
|
19,461 |
|
|
|
189,554 |
|
|
|
130,009 |
|
|
|
110,944 |
|
|
|
1,586,785 |
|
|
Wholesale/retail
|
|
|
390,832 |
|
|
|
411,356 |
|
|
|
43,851 |
|
|
|
32,611 |
|
|
|
13,140 |
|
|
|
60,423 |
|
|
|
32,060 |
|
|
|
984,273 |
|
|
Manufacturing
|
|
|
206,692 |
|
|
|
99,581 |
|
|
|
18,993 |
|
|
|
1,317 |
|
|
|
25,972 |
|
|
|
20,472 |
|
|
|
7,016 |
|
|
|
380,043 |
|
|
Healthcare
|
|
|
506,577 |
|
|
|
229,190 |
|
|
|
8,206 |
|
|
|
5,939 |
|
|
|
45,303 |
|
|
|
22,183 |
|
|
|
23,411 |
|
|
|
840,809 |
|
|
Integrated food services
|
|
|
12,724 |
|
|
|
9,497 |
|
|
|
– |
|
|
|
270 |
|
|
|
146 |
|
|
|
– |
|
|
|
189,000 |
|
|
|
211,637 |
|
|
Other commercial
and industrial
|
|
|
88,815 |
|
|
|
76,552 |
|
|
|
32,848 |
|
|
|
16,012 |
|
|
|
5,193 |
|
|
|
18,303 |
|
|
|
47,535 |
|
|
|
285,258 |
|
|
Total commercial loans
|
|
$ |
2,618,045 |
|
|
$ |
1,916,270 |
|
|
$ |
262,597 |
|
|
$ |
75,889 |
|
|
$ |
514,100 |
|
|
$ |
251,390 |
|
|
$ |
409,966 |
|
|
$ |
6,048,257 |
|
Supporting the energy industry with loans to producers and other energy-related entities has been a hallmark of the Company since its founding and represents the largest portion of our commercial loan portfolio. In addition, energy production and related industries have a significant impact on the economy in our primary markets. Loans collateralized by oil and gas properties are subject to a semi-annual engineering review by our internal staff of petroleum engineers. This review is utilized as the basis for developing the expected cash flows supporting the loan amount. The projected cash flows are discounted according to risk characteristics of the underlying oil and gas properties. Loans are evaluated to demonstrate with reasonable certainty that crude oil, natural gas and natural gas liquids can be recovered from known oil and gas reservoirs under existing economic and operating conditions at current pricing levels and with existing conventional equipment and operating methods and costs. As part of our evaluation of credit quality, we analyze rigorous stress tests over a range of commodity prices and take proactive steps to mitigate risk when appropriate.
Energy loans totaled $1.8 billion or 17% of total loans. Outstanding energy loans increased $48 million during the first quarter of 2011. Unfunded energy loan commitments decreased $118 million to $1.9 billion at March 31, 2011.
Approximately $1.5 billion of energy loans were to oil and gas producers, up $3.8 million over December 31, 2010. Approximately 51% of the committed production loans are secured by properties primarily producing natural gas and 49% are secured by properties primarily producing oil. Loans to borrowers that provide services to the energy industry increased $29 million over December 31, 2010 to $62 million and loans to borrowers engaged in wholesale or retail energy sales increased $30 million to $217 million. Loans to borrowers that manufacture equipment primarily for the energy industry decreased $12 million during the first quarter of 2011 to $15 million at March 31, 2011.
The services sector of the loan portfolio totaled $1.6 billion or 15% of total loans and consists of a large number of loans to a variety of businesses, including communications, educational, gaming and transportation services. Service
sector loans increased $5.9 million from December 31, 2010. Approximately $1.0 billion of the services category is made up of loans with individual balances of less than $10 million. Service sector loans are generally secured by the assets of the borrower with repayment coming from the cash flows of ongoing operations of the customer’s business. Loans in this sector may also be secured by personal guarantees of the owners or related parties.
We participate in shared national credits when appropriate to obtain or maintain business relationships with local customers. Shared national credits are defined by banking regulators as credits of more than $20 million and with three or more non-affiliated banks as participants. At March 31, 2011, the outstanding principal balance of these loans totaled $1.5 billion. Substantially all of these loans are to borrowers with local market relationships. We serve as the agent lender in approximately 19% of our shared national credits, based on dollars committed. We hold shared national credits to the same standard of analysis and perform the same level of review as internally originated credits. Our lending policies generally avoid loans in which we do not have the opportunity to maintain or achieve other business relationships with the customer. In addition to management’s quarterly assessment of credit risk, grading of shared national credits is provided annually by banking regulators. Risk grading provided by the regulators in the third quarter of 2010 did not differ significantly from management’s assessment.
Commercial Real Estate
Commercial real estate represents loans for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.
Commercial real estate loans totaled $2.2 billion or 21% of the loan portfolio at March 31, 2011. Over the past five years, the percentage of commercial real estate loans to our total loan portfolio ranged from 20% to 23%. The outstanding balance of commercial real estate loans decreased $54 million from the previous quarter end. The commercial real estate sector of our loan portfolio is distributed as follows in Table 21.
Table 21 – Commercial Real Estate Loans by Principal Market
(In thousands)
| |
|
Oklahoma
|
|
|
Texas
|
|
|
New Mexico
|
|
|
Arkansas
|
|
|
Colorado
|
|
|
Arizona
|
|
|
Kansas/
Missouri
|
|
|
Total
|
|
|
Construction and land development
|
|
$ |
109,911 |
|
|
$ |
82,011 |
|
|
$ |
61,289 |
|
|
$ |
13,228 |
|
|
$ |
86,048 |
|
|
$ |
37,260 |
|
|
$ |
4,590 |
|
|
$ |
394,337 |
|
|
Retail
|
|
|
141,719 |
|
|
|
142,126 |
|
|
|
48,878 |
|
|
|
17,891 |
|
|
|
6,945 |
|
|
|
51,733 |
|
|
|
10,901 |
|
|
|
420,193 |
|
|
Office
|
|
|
102,242 |
|
|
|
192,677 |
|
|
|
95,258 |
|
|
|
14,961 |
|
|
|
41,775 |
|
|
|
41,535 |
|
|
|
67 |
|
|
|
488,515 |
|
|
Multifamily
|
|
|
118,088 |
|
|
|
112,032 |
|
|
|
21,376 |
|
|
|
48,720 |
|
|
|
7,196 |
|
|
|
44,416 |
|
|
|
3,412 |
|
|
|
355,240 |
|
|
Industrial
|
|
|
67,705 |
|
|
|
66,955 |
|
|
|
26,355 |
|
|
|
393 |
|
|
|
1,050 |
|
|
|
6,846 |
|
|
|
8,503 |
|
|
|
177,807 |
|
|
Other real estate loans
|
|
|
121,589 |
|
|
|
92,016 |
|
|
|
72,948 |
|
|
|
29,682 |
|
|
|
29,402 |
|
|
|
31,652 |
|
|
|
9,601 |
|
|
|
386,890 |
|
|
Total commercial real estate loans
|
|
$ |
661,254 |
|
|
$ |
687,817 |
|
|
$ |
326,104 |
|
|
$ |
124,875 |
|
|
$ |
172,416 |
|
|
$ |
213,442 |
|
|
$ |
37,074 |
|
|
$ |
2,222,982 |
|
Construction and land development loans, which consisted primarily of residential construction properties and developed building lots, decreased $54 million from December 31, 2010 to $394 million at March 31, 2011 primarily due to payments. In addition, approximately $4.8 million of construction and land development loans were transferred to other real estate owned in the first quarter of 2011 and $1.4 million were charged-off. This sector of the loan portfolio is expected to continue to decrease as construction projects currently in process are completed.
Residential Mortgage and Consumer
Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. Residential mortgage loans are secured by a first or second-mortgage on the customer’s primary residence. Consumer loans include direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as other unsecured loans. Consumer loans also include indirect automobile loans made through primary dealers. Residential mortgage and consumer loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability.
Residential mortgage loans totaled $1.8 billion, down $51 million from December 31, 2010. Permanent 1-4 family mortgage loans decreased $58 million and home equity loans increased $7.2 million, primarily in the Oklahoma and Texas markets. In general, we sell the majority of our conforming fixed-rate loan originations in the secondary market and retain the majority of our non-conforming and adjustable-rate mortgage loans. We have no concentration in sub-prime residential mortgage loans. Our mortgage loan portfolio does not include payment option adjustable rate mortgage loans or adjustable rate mortgage loans with initial rates that are below market.
The permanent mortgage loan portfolio is primarily composed of various mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals or certain professionals. The aggregate outstanding balance of loans in these programs is $1.1 billion. Jumbo loans may be fixed or variable rate and are fully amortizing. The size of jumbo loans exceed maximums set under government sponsored entity standards, but otherwise generally conform to those standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38%. Loan-to-value ratios (“LTV”) are tiered from 60% to 100%, depending on the market. Special mortgage programs include fixed and variable rate fully amortizing loans tailored to the needs of certain health-care professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.
Approximately $95 million or 8% of permanent mortgage loans consist of first lien, fixed rate residential mortgage loans originated under various community development programs. The outstanding balance of these loans is down from $96 million at December 31, 2010. These loans were underwritten to standards approved by various U.S. government agencies under these programs and include full documentation. However, these loans do have a higher risk of delinquency and losses given default than traditional residential mortgage loans. The initial maximum LTV of loans in these programs was 103%.
The composition of residential mortgage and consumer loans at March 31, 2011 is as follows in Table 22.
Table 22 – Residential Mortgage and Consumer Loans by Principal Market
(In thousands)
| |
|
Oklahoma
|
|
|
Texas
|
|
|
New Mexico
|
|
|
Arkansas
|
|
|
Colorado
|
|
|
Arizona
|
|
|
Kansas/
Missouri
|
|
|
Total
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
$ |
879,142 |
|
|
$ |
188,622 |
|
|
$ |
11,879 |
|
|
$ |
9,202 |
|
|
$ |
46,596 |
|
|
$ |
73,980 |
|
|
$ |
7,400 |
|
|
$ |
1,216,821 |
|
|
Home equity
|
|
|
340,095 |
|
|
|
95,303 |
|
|
|
78,587 |
|
|
|
4,912 |
|
|
|
21,379 |
|
|
|
15,404 |
|
|
|
4,820 |
|
|
|
560,500 |
|
|
Total residential mortgage
|
|
$ |
1,219,237 |
|
|
$ |
283,925 |
|
|
$ |
90,466 |
|
|
$ |
14,114 |
|
|
$ |
67,975 |
|
|
$ |
89,384 |
|
|
$ |
12,220 |
|
|
$ |
1,777,321 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
$ |
111,488 |
|
|
$ |
31,680 |
|
|
$ |
– |
|
|
$ |
55,495 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
198,663 |
|
|
Other consumer
|
|
|
179,924 |
|
|
|
109,519 |
|
|
|
19,242 |
|
|
|
6,251 |
|
|
|
20,145 |
|
|
|
5,266 |
|
|
|
2,265 |
|
|
|
342,612 |
|
|
Total consumer
|
|
$ |
291,412 |
|
|
$ |
141,199 |
|
|
$ |
19,242 |
|
|
$ |
61,746 |
|
|
$ |
20,145 |
|
|
$ |
5,266 |
|
|
$ |
2,265 |
|
|
$ |
541,275 |
|
Indirect automobile loans decreased $41 million from December 31, 2010, primarily due to the previously-disclosed decision by the Company to exit the business in the first quarter of 2009 in favor of a customer-focused direct lending approach.
Loan Commitments
We enter into certain off-balance sheet arrangements in the normal course of business. These arrangements included unfunded loan commitments which totaled $5.1 billion and standby letters of credit which totaled $520 million at March 31, 2011. Loan commitments may be unconditional obligations to provide financing or conditional obligations that depend on the borrower’s financial condition, collateral value or other factors. Standby letters of credit are unconditional commitments to guarantee the performance of our customer to a third party. Since some of these commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Approximately $2.4 million of the outstanding standby letters of credit were issued on behalf of customers whose loans are non-performing at March 31, 2011.
We also have off-balance sheet commitments for residential mortgage loans sold with full or partial recourse as more fully described in Note 5 to the Consolidated Financial Statements. At March 31, 2011, the principal balance of residential mortgage loans sold subject to recourse obligations totaled $284 million, down from $289 million at December 31, 2010. Substantially all of these loans are to borrowers in our primary markets including $200 million to borrowers in Oklahoma, $30 million to borrowers in Arkansas, $17 million to borrowers in New Mexico, $15 million to borrowers in the Kansas/Missouri area and $13 million to borrowers in Texas.
Under certain conditions, we also have an off-balance sheet obligation to repurchase residential mortgage loans sold to government sponsored entities through our mortgage banking activities due to standard representations and warranties made under contractual agreements. As of March 31, 2011, less than 10% of the repurchase requests made in 2010 and 2011 have resulted in actual repurchases or indemnification by BOK Financial. We have repurchased 2 loans for approximately $267 thousand from the agencies in 2011 and no losses have been incurred on these loans as of March 31, 2011. At March 31, 2011, we have unresolved deficiency requests from the agencies on 124 loans with an aggregate outstanding balance of $22 million.
Customer Derivative Programs
We offer programs that permit our customers to hedge various risks, including fluctuations in energy, cattle and other agricultural product prices, interest rates and foreign exchange rates, or to take positions in derivative contracts. Each of these programs work essentially the same way. Derivative contracts are executed between the customers and the Company. Offsetting contracts are executed between the Company and selected counterparties to minimize the risk to us of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to the customer contracts, except for a fixed pricing spread or a fee paid to us as compensation for administrative costs, credit risk and profit.
The customer derivative programs create credit risk for potential amounts due to the Company from our customers and from the counterparties. Customer credit risk is monitored through existing credit policies and procedures. The effects of changes in commodity prices, interest rates or foreign exchange rates are evaluated across a range of possible options to determine the maximum exposure we are willing to have individually to any customer. Customers may also be required to provide margin collateral to further limit our credit risk.
Counterparty credit risk is evaluated through existing policies and procedures. This evaluation considers the total relationship between BOK Financial and each of the counterparties. Individual limits are established by management, approved by Credit Administration and reviewed by the Asset / Liability Committee. Margin collateral is required if the exposure between the Company and any counterparty exceeds established limits. Based on declines in the counterparties’ credit ratings, these limits may be reduced and additional margin collateral may be required.
A deterioration of the credit standing of one or more of the customers or counterparties to these contracts may result in BOK Financial recognizing a loss as the fair value of the affected contracts may no longer move in tandem with the offsetting contracts. This occurs if the credit standing of the customer or counterparty deteriorated such that either the fair value of underlying collateral no longer supported the contract or the customer or counterparty’s ability to provide margin collateral was impaired.
We recognized a $2.6 million credit loss in the first quarter of 2011 on customer derivative positions. Two customers who used interest rate based derivative contracts to hedge their mortgage loan production were unable to meet their margin requirements. Subsequent to March 31, these losses were realized when the customer contracts
were closed.
Derivative contracts are carried at fair value. At March 31, 2011, the net fair values of derivative contracts reported as assets under these programs totaled $244 million, down from $268 million at December 31, 2010 due to cash settlements and reduced transaction volumes. At March 31, 2011, derivative contracts carried as assets included energy contracts with fair values of $109 million, interest rate contracts with fair values of $74 million, and foreign exchange contracts with fair values of $57 million. The aggregate net fair values of derivative contracts held under these programs reported as liabilities totaled $156 million.
At March 31, 2011, total derivative assets were reduced by $24 million of cash collateral received from counterparties and total derivative liabilities were reduced by $112 million of cash collateral paid to counterparties related to instruments executed with the same counterparty under a master netting agreement.
A table showing the notional and fair value of derivative assets and liabilities on both a gross and net basis is presented in Note 3 to the Consolidated Financial Statements (Unaudited).
The fair value of derivative contracts reported as assets under these programs, net of cash margin held by the Company, by category of debtor at March 31, 2011 follows in Table 23.
Table 23 – Fair Value of Derivative Contract Report As Assets Under Customer Derivative Programs
(In thousands)
|
Customers
|
|
$ |
166,702 |
|
|
Banks
|
|
|
48,858 |
|
|
Energy companies
|
|
|
22,974 |
|
|
Other
|
|
|
5,602 |
|
|
Fair value of customer hedge asset derivative contracts, net
|
|
$ |
244,136 |
|
At March 31, 2011, the largest amount due from a single counterparty, a highly-rated international financial institution, totaled $15 million. This amount is offset by $12 million of cash collateral received from this counterparty. The next largest amount due was $14 million from an energy customer. This amount was fully secured by cash and securities as of March 31, 2011.
Our customer derivative program also introduces liquidity and capital risk. We are required to provide cash margin to certain counterparties when the net negative fair value of the contracts exceeds established limits. Also, changes in commodity prices affect the amount of regulatory capital we are required to hold as support for the fair value of our derivative assets. These risks are modeled as part of the management of these programs. Based on current prices, a decrease in market prices equivalent to $41 per barrel of oil would increase the fair value of derivative assets by $1.4 million. An increase in prices equivalent $175 per barrel of oil would increase the fair value of our derivative assets by $292 million. Liquidity requirements of this program are also affected by our credit rating. A decrease in credit rating from A1 to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $55 million.
Summary of Loan Loss Experience
We maintain separate allowances for loan losses and reserves for off-balance sheet credit risk. The combined allowance for loan losses and off-balance sheet credit losses totaled $303 million or 2.86% of outstanding loans and 134.17% of nonaccruing loans at March 31, 2011. The allowance for loan losses was $290 million and the allowance for off-balance sheet credit losses was $14 million. At December 31, 2010, the combined allowance for loan losses and off-balance sheet credit losses was $307 million or 2.89% of outstanding loans and 133% of nonaccruing loans. At December 31, 2010, the allowance for loan losses totaled $293 million and the allowance for off-balance sheet credit losses totaled $14 million.
The provision for loan losses is the amount necessary to maintain the allowance for loan losses at an amount determined by management to be adequate based on its evaluation and includes the combined charge to expense for both the allowance for loan losses and the allowance for off-balance sheet credit losses. All losses incurred from lending activities will ultimately be reflected in charge-offs against the allowance for loan losses following funds advanced against outstanding commitments and after the exhaustion of collection efforts. The provision for credit losses totaled $6.3 million for the first quarter of 2011, $7.0 million for the fourth quarter of 2010 and $42.1 million
for the first quarter of 2010. Factors considered in determining the provision for credit losses for the first quarter of 2011 included trends of net charge-offs, nonperforming loans and risk grading.
Table 24 – Summary of Loan Loss Experience
(Dollars in thousands)
| |
|
Three Months Ended
|
|
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
292,971 |
|
|
$ |
299,154 |
|
|
$ |
299,489 |
|
|
$ |
299,717 |
|
|
$ |
292,095 |
|
|
Loans charged off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2,352 |
|
|
|
4,802 |
|
|
|
5,435 |
|
|
|
6,030 |
|
|
|
11,373 |
|
|
Commercial real estate
|
|
|
6,893 |
|
|
|
9,462 |
|
|
|
8,704 |
|
|
|
19,439 |
|
|
|
22,357 |
|
|
Residential mortgage
|
|
|
2,948 |
|
|
|
2,030 |
|
|
|
7,380 |
|
|
|
8,804 |
|
|
|
1,842 |
|
|
Consumer
|
|
|
3,039 |
|
|
|
3,859 |
|
|
|
3,820 |
|
|
|
3,895 |
|
|
|
4,756 |
|
|
Total
|
|
|
15,232 |
|
|
|
20,153 |
|
|
|
25,339 |
|
|
|
38,168 |
|
|
|
40,328 |
|
|
Recoveries of loans previously charged off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,571 |
|
|
|
2,933 |
|
|
|
2,309 |
|
|
|
958 |
|
|
|
3,063 |
|
|
Commercial real estate
|
|
|
343 |
|
|
|
1,327 |
|
|
|
1,086 |
|
|
|
94 |
|
|
|
672 |
|
|
Residential mortgage
|
|
|
1,082 |
|
|
|
338 |
|
|
|
316 |
|
|
|
127 |
|
|
|
120 |
|
|
Consumer
|
|
|
1,918 |
|
|
|
1,342 |
|
|
|
1,493 |
|
|
|
1,435 |
|
|
|
1,995 |
|
|
Total
|
|
|
4,914 |
|
|
|
5,940 |
|
|
|
5,204 |
|
|
|
2,614 |
|
|
|
5,850 |
|
|
Net loans charged off
|
|
|
10,318 |
|
|
|
14,213 |
|
|
|
20,135 |
|
|
|
35,554 |
|
|
|
34,478 |
|
|
Provision for loan losses
|
|
|
6,896 |
|
|
|
8,030 |
|
|
|
19,800 |
|
|
|
35,326 |
|
|
|
42,100 |
|
|
Ending balance
|
|
$ |
289,549 |
|
|
$ |
292,971 |
|
|
$ |
299,154 |
|
|
$ |
299,489 |
|
|
$ |
299,717 |
|
|
Allowance for off-balance sheet credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
14,271 |
|
|
$ |
15,302 |
|
|
$ |
15,102 |
|
|
$ |
14,388 |
|
|
$ |
14,388 |
|
|
Provision for off-balance sheet credit losses
|
|
|
(646 |
) |
|
|
(1,031 |
) |
|
|
200 |
|
|
|
714 |
|
|
|
– |
|
|
Ending balance
|
|
$ |
13,625 |
|
|
$ |
14,271 |
|
|
$ |
15,302 |
|
|
$ |
15,102 |
|
|
$ |
14,388 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for credit losses
|
|
$ |
6,250 |
|
|
$ |
6,999 |
|
|
$ |
20,000 |
|
|
$ |
36,040 |
|
|
$ |
42,100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to loans outstanding at period-end
|
|
|
2.73 |
% |
|
|
2.75 |
% |
|
|
2.77 |
% |
|
|
2.75 |
% |
|
|
2.73 |
% |
|
Net charge-offs (annualized) to average loans
|
|
|
0.39 |
|
|
|
0.53 |
|
|
|
0.74 |
|
|
|
1.30 |
|
|
|
1.23 |
|
|
Total provision for credit losses (annualized) to average loans
|
|
|
0.23 |
|
|
|
0.26 |
|
|
|
0.74 |
|
|
|
1.31 |
|
|
|
1.51 |
|
|
Recoveries to gross charge-offs
|
|
|
32.26 |
|
|
|
29.47 |
|
|
|
20.54 |
|
|
|
6.85 |
|
|
|
14.51 |
|
|
Allowance for off-balance sheet credit losses to off-balance sheet credit commitments
|
|
|
0.24 |
% |
|
|
0.25 |
% |
|
|
0.28 |
% |
|
|
0.28 |
% |
|
|
0.26 |
% |
|
Combined allowance for credit losses to loans outstanding at period-end
|
|
|
2.86 |
|
|
|
2.89 |
|
|
|
2.91 |
|
|
|
2.89 |
|
|
|
2.86 |
|
Allowance for Loan Losses
The adequacy of the allowance for loan losses is assessed by management based on an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio. The allowance consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances based on migration factors and non-specific allowances based on general economic, risk concentration and related factors. An independent Credit Administration department is responsible for performing this evaluation for the entire company to ensure that the methodology is applied consistently. For the three months ended March 31, 2011, there have been no material changes in the approach or techniques utilized in developing the allowance for loan losses.
Specific allowances for impaired loans are determined by evaluation of estimated future cash flows, collateral value or historical statistics. Loans are considered to be impaired when it is probable that we will not be able 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. Generally, all nonaccruing commercial and commercial real estate loans are considered impaired. Substantially all impaired loans are collateralized. Collateral includes real property, inventory, accounts receivable, operating equipment, interests in mineral rights, and other property. Collateral may also include personal guaranties by borrowers and related parties.
Delinquency status is not a significant consideration in the evaluation of impairment or risk-grading of commercial or commercial real estate loans. These evaluations are based on an assessment of the borrowers’ paying capacity and attempt to identify changes in credit risk before payments become delinquent. Changes in the delinquency trends of residential mortgage loans and consumer loans may indicate increases or decreases in expected losses.
Impaired loans are charged-off when the loan balance or a portion of the loan balance is no longer supported by the paying capacity of the borrower based on an evaluation of available cash resources or collateral value. Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are generally on an “as is” basis and are not adjusted by us. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows from proven oil and gas reserves under existing economic and operating conditions. The value of other collateral is generally determined by our special assets staff based on projected liquidation cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. The excess of the outstanding principal balance over the fair value of collateral, less estimated costs and available cash resources of the borrower is charged-off against the allowance for loan losses.
No allowances are attributed to the remaining balance of loans that have been charged-down to amounts management expects to recover. However, the remaining balance continues to be classified as nonaccruing until full recovery of principal and interest, including the charged-off portion of the loans, is probable.
Impaired loans totaled $197 million at March 31, 2011 and $203 million at December 31, 2010. At March 31, 2011, $132 million of impaired loans had specific allowances of $9.8 million and $66 million had no specific allowances because they had been charged down to amounts we expect to recover. Impaired loans had gross outstanding principal balances of $276 million. Cumulative life-to-date charge-offs of impaired loans at March 31, 2011 totaled $78 million, including $2.8 million charged-off in the first quarter of 2011. At December 31, 2010, $125 million of impaired loans had $7.1 million of specific allowances and $78 million had no specific reserves because they had been charged down to amounts we expect to recover.
General allowances for unimpaired loans are based on migration models. Separate migration models are used to determine general allowances for commercial and commercial real estate loans, residential mortgage loans and consumer loans. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk-graded based on an evaluation of the borrowers’ ability to repay the loans. Migration factors are determined for each risk-grade to determine the inherent loss based on historical trends. We use an eight-quarter aggregate accumulation of net losses as a basis for the migration factors. Losses incurred in more recent periods are more heavily weighted by a sum-of-periods-digits formula. The higher of current loss factors based on migration trends or a minimum migration factor based upon long-term history is assigned to each risk grade.
Migration models fairly measure loss exposure during an economic cycle. However, because they are based on historic trends, their accuracy is limited near the beginning and ending of a cycle. Because of this limitation, the results of the migration model are evaluated by management quarterly. The general allowance may be adjusted upward or downward accordingly so that the allowance for loan losses fairly represents the expected credit losses inherent in the loan portfolio as of the balance sheet date.
The general allowance for residential mortgage loans is based on an eight-quarter average percent of loss. The general allowance for consumer loans is based on an eight-quarter average percent of loss with separate migration factors determined by major product line, such as indirect automobile loans and direct consumer loans.
The aggregate amount of general allowances determined by migration factors for all unimpaired loans totaled $255 million at March 31, 2011 and $259 million at December 31, 2010.
Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or identified by the migration models. These factors include trends in the economy in our primary lending areas, conditions in certain industries where we have a concentration and overall growth in the loan portfolio. Evaluation of nonspecific factors considers the effect of the duration of the business cycle on migration factors. Nonspecific factors also consider current economic conditions and other relevant factors. Nonspecific allowances totaled $25 million at March 31, 2011 and $27 million at December 31, 2010.
An allocation of the allowance for loan losses by loan category is included in Note 4 of the Consolidated Financial Statements.
Our loan review process also identified 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 still performing in accordance with the original terms of the loan agreements, and no loss of principal or interest is anticipated, these loans were not included in nonperforming assets. Known information does, however, cause management concern as to the borrowers’ ability to comply with current repayment terms. These potential problem loans totaled $183 million at March 31, 2011 and $176 million at December 31, 2010. The current composition of potential problem loans by primary industry included wholesale/retail - $51 million, services - $36 million, commercial real estate secured by office buildings - $23 million, construction and land development - $18 million and residential mortgage - $16 million.
Net Loans Charged-Off
Loans are charged off against the allowance for loan losses 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.
Net loans charged off during the first quarter of 2011 totaled $10.3 million compared to $14.2 million in the previous quarter and $34.5 million in the first quarter of 2010. The ratio of net loans charged off (annualized) to average outstanding loans was 0.39% for the first quarter of 2011 compared with 0.53% in the fourth quarter of 2010 and 1.23% for the first quarter of 2010. Net loans charged off in the first quarter of 2011 decreased $3.9 million from the previous quarter.
Net loans charged off by category and principal market area during the first quarter of 2011 follow in Table 25.
Table 25 – Net Loans Charged Off (Recovered)
(In thousands)
| |
|
Oklahoma
|
|
|
Texas
|
|
|
Colorado
|
|
|
Arkansas
|
|
|
New
Mexico
|
|
|
Arizona
|
|
|
Kansas/
Missouri
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
(518 |
) |
|
$ |
714 |
|
|
$ |
(42 |
) |
|
$ |
43 |
|
|
$ |
(149 |
) |
|
$ |
737 |
|
|
$ |
(4 |
) |
|
$ |
781 |
|
|
Commercial real estate
|
|
|
5,049 |
|
|
|
154 |
|
|
|
(59 |
) |
|
|
– |
|
|
|
238 |
|
|
|
1,168 |
|
|
|
– |
|
|
|
6,550 |
|
|
Residential mortgage
|
|
|
1,792 |
|
|
|
(118 |
) |
|
|
– |
|
|
|
18 |
|
|
|
180 |
|
|
|
(6 |
) |
|
|
– |
|
|
|
1,866 |
|
|
Consumer
|
|
|
535 |
|
|
|
218 |
|
|
|
9 |
|
|
|
270 |
|
|
|
97 |
|
|
|
(8 |
) |
|
|
– |
|
|
|
1,121 |
|
|
Total net loans charged off
|
|
$ |
6,858 |
|
|
$ |
968 |
|
|
$ |
(92 |
) |
|
$ |
331 |
|
|
$ |
366 |
|
|
$ |
1,891 |
|
|
$ |
(4 |
) |
|
$ |
10,318 |
|
Net commercial loans charged off during the first quarter of 2011 decreased $1.1 million compared to the prior quarter and included $1.1 million from the services sector of the loan portfolio primarily in the Arizona and Texas markets, partially offset by a net recovery of $416 thousand from the other commercial and industrial sector of the loan portfolio. We had net recoveries of commercial loan charge-offs in four of our seven primary markets in the first quarter of 2011.
Net charge-offs of commercial real estate loans decreased $1.6 million from the fourth quarter of 2010 and included $4.4 million of loans secured by multifamily residential properties primarily in the Oklahoma market and $1.2 million of land and residential construction sector loans primarily in the Arizona, New Mexico, Oklahoma and Texas markets. Land and residential construction sector charge-offs decreased $2.3 million from the prior quarter.
Residential mortgage net charge-offs increased $174 thousand over the previous quarter and consumer loan net charge-offs, which includes indirect auto loan and deposit account overdraft losses, decreased $1.4 million from the previous quarter. Net charge-offs of indirect auto loans totaled $676 thousand for the first quarter of 2011 and $922 thousand for the fourth quarter of 2010.
Nonperforming Assets
Table 26 – Nonperforming Assets
(In thousands)
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
57,449 |
|
|
$ |
38,455 |
|
|
$ |
49,361 |
|
|
$ |
82,775 |
|
|
$ |
84,491 |
|
|
Commercial real estate
|
|
|
125,504 |
|
|
|
150,366 |
|
|
|
177,709 |
|
|
|
193,698 |
|
|
|
219,639 |
|
|
Residential mortgage
|
|
|
37,824 |
|
|
|
37,426 |
|
|
|
38,898 |
|
|
|
40,033 |
|
|
|
36,281 |
|
|
Consumer
|
|
|
5,185 |
|
|
|
4,567 |
|
|
|
2,784 |
|
|
|
3,188 |
|
|
|
3,164 |
|
|
Total nonaccrual loans
|
|
|
225,962 |
|
|
|
230,814 |
|
|
|
268,752 |
|
|
|
319,694 |
|
|
|
343,575 |
|
|
Renegotiated loans2
|
|
|
21,705 |
|
|
|
22,261 |
|
|
|
25,252 |
|
|
|
21,327 |
|
|
|
17,763 |
|
|
Total nonperforming loans
|
|
|
247,667 |
|
|
|
253,075 |
|
|
|
294,004 |
|
|
|
341,021 |
|
|
|
361,338 |
|
|
Other nonperforming assets
|
|
|
131,420 |
|
|
|
141,394 |
|
|
|
126,859 |
|
|
|
119,908 |
|
|
|
121,933 |
|
|
Total nonperforming assets
|
|
$ |
379,087 |
|
|
$ |
394,469 |
|
|
$ |
420,863 |
|
|
$ |
460,929 |
|
|
$ |
483,271 |
|
|
Nonaccrual loans by principal market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oklahoma
|
|
$ |
49,585 |
|
|
$ |
60,805 |
|
|
$ |
72,264 |
|
|
$ |
93,898 |
|
|
$ |
102,231 |
|
|
Texas
|
|
|
34,404 |
|
|
|
33,157 |
|
|
|
36,979 |
|
|
|
49,695 |
|
|
|
58,067 |
|
|
New Mexico
|
|
|
17,510 |
|
|
|
19,283 |
|
|
|
23,792 |
|
|
|
26,956 |
|
|
|
23,021 |
|
|
Arkansas
|
|
|
29,769 |
|
|
|
7,914 |
|
|
|
9,990 |
|
|
|
10,933 |
|
|
|
14,652 |
|
|
Colorado3
|
|
|
40,629 |
|
|
|
49,416 |
|
|
|
55,631 |
|
|
|
66,040 |
|
|
|
66,883 |
|
|
Arizona
|
|
|
54,065 |
|
|
|
60,239 |
|
|
|
70,038 |
|
|
|
72,111 |
|
|
|
78,656 |
|
|
Kansas/Missouri
|
|
|
– |
|
|
|
– |
|
|
|
58 |
|
|
|
61 |
|
|
|
65 |
|
|
Total nonaccrual loans
|
|
$ |
225,962 |
|
|
$ |
230,814 |
|
|
$ |
268,752 |
|
|
$ |
319,694 |
|
|
$ |
343,575 |
|
|
Nonaccrual loans by loan portfolio sector:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
415 |
|
|
$ |
465 |
|
|
$ |
8,189 |
|
|
$ |
26,259 |
|
|
$ |
17,182 |
|
|
Manufacturing
|
|
|
4,545 |
|
|
|
2,116 |
|
|
|
2,454 |
|
|
|
3,237 |
|
|
|
4,834 |
|
|
Wholesale / retail
|
|
|
30,411 |
|
|
|
8,486 |
|
|
|
5,584 |
|
|
|
5,561 |
|
|
|
6,629 |
|
|
Integrated food services
|
|
|
6 |
|
|
|
13 |
|
|
|
58 |
|
|
|
58 |
|
|
|
65 |
|
|
Services
|
|
|
15,720 |
|
|
|
19,262 |
|
|
|
23,925 |
|
|
|
31,062 |
|
|
|
35,535 |
|
|
Healthcare
|
|
|
2,574 |
|
|
|
3,534 |
|
|
|
2,608 |
|
|
|
8,568 |
|
|
|
10,538 |
|
|
Other
|
|
|
3,778 |
|
|
|
4,579 |
|
|
|
6,543 |
|
|
|
8,030 |
|
|
|
9,708 |
|
|
Total commercial
|
|
|
57,449 |
|
|
|
38,455 |
|
|
|
49,361 |
|
|
|
82,775 |
|
|
|
84,491 |
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land development and construction
|
|
|
90,707 |
|
|
|
99,579 |
|
|
|
116,252 |
|
|
|
132,686 |
|
|
|
140,508 |
|
|
Retail
|
|
|
5,276 |
|
|
|
4,978 |
|
|
|
8,041 |
|
|
|
4,967 |
|
|
|
14,843 |
|
|
Office
|
|
|
14,628 |
|
|
|
19,654 |
|
|
|
24,942 |
|
|
|
24,764 |
|
|
|
26,660 |
|
|
Multifamily
|
|
|
1,900 |
|
|
|
6,725 |
|
|
|
6,924 |
|
|
|
7,253 |
|
|
|
15,725 |
|
|
Industrial
|
|
|
– |
|
|
|
4,087 |
|
|
|
4,151 |
|
|
|
4,223 |
|
|
|
– |
|
|
Other commercial real estate
|
|
|
12,993 |
|
|
|
15,343 |
|
|
|
17,399 |
|
|
|
19,805 |
|
|
|
21,903 |
|
|
Total commercial real estate
|
|
|
125,504 |
|
|
|
150,366 |
|
|
|
177,709 |
|
|
|
193,698 |
|
|
|
219,639 |
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
33,466 |
|
|
|
32,111 |
|
|
|
36,654 |
|
|
|
37,978 |
|
|
|
34,134 |
|
|
Home equity
|
|
|
4,358 |
|
|
|
5,315 |
|
|
|
2,244 |
|
|
|
2,055 |
|
|
|
2,147 |
|
|
Total residential mortgage
|
|
|
37,824 |
|
|
|
37,426 |
|
|
|
38,898 |
|
|
|
40,033 |
|
|
|
36,281 |
|
|
Consumer
|
|
|
5,185 |
|
|
|
4,567 |
|
|
|
2,784 |
|
|
|
3,188 |
|
|
|
3,164 |
|
|
Total nonaccrual loans
|
|
$ |
225,962 |
|
|
$ |
230,814 |
|
|
$ |
268,752 |
|
|
$ |
319,694 |
|
|
$ |
343,575 |
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for loan losses to nonperforming loans
|
|
|
116.91 |
% |
|
|
115.76 |
% |
|
|
101.75 |
% |
|
|
87.82 |
% |
|
|
82.95 |
% |
|
Nonperforming loans to period-end loans
|
|
|
2.34 |
|
|
|
2.38 |
|
|
|
2.72 |
|
|
|
3.13 |
|
|
|
3.29 |
|
|
Accruing loans past due (90 days or more) 1
|
|
$ |
9,291 |
|
|
$ |
9,961 |
|
|
$ |
6,433 |
|
|
$ |
12,474 |
|
|
$ |
12,915 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Includes residential mortgages guaranteed by agencies of the U.S. Government.
|
|
$ |
1,248 |
|
|
$ |
1,995 |
|
|
$ |
854 |
|
|
$ |
3,210 |
|
|
$ |
3,183 |
|
|
2Includes residential mortgage loans guaranteed by agencies of the U.S. government. These loans have been modified to extend payment terms and/or reduce interest rates.
|
|
|
18,304 |
|
|
|
18,551 |
|
|
|
21,706 |
|
|
|
17,598 |
|
|
|
14,083 |
|
|
3Includes loans subject to First United Bank sellers escrow.
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,281 |
|
Nonperforming assets decreased $15 million during the first quarter of 2011 to $379 million or 3.54% of outstanding loans and repossessed assets at March 31, 2011. Nonaccruing loans totaled $226 million, renegotiated residential mortgage loans totaled $22 million (including $18 million of residential mortgage loans guaranteed by U.S. government agencies) and real estate and other repossessed assets totaled $131 million. The Company generally retains nonperforming assets to maximize potential recovery which may cause future nonperforming assets to increase.
Renegotiated loans represent troubled debt restructurings of residential mortgage loans. Generally, we modify residential mortgage loans by reducing interest rates and extending the number of payments. We do not forgive principal or unpaid interest. At March 31, 2011, approximately $11 million of the renegotiated residential mortgage loans are currently performing in accordance with the modified terms, $3.6 million are 30 to 89 days past due and $6.8 million are past due 90 days or more. Restructured residential mortgage loans guaranteed by agencies of the U.S. government in accordance with agency guideline represent $18 million of our $22 million portfolio of renegotiated loans. Interest continues to accrue on these guaranteed loans based on the modified terms of the loan. Renegotiated loans may be transferred to loans held for sale after a period of satisfactory performance, generally at least nine months. If it becomes probable that we will not be able to collect all amounts due according to the modified loan terms, the loans are placed on nonaccrual status and included in nonaccrual loans.
Commercial and commercial real estate loans are considered distressed when it becomes probable that we will not collect the full contractual principal and interest. All distressed commercial and commercial real estate loans are placed on nonaccrual status. We may modify loans to distressed borrowers generally consisting of extension of payment terms, not to exceed the final contractual maturity date of the original loan. We do not forgive principal or accrued but unpaid interest, nor do we grant interest rate concessions. We do not modify consumer loans to troubled borrowers.
A rollforward of nonperforming assets for the first quarter of 2011 follows in Table 27.
Table 27 – Rollforward of Nonperforming Assets
(In thousands)
| |
|
Nonaccruing Loans
|
|
|
Renegotiated Loans
|
|
|
Real Estate and Other Repossessed Assets
|
|
|
Total Nonperforming Assets
|
|
|
Balance, December 31, 2010
|
|
$ |
230,814 |
|
|
$ |
22,261 |
|
|
$ |
141,394 |
|
|
$ |
394,469 |
|
|
Additions
|
|
|
54,768 |
|
|
|
2,783 |
|
|
|
– |
|
|
|
57,551 |
|
|
Payments
|
|
|
(23,743 |
) |
|
|
(239 |
) |
|
|
– |
|
|
|
(23,982 |
) |
|
Charge-offs
|
|
|
(15,232 |
) |
|
|
– |
|
|
|
– |
|
|
|
(15,232 |
) |
|
Net writedowns and losses
|
|
|
– |
|
|
|
– |
|
|
|
(4,331 |
) |
|
|
(4,331 |
) |
|
Foreclosures
|
|
|
(21,010 |
) |
|
|
– |
|
|
|
21,010 |
|
|
|
– |
|
|
Proceeds from sales
|
|
|
– |
|
|
|
– |
|
|
|
(15,232 |
) |
|
|
(15,232 |
) |
|
Net transfer to nonaccruing Loans
|
|
|
348 |
|
|
|
(348 |
) |
|
|
– |
|
|
|
– |
|
|
Transfer to residential mortgage loans held for sale
|
|
|
– |
|
|
|
(2,094 |
) |
|
|
– |
|
|
|
(2,094 |
) |
|
Transfer to available for sale securities
|
|
|
– |
|
|
|
– |
|
|
|
(11,723 |
) |
|
|
(11,723 |
) |
|
Other, net
|
|
|
17 |
|
|
|
(658 |
) |
|
|
302 |
|
|
|
(339 |
) |
|
Balance, March 31, 2011
|
|
$ |
225,962 |
|
|
$ |
21,705 |
|
|
$ |
131,420 |
|
|
$ |
379,087 |
|
The distribution of nonaccruing loans among our various markets follows in Table 28.
Table 28 – Nonaccruing Loans by Principal Market
(Dollars in thousands)
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Change
|
|
| |
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Oklahoma
|
|
$ |
49,585 |
|
|
|
1.04 |
% |
|
$ |
60,805 |
|
|
|
1.24 |
% |
|
$ |
(11,220 |
) |
|
|
(20 |
) bp |
|
Texas
|
|
|
34,404 |
|
|
|
1.14 |
|
|
|
33,157 |
|
|
|
1.10 |
|
|
|
1,247 |
|
|
|
4 |
|
|
New Mexico
|
|
|
17,510 |
|
|
|
2.51 |
|
|
|
19,283 |
|
|
|
2.75 |
|
|
|
(1,773 |
) |
|
|
(24 |
) |
|
Arkansas
|
|
|
29,769 |
|
|
|
10.76 |
|
|
|
7,914 |
|
|
|
2.75 |
|
|
|
21,855 |
|
|
|
801 |
|
|
Colorado
|
|
|
40,629 |
|
|
|
5.24 |
|
|
|
49,416 |
|
|
|
6.49 |
|
|
|
(8,787 |
) |
|
|
(125 |
) |
|
Arizona
|
|
|
54,065 |
|
|
|
9.66 |
|
|
|
60,239 |
|
|
|
11.48 |
|
|
|
(6,174 |
) |
|
|
(182 |
) |
|
Kansas / Missouri
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total
|
|
$ |
225,962 |
|
|
|
2.13 |
% |
|
$ |
230,814 |
|
|
|
2.17 |
% |
|
$ |
(4,852 |
) |
|
|
(4 |
) bp |
The majority of nonaccruing loans are concentrated in the Oklahoma, Arizona and Colorado markets. Nonaccruing loans in the Oklahoma market are primarily composed of $11 million of commercial real estate loans and $11 million of commercial loans. Nonaccruing loans in the Arizona and Colorado markets consisted primarily of commercial real estate loans.
Nonaccruing loans decreased $4.9 million from December 31, 2010. Nonaccruing loans in Arkansas increased $22 million due largely to a single customer relationship. Nonaccruing loans decreased $11 million in the Oklahoma market, $8.8 million in the Colorado market and $6.2 million in the Arizona market.
Commercial
Nonaccruing commercial loans totaled $57 million or 0.95% of total commercial loans at March 31, 2011 and $38 million or 0.65% of total commercial loans at December 31, 2010. At March 31, 2011, nonaccruing commercial loans were primarily composed of $30 million or 3.09% of total wholesale / retail sector loans and nonaccruing services sector loans totaled $16 million or 0.99% of total services sector loans.
Nonaccruing commercial loans increased $19 million over December 31, 2010 largely due to a single customer relationship in the Arkansas market in the wholesale / retail sector. Newly identified nonaccruing commercial loans in the first quarter of 2011 totaled approximately $31 million, offset by $8.4 million in payments, $2.4 million in charge-offs and $1.1 million in foreclosures. The distribution of nonaccruing commercial loans among our various markets was as follows in Table 29.
Table 29 – Nonaccruing Commercial Loans by Principal Market
(Dollars in thousands)
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Change
|
|
| |
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Oklahoma
|
|
$ |
10,776 |
|
|
|
0.41 |
% |
|
$ |
13,978 |
|
|
|
0.54 |
% |
|
$ |
(3,202 |
) |
|
|
(13 |
) bp |
|
Texas
|
|
|
9,165 |
|
|
|
0.48 |
|
|
|
5,603 |
|
|
|
0.30 |
|
|
|
3,562 |
|
|
|
18 |
|
|
New Mexico
|
|
|
3,667 |
|
|
|
1.40 |
|
|
|
5,818 |
|
|
|
2.08 |
|
|
|
(2,151 |
) |
|
|
(68 |
) |
|
Arkansas
|
|
|
22,651 |
|
|
|
29.85 |
|
|
|
212 |
|
|
|
0.25 |
|
|
|
22,439 |
|
|
|
2,960 |
bp |
|
Colorado
|
|
|
5,086 |
|
|
|
0.99 |
|
|
|
6,702 |
|
|
|
1.42 |
|
|
|
(1,616 |
) |
|
|
(43 |
) |
|
Arizona
|
|
|
6,104 |
|
|
|
2.43 |
|
|
|
6,142 |
|
|
|
2.66 |
|
|
|
(38 |
) |
|
|
(23 |
) |
|
Kansas / Missouri
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total commercial
|
|
$ |
57,449 |
|
|
|
0.95 |
% |
|
$ |
38,455 |
|
|
|
0.65 |
% |
|
$ |
18,994 |
|
|
|
30 |
bp |
Commercial Real Estate
Nonaccruing commercial real estate loans totaled $126 million or 5.65% of outstanding commercial real estate loans at March 31, 2011 compared to $150 million or 6.60% of outstanding commercial real estate loans at December 31, 2010. Nonaccruing commercial real estate loans continue to be largely concentrated in land development and residential construction loans. Nonaccruing commercial real estate loans decreased $25 million since December 31, 2010. Newly identified nonaccruing commercial real estate loans totaled $6.9 million, offset by $6.9 million of charge-offs, $12 million of cash payments received and $13 million of foreclosures. The distribution of our nonaccruing commercial real estate loans among our geographic market is as follows in Table 30.
Table 30 – Nonaccruing Commercial Real Estate Loans by Principal Market
(Dollars in thousands)
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Change
|
|
| |
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Amount
|
|
|
% of outstanding loans
|
|
|
Oklahoma
|
|
$ |
10,907 |
|
|
|
1.65 |
% |
|
$ |
19,005 |
|
|
|
2.62 |
% |
|
$ |
(8,098 |
) |
|
|
(97 |
) bp |
|
Texas
|
|
|
18,985 |
|
|
|
2.76 |
|
|
|
21,228 |
|
|
|
3.09 |
|
|
|
(2,243 |
) |
|
|
(33 |
) |
|
New Mexico
|
|
|
11,736 |
|
|
|
3.60 |
|
|
|
11,494 |
|
|
|
3.65 |
|
|
|
242 |
|
|
|
(5 |
) |
|
Arkansas
|
|
|
5,830 |
|
|
|
4.67 |
|
|
|
6,346 |
|
|
|
5.42 |
|
|
|
(516 |
) |
|
|
(75 |
) |
|
Colorado
|
|
|
33,963 |
|
|
|
19.70 |
|
|
|
41,066 |
|
|
|
20.83 |
|
|
|
(7,103 |
) |
|
|
(113 |
) |
|
Arizona
|
|
|
44,083 |
|
|
|
20.65 |
|
|
|
51,227 |
|
|
|
25.48 |
|
|
|
(7,144 |
) |
|
|
(483 |
) |
|
Kansas / Missouri
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total commercial real estate
|
|
$ |
125,504 |
|
|
|
5.65 |
% |
|
$ |
150,366 |
|
|
|
6.60 |
% |
|
$ |
(24,862 |
) |
|
|
(95 |
) bp |
Nonaccruing commercial real estate loans are primarily concentrated in the Arizona and Colorado markets. Approximately $44 million or 20.65% of commercial real estate loans in Arizona are nonaccruing and consist primarily of nonaccruing residential construction and land development loans. Approximately $34 million or 19.70% of commercial real estate loans in the Colorado market are nonaccruing and consist primarily of nonaccruing residential construction and land development loans.
Residential Mortgage and Consumer
Nonaccruing residential mortgage loans totaled $38 million or 2.13% of outstanding residential loans at March 31, 2011 compared to $37 million or 2.05% of total residential loans at December 31, 2010. Nonaccruing residential mortgage loans primarily consist of permanent residential mortgage loans which totaled $33 million or 2.75% of outstanding residential mortgage loans at March 31, 2011, a $1.4 million increase over December 31, 2010. Nonaccruing home equity loans continued to perform well with only $4.4 million or 0.78% of total home equity loans in nonaccrual status.
In addition to nonaccruing residential mortgage and consumer loans, payments of residential mortgage loans and consumer loans may be delinquent. The composition of residential mortgage and consumer loans past due is included in the following Table 31. Residential mortgage loans past due 30 to 89 days decreased $9.3 million and residential mortgage loans past due 90 days or more decreased $747 thousand during first quarter of 2011. Consumer loans past due 30 to 89 days decreased $2.8 million from December 31, 2010 primarily due to a decrease in indirect automobile loans, partially offset by an increase in other consumer loans. Consumer loans past due 90 days or more decreased $229 thousand during the first quarter of 2011, primarily due to a decrease in other consumer loans.
Table 31 – Residential Mortgage and Consumer Loans Past Due
(In thousands)
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
| |
|
90 Days or More
|
|
|
30 to 89 Days
|
|
|
90 Days or More
|
|
|
30 to 89 Days
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage1
|
|
$ |
1,248 |
|
|
$ |
12,776 |
|
|
$ |
1,995 |
|
|
$ |
21,719 |
|
|
Home equity
|
|
|
– |
|
|
|
1,246 |
|
|
|
– |
|
|
|
1,605 |
|
|
Total residential mortgage
|
|
$ |
1,248 |
|
|
$ |
14,022 |
|
|
$ |
1,995 |
|
|
$ |
23,324 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
$ |
73 |
|
|
$ |
7,865 |
|
|
$ |
67 |
|
|
$ |
11,382 |
|
|
Other consumer
|
|
|
60 |
|
|
|
1,647 |
|
|
|
295 |
|
|
|
927 |
|
|
Total consumer
|
|
$ |
133 |
|
|
$ |
9,512 |
|
|
$ |
362 |
|
|
$ |
12,309 |
|
|
1
|
Excludes past due residential mortgage loans which we may voluntarily repurchase but do not have the obligation to repurchase from Government National Mortgage Association (“GNMA”) mortgage pools. Repayment of these loans is fully guaranteed by agencies of the U.S. government. See Note 4 in the Consolidated Financial Statements for additional discussion.
|
Real Estate and Other Repossessed Assets
Real estate and other repossessed assets are assets acquired in partial or total forgiveness of loans. The assets are carried at the lower of costs, determined by the fair value at the date of foreclosure less estimated disposal costs, or the current fair value less estimated disposal costs. The fair value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice. Appraisals are ordered at foreclosure and are updated on a no less than annual basis. For certain property types, such as residential building lots, or in certain distressed markets, we may request updated appraisals more frequently. Appraised values are on an “as is” basis and are not adjusted. For uncompleted properties, we may also obtain the appraised value for properties on an “as completed” basis to use in the determination of whether to develop properties to completion. Such costs to complete properties may be capitalized not to exceed the estimated “as completed” fair value as determined by the independent appraisal. The fair value of mineral rights is generally determined by our internal staff of engineers based on the projected cash flows from proven oil and gas reserves under existing economic and operating conditions. The value of other assets is generally determined by our special assets staff based on projected liquidation cash flow under current market conditions.
The carrying value of real estate and other repossessed assets is evaluated by management on a quarterly basis. We consider decreases in listing prices and other relevant information in our quarterly evaluations and reduce the carrying values when necessary.
Real estate and other repossessed assets totaled $131 million at March 31, 2011, a decrease of $10 million from December 31, 2010. During the first quarter of 2011, $12 million of cost basis shares of an entity in which we hold an equity interest were transferred to the available for sales portfolio as the shares are listed for trading on a national stock exchange. The distribution of real estate and other repossessed assets attributed by geographical market is included in Table 32 following.
Table 32 – Real Estate and Other Repossessed Assets by Principal Market
(In thousands)
| |
|
Oklahoma
|
|
|
Texas
|
|
|
Colorado
|
|
|
Arkansas
|
|
|
New
Mexico
|
|
|
Arizona
|
|
|
Kansas/
Missouri
|
|
|
Other
|
|
|
Total
|
|
|
1-4 family residential properties and residential land development properties
|
|
$ |
9,189 |
|
|
$ |
19,501 |
|
|
$ |
3,587 |
|
|
$ |
5,879 |
|
|
$ |
1,031 |
|
|
$ |
13,543 |
|
|
$ |
777 |
|
|
$ |
2,157 |
|
|
$ |
55,664 |
|
|
Developed commercial real estate properties
|
|
|
2,244 |
|
|
|
1,510 |
|
|
|
8,957 |
|
|
|
2,199 |
|
|
|
5,546 |
|
|
|
22,545 |
|
|
|
– |
|
|
|
3,332 |
|
|
|
46,333 |
|
|
Undeveloped land
|
|
|
297 |
|
|
|
8,919 |
|
|
|
3,026 |
|
|
|
72 |
|
|
|
1,501 |
|
|
|
5,953 |
|
|
|
4,802 |
|
|
|
– |
|
|
|
24,570 |
|
|
Oil and gas properties
|
|
|
– |
|
|
|
2,403 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,403 |
|
|
Construction equipment
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,597 |
|
|
|
– |
|
|
|
1,597 |
|
|
Vehicles
|
|
|
313 |
|
|
|
113 |
|
|
|
– |
|
|
|
257 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
683 |
|
|
Other
|
|
|
– |
|
|
|
– |
|
|
|
170 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
170 |
|
|
Total real estate and other repossessed assets
|
|
$ |
12,043 |
|
|
$ |
32,446 |
|
|
$ |
15,740 |
|
|
$ |
8,407 |
|
|
$ |
8,078 |
|
|
$ |
42,041 |
|
|
$ |
7,176 |
|
|
$ |
5,489 |
|
|
$ |
131,420 |
|
Undeveloped land is primarily zoned for commercial development. Developed commercial real estate properties are primarily completed with no additional construction necessary for sale.
Liquidity and Capital
Subsidiary Bank
Deposits and borrowed funds are the primary sources of liquidity for our subsidiary bank. Based on average balances for the first quarter of 2011, approximately 75% of our funding was provided by average deposit accounts, 9% from borrowed funds, 2% from long-term subordinated debt and 11% from equity. Our funding sources, which primarily include deposits and borrowings from the Federal Home Loan Banks and other banks, provide adequate liquidity to meet our operating needs.
Deposit accounts represent our largest funding source. We compete for retail and commercial deposits by offering a broad range of products and services and focusing on customer convenience. Retail deposit growth is supported through our Perfect Banking sales and customer service program, free checking and online bill paying services, mobile banking services, an extensive network of branch locations and ATMs and a 24-hour Express Bank call center. Commercial deposit growth is supported by offering treasury management and lockbox services. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.
Average deposits for the first quarter of 2011 totaled $17.7 billion and represented approximately 75% of total average liabilities and capital, compared with $17.3 billion and 71% of total average liabilities and capital for the fourth quarter of 2010. Average deposits increased $428 million in first quarter of 2011. Average interest-bearing transaction deposit accounts continued to grow, up $307 million over the fourth quarter of 2010. Growth in our average interest-bearing transaction deposit accounts included $527 million of commercial deposits, partially offset by a seasonal decrease of $158 million in wealth management deposits and a $58 million decrease in consumer banking deposits. Average demand deposits increased $94 million in the first quarter of 2011, from the fourth quarter of 2010, primarily related to a $260 million increase in balances held by our commercial banking customers and a $15 million increase in wealth management deposits, partially offset by a seasonal decrease of $145 million in consumer deposits. Average time deposits also increased $15 million during the first quarter of 2011. Growth in our average commercial deposit balances was largely driven by small business and commercial and industrial customers.
Brokered deposits, which are included in time deposits, averaged $237 million for the first quarter of 2011, up $2.8 million over the fourth quarter of 2010.
The distribution of deposit accounts among our principal markets is shown in Table 33.
Table 33 – Period-end Deposits by Principal Market Area
(In thousands)
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Oklahoma:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
$ |
2,420,210 |
|
|
$ |
2,271,375 |
|
|
$ |
2,238,303 |
|
|
$ |
2,101,994 |
|
|
$ |
2,062,084 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
6,068,304 |
|
|
|
6,061,626 |
|
|
|
5,609,811 |
|
|
|
5,562,287 |
|
|
|
5,237,983 |
|
|
Savings
|
|
|
120,020 |
|
|
|
106,411 |
|
|
|
103,524 |
|
|
|
102,590 |
|
|
|
101,708 |
|
|
Time
|
|
|
1,465,506 |
|
|
|
1,373,307 |
|
|
|
1,497,344 |
|
|
|
1,442,525 |
|
|
|
1,360,756 |
|
|
Total interest-bearing
|
|
|
7,653,830 |
|
|
|
7,541,344 |
|
|
|
7,210,679 |
|
|
|
7,107,402 |
|
|
|
6,700,447 |
|
|
Total Oklahoma
|
|
|
10,074,040 |
|
|
|
9,812,719 |
|
|
|
9,448,982 |
|
|
|
9,209,396 |
|
|
|
8,762,531 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
1,405,892 |
|
|
|
1,389,876 |
|
|
|
1,238,103 |
|
|
|
1,150,495 |
|
|
|
1,068,656 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
1,977,850 |
|
|
|
1,791,810 |
|
|
|
1,786,979 |
|
|
|
1,674,519 |
|
|
|
1,675,759 |
|
|
Savings
|
|
|
40,313 |
|
|
|
36,429 |
|
|
|
35,614 |
|
|
|
36,814 |
|
|
|
37,175 |
|
|
Time
|
|
|
1,015,754 |
|
|
|
966,116 |
|
|
|
1,031,877 |
|
|
|
1,003,936 |
|
|
|
1,043,813 |
|
|
Total interest-bearing
|
|
|
3,033,917 |
|
|
|
2,794,355 |
|
|
|
2,854,470 |
|
|
|
2,715,269 |
|
|
|
2,756,747 |
|
|
Total Texas
|
|
|
4,439,809 |
|
|
|
4,184,231 |
|
|
|
4,092,573 |
|
|
|
3,865,764 |
|
|
|
3,825,403 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Mexico:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
282,708 |
|
|
|
270,916 |
|
|
|
262,567 |
|
|
|
223,869 |
|
|
|
222,685 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
498,355 |
|
|
|
530,244 |
|
|
|
535,012 |
|
|
|
491,708 |
|
|
|
480,189 |
|
|
Savings
|
|
|
24,455 |
|
|
|
28,342 |
|
|
|
27,906 |
|
|
|
30,231 |
|
|
|
20,036 |
|
|
Time
|
|
|
453,580 |
|
|
|
450,177 |
|
|
|
469,493 |
|
|
|
476,155 |
|
|
|
495,243 |
|
|
Total interest-bearing
|
|
|
976,390 |
|
|
|
1,008,763 |
|
|
|
1,032,411 |
|
|
|
998,094 |
|
|
|
995,468 |
|
|
Total New Mexico
|
|
|
1,259,098 |
|
|
|
1,279,679 |
|
|
|
1,294,978 |
|
|
|
1,221,963 |
|
|
|
1,218,153 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arkansas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
15,144 |
|
|
|
15,310 |
|
|
|
17,604 |
|
|
|
14,919 |
|
|
|
17,599 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
130,613 |
|
|
|
129,580 |
|
|
|
137,797 |
|
|
|
108,104 |
|
|
|
61,398 |
|
|
Savings
|
|
|
1,514 |
|
|
|
1,266 |
|
|
|
1,522 |
|
|
|
1,288 |
|
|
|
1,266 |
|
|
Time
|
|
|
94,889 |
|
|
|
100,998 |
|
|
|
116,536 |
|
|
|
119,472 |
|
|
|
105,794 |
|
|
Total interest-bearing
|
|
|
227,016 |
|
|
|
231,844 |
|
|
|
255,855 |
|
|
|
228,864 |
|
|
|
168,458 |
|
|
Total Arkansas
|
|
|
242,160 |
|
|
|
247,154 |
|
|
|
273,459 |
|
|
|
243,783 |
|
|
|
186,057 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
197,579 |
|
|
|
157,742 |
|
|
|
156,685 |
|
|
|
143,783 |
|
|
|
136,048 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
528,948 |
|
|
|
522,207 |
|
|
|
501,405 |
|
|
|
441,085 |
|
|
|
456,508 |
|
|
Savings
|
|
|
21,655 |
|
|
|
20,310 |
|
|
|
19,681 |
|
|
|
18,869 |
|
|
|
18,118 |
|
|
Time
|
|
|
546,586 |
|
|
|
502,889 |
|
|
|
495,899 |
|
|
|
497,538 |
|
|
|
509,410 |
|
|
Total interest-bearing
|
|
|
1,097,189 |
|
|
|
1,045,406 |
|
|
|
1,016,985 |
|
|
|
957,492 |
|
|
|
984,036 |
|
|
Total Colorado
|
|
|
1,294,768 |
|
|
|
1,203,148 |
|
|
|
1,173,670 |
|
|
|
1,101,275 |
|
|
|
1,120,084 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
106,880 |
|
|
|
74,887 |
|
|
|
97,384 |
|
|
|
71,711 |
|
|
|
61,183 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
102,089 |
|
|
|
95,890 |
|
|
|
94,108 |
|
|
|
94,033 |
|
|
|
81,851 |
|
|
Savings
|
|
|
984 |
|
|
|
809 |
|
|
|
812 |
|
|
|
1,062 |
|
|
|
1,105 |
|
|
Time
|
|
|
50,060 |
|
|
|
52,227 |
|
|
|
59,678 |
|
|
|
63,643 |
|
|
|
64,592 |
|
|
Total interest-bearing
|
|
|
153,133 |
|
|
|
148,926 |
|
|
|
154,598 |
|
|
|
158,738 |
|
|
|
147,548 |
|
|
Total Arizona
|
|
|
260,013 |
|
|
|
223,813 |
|
|
|
251,982 |
|
|
|
230,449 |
|
|
|
208,731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kansas/Missouri:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
28,774 |
|
|
|
40,658 |
|
|
|
35,869 |
|
|
|
28,518 |
|
|
|
31,726 |
|
|
Interest-bearing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
222,705 |
|
|
|
124,005 |
|
|
|
180,273 |
|
|
|
116,423 |
|
|
|
100,037 |
|
|
Savings
|
|
|
323 |
|
|
|
200 |
|
|
|
132 |
|
|
|
110 |
|
|
|
146 |
|
|
Time
|
|
|
51,236 |
|
|
|
63,454 |
|
|
|
70,673 |
|
|
|
69,819 |
|
|
|
74,648 |
|
|
Total interest-bearing
|
|
|
274,264 |
|
|
|
187,659 |
|
|
|
251,078 |
|
|
|
186,352 |
|
|
|
174,831 |
|
|
Total Kansas/Missouri
|
|
|
303,038 |
|
|
|
228,317 |
|
|
|
286,947 |
|
|
|
214,870 |
|
|
|
206,557 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total BOK Financial deposits
|
|
$ |
17,872,926 |
|
|
$ |
17,179,061 |
|
|
$ |
16,822,591 |
|
|
$ |
16,087,500 |
|
|
$ |
15,527,516 |
|
In addition to deposits, subsidiary bank liquidity is provided primarily by federal funds purchased, securities repurchase agreements and Federal Home Loan Bank borrowings. Federal funds purchased consist primarily of unsecured, overnight funds acquired from other financial institutions. Funds are primarily purchased from bankers’ banks and Federal Home Loan Banks from across the country. The largest single source of Federal funds purchased totaled $183 million at March 31, 2011. Securities repurchase agreements generally mature within 90 days and are secured by certain available for sale securities. All of our repurchase agreement transactions are recognized as secured borrowing. Federal Home Loan Bank borrowings are generally short term and are secured by a blanket pledge of eligible collateral (generally unencumbered U.S. Treasury and U.S. agency issued residential mortgage-backed securities, 1-4 family residential mortgage loans, multifamily and other qualifying commercial real estate loans). Amounts borrowed from the Federal Home Loan Banks of Topeka and Dallas averaged $112 million during the first quarter.
We generally have been using the proceeds of deposit growth to reduce higher-costing other borrowing while maintaining access to these funding sources. At March 31, 2011, the estimated unused credit available to the subsidiary bank from collateralized sources was approximately $7.4 billion.
Information relating to other borrowing is summarized in Table 34 following:
Table 34 – Other borrowings
(In thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
| |
|
|
|
|
Average
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
Average
|
|
|
|
|
|
Outstanding
|
|
| |
|
As of
|
|
|
Balance
|
|
|
|
|
|
At Any Month
|
|
|
As of
|
|
|
Balance
|
|
|
|
|
|
At Any Month
|
|
| |
|
March 31,
|
|
|
During the
|
|
|
|
|
|
End During
|
|
|
Dec. 31,
|
|
|
During the
|
|
|
|
|
|
End During
|
|
| |
|
2011
|
|
|
Quarter
|
|
|
Rate
|
|
|
the Quarter
|
|
|
2010
|
|
|
Quarter
|
|
|
Rate
|
|
|
the Quarter
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company and Other Non-Bank Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred debt
|
|
$ |
7,217 |
|
|
|
7,217 |
|
|
|
5.06 |
% |
|
$ |
7,217 |
|
|
$ |
7,217 |
|
|
|
7,217 |
|
|
|
5.06 |
% |
|
$ |
7,217 |
|
|
Other
|
|
|
1,300 |
|
|
|
58 |
|
|
|
– |
% |
|
|
1,300 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
% |
|
|
– |
|
|
Total Parent Company and other Non-Bank Subsidiaries
|
|
|
8,517 |
|
|
|
7,275 |
|
|
|
5.06 |
% |
|
|
|
|
|
|
7,217 |
|
|
|
7,217 |
|
|
|
5.06 |
% |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary Bank:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds purchased
|
|
|
466,749 |
|
|
|
820,969 |
|
|
|
0.22 |
% |
|
|
965,762 |
|
|
|
1,025,018 |
|
|
|
775,620 |
|
|
|
0.11 |
% |
|
|
1,025,018 |
|
|
Repurchase agreements
|
|
|
1,006,051 |
|
|
|
1,062,359 |
|
|
|
0.25 |
% |
|
|
1,124,060 |
|
|
|
1,258,762 |
|
|
|
1,201,760 |
|
|
|
0.59 |
% |
|
|
1,258,762 |
|
|
Federal Home Loan Bank advances
|
|
|
1,699 |
|
|
|
111,725 |
|
|
|
3.20 |
% |
|
|
1,749 |
|
|
|
801,797 |
|
|
|
800,042 |
|
|
|
0.14 |
% |
|
|
851,562 |
|
|
Subordinated debentures
|
|
|
398,744 |
|
|
|
398,723 |
|
|
|
5.51 |
% |
|
|
398,744 |
|
|
|
398,701 |
|
|
|
398,680 |
|
|
|
5.78 |
% |
|
|
398,701 |
|
|
Other
|
|
|
26,648 |
|
|
|
25,987 |
|
|
|
2.52 |
% |
|
|
30,664 |
|
|
|
24,564 |
|
|
|
22,497 |
|
|
|
1.69 |
% |
|
|
32,543 |
|
|
Total Subsidiary Bank
|
|
|
1,899,891 |
|
|
|
2,419,763 |
|
|
|
1.39 |
% |
|
|
|
|
|
|
3,508,842 |
|
|
|
3,198,599 |
|
|
|
0.95 |
% |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Borrowings
|
|
$ |
1,908,408 |
|
|
$ |
2,427,038 |
|
|
|
1.44 |
% |
|
|
|
|
|
$ |
3,516,059 |
|
|
$ |
3,205,816 |
|
|
|
0.98 |
% |
|
|
|
|
Parent Company
The primary source of liquidity for BOK Financial is dividends from the subsidiary bank, which are limited by various banking regulations to net profits, as defined, for the year plus retained profits for the two preceding years. Dividends are further restricted by minimum capital requirements. Based on the most restrictive limitations as well as management’s internal capital policy, at March 31, 2011, the subsidiary bank could declare up to $72 million of dividends without regulatory approval. Future losses or increases in required regulatory capital at the subsidiary bank could affect its ability to pay dividends to the parent company.
The Company has an unsecured revolving credit agreement with George B. Kaiser, its Chairman and principal shareholder. The committed amount under the terms of the credit agreement is $100 million and matures on December 2, 2012. Interest on outstanding balances due to Mr. Kaiser is based on one-month LIBOR plus 250 basis points and is payable quarterly. Additional interest in the form of a facility fee is paid quarterly on the unused portion of the commitment at 50 basis points. The credit agreement has no restrictive covenants. No amounts were outstanding under this credit agreement as of March 31, 2011 or December 31, 2010.
Our equity capital at March 31, 2011 was $2.6 billion, up from $2.5 billion at December 31, 2010. Net income less cash dividend paid increased equity $48 million during the first quarter of 2011. Capital is managed to maximize
long-term value to the shareholders. Factors considered in managing capital include projections of future earnings, asset growth and acquisition strategies, and regulatory and debt covenant requirements. Capital management may include subordinated debt issuance, share repurchase and stock and cash dividends.
Based on asset size, we are the largest commercial bank that elected not to participate in the TARP Capital Purchase Program. The decision not to participate in TARP was based on an evaluation of our capital needs in both the current environment and in several capital stress environments. We considered capital requirements for organic growth and potential acquisitions, the cost of TARP capital and a defined exit strategy when the cost of TARP capital increases substantially at the end of year five.
On April 26, 2005, the Board of Directors authorized a share repurchase program, which replaced a previously authorized program. The maximum of two million common shares may be repurchased. The specific timing and amount of shares repurchased will vary based on market conditions, regulatory limitations and other factors. Repurchases may be made over time in open market or privately negotiated transactions. The repurchase program may be suspended or discontinued at any time without prior notice. Since this program began, 784,073 shares have been repurchased by the Company for $38.7 million. No shares were repurchased in the first quarter of 2011.
BOK Financial and its subsidiary bank are subject to various capital requirements administered by federal agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that could have a material impact on operations. These capital requirements include quantitative measures of assets, liabilities, and off-balance sheet items. The capital standards are also subject to qualitative judgments by the regulators.
For a banking institution to qualify as well capitalized, its Tier 1, Total and Leverage capital ratios must be at least 6%, 10% and 5%, respectively. The Company’s banking subsidiary exceeded the regulatory definitions of well capitalized. The capital ratios for BOK Financial on a consolidated basis are presented in Table 35.
Table 35 – Capital Ratios
|
|
|
Well Capitalized
|
|
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
Minimums
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total equity to average assets
|
|
|
– |
|
|
|
10.80 |
% |
|
|
10.44 |
% |
|
|
10.26 |
% |
|
|
10.15 |
% |
|
|
9.69 |
% |
|
Tangible common equity ratio
|
|
|
– |
|
|
|
9.54 |
|
|
|
9.21 |
|
|
|
8.96 |
|
|
|
8.88 |
|
|
|
8.46 |
|
|
Tier 1 common equity ratio
|
|
|
– |
|
|
|
12.84 |
|
|
|
12.55 |
|
|
|
12.17 |
|
|
|
11.77 |
|
|
|
11.33 |
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
|
6.00 |
% |
|
|
12.97 |
|
|
|
12.69 |
|
|
|
12.30 |
|
|
|
11.90 |
|
|
|
11.45 |
|
|
Total capital
|
|
|
10.00 |
|
|
|
16.48 |
|
|
|
16.20 |
|
|
|
15.79 |
|
|
|
15.38 |
|
|
|
15.09 |
|
|
Leverage
|
|
|
5.00 |
|
|
|
9.13 |
|
|
|
8.74 |
|
|
|
8.61 |
|
|
|
8.57 |
|
|
|
8.25 |
|
Capital resources of financial institutions are also regularly measured by the tangible common shareholders’ equity ratio. Tangible common shareholders’ equity is shareholders’ equity as defined by generally accepted accounting principles in the United States of America (“GAAP”) less intangible assets and equity which does not benefit common shareholders. Equity that does not benefit common shareholders includes preferred equity and equity provided by the U.S. Treasury’s TARP program. Tier 1 common equity is tier 1 equity as defined by banking regulations, adjusted for other comprehensive income (loss) and equity which does not benefit common shareholders. These non-GAAP measures are valuable indicators of a financial institution’s capital strength since it eliminates intangible assets from shareholders’ equity and retains the effect of unrealized losses on securities and other components of accumulated other comprehensive income (loss) in shareholders’ equity.
Table 36 following provides a reconciliation of the non-GAAP measures with financial measures defined by GAAP.
Table 36 – Non-GAAP Measures
(Dollars in thousands)
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
$ |
2,576,133 |
|
|
$ |
2,521,726 |
|
|
$ |
2,503,650 |
|
|
$ |
2,428,738 |
|
|
$ |
2,312,443 |
|
|
Less: Goodwill and intangible assets, net
|
|
|
348,507 |
|
|
|
349,404 |
|
|
|
350,769 |
|
|
|
351,592 |
|
|
|
352,916 |
|
|
Tangible common equity
|
|
|
2,227,626 |
|
|
|
2,172,322 |
|
|
|
2,152,881 |
|
|
|
2,077,146 |
|
|
|
1,959,527 |
|
|
Total assets
|
|
|
23,701,023 |
|
|
|
23,941,603 |
|
|
|
24,385,952 |
|
|
|
23,736,728 |
|
|
|
23,501,976 |
|
|
Less: Goodwill and intangible assets, net
|
|
|
348,507 |
|
|
|
349,404 |
|
|
|
350,769 |
|
|
|
351,592 |
|
|
|
352,916 |
|
|
Tangible assets
|
|
$ |
23,352,516 |
|
|
$ |
23,592,199 |
|
|
$ |
24,035,183 |
|
|
$ |
23,385,136 |
|
|
$ |
23,149,060 |
|
|
Tangible common equity ratio
|
|
|
9.54 |
% |
|
|
9.21 |
% |
|
|
8.96 |
% |
|
|
8.88 |
% |
|
|
8.46 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common equity ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
$ |
2,129,998 |
|
|
$ |
2,076,525 |
|
|
$ |
2,027,226 |
|
|
$ |
1,976,588 |
|
|
$ |
1,922,783 |
|
|
Less: Non-controlling interest
|
|
|
21,555 |
|
|
|
22,152 |
|
|
|
20,338 |
|
|
|
21,289 |
|
|
|
20,274 |
|
|
Tier 1 common equity
|
|
|
2,108,443 |
|
|
|
2,054,373 |
|
|
|
2,006,888 |
|
|
|
1,955,299 |
|
|
|
1,902,509 |
|
|
Risk weighted assets
|
|
$ |
16,416,387 |
|
|
$ |
16,368,976 |
|
|
$ |
16,484,702 |
|
|
$ |
16,611,662 |
|
|
$ |
16,787,566 |
|
|
Tier 1 common equity ratio
|
|
|
12.84 |
% |
|
|
12.55 |
% |
|
|
12.17 |
% |
|
|
11.77 |
% |
|
|
11.33 |
% |
Off-Balance Sheet Arrangements
The Company agreed to guarantee rents totaling $28.7 million through September of 2017 to the City of Tulsa (“City”) as owner of a building immediately adjacent to the Bank’s main office for space currently rented by third-party tenants in the building. All rent payments are current. Remaining guaranteed rents totaled $19.3 million at March 31, 2011. Current leases expire or are subject to lessee termination options at various dates in 2012 and 2014. Our obligation under the agreement would be affected by lessee decisions to exercise these options.
In return for this guarantee, we will receive 80% of net cash flow as defined in an agreement with the City through September 2017 from rental of space that was vacant at the inception of the agreement. Approximately 42 thousand square feet of this additional space has been rented to outside parties since the date of the agreement. The maximum amount that we may receive under this agreement is $4.5 million.
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 prices, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. Market risk excludes changes in fair value due to credit of the individual issuers of financial instruments.
BOK Financial is subject to market risk primarily through the effect of changes in interest rates on both its assets held for purposes other than trading and trading assets. The effects of other changes, such as foreign exchange rates, commodity prices or equity prices do not pose significant market risk to BOK Financial. BOK Financial has no material investments in assets that are affected by changes in foreign exchange rates or equity prices. Energy and agricultural product derivative contracts, which are affected by changes in commodity prices, are matched against offsetting contracts as previously discussed.
The Asset / Liability Committee is responsible for managing market risk in accordance with policy guidelines established by the Board of Directors. The Committee monitors projected variation in net interest revenue and net interest income and economic value of equity due to specified changes in interest rates. The internal policy limit for net interest revenue variation is a maximum decline of 5% to an up or down 200 basis point change over twelve months. These guidelines also set maximum levels for short-term borrowings, short-term assets, public funds, and brokered deposits, and establish minimum levels for un-pledged assets, among other things. Compliance with these guidelines is reviewed monthly.
Interest Rate Risk – Other than Trading
As previously noted in the Net Interest Revenue section of this report, management has implemented strategies to manage the Company’s balance sheet to have relatively limited exposure to changes in interest rates over a twelve month period. The effectiveness of these strategies in managing the overall interest rate risk is evaluated through the use of an asset/liability model. 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 12 months and longer time periods based on multiple interest rate scenarios. Two specified interest rate scenarios are used to evaluate interest rate risk against policy guidelines. The first assumes a sustained parallel 200 basis point increase and the second assumes a sustained parallel 50 basis point decrease in interest rates. Management historically evaluated interest rate sensitivity for a sustained 200 basis point decrease in interest rates. However, the results of a 200 basis point decrease in interest rates in the current low-rate environment are not meaningful.
The Company’s primary interest rate exposures included the Federal Funds rate, which affects short-term borrowings, and the prime lending rate and LIBOR, which are the basis for much of the variable-rate loan pricing. Additionally, mortgage rates directly affect 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. The model incorporates assumptions regarding the effects of changes in interest rates and account balances on indeterminable maturity deposits based on a combination of historical analysis and expected behavior. The impact of planned growth and new business activities is factored into the simulation model. The effects of changes in interest rates on the value of mortgage servicing rights are excluded from Table 37 due to the extreme volatility over such a large rate range. The effects of interest rate changes on the value of mortgage servicing rights and securities identified as economic hedges are presented in Note 5 to the Consolidated Financial Statements.
The simulations used to manage market risk are based on numerous assumptions regarding the effects of changes in interest rates on the timing and extent of re-pricing 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, market conditions and management strategies, among other factors.
Table 36 – Interest Rate Sensitivity
(Dollars in thousands)
| |
|
200 bp Increase
|
|
|
50 bp Decrease
|
|
| |
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Anticipated impact over the next twelve months on net interest revenue
|
|
$ |
(426 |
) |
|
$ |
(12,706 |
) |
|
$ |
(10,292 |
) |
|
$ |
(24,197 |
) |
| |
|
|
(0.06 |
)% |
|
|
(1.7 |
)% |
|
|
(1.4 |
)% |
|
|
(3.3 |
)% |
Trading Activities
BOK Financial enters into trading 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 bonds and financial futures for its own account. 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.
Management 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 using a variance / covariance matrix of interest rate changes. 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 VAR to $7.4 million. At March 31, 2011, the VAR was $2.6 million. The greatest value at risk during the first quarter of 2011 was $3.1 million.
Controls and Procedures
As required by Rule 13a-15(b), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by their report, of the effectiveness of the company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), BOK Financial’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the company’s internal controls over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the company’s internal controls over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.
Forward-Looking Statements
This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about BOK Financial, the financial services industry and the economy in general. Words such as “anticipates,” “believes,” ”estimates,” “expects,” “forecasts,” “plans,” “projects,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the provision and reserve for loan losses involve judgments as to expected 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 that BOK Financial has not independently verified. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to: (1) the ability to fully realize expected cost savings from mergers 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.
|
Consolidated Statements of Earnings (Unaudited)
|
|
|
|
|
|
|
|
(In thousands except share and per share data)
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
Three Months Ended
|
|
| |
|
March 31,
|
|
|
Interest revenue
|
|
2011
|
|
|
2010
|
|
|
Loans
|
|
$ |
123,740 |
|
|
$ |
131,944 |
|
|
Residential mortgage loans held for sale
|
|
|
1,339 |
|
|
|
1,747 |
|
|
Taxable securities
|
|
|
74,589 |
|
|
|
82,612 |
|
|
Tax-exempt securities
|
|
|
2,003 |
|
|
|
2,449 |
|
|
Total securities
|
|
|
76,592 |
|
|
|
85,061 |
|
|
Trading securities
|
|
|
414 |
|
|
|
610 |
|
|
Funds sold and resell agreements
|
|
|
4 |
|
|
|
8 |
|
|
Total interest revenue
|
|
|
202,089 |
|
|
|
219,370 |
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
24,042 |
|
|
|
27,617 |
|
|
Borrowed funds
|
|
|
1,831 |
|
|
|
3,613 |
|
|
Subordinated debentures
|
|
|
5,577 |
|
|
|
5,566 |
|
|
Total interest expense
|
|
|
31,450 |
|
|
|
36,796 |
|
|
Net interest revenue
|
|
|
170,639 |
|
|
|
182,574 |
|
|
Provision for credit losses
|
|
|
6,250 |
|
|
|
42,100 |
|
|
Net interest revenue after provision for credit losses
|
|
|
164,389 |
|
|
|
140,474 |
|
|
Other operating revenue
|
|
|
|
|
|
|
|
|
|
Brokerage and trading revenue
|
|
|
25,376 |
|
|
|
21,035 |
|
|
Transaction card revenue
|
|
|
28,445 |
|
|
|
25,687 |
|
|
Trust fees and commissions
|
|
|
18,422 |
|
|
|
16,320 |
|
|
Deposit service charges and fees
|
|
|
22,480 |
|
|
|
26,792 |
|
|
Mortgage banking revenue
|
|
|
17,356 |
|
|
|
14,871 |
|
|
Bank-owned life insurance
|
|
|
2,863 |
|
|
|
2,972 |
|
|
Other revenue
|
|
|
8,332 |
|
|
|
7,638 |
|
|
Total fees and commissions
|
|
|
123,274 |
|
|
|
115,315 |
|
|
Loss on other assets, net
|
|
|
(68 |
) |
|
|
(1,390 |
) |
|
Loss on derivatives, net
|
|
|
(2,413 |
) |
|
|
(341 |
) |
|
Gain on securities, net
|
|
|
1,384 |
|
|
|
4,524 |
|
|
Total other-than-temporary impairment losses
|
|
|
– |
|
|
|
(9,708 |
) |
|
Portion of loss recognized in (reclassified from) other comprehensive income
|
|
|
(4,599 |
) |
|
|
5,483 |
|
|
Net impairment losses recognized in earnings
|
|
|
(4,599 |
) |
|
|
(4,225 |
) |
|
Total other operating revenue
|
|
|
117,578 |
|
|
|
113,883 |
|
|
Other operating expense
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
99,994 |
|
|
|
96,824 |
|
|
Business promotion
|
|
|
4,624 |
|
|
|
3,978 |
|
|
Professional fees and services
|
|
|
7,458 |
|
|
|
6,401 |
|
|
Net occupancy and equipment
|
|
|
15,604 |
|
|
|
15,511 |
|
|
Insurance
|
|
|
6,186 |
|
|
|
6,533 |
|
|
Data processing and communications
|
|
|
22,503 |
|
|
|
20,309 |
|
|
Printing, postage and supplies
|
|
|
3,082 |
|
|
|
3,322 |
|
|
Net losses and operating expenses of repossessed assets
|
|
|
6,015 |
|
|
|
7,220 |
|
|
Amortization of intangible assets
|
|
|
896 |
|
|
|
1,324 |
|
|
Mortgage banking costs
|
|
|
6,471 |
|
|
|
9,267 |
|
|
Change in fair value of mortgage servicing rights
|
|
|
(3,129 |
) |
|
|
(13,932 |
) |
|
Other expense
|
|
|
8,745 |
|
|
|
6,975 |
|
|
Total other operating expense
|
|
|
178,449 |
|
|
|
163,732 |
|
|
Income before taxes
|
|
|
103,518 |
|
|
|
90,625 |
|
|
Federal and state income tax
|
|
|
38,752 |
|
|
|
30,283 |
|
|
Net income before non-controlling interest
|
|
|
64,766 |
|
|
|
60,342 |
|
|
Net income (loss) attributable to non-controlling interest
|
|
|
(8 |
) |
|
|
209 |
|
|
Net income attributable to BOK Financial Corporation
|
|
$ |
64,774 |
|
|
$ |
60,133 |
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.95 |
|
|
$ |
0.88 |
|
|
Diluted
|
|
$ |
0.94 |
|
|
$ |
0.88 |
|
|
Average shares used in computation:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
67,901,722 |
|
|
|
67,592,315 |
|
|
Diluted
|
|
|
68,176,527 |
|
|
|
67,790,049 |
|
|
Dividends declared per share
|
|
$ |
0.25 |
|
|
$ |
0.24 |
|
See accompanying notes to consolidated financial statements.
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
(In thousands except share data)
|
|
|
|
|
|
|
|
|
|
| |
|
March 31,
|
|
|
Dec. 31,
|
|
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2010
|
|
| |
|
(Unaudited)
|
|
|
(Footnote 1)
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$ |
805,928 |
|
|
$ |
1,247,946 |
|
|
$ |
902,575 |
|
|
Funds sold and resell agreements
|
|
|
2,462 |
|
|
|
21,458 |
|
|
|
29,410 |
|
|
Trading securities
|
|
|
80,719 |
|
|
|
55,467 |
|
|
|
115,641 |
|
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
9,707,825 |
|
|
|
9,171,908 |
|
|
|
8,744,641 |
|
|
Available for sale securities pledged to creditors
|
|
|
– |
|
|
|
139,344 |
|
|
|
159,754 |
|
|
Investment (fair value: March 31, 2011 – $355,052; December 31, 2010 – $346,105; March 31, 2010 – $314,888)
|
|
|
343,401 |
|
|
|
339,553 |
|
|
|
309,910 |
|
|
Mortgage trading securities
|
|
|
326,624 |
|
|
|
428,021 |
|
|
|
427,196 |
|
|
Total securities
|
|
|
10,377,850 |
|
|
|
10,078,826 |
|
|
|
9,641,501 |
|
|
Residential mortgage loans held for sale
|
|
|
127,119 |
|
|
|
263,413 |
|
|
|
178,362 |
|
|
Loans
|
|
|
10,589,835 |
|
|
|
10,643,036 |
|
|
|
10,971,224 |
|
|
Less allowance for loan losses
|
|
|
(289,549 |
) |
|
|
(292,971 |
) |
|
|
(299,717 |
) |
|
Loans, net of allowance
|
|
|
10,300,286 |
|
|
|
10,350,065 |
|
|
|
10,671,507 |
|
|
Premises and equipment, net
|
|
|
265,532 |
|
|
|
265,465 |
|
|
|
279,152 |
|
|
Accrued revenue receivable
|
|
|
113,060 |
|
|
|
148,940 |
|
|
|
107,300 |
|
|
Goodwill
|
|
|
335,601 |
|
|
|
335,601 |
|
|
|
335,601 |
|
|
Intangible assets, net
|
|
|
12,906 |
|
|
|
13,803 |
|
|
|
17,315 |
|
|
Mortgage servicing rights
|
|
|
120,345 |
|
|
|
115,723 |
|
|
|
119,066 |
|
|
Real estate and other repossessed assets
|
|
|
131,420 |
|
|
|
141,394 |
|
|
|
121,933 |
|
|
Bankers’ acceptances
|
|
|
1,884 |
|
|
|
1,222 |
|
|
|
2,945 |
|
|
Derivative contracts
|
|
|
245,124 |
|
|
|
270,445 |
|
|
|
325,364 |
|
|
Cash surrender value of bank-owned life insurance
|
|
|
258,322 |
|
|
|
255,442 |
|
|
|
248,927 |
|
|
Receivable on unsettled securities trades
|
|
|
242,828 |
|
|
|
135,059 |
|
|
|
– |
|
|
Other assets
|
|
|
279,637 |
|
|
|
241,334 |
|
|
|
405,377 |
|
|
Total assets
|
|
$ |
23,701,023 |
|
|
$ |
23,941,603 |
|
|
$ |
23,501,976 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
$ |
4,457,187 |
|
|
$ |
4,220,764 |
|
|
$ |
3,599,981 |
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
9,528,864 |
|
|
|
9,255,362 |
|
|
|
8,093,725 |
|
|
Savings
|
|
|
209,264 |
|
|
|
193,767 |
|
|
|
179,554 |
|
|
Time (includes fair value: $0 at March 31, 2011; $27,414 at December 31, 2010; $32,364 at March 31, 2010)
|
|
|
3,677,611 |
|
|
|
3,509,168 |
|
|
|
3,654,256 |
|
|
Total deposits
|
|
|
17,872,926 |
|
|
|
17,179,061 |
|
|
|
15,527,516 |
|
|
Funds purchased
|
|
|
466,749 |
|
|
|
1,025,019 |
|
|
|
1,465,983 |
|
|
Repurchase agreements
|
|
|
1,006,051 |
|
|
|
1,258,761 |
|
|
|
1,172,280 |
|
|
Other borrowings
|
|
|
36,864 |
|
|
|
833,578 |
|
|
|
1,909,934 |
|
|
Subordinated debentures
|
|
|
398,744 |
|
|
|
398,701 |
|
|
|
398,578 |
|
|
Accrued interest, taxes and expense
|
|
|
135,486 |
|
|
|
134,107 |
|
|
|
117,179 |
|
|
Bankers’ acceptances
|
|
|
1,884 |
|
|
|
1,222 |
|
|
|
2,945 |
|
|
Due on unsettled securities trades
|
|
|
843,904 |
|
|
|
160,425 |
|
|
|
103,186 |
|
|
Derivative contracts
|
|
|
156,038 |
|
|
|
215,420 |
|
|
|
311,685 |
|
|
Other liabilities
|
|
|
184,689 |
|
|
|
191,431 |
|
|
|
159,973 |
|
|
Total liabilities
|
|
|
21,103,335 |
|
|
|
21,397,725 |
|
|
|
21,169,259 |
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.00006 par value; 2,500,000,000 shares authorized; shares issued and outstanding: March 31, 2011 – 71,073,780; December 31, 2010 – 70,815,563; March 31, 2010 – 70,593,401)
|
|
|
4 |
|
|
|
4 |
|
|
|
4 |
|
|
Capital surplus
|
|
|
790,852 |
|
|
|
782,805 |
|
|
|
764,863 |
|
|
Retained earnings
|
|
|
1,791,698 |
|
|
|
1,743,880 |
|
|
|
1,607,828 |
|
|
Treasury stock (shares at cost: March 31, 2011 – 2,635,358; December 31, 2010 – 2.607,874; March 31, 2010 – 2,550,483)
|
|
|
(114,734 |
) |
|
|
(112,802 |
) |
|
|
(107,909 |
) |
|
Accumulated other comprehensive income
|
|
|
108,313 |
|
|
|
107,839 |
|
|
|
47,657 |
|
|
Total shareholders’ equity
|
|
|
2,576,133 |
|
|
|
2,521,726 |
|
|
|
2,312,443 |
|
|
Non-controlling interest
|
|
|
21,555 |
|
|
|
22,152 |
|
|
|
20,274 |
|
|
Total equity
|
|
|
2,597,688 |
|
|
|
2,543,878 |
|
|
|
2,332,717 |
|
|
Total liabilities and equity
|
|
$ |
23,701,023 |
|
|
$ |
23,941,603 |
|
|
$ |
23,501,976 |
|
See accompanying notes to consolidated financial statements.
Consolidated Statements of Changes in Equity (Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Common Stock
|
|
|
Other
Comprehensive
|
|
|
Capital
|
|
|
Retained
|
|
|
Treasury Stock
|
|
|
Total
Shareholders’
|
|
|
Non-
Controlling
|
|
|
Total
|
|
| |
|
Shares
|
|
|
Amount
|
|
|
Income(Loss)
|
|
|
Surplus
|
|
|
Earnings
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2009
|
|
|
70,312 |
|
|
$ |
4 |
|
|
$ |
(10,740 |
) |
|
$ |
758,723 |
|
|
$ |
1,563,683 |
|
|
|
2,509 |
|
|
$ |
(105,857 |
) |
|
$ |
2,205,813 |
|
|
$ |
19,561 |
|
|
$ |
2,225,374 |
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from BOKF
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
60,133 |
|
|
|
– |
|
|
|
– |
|
|
|
60,133 |
|
|
|
– |
|
|
|
60,133 |
|
|
Net income attributable to non-controlling interest
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(209 |
) |
|
|
(209 |
) |
|
Other comprehensive income, net of tax
|
|
|
– |
|
|
|
– |
|
|
|
58,397 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
58,397 |
|
|
|
– |
|
|
|
58,397 |
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,530 |
|
|
|
(209 |
) |
|
|
118,321 |
|
|
Exercise of stock options
|
|
|
281 |
|
|
|
– |
|
|
|
– |
|
|
|
3,750 |
|
|
|
– |
|
|
|
41 |
|
|
|
(2,052 |
) |
|
|
1,698 |
|
|
|
– |
|
|
|
1,698 |
|
|
Tax benefit on exercise of stock options
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(83 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(83 |
) |
|
|
– |
|
|
|
(83 |
) |
|
Stock-based compensation
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,473 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,473 |
|
|
|
– |
|
|
|
2,473 |
|
|
Cash dividends on common stock
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(15,988 |
) |
|
|
– |
|
|
|
– |
|
|
|
(15,988 |
) |
|
|
– |
|
|
|
(15,988 |
) |
|
Capital calls, net
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
922 |
|
|
|
922 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2010
|
|
|
70,593 |
|
|
$ |
4 |
|
|
$ |
47,657 |
|
|
$ |
764,863 |
|
|
$ |
1,607,828 |
|
|
|
2,550 |
|
|
$ |
(107,909 |
) |
|
$ |
2,312,443 |
|
|
$ |
20,274 |
|
|
$ |
2,332,717 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2010
|
|
|
70,816 |
|
|
$ |
4 |
|
|
$ |
107,839 |
|
|
$ |
782,805 |
|
|
$ |
1,743,880 |
|
|
|
2,608 |
|
|
$ |
(112,802 |
) |
|
$ |
2,521,726 |
|
|
$ |
22,152 |
|
|
$ |
2,543,878 |
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from BOKF
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
64,774 |
|
|
|
– |
|
|
|
– |
|
|
|
64,774 |
|
|
|
– |
|
|
|
64,774 |
|
|
Net income attributable to non-controlling interest
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
8 |
|
|
|
8 |
|
|
Other comprehensive income, net of tax
|
|
|
– |
|
|
|
– |
|
|
|
474 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
474 |
|
|
|
– |
|
|
|
474 |
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
65,248 |
|
|
|
8 |
|
|
|
65,256 |
|
|
Exercise of stock options
|
|
|
258 |
|
|
|
– |
|
|
|
– |
|
|
|
4,887 |
|
|
|
– |
|
|
|
27 |
|
|
|
(1,932 |
) |
|
|
2,955 |
|
|
|
– |
|
|
|
2,955 |
|
|
Tax benefit on exercise of stock options
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
545 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
545 |
|
|
|
– |
|
|
|
545 |
|
|
Stock-based compensation
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,615 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,615 |
|
|
|
– |
|
|
|
2,615 |
|
|
Cash dividends on common stock
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(16,956 |
) |
|
|
– |
|
|
|
– |
|
|
|
(16,956 |
) |
|
|
– |
|
|
|
(16,956 |
) |
|
Capital distributions, net
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(605 |
) |
|
|
(605 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2011
|
|
|
71,074 |
|
|
$ |
4 |
|
|
$ |
108,313 |
|
|
$ |
790,852 |
|
|
$ |
1,791,698 |
|
|
|
2,635 |
|
|
$ |
(114,734 |
) |
|
$ |
2,576,133 |
|
|
$ |
21,555 |
|
|
$ |
2,597,688 |
|
Se
See accompanying notes to consolidated financial statements.
|
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
| |
|
Three Months Ended
|
|
| |
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
Net income before non-controlling interest
|
|
$ |
64,766 |
|
|
$ |
60,342 |
|
|
Adjustments to reconcile net income before non-controlling interest to net cash
Provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
6,250 |
|
|
|
42,100 |
|
|
Change in fair value of mortgage servicing rights
|
|
|
(3,129 |
) |
|
|
(13,932 |
) |
|
Unrealized (gains) losses from derivatives
|
|
|
7,694 |
|
|
|
(1,160 |
) |
|
Tax expense (benefit) on exercise of stock options
|
|
|
(545 |
) |
|
|
83 |
|
|
Change in bank-owned life insurance
|
|
|
(2,863 |
) |
|
|
(2,972 |
) |
|
Stock-based compensation
|
|
|
2,615 |
|
|
|
2,473 |
|
|
Depreciation and amortization
|
|
|
12,369 |
|
|
|
17,380 |
|
|
Net amortization of securities discounts and premiums
|
|
|
24,098 |
|
|
|
21,539 |
|
|
Net realized (gains) losses on financial instruments and other assets
|
|
|
(9,722 |
) |
|
|
2,545 |
|
|
Mortgage loans originated for resale
|
|
|
(418,754 |
) |
|
|
(338,799 |
) |
|
Proceeds from sale of mortgage loans held for sale
|
|
|
562,576 |
|
|
|
382,487 |
|
|
Capitalized mortgage servicing rights
|
|
|
(4,969 |
) |
|
|
(5,201 |
) |
|
Change in trading securities, including mortgage trading securities
|
|
|
76,145 |
|
|
|
(194,364 |
) |
|
Change in accrued revenue receivable
|
|
|
35,880 |
|
|
|
1,522 |
|
|
Change in other assets
|
|
|
9,391 |
|
|
|
(9,048 |
) |
|
Change in accrued interest, taxes and expense
|
|
|
1,379 |
|
|
|
5,729 |
|
|
Change in other liabilities
|
|
|
(4,838 |
) |
|
|
2,763 |
|
|
Net cash provided by (used in) operating activities
|
|
|
358,343 |
|
|
|
(26,513 |
) |
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities of investment securities
|
|
|
3,610 |
|
|
|
3,303 |
|
|
Proceeds from maturities or redemptions of available for sale securities
|
|
|
738,921 |
|
|
|
537,497 |
|
|
Purchases of investment securities
|
|
|
(7,495 |
) |
|
|
(72,863 |
) |
|
Purchases of available for sale securities
|
|
|
(1,939,500 |
) |
|
|
(1,036,892 |
) |
|
Proceeds from sales of available for sale securities
|
|
|
793,152 |
|
|
|
535,514 |
|
|
Change in amount receivable on unsettled security transactions
|
|
|
(107,769 |
) |
|
|
– |
|
|
Loans originated or acquired net of principal collected
|
|
|
21,873 |
|
|
|
266,058 |
|
|
Purchase of mortgage servicing rights
|
|
|
– |
|
|
|
(8,681 |
) |
|
Net (payments on) proceeds from derivative asset contracts
|
|
|
(65,861 |
) |
|
|
8,136 |
|
|
Proceeds from disposition of assets
|
|
|
15,233 |
|
|
|
8,103 |
|
|
Purchases of other assets
|
|
|
(7,443 |
) |
|
|
(9,170 |
) |
|
Net cash provided by (used in) investing activities
|
|
|
(555,279 |
) |
|
|
231,005 |
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
Net change in demand deposits, transaction deposits and savings accounts
|
|
|
525,422 |
|
|
|
123,025 |
|
|
Net change in time deposits
|
|
|
168,603 |
|
|
|
(113,202 |
) |
|
Net change in other borrowings
|
|
|
(1,607,694 |
) |
|
|
(56,903 |
) |
|
Net (payments on) proceeds from derivative liability contracts
|
|
|
64,182 |
|
|
|
(6,627 |
) |
|
Net change in derivative margin accounts
|
|
|
(84,614 |
) |
|
|
(16,178 |
) |
|
Change in amount due on unsettled security transactions
|
|
|
683,479 |
|
|
|
(109,149 |
) |
|
Issuance of common and treasury stock, net
|
|
|
2,955 |
|
|
|
1,698 |
|
|
Tax benefit on exercise of stock options
|
|
|
545 |
|
|
|
(83 |
) |
|
Dividends paid
|
|
|
(16,956 |
) |
|
|
(16,304 |
) |
|
Net cash used in financing activities
|
|
|
(264,078 |
) |
|
|
(193,723 |
) |
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(461,014 |
) |
|
|
10,769 |
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,269,404 |
|
|
|
921,216 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
808,390 |
|
|
$ |
931,985 |
|
| |
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
26,239 |
|
|
$ |
32,616 |
|
|
Cash paid for taxes
|
|
$ |
9,265 |
|
|
$ |
6,011 |
|
|
Net loans transferred to repossessed real estate and other assets
|
|
$ |
21,010 |
|
|
$ |
7,938 |
|
|
Accrued purchase of mortgage servicing rights
|
|
$ |
– |
|
|
$ |
23,211 |
|
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements (Unaudited)
(1) Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of BOK Financial Corporation (“BOK Financial” or “the Company”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The unaudited consolidated financial statements include accounts of BOK Financial and its subsidiaries, principally BOKF, NA (“the Bank”), BOSC, Inc., Cavanal Hill Investment Management, Inc. and Southwest Trust Company, N.A. Operating divisions of BOKF, NA include Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Oklahoma, Bank of Texas, Colorado State Bank and Trust, Bank of Kansas City and the TransFund electronic funds network.
The financial information should be read in conjunction with BOK Financial’s 2010 Form 10-K filed with the Securities and Exchange Commission, which contains audited financial statements. Amounts presented as of December 31, 2010 have been derived from the audited financial statements included in BOK Financial’s 2010 Form 10-K but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.
Newly Adopted and Pending Accounting Policies
Financial Accounting Standards Board (“FASB”)
FASB Accounting Standards Update No. 2010-06, “Improving Disclosures About Fair Value Measurements” (“ASU 2010-06”)
ASU 2010-06 amended ASC 820 to add new disclosure requirements about transfers into and out of Levels 1 and 2, as defined in ASC 820 and separate disclosures about purchases, sales, issuance and settlements relating to Level 3 measurements, as defined in ASC 820. It also clarified existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 was effective for the Company on January 1, 2010 with exception of the requirement to provide Level 3 activity of purchases, sales, issuances, and settlement on a gross basis, which was effective for the Company on January 1, 2011. ASU 2010-06 did not have a significant impact on the Company’s financial statements.
FASB Accounting Standards Update No. 2010-20 “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASU 2010-20”)
On July 21, 2010, the FASB issued ASU 2010-20 which expanded the disclosure requirements concerning the credit quality of an entity’s financing receivables and its allowance for credit losses. ASU 2010-20 was effective for the Company as of December 31, 2010 as it relates to disclosures required as of the end of the reporting period. Disclosures related to activity during the reporting period were effective for the Company on or after January 1, 2011.
FASB Accounting Standards Update No. 2010-28 “Intangibles – Goodwill and Other (Topic 530): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”)
On December 17, 2010, the FASB issued ASU 2010-28, a consensus of the FASB Emerging Issues Task Force. ASU 2010-28 modified Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The entity is no longer be able to assert that a reporting unit is not required to perform Step 2 because the carrying amount of the reporting unit is zero or negative. The amendment was effective for the Company January 1, 2011 and is not expected to have a significant impact on the consolidated financial statements.
FASB Accounting Standards Update No. 2011-01 “Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructuring in Update No. 2010-20” (“ASU 2011-01”)
On January 20, 2011, the FASB issued ASU 2011-01, which temporarily defers the effective date in ASU 2010-20 for disclosure about troubled debt restructuring by creditors to coincide with the effective date of the proposed guidance clarifying what constitutes a troubled debt restructuring.
FASB Accounting Standards Update No. 2011-02 “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring” (“ASU 2011-01”)
On April 5, 2011, the FASB issued ASU 2011-02 to provide additional guidance or clarification to help creditors in determining whether a credit has granted a concession and whether a debtor is experiencing financial difficulties for the purposes of determining whether a restructuring constitutes a troubled debt restructuring. ASU 2011-02 is effective for the Company on July 1, 2011 and will be applied retrospectively to the beginning of the annual period of adoption. In addition, the disclosures required by ASU 2010-20 temporarily deferred by ASU 2011-01 will be made for the interim period beginning July 1, 2011. ASU 2011-02 is not expected to have a material impact on the Company’s consolidated financial statements.
(2) Securities
Investment Securities
The amortized cost and fair values of investment securities are as follows (in thousands):
| |
|
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
| |
|
|
|
|
|
|
|
Not Recognized in OCI¹
|
|
|
|
|
|
|
|
|
Not Recognized in OCI¹
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
185,272 |
|
|
$ |
189,518 |
|
|
$ |
4,303 |
|
|
$ |
(57 |
) |
|
$ |
236,074 |
|
|
$ |
241,183 |
|
|
$ |
5,368 |
|
|
$ |
(259 |
) |
|
Other debt securities
|
|
|
158,129 |
|
|
|
165,534 |
|
|
|
7,665 |
|
|
|
(260 |
) |
|
|
73,836 |
|
|
|
73,705 |
|
|
|
86 |
|
|
|
(217 |
) |
|
Total
|
|
$ |
343,401 |
|
|
$ |
355,052 |
|
|
$ |
11,968 |
|
|
$ |
(317 |
) |
|
$ |
309,910 |
|
|
$ |
314,888 |
|
|
$ |
5,454 |
|
|
$ |
(476 |
) |
| |
|
December 31, 2010
|
|
| |
|
|
|
|
|
|
|
Not Recognized in OCI¹
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
184,898 |
|
|
$ |
188,577 |
|
|
$ |
3,912 |
|
|
$ |
(233 |
) |
|
Other debt securities
|
|
|
154,655 |
|
|
|
157,528 |
|
|
|
4,505 |
|
|
|
(1,632 |
) |
|
Total
|
|
$ |
339,553 |
|
|
$ |
346,105 |
|
|
$ |
8,417 |
|
|
$ |
(1,865 |
) |
|
¹
|
Other comprehensive income
|
The amortized cost and fair values of investment securities at March 31, 2011, by contractual maturity, are as shown in the following table (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
| |
|
Less than
|
|
|
One to
|
|
|
Six to
|
|
|
Over
|
|
|
|
|
|
Average
|
|
| |
|
One Year
|
|
|
Five Years
|
|
|
Ten Years
|
|
|
Ten Years
|
|
|
Total
|
|
|
Maturity²
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
56,592 |
|
|
$ |
95,914 |
|
|
$ |
26,737 |
|
|
$ |
6,029 |
|
|
$ |
185,272 |
|
|
|
2.69 |
|
|
Fair value
|
|
|
56,872 |
|
|
|
99,038 |
|
|
|
27,507 |
|
|
|
6,101 |
|
|
|
189,518 |
|
|
|
|
|
|
Nominal yield¹
|
|
|
4.64 |
|
|
|
4.57 |
|
|
|
5.51 |
|
|
|
6.24 |
|
|
|
4.78 |
|
|
|
|
|
|
Other debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
5,599 |
|
|
$ |
25,673 |
|
|
$ |
22,534 |
|
|
$ |
104,323 |
|
|
$ |
158,129 |
|
|
|
11.07 |
|
|
Fair value
|
|
|
5,625 |
|
|
|
25,938 |
|
|
|
22,832 |
|
|
|
111,139 |
|
|
|
165,534 |
|
|
|
|
|
|
Nominal yield
|
|
|
5.62 |
|
|
|
5.31 |
|
|
|
5.69 |
|
|
|
6.30 |
|
|
|
6.03 |
|
|
|
|
|
|
Total fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
62,191 |
|
|
$ |
121,587 |
|
|
$ |
49,271 |
|
|
$ |
110,352 |
|
|
$ |
343,401 |
|
|
|
6.55 |
|
|
Fair value
|
|
|
62,497 |
|
|
|
124,976 |
|
|
|
50,339 |
|
|
|
117,240 |
|
|
|
355,052 |
|
|
|
|
|
|
Nominal yield
|
|
|
4.73 |
|
|
|
4.73 |
|
|
|
5.59 |
|
|
|
6.29 |
|
|
|
5.36 |
|
|
|
|
|
|
Total investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
343,401 |
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355,052 |
|
|
|
|
|
|
Nominal yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.36 |
|
|
|
|
|
|
¹
|
Calculated on a taxable equivalent basis using a 39% effective tax rate.
|
|
²
|
Expected maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without penalty.
|
Available for Sale Securities
The amortized cost and fair value of available for sale securities are as follows (in thousands):
| |
|
March 31, 2011
|
|
| |
|
|
|
|
|
|
|
Recognized in OCI¹
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
|
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
|
OTTI²
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
69,039 |
|
|
$ |
69,859 |
|
|
$ |
1,401 |
|
|
$ |
(225 |
) |
|
$ |
(356 |
) |
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
5,351,388 |
|
|
|
5,470,100 |
|
|
|
128,500 |
|
|
|
(9,788 |
) |
|
|
– |
|
|
FHLMC
|
|
|
2,533,322 |
|
|
|
2,603,754 |
|
|
|
77,362 |
|
|
|
(6,930 |
) |
|
|
– |
|
|
GNMA
|
|
|
728,643 |
|
|
|
760,432 |
|
|
|
31,882 |
|
|
|
(93 |
) |
|
|
– |
|
|
Other
|
|
|
85,298 |
|
|
|
91,304 |
|
|
|
6,006 |
|
|
|
– |
|
|
|
– |
|
|
Total U.S. agencies
|
|
|
8,698,651 |
|
|
|
8,925,590 |
|
|
|
243,750 |
|
|
|
(16,811 |
) |
|
|
– |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
208,550 |
|
|
|
181,979 |
|
|
|
58 |
|
|
|
(188 |
) |
|
|
(26,441 |
) |
|
Jumbo-A loans
|
|
|
421,315 |
|
|
|
391,306 |
|
|
|
1,033 |
|
|
|
(9,562 |
) |
|
|
(21,480 |
) |
|
Total private issue
|
|
|
629,865 |
|
|
|
573,285 |
|
|
|
1,091 |
|
|
|
(9,750 |
) |
|
|
(47,921 |
) |
|
Total residential mortgage-backed securities
|
|
|
9,328,516 |
|
|
|
9,498,875 |
|
|
|
244,841 |
|
|
|
(26,561 |
) |
|
|
(47,921 |
) |
|
Other debt securities
|
|
|
5,900 |
|
|
|
5,899 |
|
|
|
– |
|
|
|
(1 |
) |
|
|
– |
|
|
Federal Reserve Bank stock
|
|
|
33,423 |
|
|
|
33,423 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
8,501 |
|
|
|
8,501 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
19,511 |
|
|
|
22,574 |
|
|
|
3,063 |
|
|
|
– |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
41,595 |
|
|
|
68,694 |
|
|
|
27,105 |
|
|
|
(6 |
) |
|
|
– |
|
|
Total
|
|
$ |
9,506,485 |
|
|
$ |
9,707,825 |
|
|
$ |
276,410 |
|
|
$ |
(26,793 |
) |
|
$ |
(48,277 |
) |
|
¹
|
Other comprehensive income
|
|
²
|
Amounts represent the temporary impairment currently recognized in OCI of securities identified as other-than-temporarily impaired.
|
| |
|
December 31, 2010
|
|
| |
|
|
|
|
|
|
|
Recognized in OCI¹
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
|
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
|
OTTI²
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
72,190 |
|
|
$ |
72,942 |
|
|
$ |
1,172 |
|
|
$ |
(315 |
) |
|
$ |
(105 |
) |
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
4,791,438 |
|
|
|
4,925,693 |
|
|
|
147,024 |
|
|
|
(12,769 |
) |
|
|
– |
|
|
FHLMC
|
|
|
2,545,208 |
|
|
|
2,620,066 |
|
|
|
83,341 |
|
|
|
(8,483 |
) |
|
|
– |
|
|
GNMA
|
|
|
765,046 |
|
|
|
801,993 |
|
|
|
37,193 |
|
|
|
(246 |
) |
|
|
– |
|
|
Other
|
|
|
92,013 |
|
|
|
99,157 |
|
|
|
7,144 |
|
|
|
– |
|
|
|
– |
|
|
Total U.S. agencies
|
|
|
8,193,705 |
|
|
|
8,446,909 |
|
|
|
274,702 |
|
|
|
(21,498 |
) |
|
|
– |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
220,332 |
|
|
|
186,674 |
|
|
|
– |
|
|
|
(353 |
) |
|
|
(33,305 |
) |
|
Jumbo-A loans
|
|
|
494,098 |
|
|
|
457,535 |
|
|
|
923 |
|
|
|
(14,067 |
) |
|
|
(23,419 |
) |
|
Total private issue
|
|
|
714,430 |
|
|
|
644,209 |
|
|
|
923 |
|
|
|
(14,420 |
) |
|
|
(56,724 |
) |
|
Total residential mortgage-backed securities
|
|
|
8,908,135 |
|
|
|
9,091,118 |
|
|
|
275,625 |
|
|
|
(35,918 |
) |
|
|
(56,724 |
) |
|
Other debt securities
|
|
|
6,401 |
|
|
|
6,401 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Federal Reserve Bank stock
|
|
|
33,424 |
|
|
|
33,424 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
42,207 |
|
|
|
42,207 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
19,511 |
|
|
|
22,114 |
|
|
|
2,603 |
|
|
|
– |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
29,181 |
|
|
|
43,046 |
|
|
|
14,192 |
|
|
|
(327 |
) |
|
|
– |
|
|
Total
|
|
$ |
9,111,049 |
|
|
$ |
9,311,252 |
|
|
$ |
293,592 |
|
|
$ |
(36,560 |
) |
|
$ |
(56,829 |
) |
|
¹
|
Other comprehensive income
|
|
²
|
Amounts represent the temporary impairment currently recognized in OCI of securities identified as other-than-temporarily impaired.
|
| |
|
March 31, 2010
|
|
| |
|
|
|
|
|
|
|
Recognized in OCI¹
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Gross Unrealized
|
|
|
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Gain
|
|
|
Loss
|
|
|
OTTI²
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
63,382 |
|
|
$ |
63,325 |
|
|
$ |
1,133 |
|
|
$ |
(1,190 |
) |
|
$ |
– |
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
3,759,339 |
|
|
|
3,881,851 |
|
|
|
126,916 |
|
|
|
(4,404 |
) |
|
|
– |
|
|
FHLMC
|
|
|
2,473,058 |
|
|
|
2,554,766 |
|
|
|
81,708 |
|
|
|
– |
|
|
|
– |
|
|
GNMA
|
|
|
1,199,783 |
|
|
|
1,220,895 |
|
|
|
24,102 |
|
|
|
(2,990 |
) |
|
|
– |
|
|
Other
|
|
|
193,480 |
|
|
|
197,759 |
|
|
|
6,417 |
|
|
|
(2,138 |
) |
|
|
– |
|
|
Total U.S. agencies
|
|
|
7,625,660 |
|
|
|
7,855,271 |
|
|
|
239,143 |
|
|
|
(9,532 |
) |
|
|
– |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
247,525 |
|
|
|
185,999 |
|
|
|
– |
|
|
|
(1,917 |
) |
|
|
(59,609 |
) |
|
Jumbo-A loans
|
|
|
662,219 |
|
|
|
580,106 |
|
|
|
172 |
|
|
|
(55,846 |
) |
|
|
(26,439 |
) |
|
Total private issue
|
|
|
909,744 |
|
|
|
766,105 |
|
|
|
172 |
|
|
|
(57,763 |
) |
|
|
(86,048 |
) |
|
Total residential mortgage-backed securities
|
|
|
8,535,404 |
|
|
|
8,621,376 |
|
|
|
239,315 |
|
|
|
(67,295 |
) |
|
|
(86,048 |
) |
|
Other debt securities
|
|
|
17,222 |
|
|
|
17,179 |
|
|
|
– |
|
|
|
(43 |
) |
|
|
– |
|
|
Federal Reserve Bank stock
|
|
|
32,526 |
|
|
|
32,526 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
92,727 |
|
|
|
92,727 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
19,224 |
|
|
|
22,774 |
|
|
|
3,550 |
|
|
|
– |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
36,156 |
|
|
|
54,488 |
|
|
|
18,856 |
|
|
|
(524 |
) |
|
|
– |
|
|
Total
|
|
$ |
8,796,641 |
|
|
$ |
8,904,395 |
|
|
$ |
262,854 |
|
|
$ |
(69,052 |
) |
|
$ |
(86,048 |
) |
|
¹
|
Other comprehensive income
|
|
²
|
Amounts represent the temporary impairment currently recognized in OCI of securities identified as other-than-temporarily impaired.
|
The amortized cost and fair values of available for sale securities at March 31, 2011, by contractual maturity, are as shown in the following table (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
| |
|
Less than
|
|
|
One to
|
|
|
Six to
|
|
|
Over
|
|
|
|
|
|
Average
|
|
| |
|
One Year
|
|
|
Five Years
|
|
|
Ten Years
|
|
|
Ten Years6
|
|
|
Total
|
|
|
Maturity5
|
|
|
Municipal and other tax-exempt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
901 |
|
|
$ |
7,392 |
|
|
$ |
12,516 |
|
|
$ |
48,230 |
|
|
$ |
69,039 |
|
|
|
19.77 |
|
|
Fair value
|
|
|
914 |
|
|
|
7,933 |
|
|
|
13,303 |
|
|
|
47,709 |
|
|
|
69,859 |
|
|
|
|
|
|
Nominal yield¹
|
|
|
3.55 |
|
|
|
4.10 |
|
|
|
4.04 |
|
|
|
1.02 |
|
|
|
1.93 |
|
|
|
|
|
|
Other debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
5,900 |
|
|
$ |
5,900 |
|
|
|
32.70 |
|
|
Fair value
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,899 |
|
|
|
5,899 |
|
|
|
|
|
|
Nominal yield¹
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1.87 |
|
|
|
1.87 |
|
|
|
|
|
|
Total fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$ |
901 |
|
|
$ |
7,392 |
|
|
$ |
12,516 |
|
|
$ |
54,130 |
|
|
$ |
74,939 |
|
|
|
20.78 |
|
|
Fair value
|
|
|
914 |
|
|
|
7,933 |
|
|
|
13,303 |
|
|
|
53,608 |
|
|
|
75,758 |
|
|
|
|
|
|
Nominal yield
|
|
|
3.55 |
|
|
|
4.10 |
|
|
|
4.04 |
|
|
|
1.11 |
|
|
|
1.93 |
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,328,516 |
|
|
|
² |
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,498,875 |
|
|
|
|
|
|
Nominal yield4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.94 |
|
|
|
|
|
|
Equity securities and mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
103,030 |
|
|
|
³ |
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133,192 |
|
|
|
|
|
|
Nominal yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.46 |
|
|
|
|
|
|
Total available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,506,485 |
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,707,825 |
|
|
|
|
|
|
Nominal yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.91 |
|
|
|
|
|
|
¹
|
Calculated on a taxable equivalent basis using a 39% effective tax rate.
|
|
²
|
The average expected lives of mortgage-backed securities were 2.92 years based upon current prepayment assumptions.
|
|
³
|
Primarily restricted common stock of U.S. government agencies and preferred stock of corporate issuers 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.
|
|
6
|
Nominal yield on municipal and other tax-exempt securities and other debt securities with contractual maturity dates over ten years are based on variable rates which generally are reset with 35 days.
|
Sales of available for sale securities resulted in gains and losses as follows (in thousands):
| |
|
Three Months Ended
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Proceeds
|
|
$ |
639,684 |
|
|
$ |
320,148 |
|
|
Gross realized gains
|
|
|
10,967 |
|
|
|
5,357 |
|
|
Gross realized losses
|
|
|
4,155 |
|
|
|
– |
|
|
Related federal and state income tax expense
|
|
|
2,550 |
|
|
|
1,789 |
|
Gains and losses on sales of available for sale securities are realized on settlement date.
In addition to securities that have been reclassified as pledged to creditors, securities with an amortized cost of $3.9 billion at March 31, 2011, $5.3 billion at December 31, 2010 and $4.7 billion at March 31, 2010 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 re-pledge these securities.
Temporarily Impaired Securities as of March 31, 2011
(In thousands)
| |
|
Number
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
| |
|
of
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
| |
|
Securities
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax- exempt
|
|
|
14 |
|
|
$ |
3,931 |
|
|
$ |
45 |
|
|
$ |
1,559 |
|
|
$ |
12 |
|
|
$ |
5,490 |
|
|
$ |
57 |
|
|
Other
|
|
|
15 |
|
|
|
34,384 |
|
|
|
260 |
|
|
|
– |
|
|
|
– |
|
|
|
34,384 |
|
|
|
260 |
|
|
Total investment
|
|
|
29 |
|
|
|
38,315 |
|
|
|
305 |
|
|
|
1,559 |
|
|
|
12 |
|
|
|
39,874 |
|
|
|
317 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
49 |
|
|
|
13,508 |
|
|
|
121 |
|
|
|
30,516 |
|
|
|
460 |
|
|
|
44,024 |
|
|
|
581 |
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
25 |
|
|
|
1,518,826 |
|
|
|
9,788 |
|
|
|
– |
|
|
|
– |
|
|
|
1,518,826 |
|
|
|
9,788 |
|
|
FHLMC
|
|
|
17 |
|
|
|
621,004 |
|
|
|
6,930 |
|
|
|
– |
|
|
|
– |
|
|
|
621,004 |
|
|
|
6,930 |
|
|
GNMA
|
|
|
3 |
|
|
|
6,747 |
|
|
|
93 |
|
|
|
– |
|
|
|
– |
|
|
|
6,747 |
|
|
|
93 |
|
|
Total U.S. agencies
|
|
|
45 |
|
|
|
2,146,577 |
|
|
|
16,811 |
|
|
|
– |
|
|
|
– |
|
|
|
2,146,577 |
|
|
|
16,811 |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
21 |
|
|
|
– |
|
|
|
– |
|
|
|
175,166 |
|
|
|
26,629 |
|
|
|
175,166 |
|
|
|
26,629 |
|
|
Jumbo-A loans
|
|
|
37 |
|
|
|
– |
|
|
|
– |
|
|
|
308,901 |
|
|
|
31,042 |
|
|
|
308,901 |
|
|
|
31,042 |
|
|
Total private issue
|
|
|
58 |
|
|
|
– |
|
|
|
– |
|
|
|
484,067 |
|
|
|
57,671 |
|
|
|
484,067 |
|
|
|
57,671 |
|
|
Total residential mortgage-backed securities
|
|
|
103 |
|
|
|
2,146,577 |
|
|
|
16,811 |
|
|
|
484,067 |
|
|
|
57,671 |
|
|
|
2,630,644 |
|
|
|
74,482 |
|
|
Other debt securities
|
|
|
1 |
|
|
|
499 |
|
|
|
1 |
|
|
|
– |
|
|
|
– |
|
|
|
499 |
|
|
|
1 |
|
|
Equity securities and mutual funds
|
|
|
1 |
|
|
|
304 |
|
|
|
5 |
|
|
|
180 |
|
|
|
1 |
|
|
|
484 |
|
|
|
6 |
|
|
Total available for sale
|
|
|
154 |
|
|
|
2,160,888 |
|
|
|
16,938 |
|
|
|
514,763 |
|
|
|
58,132 |
|
|
|
2,675,651 |
|
|
|
75,070 |
|
|
Total
|
|
|
183 |
|
|
$ |
2,199,203 |
|
|
$ |
17,243 |
|
|
$ |
516,322 |
|
|
$ |
58,144 |
|
|
$ |
2,715,525 |
|
|
$ |
75,387 |
|
Temporarily Impaired Securities as of December 31, 2010
(In thousands)
| |
|
Number
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
| |
|
of
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
| |
|
Securities
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax- exempt
|
|
|
37 |
|
|
$ |
12,482 |
|
|
$ |
211 |
|
|
$ |
786 |
|
|
$ |
22 |
|
|
$ |
13,268 |
|
|
$ |
233 |
|
|
Other
|
|
|
15 |
|
|
|
80,698 |
|
|
|
1,632 |
|
|
|
– |
|
|
|
– |
|
|
|
80,698 |
|
|
|
1,632 |
|
|
Total investment
|
|
|
52 |
|
|
|
93,180 |
|
|
|
1,843 |
|
|
|
786 |
|
|
|
22 |
|
|
|
93,966 |
|
|
|
1,865 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
42 |
|
|
|
22,271 |
|
|
|
171 |
|
|
|
25,235 |
|
|
|
249 |
|
|
|
47,506 |
|
|
|
420 |
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
26 |
|
|
|
1,099,710 |
|
|
|
12,769 |
|
|
|
– |
|
|
|
– |
|
|
|
1,099,710 |
|
|
|
12,769 |
|
|
FHLMC
|
|
|
12 |
|
|
|
491,776 |
|
|
|
8,483 |
|
|
|
– |
|
|
|
– |
|
|
|
491,776 |
|
|
|
8,483 |
|
|
GNMA
|
|
|
3 |
|
|
|
5,681 |
|
|
|
246 |
|
|
|
– |
|
|
|
– |
|
|
|
5,681 |
|
|
|
246 |
|
|
Total U.S. agencies
|
|
|
41 |
|
|
|
1,597,167 |
|
|
|
21,498 |
|
|
|
– |
|
|
|
– |
|
|
|
1,597,167 |
|
|
|
21,498 |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
22 |
|
|
|
– |
|
|
|
– |
|
|
|
186,675 |
|
|
|
33,658 |
|
|
|
186,675 |
|
|
|
33,658 |
|
|
Jumbo-A loans
|
|
|
53 |
|
|
|
– |
|
|
|
– |
|
|
|
417,917 |
|
|
|
37,486 |
|
|
|
417,917 |
|
|
|
37,486 |
|
|
Total private issue
|
|
|
75 |
|
|
|
– |
|
|
|
– |
|
|
|
604,592 |
|
|
|
71,144 |
|
|
|
604,592 |
|
|
|
71,144 |
|
|
Total residential mortgage-backed securities
|
|
|
116 |
|
|
|
1,597,167 |
|
|
|
21,498 |
|
|
|
604,592 |
|
|
|
71,144 |
|
|
|
2,201,759 |
|
|
|
92,642 |
|
|
Equity securities and mutual funds
|
|
|
2 |
|
|
|
– |
|
|
|
– |
|
|
|
2,878 |
|
|
|
327 |
|
|
|
2,878 |
|
|
|
327 |
|
|
Total available for sale
|
|
|
160 |
|
|
|
1,619,438 |
|
|
|
21,669 |
|
|
|
632,705 |
|
|
|
71,720 |
|
|
|
2,252,143 |
|
|
|
93,389 |
|
|
Total
|
|
|
212 |
|
|
$ |
1,712,618 |
|
|
$ |
23,512 |
|
|
$ |
633,491 |
|
|
$ |
71,742 |
|
|
$ |
2,346,109 |
|
|
$ |
95,254 |
|
Temporarily Impaired Securities as of March 31, 2010
(In thousands)
| |
|
Number
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
| |
|
of
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
| |
|
Securities
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax exempt
|
|
|
46 |
|
|
$ |
12,009 |
|
|
$ |
196 |
|
|
$ |
3,673 |
|
|
$ |
63 |
|
|
$ |
15,682 |
|
|
$ |
259 |
|
|
Other debt securities
|
|
|
5 |
|
|
|
31,683 |
|
|
|
217 |
|
|
|
– |
|
|
|
– |
|
|
|
31,683 |
|
|
|
217 |
|
|
Total investment
|
|
|
51 |
|
|
$ |
43,692 |
|
|
$ |
413 |
|
|
$ |
3,673 |
|
|
$ |
63 |
|
|
$ |
47,365 |
|
|
$ |
476 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
33 |
|
|
$ |
40,054 |
|
|
$ |
1,172 |
|
|
$ |
657 |
|
|
$ |
18 |
|
|
$ |
40,711 |
|
|
$ |
1,190 |
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
11 |
|
|
|
276,612 |
|
|
|
4,404 |
|
|
|
– |
|
|
|
– |
|
|
|
276,612 |
|
|
|
4,404 |
|
|
FHLMC
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
GNMA
|
|
|
7 |
|
|
|
175,849 |
|
|
|
2,990 |
|
|
|
– |
|
|
|
– |
|
|
|
175,849 |
|
|
|
2,990 |
|
|
Other
|
|
|
2 |
|
|
|
38,017 |
|
|
|
2,138 |
|
|
|
– |
|
|
|
– |
|
|
|
38,017 |
|
|
|
2,138 |
|
|
Total U.S. agencies
|
|
|
20 |
|
|
|
490,478 |
|
|
|
9,532 |
|
|
|
– |
|
|
|
– |
|
|
|
490,478 |
|
|
|
9,532 |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
21 |
|
|
|
– |
|
|
|
– |
|
|
|
185,999 |
|
|
|
61,526 |
|
|
|
185,999 |
|
|
|
61,526 |
|
|
Jumbo-A loans
|
|
|
63 |
|
|
|
– |
|
|
|
– |
|
|
|
560,004 |
|
|
|
82,285 |
|
|
|
560,004 |
|
|
|
82,285 |
|
|
Total private issue
|
|
|
84 |
|
|
|
– |
|
|
|
– |
|
|
|
746,003 |
|
|
|
143,811 |
|
|
|
746,003 |
|
|
|
143,811 |
|
|
Total residential mortgage-backed securities
|
|
|
104 |
|
|
|
490,478 |
|
|
|
9,532 |
|
|
|
746,003 |
|
|
|
143,811 |
|
|
|
1,236,481 |
|
|
|
153,343 |
|
|
Other debt securities
|
|
|
5 |
|
|
|
8,100 |
|
|
|
43 |
|
|
|
30 |
|
|
|
– |
|
|
|
8,130 |
|
|
|
43 |
|
|
Perpetual preferred stock
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
3 |
|
|
|
2,825 |
|
|
|
524 |
|
|
|
– |
|
|
|
– |
|
|
|
2,825 |
|
|
|
524 |
|
|
Total available for sale
|
|
|
145 |
|
|
|
541,457 |
|
|
|
11,271 |
|
|
|
746,690 |
|
|
|
143,829 |
|
|
|
1,288,147 |
|
|
|
155,100 |
|
|
Total
|
|
|
196 |
|
|
$ |
585,149 |
|
|
$ |
11,684 |
|
|
$ |
750,363 |
|
|
$ |
143,892 |
|
|
$ |
1,335,512 |
|
|
$ |
155,576 |
|
On a quarterly basis, the Company performs separate evaluations of impaired debt and equity securities to determine if the unrealized losses are temporary.
For debt securities, management determines whether it intends to sell or if it is more-likely-than-not that it will be required to sell impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements and securities portfolio management. Based on this evaluation as of March 31, 2011, we do not intend to sell any impaired available for sale securities before fair value recovers to our current amortized cost and it is more-likely-than-not that we will not be required to sell impaired securities before fair value recovers, which may be maturity.
For all impaired debt securities for which there was no intent or expected requirement to sell, the evaluation considers all available evidence to assess whether it is more likely than not that all amounts due would not be collected according to the security’s contractual terms.
Impairment of debt securities rated investment grade by all nationally-recognized rating agencies are considered temporary unless specific contrary information is identified. None of the debt securities rated investment grade were considered to be other-than-temporarily impaired at March 31, 2011.
As of March 31, 2011, the composition of the Company’s securities portfolio by the lowest current credit rating assigned by any of the three nationally-recognized rating agencies is as follows (in thousands):
| |
|
U.S. Govt / GSE 1
|
|
|
AAA - AA
|
|
|
A - BBB
|
|
|
Below Investment Grade
|
|
|
Not Rated
|
|
|
Total
|
|
| |
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
| |
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
63,391 |
|
|
$ |
64,875 |
|
|
$ |
34,894 |
|
|
$ |
35,744 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
86,987 |
|
|
$ |
88,899 |
|
|
$ |
185,272 |
|
|
$ |
189,518 |
|
|
Other debt securities
|
|
|
– |
|
|
|
– |
|
|
|
153,294 |
|
|
|
160,696 |
|
|
|
1,350 |
|
|
|
1,350 |
|
|
|
– |
|
|
|
– |
|
|
|
3,485 |
|
|
|
3,488 |
|
|
|
158,129 |
|
|
|
165,534 |
|
|
Total
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
216,685 |
|
|
$ |
225,571 |
|
|
$ |
36,244 |
|
|
$ |
37,094 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
90,472 |
|
|
$ |
92,387 |
|
|
$ |
343,401 |
|
|
$ |
355,052 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
40,396 |
|
|
$ |
41,508 |
|
|
$ |
12,082 |
|
|
$ |
12,095 |
|
|
$ |
14,584 |
|
|
$ |
14,145 |
|
|
$ |
1,977 |
|
|
$ |
2,111 |
|
|
$ |
69,039 |
|
|
$ |
69,859 |
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
5,351,388 |
|
|
|
5,470,100 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,351,388 |
|
|
|
5,470,100 |
|
|
FHLMC
|
|
|
2,533,322 |
|
|
|
2,603,754 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,533,322 |
|
|
|
2,603,754 |
|
|
GNMA
|
|
|
728,643 |
|
|
|
760,432 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
728,643 |
|
|
|
760,432 |
|
|
Other
|
|
|
85,298 |
|
|
|
91,304 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
85,298 |
|
|
|
91,304 |
|
|
Total U.S. agencies
|
|
|
8,698,651 |
|
|
|
8,925,590 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
8,698,651 |
|
|
|
8,925,590 |
|
|
Private issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A loans
|
|
|
– |
|
|
|
– |
|
|
|
3,965 |
|
|
|
3,833 |
|
|
|
10,310 |
|
|
|
10,254 |
|
|
|
194,275 |
|
|
|
167,892 |
|
|
|
– |
|
|
|
– |
|
|
|
208,550 |
|
|
|
181,979 |
|
|
Jumbo-A loans
|
|
|
– |
|
|
|
– |
|
|
|
34,072 |
|
|
|
34,388 |
|
|
|
83,547 |
|
|
|
77,832 |
|
|
|
303,696 |
|
|
|
279,086 |
|
|
|
– |
|
|
|
– |
|
|
|
421,315 |
|
|
|
391,306 |
|
|
Total private issue
|
|
|
– |
|
|
|
– |
|
|
|
38,037 |
|
|
|
38,221 |
|
|
|
93,857 |
|
|
|
88,086 |
|
|
|
497,971 |
|
|
|
446,978 |
|
|
|
– |
|
|
|
– |
|
|
|
629,865 |
|
|
|
573,285 |
|
|
Total residential mortgage-backed securities
|
|
|
8,698,651 |
|
|
|
8,925,590 |
|
|
|
38,037 |
|
|
|
38,221 |
|
|
|
93,857 |
|
|
|
88,086 |
|
|
|
497,971 |
|
|
|
446,978 |
|
|
|
– |
|
|
|
– |
|
|
|
9,328,516 |
|
|
|
9,498,875 |
|
|
Other debt securities
|
|
|
– |
|
|
|
– |
|
|
|
5,900 |
|
|
|
5,899 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,900 |
|
|
|
5,899 |
|
|
Federal Reserve Bank stock
|
|
|
33,423 |
|
|
|
33,423 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
33,423 |
|
|
|
33,423 |
|
|
Federal Home Loan Bank stock
|
|
|
8,501 |
|
|
|
8,501 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
8,501 |
|
|
|
8,501 |
|
|
Perpetual preferred stock
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
19,511 |
|
|
|
22,574 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
19,511 |
|
|
|
22,574 |
|
|
Equity securities and mutual funds
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
41,595 |
|
|
|
68,694 |
|
|
|
41,595 |
|
|
|
68,694 |
|
|
Total
|
|
$ |
8,740,575 |
|
|
$ |
8,967,514 |
|
|
$ |
84,333 |
|
|
$ |
85,628 |
|
|
$ |
125,450 |
|
|
$ |
122,755 |
|
|
$ |
512,555 |
|
|
$ |
461,123 |
|
|
$ |
43,572 |
|
|
$ |
70,805 |
|
|
$ |
9,506,485 |
|
|
$ |
9,707,825 |
|
|
1
|
U.S. government and government sponsored enterprises are not rated by the nationally-recognized rating agencies as these securities are guaranteed by agencies of the U.S. government or government-sponsored enterprises.
|
At March 31, 2011, approximately $498 million of the portfolio of privately issued residential mortgage-backed securities (based on amortized cost after impairment charges) was rated below investment grade by at least one of the nationally-recognized rating agencies. The aggregate unrealized loss on these securities totaled $51 million. Ratings by the nationally recognized rating agencies are subjective in nature and accordingly ratings can vary significantly amongst the agencies. Limitations generally expressed by the rating agencies include statements that ratings do not predict the specific percentage default likelihood over any given period of time and that ratings do not opine on expected loss severity of an obligation should the issuer default. As such, the impairment of securities rated below investment grade by at least one of the nationally-recognized rating agencies was evaluated to determine if we expect not to recover the entire amortized cost basis of the security. This evaluation was based on projections of estimated cash flows based on individual loans underlying each security using current and anticipated increases in unemployment and default rates, decreases in housing prices and estimated liquidation costs at foreclosure.
The primary assumptions used in this evaluation were:
|
·
|
Unemployment rates – increasing to 9.5% over the next 12 months, dropping to 8% for the following 21 months, and holding at 8% thereafter.
|
|
·
|
Housing price depreciation – starting with current depreciated housing prices based on information derived from the Federal Housing Finance Agency data, decreasing by an additional 4% over the next twelve months and holding at that level thereafter.
|
|
·
|
Estimated Liquidation Costs – held constant at 25% to 30% for Jumbo-A loans and 35% to 38% for Alt-A loans of then-current depreciated housing price at estimated foreclosure date.
|
|
·
|
Discount rates – estimated cash flows were discounted at rates that range from 2.90% to 6.25% based on our current expected yields.
|
We also consider the adjusted loan-to-value ratio and credit enhancement coverage ratio as part of the assessment of the cash flows available to recover the amortized cost of the debt securities. Each factor is considered in the evaluation.
Adjusted loan-to-value ratio is an estimate of the collateral value available to support the realizable value of the security. The Company calculates the adjusted loan-to-value ratio for each security using loan-level data. The adjusted loan-to-value ratio is the original loan-to-value ratio adjusted for market-specific home price depreciation and the credit enhancement on the specific tranche of the security owned by the Company. The home price depreciation is derived from the Federal Housing Finance Agency (“FHFA”). FHFA provides historical information on home price depreciation at both the Metropolitan Statistical Area (“MSA”) and state level. This information is matched to each loan to calculate the home price depreciation. Data is accumulated from the loan level to determine the adjusted loan-to-value ratio for the security as a whole. The Company believes that an adjusted loan-to-value ratio above 85% provides evidence that the collateral value may not provide sufficient cash flows to support our carrying value. The 85% guideline provides for further home price depreciation in future periods beyond our assumptions of current loss trends for residential real estate loans and is consistent with current underwriting standards used by the Company to originate new residential mortgage loans.
A distribution of the amortized cost (after recognition of the other-than-temporary impairment) and fair value by adjusted loan to value ratio is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
Credit Losses Recognized
|
|
| |
|
|
|
|
|
|
|
|
|
|
Three month ended
March 31, 2011
|
|
|
Life-to-date
|
|
|
Adjusted LTV Ratio
|
|
Number of Securities
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Number of
Securities
|
|
|
Amount
|
|
|
Number of Securities
|
|
|
Amount
|
|
|
< 70 %
|
|
|
4 |
|
|
$ |
20,564 |
|
|
$ |
20,263 |
|
|
|
– |
|
|
$ |
– |
|
|
|
– |
|
|
$ |
– |
|
|
70 < 75
|
|
|
3 |
|
|
|
40,639 |
|
|
|
38,152 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
75 < 80
|
|
|
3 |
|
|
|
15,267 |
|
|
|
15,164 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
80 < 85
|
|
|
9 |
|
|
|
137,425 |
|
|
|
125,754 |
|
|
|
5 |
|
|
|
2,100 |
|
|
|
6 |
|
|
|
7,328 |
|
|
>= 85
|
|
|
42 |
|
|
|
284,076 |
|
|
|
247,645 |
|
|
|
25 |
|
|
|
2,499 |
|
|
|
38 |
|
|
|
48,876 |
|
|
Total
|
|
|
61 |
|
|
$ |
497,971 |
|
|
$ |
446,978 |
|
|
|
30 |
|
|
|
4,599 |
|
|
|
44 |
|
|
$ |
56,204 |
|
Credit enhancement coverage ratio is an estimate of credit enhancement available to absorb current projected losses within the pool of loans that support the security. The Company acquires the benefit of credit enhancement by investing in super-senior tranches for many of our residential mortgage-backed securities. Subordinated tranches held by other investors are specifically designed to absorb losses before the super-senior tranches which effectively doubled the typical credit support for these types of bonds. Current projected losses consider depreciation of home prices based on FHFA data, estimated costs and additional losses to liquidate collateral and delinquency status of the individual loans underlying the security. Management believes that a credit enhancement coverage ratio below 1.50 provides evidence that current credit enhancement may not provide sufficient cash flows of the individual loans to support our carrying value at the security level. The credit enhancement coverage ratio guideline of 1.50 times is based on standard underwriting criteria which consider loans with coverage ratios of 1.20 to 1.25 times to be well-secured.
Additional evidence considered by the Company is the current loan-to-value ratio and the FICO score of individual borrowers whose loans are still performing within the collateral pool as forward-looking indicators of possible future losses that could affect our evaluation.
Based upon projected declines in expected cash flows from certain private-label residential mortgage-backed
securities for which the Company had previously recognized other-than-temporary impairment charges in earnings and other comprehensive income, the Company recognized $4.6 million of additional credit loss impairment in earnings during the first quarter of 2011.
Impaired equity securities, including perpetual preferred stocks, are evaluated based on management’s ability and intent to hold the securities until fair value recovers over periods not to exceed three years. The assessment of the ability and intent to hold these securities focuses on liquidity needs, asset / liability management objectives and securities portfolio objectives. Factors considered when assessing recovery include forecasts of general economic conditions and specific performance of the issuer, analyst ratings and credit spreads for preferred stocks which have debt-like characteristics. The Company has evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and based on that evaluation has ability and intent to hold these investments until a recovery fair value. Accordingly, all impairment of equity securities was considered temporary at March 31, 2011.
The following is a tabular roll forward of the amount of credit-related other-than-temporary impairments recognized on available-for-sale debt securities in earnings (in thousands):
| |
|
Three Months
Ended
March 31, 2011
|
|
|
Three Months
Ended
March 31, 2010
|
|
|
Balance of credit-related OTTI recognized on available for sale debt securities at January 1, 2011 and 2010, respectively
|
|
$ |
52,624 |
|
|
$ |
25,142 |
|
|
Additions for credit-related OTTI not previously recognized
|
|
|
– |
|
|
|
998 |
|
|
Additions for increases in credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost
|
|
|
4,599 |
|
|
|
3,227 |
|
|
Balance of credit-related OTTI recognized on available for sale debt securities at March 31, 2011 and 2010, respectively
|
|
$ |
57,223 |
|
|
$ |
29,367 |
|
Mortgage Trading Securities
Mortgage trading securities are residential mortgage-backed securities issued by U.S. government agencies that have been designated as an economic hedge of the mortgage servicing rights and are separately identified on the balance sheet. The Company has elected to carry these securities at fair value with changes in fair value being recognized in earnings as they occur. Mortgage trading securities were carried at their fair value of $327 million at March 31, 2011 with a net unrealized loss of $3.7 million. Mortgage trading securities were carried at their fair value of $428 million at December 31, 2010, with a net unrealized loss of $5.6 million. The Company recognized a net loss of $3.5 million on mortgage trading securities in the first quarter of 2011 and a $448 thousand net gain in the first quarter of 2010.
(3) Derivatives
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2011 (in thousands):
| |
|
Gross Basis
|
|
|
Net Basis²
|
|
| |
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
| |
|
Notional¹
|
|
|
Fair Value
|
|
|
Notional¹
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Customer risk management programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$ |
9,774,337 |
|
|
$ |
124,120 |
|
|
$ |
9,526,697 |
|
|
$ |
124,651 |
|
|
$ |
74,003 |
|
|
$ |
74,534 |
|
|
Energy contracts
|
|
|
2,052,150 |
|
|
|
220,170 |
|
|
|
2,199,841 |
|
|
|
220,021 |
|
|
|
108,841 |
|
|
|
108,692 |
|
|
Agricultural contracts
|
|
|
157,611 |
|
|
|
13,510 |
|
|
|
168,439 |
|
|
|
13,428 |
|
|
|
9,355 |
|
|
|
9,273 |
|
|
Foreign exchange contracts
|
|
|
57,222 |
|
|
|
57,222 |
|
|
|
57,222 |
|
|
|
57,222 |
|
|
|
57,222 |
|
|
|
57,222 |
|
|
CD options
|
|
|
166,409 |
|
|
|
18,464 |
|
|
|
166,409 |
|
|
|
18,464 |
|
|
|
18,464 |
|
|
|
18,464 |
|
|
Total customer derivative before cash collateral
|
|
|
12,207,729 |
|
|
|
433,486 |
|
|
|
12,118,608 |
|
|
|
433,786 |
|
|
|
267,885 |
|
|
|
268,185 |
|
|
Less: cash collateral
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(23,749 |
) |
|
|
(112,148 |
) |
|
Total customer derivatives
|
|
|
12,207,729 |
|
|
|
433,486 |
|
|
|
12,118,608 |
|
|
|
433,786 |
|
|
|
244,136 |
|
|
|
156,037 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk management programs
|
|
|
44,000 |
|
|
|
988 |
|
|
|
144 |
|
|
|
1 |
|
|
|
988 |
|
|
|
1 |
|
|
Total derivative contracts
|
|
$ |
12,251,729 |
|
|
$ |
434,474 |
|
|
$ |
12,118,752 |
|
|
$ |
433,787 |
|
|
$ |
245,124 |
|
|
$ |
156,038 |
|
|
|
¹
|
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.
|
|
|
²
|
Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.
|
When bilateral netting agreements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by counterparty basis.
Derivative contracts may also require the company to provide or receive cash margin as collateral for derivative assets and liabilities. Derivative assets and liabilities are reported net of cash margin when certain conditions are met. As of March 31, 2011, a decrease in credit rating from A1 to below investment grade would increase our obligation to post cash margin on existing contracts by approximately $55 million.
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at December 31, 2010 (in thousands):
| |
|
Gross Basis
|
|
|
Net Basis²
|
|
| |
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
| |
|
Notional¹
|
|
|
Fair Value
|
|
|
Notional¹
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Customer risk management programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$ |
11,664,409 |
|
|
$ |
235,961 |
|
|
$ |
11,524,077 |
|
|
$ |
233,421 |
|
|
$ |
141,279 |
|
|
$ |
138,739 |
|
|
Energy contracts
|
|
|
1,914,519 |
|
|
|
188,655 |
|
|
|
2,103,923 |
|
|
|
191,075 |
|
|
|
76,746 |
|
|
|
79,166 |
|
|
Agricultural contracts
|
|
|
183,250 |
|
|
|
10,616 |
|
|
|
186,709 |
|
|
|
10,534 |
|
|
|
4,226 |
|
|
|
4,144 |
|
|
Foreign exchange contracts
|
|
|
45,014 |
|
|
|
45,014 |
|
|
|
45,014 |
|
|
|
45,014 |
|
|
|
45,014 |
|
|
|
45,014 |
|
|
CD options
|
|
|
160,535 |
|
|
|
16,247 |
|
|
|
160,535 |
|
|
|
16,247 |
|
|
|
16,247 |
|
|
|
16,247 |
|
|
Total customer derivative before cash collateral
|
|
|
13,967,727 |
|
|
|
496,493 |
|
|
|
14,020,258 |
|
|
|
496,291 |
|
|
|
283,512 |
|
|
|
283,310 |
|
|
Less: cash collateral
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(15,017 |
) |
|
|
(68,987 |
) |
|
Total customer derivatives
|
|
|
13,967,727 |
|
|
|
496,493 |
|
|
|
14,020,258 |
|
|
|
496,291 |
|
|
|
268,495 |
|
|
|
214,323 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk management programs
|
|
|
124,000 |
|
|
|
1,950 |
|
|
|
17,977 |
|
|
|
1,097 |
|
|
|
1,950 |
|
|
|
1,097 |
|
|
Total derivative contracts
|
|
$ |
14,091,727 |
|
|
$ |
498,443 |
|
|
$ |
14,038,235 |
|
|
$ |
497,388 |
|
|
$ |
270,445 |
|
|
$ |
215,420 |
|
|
|
¹
|
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.
|
|
|
²
|
Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.
|
The following table summarizes the fair values of derivative contracts recorded as “derivative contracts” assets and liabilities in the balance sheet at March 31, 2010 (in thousands):
| |
|
Gross Basis
|
|
|
Net Basis
|
|
| |
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities2
|
|
| |
|
Notional¹
|
|
|
Fair Value
|
|
|
Notional¹
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Customer risk management programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$ |
5,910,266 |
|
|
$ |
95,319 |
|
|
$ |
5,899,664 |
|
|
$ |
100,348 |
|
|
$ |
95,319 |
|
|
$ |
100,348 |
|
|
Energy contracts
|
|
|
3,161,113 |
|
|
|
451,372 |
|
|
|
3,433,000 |
|
|
|
453,568 |
|
|
|
169,770 |
|
|
|
171,966 |
|
|
Agricultural contracts
|
|
|
34,825 |
|
|
|
5,548 |
|
|
|
35,050 |
|
|
|
5,317 |
|
|
|
5,548 |
|
|
|
5,317 |
|
|
Foreign exchange contracts
|
|
|
59,945 |
|
|
|
59,945 |
|
|
|
59,945 |
|
|
|
59,945 |
|
|
|
59,945 |
|
|
|
59,945 |
|
|
CD options
|
|
|
79,827 |
|
|
|
6,307 |
|
|
|
79,827 |
|
|
|
6,307 |
|
|
|
6,307 |
|
|
|
6,307 |
|
|
Total customer derivative before cash collateral
|
|
|
9,245,976 |
|
|
|
618,491 |
|
|
|
9,507,486 |
|
|
|
625,485 |
|
|
|
336,889 |
|
|
|
343,883 |
|
|
Less: cash collateral
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(12,506 |
) |
|
|
(32,607 |
) |
|
Total customer derivatives
|
|
|
9,245,976 |
|
|
|
618,491 |
|
|
|
9,507,486 |
|
|
|
625,485 |
|
|
|
324,383 |
|
|
|
311,276 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk management programs
|
|
|
35,000 |
|
|
|
981 |
|
|
|
91,357 |
|
|
|
409 |
|
|
|
981 |
|
|
|
409 |
|
|
Total derivative contracts
|
|
$ |
9,280,976 |
|
|
$ |
619,472 |
|
|
$ |
9,598,843 |
|
|
$ |
625,894 |
|
|
$ |
325,364 |
|
|
$ |
311,685 |
|
|
|
¹
|
Notional amounts for commodity contracts are converted into dollar-equivalent amounts based on dollar prices at the inception of the contract.
|
|
|
²
|
Derivative contracts are recorded on a net basis in the balance sheet in recognition of master netting agreements that enable the Company to settle all derivative positions with a given counterparty in total and to offset the net derivative position with the related cash collateral.
|
The following summarizes the pre-tax net gains (losses) on derivative instruments and where they are recorded in the income statement (in thousands):
| |
|
Three Months ended
March 31, 2011
|
|
|
Three Months ended
March 31, 2010
|
|
| |
|
Brokerage
and Trading Revenue
|
|
|
Gain (Loss)
on Derivatives, Net
|
|
|
Brokerage
and Trading
Revenue
|
|
|
Gain (Loss)
on Derivatives,
Net
|
|
|
Customer Risk Management Programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$ |
(2,536 |
) |
|
$ |
– |
|
|
$ |
1,563 |
|
|
$ |
– |
|
|
Energy contracts
|
|
|
3,509 |
|
|
|
– |
|
|
|
1,464 |
|
|
|
– |
|
|
Cattle contracts
|
|
|
80 |
|
|
|
– |
|
|
|
217 |
|
|
|
– |
|
|
Foreign exchange contracts
|
|
|
216 |
|
|
|
– |
|
|
|
174 |
|
|
|
– |
|
|
CD options
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total Customer Derivatives
|
|
|
1,269 |
|
|
|
– |
|
|
|
3,418 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Risk Management Programs
|
|
|
– |
|
|
|
(2,573 |
) |
|
|
– |
|
|
|
(876 |
) |
|
Total Derivative Contracts
|
|
$ |
1,269 |
|
|
$ |
(2,573 |
) |
|
$ |
3,418 |
|
|
$ |
(876 |
) |
Customer Risk Management Programs
BOK Financial offers programs to permit its customers to manage various risks, including fluctuations in energy, cattle and other agricultural products, interest rates and foreign exchange rates, or to take positions in derivative contracts. Derivative contracts are executed between the customers and BOK Financial. Offsetting contracts are executed between BOK Financial and other selected counterparties to minimize its risk of changes in commodity prices, interest rates or foreign exchange rates. The counterparty contracts are identical to customer contracts, except for a fixed pricing spread or fee paid to BOK Financial as profit and compensation for administrative costs and credit risk which is recognized over the life of the contracts and included in other operating revenue – brokerage and trading revenue.
Interest Rate Risk Management Programs
BOK Financial uses interest rate swaps in managing its interest rate sensitivity and as part of its economic hedge of the change in the fair value of mortgage servicing rights. Interest rate swaps are generally used to reduce overall asset sensitivity by converting specific fixed rate liabilities to floating rate based on LIBOR.
For the quarters ended March 31, 2011 and 2010, net interest revenue was increased by $437 thousand and $658 thousand, respectively, from the settlement of amounts receivable or payable on interest rate swaps. As of March 31,
2011, BOK Financial had interest rate swaps with a notional value of $44 million used as part of the economic hedge of the change in the fair value of the mortgage servicing rights.
As discussed in Note 5, certain derivative contracts not designated as hedging instruments related to mortgage loan commitments and forward sales contracts are included in Residential mortgage loans held for sale on the Consolidated Balance Sheets. See Note 5, for additional discussion of notional, fair value and impact on earnings of these contracts.
None of these derivative contracts have been designated as hedging instruments.
(4) 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.
Performing loans may be renewed under then current collateral value, debt service ratio and other underwriting standards. Nonperforming loans may be renewed and will remain on nonaccrual status. Nonperforming loans renewed will be evaluated and may be charged off if 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.
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. 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 collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower’s financial condition or a sustained period of performance.
Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable.
Certain residential mortgage loans originated by the Company are held for sale and are carried at fair value based on sales commitments or market quotes. Changes in fair value are recorded in other operating revenue – mortgage banking revenue.
Significant components of the loan portfolio are as follows (in thousands):
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
| |
|
Fixed
|
|
|
Variable
|
|
|
Non-
|
|
|
|
|
|
Fixed
|
|
|
Variable
|
|
|
Non-
|
|
|
|
|
| |
|
Rate
|
|
|
Rate
|
|
|
accrual
|
|
|
Total
|
|
|
Rate
|
|
|
Rate
|
|
|
accrual
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
2,813,571 |
|
|
$ |
3,177,237 |
|
|
$ |
57,449 |
|
|
$ |
6,048,257 |
|
|
$ |
2,883,905 |
|
|
$ |
3,011,636 |
|
|
$ |
38,455 |
|
|
$ |
5,933,996 |
|
|
Commercial real estate
|
|
|
834,856 |
|
|
|
1,262,622 |
|
|
|
125,504 |
|
|
|
2,222,982 |
|
|
|
829,836 |
|
|
|
1,297,148 |
|
|
|
150,366 |
|
|
|
2,277,350 |
|
|
Residential mortgage
|
|
|
837,556 |
|
|
|
901,941 |
|
|
|
37,824 |
|
|
|
1,777,321 |
|
|
|
851,048 |
|
|
|
939,774 |
|
|
|
37,426 |
|
|
|
1,828,248 |
|
|
Consumer
|
|
|
327,706 |
|
|
|
208,384 |
|
|
|
5,185 |
|
|
|
541,275 |
|
|
|
369,364 |
|
|
|
229,511 |
|
|
|
4,567 |
|
|
|
603,442 |
|
|
Total
|
|
$ |
4,813,689 |
|
|
$ |
5,550,184 |
|
|
$ |
225,962 |
|
|
$ |
10,589,835 |
|
|
$ |
4,934,153 |
|
|
$ |
5,478,069 |
|
|
$ |
230,814 |
|
|
$ |
10,643,036 |
|
|
Accruing loans past due (90 days)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,961 |
|
At March 31, 2011, approximately $4.8 billion or 45% of the total loan portfolio is to businesses and individuals in Oklahoma and $3.0 billion or 29% of our total loan portfolio is to businesses and individuals in Texas. This geographic concentration subjects the loan portfolio to the general economic conditions within this area.
Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are
underwritten individually and represent on-going relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interest in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer’s business. Inherent lending risk is centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.
At March 31, 2011, loans to energy-related businesses within the commercial loan classification totaled $1.8 billion or 17% of total loans. Loans to service-related businesses totaled $1.6 billion or 15% of total loans. Approximately $1.0 billion of loans in the services category consists of loans with individual balances of less than $10 million. Other loan classes include wholesale / retail, $984 million; healthcare, $840 million; manufacturing, $380 million; other commercial and industrial, $285 million and integrated food services, $212 million. Approximately $2.6 billion or 43% of the commercial portfolio are to businesses in Oklahoma and $1.9 billion or 32% of our commercial loan portfolio are to businesses in Texas.
Commercial real estate loans are for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.
Approximately 30% of commercial real estate loans are secured by properties located in Oklahoma, primarily in the Tulsa and Oklahoma City metropolitan areas. An additional 31% of commercial real estate loans are secured by property located in Texas, primarily in the Dallas and Houston areas. The major components of commercial real estate loans are office buildings, $488 million; retail facilities, $420 million; construction and land development, $394 million; other real estate loans, $386 million; multifamily residences, $355 million and industrial, $178 million.
Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. Residential mortgage loans are secured by a first or second-mortgage on the customer’s primary residence. Consumer loans include direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as other unsecured loans. Consumer loans also include indirect automobile loans made through primary dealers. Residential mortgage and consumer loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability. Residential mortgage loans retained in the Company’s portfolio are primarily composed of various mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals and certain professionals. Jumbo loans may be fixed or variable rate and are fully amortizing. Jumbo loans generally conform to government sponsored entity standards, with exception that the loan size exceeds maximums required under these standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38%. Loan-to-value (“LTV”) ratios are tiered from 60% to 100%, depending on the market. Special mortgage programs include fixed and variable fully amortizing loans tailored to the needs of certain healthcare professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.
At March 31, 2011 and December 31, 2010, residential mortgage loans included $22 million, respectively, of loans with repayment terms that have been modified from the original contracts. Restructured residential mortgage loans guaranteed by agencies of the U.S. government in accordance with agency guideline represent $18 million of our residential mortgage loan portfolio at March 31, 2011. Interest continues to accrue on these guaranteed loans based on the modified terms of the loan. At March 31, 2011, $6.8 million was 90 days or more past due and still accruing. If it becomes probable that we will not be able to collect all amounts due according to the modified loan terms, the loan is placed on nonaccrual status and included in nonaccrual loans. Renegotiated loans may be transferred to loans held for sale after a period of satisfactory performance, generally at least nine months.
Credit Commitments
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At March 31, 2011, outstanding commitments totaled $5.1 billion. Because some 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 upon 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. Because 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. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At March 31, 2011, outstanding standby letters of credit totaled $520 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At March 31, 2011, outstanding commercial letters of credit totaled $6 million.
Allowances for Credit Losses
BOK Financial maintains separate allowances for loan losses and for off-balance sheet credit risk related to commitments to extend credit and standby letters of credit. As discussed in greater detail in Note 5, the Company also has separate allowances related to off-balance sheet credit risk related to residential mortgage loans sold with full or partial recourse and for residential mortgage loans sold to government sponsored agencies under standard representation and warranties.
The allowance for loan losses is assessed by management on a quarterly basis and consists of specific amounts attributed to impaired loans that have not been charged down to amounts we expect to recover, general allowances based on migration factors for unimpaired loans and non-specific allowances based on general economic conditions, risk concentration and related factors. Impairment is individually measured for certain impaired loans and collectively measured for all other loans. There have been no material changes in the approach or techniques utilized in developing the allowances for loan losses and off-balance sheet credit losses.
Internally risk graded loans are evaluated individually for impairment. Non-risk graded loans are collectively evaluated for impairment through past-due status and other relevant factors. Substantially all commercial and commercial real estate loans are risk graded. Certain residential mortgage and consumer loans are also risk graded. Certain commercial loans and most residential mortgage and consumer loans are small balance, homogeneous pools of loans that are not risk graded. 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 agreements. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. Specific allowances for impaired loans are measured by an evaluation of estimated future cash flows discounted at the loans’ initial effective interest rate, the fair value of collateral for certain collateral dependent loans, or historical statistics.
General allowances for unimpaired loans are based on migration models. Separate migration models are used to determine general allowances for commercial and commercial real estate loans, residential mortgage loans and consumer loans. All commercial and commercial real estate loans are risk-graded based on an evaluation of the borrowers’ ability to repay. Risk grades are updated quarterly. Migration factors are determined for each risk grade to determine the inherent loss based on historical trends. An eight-quarter aggregate accumulation of net losses is used as a basis for the migration factors. Losses incurred in more recent periods are more heavily weighted by a sum-of-periods-digits formula. The higher of the current loss factors based on migration trends or a minimum migration factor based upon long-term history is assigned to each risk grade. The resulting general allowances may be adjusted upward or downward by management to account for the limitations in migration models which are based entirely on historical data, such as their limited accuracy at the beginning and ending of credit cycles.
The general allowance for residential mortgage loans is based on an eight-quarter average percent of loss. The general allowance for consumer loans is based on an eight-quarter average percent loss with separate migration factors determined by major product line, such as indirect automobile loans and direct consumer loans.
Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or identified by the migration models. These factors include trends in the economy in our primary lending areas, conditions in certain industries where we have a concentration and overall growth in the loan portfolio. Evaluation of nonspecific factors considers the effect of the duration of the business cycle on migration factors and also considers current economic conditions and other factors.
A provision for credit losses is charged against earnings in amounts necessary to maintain adequate allowances for loan and off-balance sheet credit 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 residential mortgage and consumer loans that are past due 180 days are charged off. Recoveries of loans previously charged off are added to the allowance.
Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are on an “as-is” basis and are not adjusted by the Company. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows from proven oil and gas reserves under existing economic and operating conditions. The value of other collateral is generally determined by our special assets staff based on projected liquidation cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined.
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at March 31, 2011 is as follows (in thousands):
| |
|
Collectively Measured
for Impairment
|
|
|
Individually Measured
for Impairment
|
|
|
Total
|
|
| |
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
5,990,958 |
|
|
$ |
109,020 |
|
|
$ |
57,299 |
|
|
$ |
4,686 |
|
|
$ |
6,048,257 |
|
|
$ |
113,706 |
|
|
Commercial real estate
|
|
|
2,097,478 |
|
|
|
90,661 |
|
|
|
125,504 |
|
|
|
3,874 |
|
|
|
2,222,982 |
|
|
|
94,535 |
|
|
Residential mortgage
|
|
|
1,765,249 |
|
|
|
44,540 |
|
|
|
12,072 |
|
|
|
1,109 |
|
|
|
1,777,321 |
|
|
|
45,649 |
|
|
Consumer
|
|
|
538,708 |
|
|
|
10,321 |
|
|
|
2,567 |
|
|
|
89 |
|
|
|
541,275 |
|
|
|
10,410 |
|
|
Total
|
|
|
10,392,393 |
|
|
|
254,542 |
|
|
|
197,442 |
|
|
|
9,758 |
|
|
|
10,589,835 |
|
|
|
264,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonspecific allowance
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
25,249 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,392,393 |
|
|
$ |
254,542 |
|
|
$ |
197,442 |
|
|
$ |
9,758 |
|
|
$ |
10,589,835 |
|
|
$ |
289,549 |
|
The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2010 is as follows (in thousands):
| |
|
Collectively Measured
for Impairment
|
|
|
Individually Measured
for Impairment
|
|
|
Total
|
|
| |
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
5,895,674 |
|
|
$ |
102,565 |
|
|
$ |
38,322 |
|
|
$ |
2,066 |
|
|
$ |
5,933,996 |
|
|
$ |
104,631 |
|
|
Commercial real estate
|
|
|
2,126,984 |
|
|
|
94,502 |
|
|
|
150,366 |
|
|
|
4,207 |
|
|
|
2,277,350 |
|
|
|
98,709 |
|
|
Residential mortgage
|
|
|
1,816,184 |
|
|
|
49,500 |
|
|
|
12,064 |
|
|
|
781 |
|
|
|
1,828,248 |
|
|
|
50,281 |
|
|
Consumer
|
|
|
601,691 |
|
|
|
12,536 |
|
|
|
1,751 |
|
|
|
78 |
|
|
|
603,442 |
|
|
|
12,614 |
|
|
Total
|
|
|
10,440,533 |
|
|
|
259,103 |
|
|
|
202,503 |
|
|
|
7,132 |
|
|
|
10,643,036 |
|
|
|
266,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonspecific allowance
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
26,736 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,440,533 |
|
|
$ |
259,103 |
|
|
$ |
202,503 |
|
|
$ |
7,132 |
|
|
$ |
10,643,036 |
|
|
$ |
292,971 |
|
The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended March 31, 2011 is summarized as follows (in thousands):
| |
|
Commercial
|
|
|
Commercial Real Estate
|
|
|
Residential Mortgage
|
|
|
Consumer
|
|
|
Nonspecific allowance
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loans losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
104,631 |
|
|
$ |
98,709 |
|
|
$ |
50,281 |
|
|
$ |
12,614 |
|
|
$ |
26,736 |
|
|
$ |
292,971 |
|
|
Provision for loan losses
|
|
|
9,856 |
|
|
|
2,376 |
|
|
|
(2,766 |
) |
|
|
(1,083 |
) |
|
|
(1,487 |
) |
|
|
6,896 |
|
|
Loans charged off
|
|
|
(2,352 |
) |
|
|
(6,893 |
) |
|
|
(2,948 |
) |
|
|
(3,039 |
) |
|
|
– |
|
|
|
(15,232 |
) |
|
Recoveries
|
|
|
1,571 |
|
|
|
343 |
|
|
|
1,082 |
|
|
|
1,918 |
|
|
|
– |
|
|
|
4,914 |
|
|
Ending balance
|
|
$ |
113,706 |
|
|
$ |
94,535 |
|
|
$ |
45,649 |
|
|
$ |
10,410 |
|
|
$ |
25,249 |
|
|
$ |
289,549 |
|
|
Allowance for off-balance sheet credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
13,456 |
|
|
$ |
443 |
|
|
$ |
131 |
|
|
$ |
241 |
|
|
$ |
– |
|
|
$ |
14,271 |
|
|
Provision for off-balance sheet credit losses
|
|
|
(1,200 |
) |
|
|
432 |
|
|
|
24 |
|
|
|
98 |
|
|
|
– |
|
|
|
(646 |
) |
|
Ending balance
|
|
$ |
12,256 |
|
|
$ |
875 |
|
|
$ |
155 |
|
|
$ |
339 |
|
|
$ |
– |
|
|
$ |
13,625 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for credit losses
|
|
$ |
8,656 |
|
|
$ |
2,808 |
|
|
$ |
(2,742 |
) |
|
$ |
(985 |
) |
|
$ |
(1,487 |
) |
|
$ |
6,250 |
|
Credit Quality Indicators
The Company utilizes risk grading as a primary credit quality indicator. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on a quarterly evaluation of the borrowers’ ability to repay the loans. Certain commercial loans and most residential mortgage and consumer loans are small, homogeneous pools that are not risk graded.
The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at March 31, 2011 is as follows (in thousands):
| |
|
Internally Risk Graded
|
|
|
Non-Graded
|
|
|
Total
|
|
| |
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
6,029,226 |
|
|
$ |
111,561 |
|
|
$ |
19,031 |
|
|
$ |
2,145 |
|
|
$ |
6,048,257 |
|
|
$ |
113,706 |
|
|
Commercial real estate
|
|
|
2,222,982 |
|
|
|
94,535 |
|
|
|
– |
|
|
|
– |
|
|
|
2,222,982 |
|
|
|
94,535 |
|
|
Residential mortgage
|
|
|
403,264 |
|
|
|
8,611 |
|
|
|
1,374,057 |
|
|
|
37,038 |
|
|
|
1,777,321 |
|
|
|
45,649 |
|
|
Consumer
|
|
|
228,179 |
|
|
|
1,984 |
|
|
|
313,096 |
|
|
|
8,426 |
|
|
|
541,275 |
|
|
|
10,410 |
|
|
Total
|
|
|
8,883,651 |
|
|
|
216,691 |
|
|
|
1,706,184 |
|
|
|
47,609 |
|
|
|
10,589,835 |
|
|
|
264,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonspecific allowance
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
25,249 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
8,883,651 |
|
|
$ |
216,691 |
|
|
$ |
1,706,184 |
|
|
$ |
47,609 |
|
|
$ |
10,589,835 |
|
|
$ |
289,549 |
|
The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at December 31, 2010 is as follows (in thousands):
| |
|
Internally Risk Graded
|
|
|
Non-Graded
|
|
|
Total
|
|
| |
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
|
Recorded Investment
|
|
|
Related
Allowance
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
5,914,178 |
|
|
$ |
102,259 |
|
|
$ |
19,818 |
|
|
$ |
2,372 |
|
|
$ |
5,933,996 |
|
|
$ |
104,631 |
|
|
Commercial real estate
|
|
|
2,277,350 |
|
|
|
98,709 |
|
|
|
– |
|
|
|
– |
|
|
|
2,277,350 |
|
|
|
98,709 |
|
|
Residential mortgage
|
|
|
451,874 |
|
|
|
8,356 |
|
|
|
1,376,374 |
|
|
|
41,925 |
|
|
|
1,828,248 |
|
|
|
50,281 |
|
|
Consumer
|
|
|
246,350 |
|
|
|
1,881 |
|
|
|
357,092 |
|
|
|
10,733 |
|
|
|
603,442 |
|
|
|
12,614 |
|
|
Total
|
|
|
8,889,752 |
|
|
|
211,205 |
|
|
|
1,753,284 |
|
|
|
55,030 |
|
|
|
10,643,036 |
|
|
|
266,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonspecific allowance
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
26,736 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
8,889,752 |
|
|
$ |
211,205 |
|
|
$ |
1,753,284 |
|
|
$ |
55,030 |
|
|
$ |
10,643,036 |
|
|
$ |
292,971 |
|
The risk grading process identified certain criticized loans as potential problem loans. These loans have a well-defined weakness that may jeopardize liquidation of the debt and represent a greater risk due to deterioration in
the financial condition of the borrower. Because the borrowers are still performing in accordance with the original terms of the loan agreements, these loans were not placed in nonaccrual status. Known information does, however, cause concern as to the borrowers’ continued compliance with current repayment terms.
The following table summarizes the Company’s loan portfolio at March 31, 2011 by the risk grade categories (in thousands):
| |
|
Internally Risk Graded
|
|
|
Non-Graded
|
|
|
|
|
| |
|
Performing
|
|
|
Potential Problem
|
|
|
Nonaccrual
|
|
|
Performing
|
|
|
Nonaccrual
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
1,754,327 |
|
|
$ |
4,710 |
|
|
$ |
415 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,759,452 |
|
|
Services
|
|
|
1,535,177 |
|
|
|
35,888 |
|
|
|
15,720 |
|
|
|
– |
|
|
|
– |
|
|
|
1,586,785 |
|
|
Wholesale/retail
|
|
|
902,603 |
|
|
|
51,259 |
|
|
|
30,411 |
|
|
|
– |
|
|
|
– |
|
|
|
984,273 |
|
|
Manufacturing
|
|
|
372,557 |
|
|
|
2,941 |
|
|
|
4,545 |
|
|
|
– |
|
|
|
– |
|
|
|
380,043 |
|
|
Healthcare
|
|
|
834,837 |
|
|
|
3,398 |
|
|
|
2,574 |
|
|
|
– |
|
|
|
– |
|
|
|
840,809 |
|
|
Integrated food services
|
|
|
210,258 |
|
|
|
1,373 |
|
|
|
6 |
|
|
|
– |
|
|
|
– |
|
|
|
211,637 |
|
|
Other commercial and industrial
|
|
|
262,599 |
|
|
|
– |
|
|
|
3,628 |
|
|
|
18,881 |
|
|
|
150 |
|
|
|
285,258 |
|
|
Total commercial
|
|
|
5,872,358 |
|
|
|
99,569 |
|
|
|
57,299 |
|
|
|
18,881 |
|
|
|
150 |
|
|
|
6,048,257 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
285,438 |
|
|
|
18,192 |
|
|
|
90,707 |
|
|
|
– |
|
|
|
– |
|
|
|
394,337 |
|
|
Retail
|
|
|
409,917 |
|
|
|
5,000 |
|
|
|
5,276 |
|
|
|
– |
|
|
|
– |
|
|
|
420,193 |
|
|
Office
|
|
|
450,424 |
|
|
|
23,463 |
|
|
|
14,628 |
|
|
|
– |
|
|
|
– |
|
|
|
488,515 |
|
|
Multifamily
|
|
|
347,637 |
|
|
|
5,703 |
|
|
|
1,900 |
|
|
|
– |
|
|
|
– |
|
|
|
355,240 |
|
|
Industrial
|
|
|
177,516 |
|
|
|
291 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
177,807 |
|
|
Other commercial real estate
|
|
|
364,375 |
|
|
|
9,522 |
|
|
|
12,993 |
|
|
|
– |
|
|
|
– |
|
|
|
386,890 |
|
|
Total commercial real estate
|
|
|
2,035,307 |
|
|
|
62,171 |
|
|
|
125,504 |
|
|
|
– |
|
|
|
– |
|
|
|
2,222,982 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
374,699 |
|
|
|
16,493 |
|
|
|
12,072 |
|
|
|
792,163 |
|
|
|
21,394 |
|
|
|
1,216,821 |
|
|
Home equity
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
556,142 |
|
|
|
4,358 |
|
|
|
560,500 |
|
|
Total residential mortgage
|
|
|
374,699 |
|
|
|
16,493 |
|
|
|
12,072 |
|
|
|
1,348,305 |
|
|
|
25,752 |
|
|
|
1,777,321 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
196,199 |
|
|
|
2,464 |
|
|
|
198,663 |
|
|
Other consumer
|
|
|
221,124 |
|
|
|
4,488 |
|
|
|
2,567 |
|
|
|
114,279 |
|
|
|
154 |
|
|
|
342,612 |
|
|
Total consumer
|
|
|
221,124 |
|
|
|
4,488 |
|
|
|
2,567 |
|
|
|
310,478 |
|
|
|
2,618 |
|
|
|
541,275 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
8,503,488 |
|
|
$ |
182,721 |
|
|
$ |
197,442 |
|
|
$ |
1,677,664 |
|
|
$ |
28,520 |
|
|
$ |
10,589,835 |
|
The following table summarizes the Company’s loan portfolio at December 31, 2010 by the risk grade categories (in thousands):
| |
|
Internally Risk Graded
|
|
|
Non-Graded
|
|
|
|
|
| |
|
Performing
|
|
|
Potential Problem
|
|
|
Nonaccrual
|
|
|
Performing
|
|
|
Nonaccrual
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
1,704,401 |
|
|
$ |
6,543 |
|
|
$ |
465 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,711,409 |
|
|
Services
|
|
|
1,531,239 |
|
|
|
30,420 |
|
|
|
19,262 |
|
|
|
– |
|
|
|
– |
|
|
|
1,580,921 |
|
|
Wholesale/retail
|
|
|
956,397 |
|
|
|
45,363 |
|
|
|
8,486 |
|
|
|
– |
|
|
|
– |
|
|
|
1,010,246 |
|
|
Manufacturing
|
|
|
319,075 |
|
|
|
4,000 |
|
|
|
2,116 |
|
|
|
– |
|
|
|
– |
|
|
|
325,191 |
|
|
Healthcare
|
|
|
801,525 |
|
|
|
4,566 |
|
|
|
3,534 |
|
|
|
– |
|
|
|
– |
|
|
|
809,625 |
|
|
Integrated food services
|
|
|
202,885 |
|
|
|
1,385 |
|
|
|
13 |
|
|
|
– |
|
|
|
– |
|
|
|
204,283 |
|
|
Other commercial and industrial
|
|
|
267,949 |
|
|
|
108 |
|
|
|
4,446 |
|
|
|
19,685 |
|
|
|
133 |
|
|
|
292,321 |
|
|
Total commercial
|
|
|
5,783,471 |
|
|
|
92,385 |
|
|
|
38,322 |
|
|
|
19,685 |
|
|
|
133 |
|
|
|
5,933,996 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
326,769 |
|
|
|
21,516 |
|
|
|
99,579 |
|
|
|
– |
|
|
|
– |
|
|
|
447,864 |
|
|
Retail
|
|
|
395,094 |
|
|
|
5,468 |
|
|
|
4,978 |
|
|
|
– |
|
|
|
– |
|
|
|
405,540 |
|
|
Office
|
|
|
420,899 |
|
|
|
16,897 |
|
|
|
19,654 |
|
|
|
– |
|
|
|
– |
|
|
|
457,450 |
|
|
Multifamily
|
|
|
355,733 |
|
|
|
6,784 |
|
|
|
6,725 |
|
|
|
– |
|
|
|
– |
|
|
|
369,242 |
|
|
Industrial
|
|
|
177,712 |
|
|
|
294 |
|
|
|
4,087 |
|
|
|
– |
|
|
|
– |
|
|
|
182,093 |
|
|
Other commercial real estate
|
|
|
390,969 |
|
|
|
8,849 |
|
|
|
15,343 |
|
|
|
– |
|
|
|
– |
|
|
|
415,161 |
|
|
Total commercial real estate
|
|
|
2,067,176 |
|
|
|
59,808 |
|
|
|
150,366 |
|
|
|
– |
|
|
|
– |
|
|
|
2,277,350 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
420,407 |
|
|
|
19,403 |
|
|
|
12,064 |
|
|
|
803,023 |
|
|
|
20,047 |
|
|
|
1,274,944 |
|
|
Home equity
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
547,989 |
|
|
|
5,315 |
|
|
|
553,304 |
|
|
Total residential mortgage
|
|
|
420,407 |
|
|
|
19,403 |
|
|
|
12,064 |
|
|
|
1,351,012 |
|
|
|
25,362 |
|
|
|
1,828,248 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
237,050 |
|
|
|
2,526 |
|
|
|
239,576 |
|
|
Other consumer
|
|
|
240,243 |
|
|
|
4,356 |
|
|
|
1,751 |
|
|
|
117,226 |
|
|
|
290 |
|
|
|
363,866 |
|
|
Total consumer
|
|
|
240,243 |
|
|
|
4,356 |
|
|
|
1,751 |
|
|
|
354,276 |
|
|
|
2,816 |
|
|
|
603,442 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
8,511,297 |
|
|
$ |
175,952 |
|
|
$ |
202,503 |
|
|
$ |
1,724,973 |
|
|
$ |
28,311 |
|
|
$ |
10,643,036 |
|
Impaired Loans
Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement.
A summary of risk-graded impaired loans follows (in thousands):
| |
|
As of March 31, 2011
|
|
|
For the three months ended March 31, 2011
|
|
| |
|
|
|
|
Recorded Investment
|
|
|
|
|
|
|
|
|
|
|
| |
|
Unpaid
Principal
Balance
|
|
|
Total
|
|
|
With No
Allowance
|
|
|
With Allowance
|
|
|
Related Allowance
|
|
|
Average Recorded Investment
|
|
|
Interest Income Recognized
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
415 |
|
|
$ |
415 |
|
|
$ |
– |
|
|
$ |
415 |
|
|
$ |
60 |
|
|
$ |
440 |
|
|
$ |
– |
|
|
Services
|
|
|
25,195 |
|
|
|
15,720 |
|
|
|
9,062 |
|
|
|
6,658 |
|
|
|
327 |
|
|
|
17,491 |
|
|
|
– |
|
|
Wholesale/retail
|
|
|
37,223 |
|
|
|
30,411 |
|
|
|
1,644 |
|
|
|
28,767 |
|
|
|
3,841 |
|
|
|
19,449 |
|
|
|
– |
|
|
Manufacturing
|
|
|
9,400 |
|
|
|
4,545 |
|
|
|
1,215 |
|
|
|
3,330 |
|
|
|
276 |
|
|
|
3,331 |
|
|
|
– |
|
|
Healthcare
|
|
|
4,018 |
|
|
|
2,574 |
|
|
|
523 |
|
|
|
2,051 |
|
|
|
182 |
|
|
|
3,054 |
|
|
|
– |
|
|
Integrated food services
|
|
|
165 |
|
|
|
6 |
|
|
|
6 |
|
|
|
– |
|
|
|
– |
|
|
|
10 |
|
|
|
– |
|
|
Other commercial and industrial
|
|
|
12,189 |
|
|
|
3,628 |
|
|
|
3,628 |
|
|
|
– |
|
|
|
– |
|
|
|
4,037 |
|
|
|
– |
|
|
Total commercial
|
|
|
88,605 |
|
|
|
57,299 |
|
|
|
16,078 |
|
|
|
41,221 |
|
|
|
4,686 |
|
|
|
47,812 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
129,332 |
|
|
|
90,707 |
|
|
|
37,651 |
|
|
|
53,056 |
|
|
|
2,768 |
|
|
|
95,143 |
|
|
|
– |
|
|
Retail
|
|
|
6,676 |
|
|
|
5,276 |
|
|
|
1,690 |
|
|
|
3,586 |
|
|
|
599 |
|
|
|
5,127 |
|
|
|
– |
|
|
Office
|
|
|
16,861 |
|
|
|
14,628 |
|
|
|
4,968 |
|
|
|
9,660 |
|
|
|
144 |
|
|
|
17,141 |
|
|
|
– |
|
|
Multifamily
|
|
|
3,096 |
|
|
|
1,900 |
|
|
|
1,900 |
|
|
|
– |
|
|
|
– |
|
|
|
4,313 |
|
|
|
– |
|
|
Industrial
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,044 |
|
|
|
– |
|
|
Other real estate loans
|
|
|
14,095 |
|
|
|
12,993 |
|
|
|
369 |
|
|
|
12,624 |
|
|
|
363 |
|
|
|
14,168 |
|
|
|
– |
|
|
Total commercial real estate
|
|
|
170,060 |
|
|
|
125,504 |
|
|
|
46,578 |
|
|
|
78,926 |
|
|
|
3,874 |
|
|
|
137,936 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
14,541 |
|
|
|
12,072 |
|
|
|
3,205 |
|
|
|
8,867 |
|
|
|
1,109 |
|
|
|
12,068 |
|
|
|
– |
|
|
Home equity
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total residential mortgage
|
|
|
14,541 |
|
|
|
12,072 |
|
|
|
3,205 |
|
|
|
8,867 |
|
|
|
1,109 |
|
|
|
12,068 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Other consumer
|
|
|
2,725 |
|
|
|
2,567 |
|
|
|
22 |
|
|
|
2,545 |
|
|
|
89 |
|
|
|
2,159 |
|
|
|
– |
|
|
Total consumer
|
|
|
2,725 |
|
|
|
2,567 |
|
|
|
22 |
|
|
|
2,545 |
|
|
|
89 |
|
|
|
2,159 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
275,931 |
|
|
$ |
197,442 |
|
|
$ |
65,883 |
|
|
$ |
131,559 |
|
|
$ |
9,758 |
|
|
$ |
199,975 |
|
|
$ |
– |
|
Approximately $2.8 million of losses on impaired loans with no related specific allowance at March 31, 2011 were charged off against the allowance for loan losses during the three months ended March 31, 2011.
Generally, no interest income is recognized on impaired loans until all principal balances, including amounts charged-off, have been recovered.
A summary of risk-graded impaired loans at December 31, 2010 follows (in thousands):
| |
|
|
|
|
Recorded Investment
|
|
|
|
|
| |
|
Unpaid
Principal
Balance
|
|
|
Total
|
|
|
With No
Allowance
|
|
|
With Allowance
|
|
|
Related Allowance
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
559 |
|
|
$ |
465 |
|
|
$ |
40 |
|
|
$ |
425 |
|
|
$ |
60 |
|
|
Services
|
|
|
28,579 |
|
|
|
19,262 |
|
|
|
9,977 |
|
|
|
9,285 |
|
|
|
1,227 |
|
|
Wholesale/retail
|
|
|
14,717 |
|
|
|
8,486 |
|
|
|
1,342 |
|
|
|
7,144 |
|
|
|
684 |
|
|
Manufacturing
|
|
|
5,811 |
|
|
|
2,116 |
|
|
|
1,300 |
|
|
|
816 |
|
|
|
– |
|
|
Healthcare
|
|
|
4,701 |
|
|
|
3,534 |
|
|
|
564 |
|
|
|
2,970 |
|
|
|
95 |
|
|
Integrated food services
|
|
|
172 |
|
|
|
13 |
|
|
|
13 |
|
|
|
– |
|
|
|
– |
|
|
Other commercial and industrial
|
|
|
13,007 |
|
|
|
4,446 |
|
|
|
4,446 |
|
|
|
– |
|
|
|
– |
|
|
Total commercial
|
|
|
67,546 |
|
|
|
38,322 |
|
|
|
17,682 |
|
|
|
20,640 |
|
|
|
2,066 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
138,922 |
|
|
|
99,579 |
|
|
|
37,578 |
|
|
|
62,001 |
|
|
|
2,428 |
|
|
Retail
|
|
|
6,111 |
|
|
|
4,978 |
|
|
|
838 |
|
|
|
4,140 |
|
|
|
514 |
|
|
Office
|
|
|
25,702 |
|
|
|
19,654 |
|
|
|
10,221 |
|
|
|
9,433 |
|
|
|
106 |
|
|
Multifamily
|
|
|
24,368 |
|
|
|
6,725 |
|
|
|
6,129 |
|
|
|
596 |
|
|
|
115 |
|
|
Industrial
|
|
|
4,087 |
|
|
|
4,087 |
|
|
|
– |
|
|
|
4,087 |
|
|
|
723 |
|
|
Other real estate loans
|
|
|
17,129 |
|
|
|
15,343 |
|
|
|
1,092 |
|
|
|
14,251 |
|
|
|
321 |
|
|
Total commercial real estate
|
|
|
216,319 |
|
|
|
150,366 |
|
|
|
55,858 |
|
|
|
94,508 |
|
|
|
4,207 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
15,258 |
|
|
|
12,064 |
|
|
|
4,492 |
|
|
|
7,572 |
|
|
|
781 |
|
|
Home equity
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total residential mortgage
|
|
|
15,258 |
|
|
|
12,064 |
|
|
|
4,492 |
|
|
|
7,572 |
|
|
|
781 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Other consumer
|
|
|
1,909 |
|
|
|
1,751 |
|
|
|
96 |
|
|
|
1,655 |
|
|
|
78 |
|
|
Total consumer
|
|
|
1,909 |
|
|
|
1,751 |
|
|
|
96 |
|
|
|
1,655 |
|
|
|
78 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
301,032 |
|
|
$ |
202,503 |
|
|
$ |
78,128 |
|
|
$ |
124,375 |
|
|
$ |
7,132 |
|
Investments in impaired loans were as follows (in thousands):
| |
|
March 31,
2011
|
|
|
Dec. 31,
2010
|
|
|
March 31,
2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
Investment in impaired loans
|
|
$ |
197,442 |
|
|
$ |
202,503 |
|
|
$ |
311,321 |
|
|
Impaired loans with specific allowance for loss
|
|
|
131,559 |
|
|
|
124,375 |
|
|
|
186,168 |
|
|
Specific allowance balance
|
|
|
9,758 |
|
|
|
7,132 |
|
|
|
11,905 |
|
|
Impaired loans with no specific allowance for loss
|
|
|
65,883 |
|
|
|
78,128 |
|
|
|
125,153 |
|
|
Average recorded investment in impaired loans
|
|
|
199,975 |
|
|
|
262,368 |
|
|
|
328,457 |
|
Nonaccrual & Past Due Loans
Past due status for all loan classes is based on the actual number of days since the last payment was due according to the contractual terms of the loans.
A summary of loans currently performing, loans 30 to 89 days past due and accruing, loans 90 days or more past due and accruing and nonaccrual loans as of March 31, 2011 is as follows (in thousands):
| |
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
| |
|
Current
|
|
|
30 to 89
Days
|
|
|
90 Days
or More
|
|
|
Nonaccrual
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
1,758,876 |
|
|
$ |
161 |
|
|
$ |
– |
|
|
$ |
415 |
|
|
$ |
1,759,452 |
|
|
Services
|
|
|
1,563,924 |
|
|
|
5,629 |
|
|
|
1,512 |
|
|
|
15,720 |
|
|
|
1,586,785 |
|
|
Wholesale/retail
|
|
|
950,505 |
|
|
|
2,761 |
|
|
|
596 |
|
|
|
30,411 |
|
|
|
984,273 |
|
|
Manufacturing
|
|
|
375,461 |
|
|
|
37 |
|
|
|
– |
|
|
|
4,545 |
|
|
|
380,043 |
|
|
Healthcare
|
|
|
835,789 |
|
|
|
1,484 |
|
|
|
962 |
|
|
|
2,574 |
|
|
|
840,809 |
|
|
Integrated food services
|
|
|
210,875 |
|
|
|
756 |
|
|
|
– |
|
|
|
6 |
|
|
|
211,637 |
|
|
Other commercial and industrial
|
|
|
275,895 |
|
|
|
5,585 |
|
|
|
– |
|
|
|
3,778 |
|
|
|
285,258 |
|
|
Total commercial
|
|
|
5,971,325 |
|
|
|
16,413 |
|
|
|
3,070 |
|
|
|
57,449 |
|
|
|
6,048,257 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
302,648 |
|
|
|
982 |
|
|
|
– |
|
|
|
90,707 |
|
|
|
394,337 |
|
|
Retail
|
|
|
409,999 |
|
|
|
4,161 |
|
|
|
757 |
|
|
|
5,276 |
|
|
|
420,193 |
|
|
Office
|
|
|
472,891 |
|
|
|
996 |
|
|
|
– |
|
|
|
14,628 |
|
|
|
488,515 |
|
|
Multifamily
|
|
|
348,715 |
|
|
|
1,434 |
|
|
|
3,191 |
|
|
|
1,900 |
|
|
|
355,240 |
|
|
Industrial
|
|
|
177,376 |
|
|
|
431 |
|
|
|
– |
|
|
|
– |
|
|
|
177,807 |
|
|
Other real estate loans
|
|
|
370,100 |
|
|
|
2,905 |
|
|
|
892 |
|
|
|
12,993 |
|
|
|
386,890 |
|
|
Total commercial real estate
|
|
|
2,081,729 |
|
|
|
10,909 |
|
|
|
4,840 |
|
|
|
125,504 |
|
|
|
2,222,982 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
1,129,035 |
|
|
|
12,776 |
|
|
|
41,544 |
1 |
|
|
33,466 |
|
|
|
1,216,821 |
|
|
Home equity
|
|
|
554,896 |
|
|
|
1,246 |
|
|
|
– |
|
|
|
4,358 |
|
|
|
560,500 |
|
|
Total residential mortgage
|
|
|
1,683,931 |
|
|
|
14,022 |
|
|
|
41,544 |
|
|
|
37,824 |
|
|
|
1,777,321 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
188,261 |
|
|
|
7,865 |
|
|
|
73 |
|
|
|
2,464 |
|
|
|
198,663 |
|
|
Other consumer
|
|
|
338,184 |
|
|
|
1,647 |
|
|
|
60 |
|
|
|
2,721 |
|
|
|
342,612 |
|
|
Total consumer
|
|
|
526,445 |
|
|
|
9,512 |
|
|
|
133 |
|
|
|
5,185 |
|
|
|
541,275 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,263,430 |
|
|
$ |
50,856 |
|
|
$ |
49,587 |
|
|
$ |
225,962 |
|
|
$ |
10,589,835 |
|
|
1
|
Includes $40 million of past due residential mortgage loans which we may voluntarily repurchase but do not have the obligation to repurchase from Government National Mortgage Association (“GNMA”) mortgage pools. The Company may repurchase eligible loans for an amount equal to the unpaid principal balance when certain delinquency criteria are met. When the delinquency criteria are met, the Company is deemed to have regained effective control over these loans whether or not the Company intends to exercise its right to repurchase these loans. The unpaid balance is included in Loans in the Consolidated Balance Sheets with an offsetting liability in Other liabilities. Repayment of the loan balances are fully guaranteed by agencies of the U.S. government.
|
A summary of loans currently performing, loans 30 to 89 days past due and accruing, loans 90 days or more past due and accruing and nonaccrual loans as of December 31, 2010 is as follows (in thousands):
| |
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
| |
|
Current
|
|
|
30 to 89
Days
|
|
|
90 Days
or More
|
|
|
Nonaccrual
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$ |
1,707,466 |
|
|
$ |
507 |
|
|
$ |
2,971 |
|
|
$ |
465 |
|
|
$ |
1,711,409 |
|
|
Services
|
|
|
1,558,120 |
|
|
|
3,196 |
|
|
|
343 |
|
|
|
19,262 |
|
|
|
1,580,921 |
|
|
Wholesale/retail
|
|
|
1,001,422 |
|
|
|
315 |
|
|
|
23 |
|
|
|
8,486 |
|
|
|
1,010,246 |
|
|
Manufacturing
|
|
|
321,102 |
|
|
|
168 |
|
|
|
1,805 |
|
|
|
2,116 |
|
|
|
325,191 |
|
|
Healthcare
|
|
|
805,124 |
|
|
|
75 |
|
|
|
892 |
|
|
|
3,534 |
|
|
|
809,625 |
|
|
Integrated food services
|
|
|
204,199 |
|
|
|
71 |
|
|
|
– |
|
|
|
13 |
|
|
|
204,283 |
|
|
Other commercial and industrial
|
|
|
287,357 |
|
|
|
111 |
|
|
|
274 |
|
|
|
4,579 |
|
|
|
292,321 |
|
|
Total commercial
|
|
|
5,884,790 |
|
|
|
4,443 |
|
|
|
6,308 |
|
|
|
38,455 |
|
|
|
5,933,996 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
344,016 |
|
|
|
3,170 |
|
|
|
1,099 |
|
|
|
99,579 |
|
|
|
447,864 |
|
|
Retail
|
|
|
394,445 |
|
|
|
6,117 |
|
|
|
– |
|
|
|
4,978 |
|
|
|
405,540 |
|
|
Office
|
|
|
437,496 |
|
|
|
300 |
|
|
|
– |
|
|
|
19,654 |
|
|
|
457,450 |
|
|
Multifamily
|
|
|
362,517 |
|
|
|
– |
|
|
|
– |
|
|
|
6,725 |
|
|
|
369,242 |
|
|
Industrial
|
|
|
177,660 |
|
|
|
346 |
|
|
|
– |
|
|
|
4,087 |
|
|
|
182,093 |
|
|
Other real estate loans
|
|
|
395,320 |
|
|
|
4,301 |
|
|
|
197 |
|
|
|
15,343 |
|
|
|
415,161 |
|
|
Total commercial real estate
|
|
|
2,111,454 |
|
|
|
14,234 |
|
|
|
1,296 |
|
|
|
150,366 |
|
|
|
2,277,350 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
1,170,693 |
|
|
|
21,719 |
|
|
|
50,421 |
1 |
|
|
32,111 |
|
|
|
1,274,944 |
|
|
Home equity
|
|
|
546,384 |
|
|
|
1,605 |
|
|
|
– |
|
|
|
5,315 |
|
|
|
553,304 |
|
|
Total residential mortgage
|
|
|
1,717,077 |
|
|
|
23,324 |
|
|
|
50,421 |
|
|
|
37,426 |
|
|
|
1,828,248 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect automobile
|
|
|
225,601 |
|
|
|
11,382 |
|
|
|
67 |
|
|
|
2,526 |
|
|
|
239,576 |
|
|
Other consumer
|
|
|
360,603 |
|
|
|
927 |
|
|
|
295 |
|
|
|
2,041 |
|
|
|
363,866 |
|
|
Total consumer
|
|
|
586,204 |
|
|
|
12,309 |
|
|
|
362 |
|
|
|
4,567 |
|
|
|
603,442 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,299,525 |
|
|
$ |
54,310 |
|
|
$ |
58,387 |
|
|
$ |
230,814 |
|
|
$ |
10,643,036 |
|
|
1
|
Permanent residential mortgage loans past due 90 days or more has been revised to include $48 million of loans which we may voluntarily repurchase but do not have the obligation to repurchase from Government National Mortgage Association (“GNMA”) mortgage pools. Previously these loans were reported as current. The Company may repurchase eligible loans for an amount equal to the unpaid principal balance when certain delinquency criteria are met. When the delinquency criteria are met, the Company is deemed to have regained effective control over these loans whether or not the Company intends to exercise its right to repurchase these loans. The unpaid balance is included in Loans in the Consolidated Balance Sheets with an offsetting liability in Other liabilities. Repayment of the loan balances are fully guaranteed by agencies of the U.S. government.
|
(5) Mortgage Banking Activities
The Company generally sells the majority of its conforming fixed-rate residential mortgage loans in the secondary market. Residential mortgage loans originated for sale by the Company are carried at fair value based on sales commitments or market quotes. Changes in the fair value are recorded in other Operating revenue – Mortgage banking revenue and interest earned is recorded Interest revenue – Residential mortgage loans held for sale in the Consolidated Statement of Earnings. Residential 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 managed through forward sales of residential mortgage-backed securities and forward sales contracts. These latter contracts set the price for loans that will be delivered in the next 60 to 90 days. Residential mortgage loan commitments and forward sales contracts are considered derivative contracts that have not been designated as hedging instruments.
The unpaid principal balance of residential mortgage loans held for sale, notional amounts of derivative contracts related to mortgage loan commitments and forward contract sales and their related fair values included in Mortgage loans held for sale on the Consolidated Balance Sheets were (in thousands):
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
March 31, 2010
|
|
| |
|
Unpaid Principal Balance/
Notional
|
|
|
Fair
Value
|
|
|
Unpaid Principal Balance/
Notional
|
|
|
Fair
Value
|
|
|
Unpaid
Principal
Balance/
Notional
|
|
|
Fair
Value
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans held for sale
|
|
$ |
120,939 |
|
|
$ |
124,182 |
|
|
$ |
253,778 |
|
|
$ |
254,669 |
|
|
$ |
176,033 |
|
|
$ |
175,517 |
|
|
Residential mortgage loan commitments
|
|
|
158,946 |
|
|
|
3,495 |
|
|
|
138,870 |
|
|
|
2,251 |
|
|
|
174,950 |
|
|
|
2,466 |
|
|
Forward sales contracts
|
|
|
262,977 |
|
|
|
(558 |
) |
|
|
396,422 |
|
|
|
6,493 |
|
|
|
343,598 |
|
|
|
379 |
|
| |
|
|
|
|
|
$ |
127,119 |
|
|
|
|
|
|
$ |
263,413 |
|
|
|
|
|
|
$ |
178,362 |
|
No residential mortgage loans held for sale were 90 days or more past due as of March 31, 2011, December 31, 2010 or March 31, 2010.
Gain (loss) included in mortgage banking revenue in the Consolidated Statements of Earnings from residential mortgage loans held for sale and changes in the fair value of derivative contracts not designated as hedging instruments related to mortgage loans commitments and forward contract sales were (in thousands):
| |
|
Three months ended
|
|
| |
|
March 31,
2011
|
|
|
March 31,
2010
|
|
| |
|
|
|
|
|
|
|
Residential mortgage loan held for sale
|
|
$ |
13,336 |
|
|
$ |
7,798 |
|
|
Residential mortgage loan commitments
|
|
|
1,244 |
|
|
|
1,971 |
|
|
Forward sales contracts
|
|
|
(7,051 |
) |
|
|
(3,247 |
) |
| |
|
$ |
7,529 |
|
|
$ |
6,522 |
|
BOK Financial transfers financial assets as part of its mortgage banking activities. Transfers are recorded as sales for financial reporting purposes when the criteria for surrender of control are met. BOK Financial retains an obligation under underwriting representations and warranties related to residential mortgage loans transferred and may retain the right to service the assets and may incur a recourse obligation. The Company may also retain a residual interest in excess cash flows generated by the assets. All assets obtained, including cash, servicing rights and residual interests, and all liabilities incurred, including recourse obligations, are initially recognized at fair value, all assets transferred are derecognized and any gain or loss on the sale is recognized in earnings as they occur. A separate allowance is maintained as part of Other liabilities for the Company’s credit risk on loans transferred subject to a recourse obligation. Other liabilities also include an allowance for obligations related to residential mortgage loans transferred under certain underwriting representation and warranties.
Mortgage servicing rights may be purchased or may be recognized when mortgage loans are originated pursuant to an existing plan for sale or, if no such plan exists, when the mortgage loans are sold. Originated mortgage servicing rights are initially recognized at fair value. Purchased servicing rights are initially recognized at purchase price. All mortgage servicing rights are subsequently carried at fair value. Changes in the fair value are recognized in earnings as they occur.
The following represents a summary of mortgage servicing rights (Dollars in thousands):
| |
|
March 31,
2011
|
|
|
December 31,
2010
|
|
|
March 31,
2010
|
|
|
Number of residential mortgage loans serviced
|
|
|
99,810 |
|
|
|
99,900 |
|
|
|
100,250 |
|
|
Outstanding Principal Balance of Residential Mortgage Loans Serviced1
|
|
$ |
12,075,328 |
|
|
$ |
12,059,241 |
|
|
$ |
11,760,761 |
|
|
Weighted Average Interest Rate
|
|
|
5.40 |
% |
|
|
5.66 |
% |
|
|
5.58 |
% |
|
Remaining Term (Months)
|
|
|
294 |
|
|
|
292 |
|
|
|
290 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Outstanding Principal Balance of Residential Mortgage Loans Serviced includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Principal Balance of Mortgage Loans Serviced for Others
|
|
$ |
11,202,626 |
|
|
$ |
11,263,130 |
|
|
$ |
10,977,336 |
|
|
Outstanding Principal Balance of Mortgage Loans Serviced for Affiliates
|
|
|
872,702 |
|
|
|
796,111 |
|
|
|
783,425 |
|
During the first quarter of 2010, the Company purchased the rights to service approximately 34 thousand residential mortgage loans with an outstanding principal balance of $4.2 billion. The loans to be serviced are primarily
concentrated in New Mexico and predominately held by Fannie Mae, Ginnie Mae, and Freddie Mac. The cash purchase price was $32 million. The acquisition date fair value of the mortgage servicing rights was approximately $43.7 million based upon independent valuation analyses which were further supported by assumptions and models the Company regularly uses to value its existing portfolio of servicing rights. The $11.8 million difference between the purchase price and acquisition date fair value was directly attributable to the seller’s distressed financial condition
For the three months ended March 31, 2011 and 2010, mortgage banking revenue included servicing fee income and late charges on loans serviced for others of $9.8 million and $8.3 million, respectively.
Activity in capitalized mortgage servicing rights and related valuation allowance during the three months ending March 31, 2011 is as follows (in thousands):
| |
|
Capitalized Mortgage Servicing Rights
|
|
| |
|
Purchased
|
|
|
Originated
|
|
|
Total
|
|
|
Balance at December 31, 2010
|
|
$ |
37,900 |
|
|
$ |
77,823 |
|
|
$ |
115,723 |
|
|
Additions, net
|
|
|
– |
|
|
|
4,969 |
|
|
|
4,969 |
|
|
Change in fair value due to loan runoff
|
|
|
(1,333 |
) |
|
|
(2,143 |
) |
|
|
(3,476 |
) |
|
Change in fair value due to market changes
|
|
|
1,776 |
|
|
|
1,353 |
|
|
|
3,129 |
|
|
Balance at March 31, 2011
|
|
$ |
38,343 |
|
|
$ |
82,002 |
|
|
$ |
120,345 |
|
Activity in capitalized mortgage servicing rights and related valuation allowance during the three months ending March 31, 2010 is as follows (in thousands):
| |
|
Capitalized Mortgage Servicing Rights
|
|
| |
|
Purchased
|
|
|
Originated
|
|
|
Total
|
|
|
Balance at December 31, 2009
|
|
$ |
7,828 |
|
|
$ |
65,996 |
|
|
$ |
73,824 |
|
|
Additions, net
|
|
|
31,892 |
|
|
|
5,201 |
|
|
|
37,093 |
|
|
Change in fair value due to loan runoff
|
|
|
(1,328 |
) |
|
|
(4,455 |
) |
|
|
(5,783 |
) |
|
Gain on purchase of mortgage servicing rights
|
|
|
11,832 |
|
|
|
– |
|
|
|
11,832 |
|
|
Change in fair value due to market changes
|
|
|
1,695 |
|
|
|
405 |
|
|
|
2,100 |
|
|
Balance at March 31, 2010
|
|
$ |
51,919 |
|
|
$ |
67,147 |
|
|
$ |
119,066 |
|
Changes in the fair value of mortgage servicing rights are included in Other Operating Expense in the Consolidated Statements of Earnings (Unaudited). Changes in fair value due to loan runoff are included in mortgage banking costs. Changes in fair value due to market changes are reported separately. Changes in fair value due to market changes during the period relate to assets held at the reporting date.
There is no active market for trading in mortgage servicing rights after origination. Fair value is determined by discounting the projected net cash flows. Significant assumptions considered significant unobservable inputs used to determine fair value are:
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
March 31, 2010
|
|
|
Discount rate – indexed to a risk-free rate commensurate with the average life of the servicing portfolio plus a market premium
|
|
|
10.36 |
% |
|
|
10.36 |
% |
|
|
10.65 |
% |
|
Prepayment rate – estimated based upon loan interest rate, original term and loan type
|
|
|
6.69% - 39.69 |
% |
|
|
6.53% - 23.03 |
% |
|
|
7.6% - 35.17 |
% |
|
Loan servicing costs – annually per loan based upon loan type
|
|
$ |
55 - $105 |
|
|
$ |
35 - $60 |
|
|
$ |
43 - $58 |
|
|
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life
|
|
|
2.43 |
% |
|
|
2.21 |
% |
|
|
2.32 |
% |
The Company is exposed to interest rate risk as mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage servicing rights, which is partially managed through forward sales of mortgage-backed securities and forward sales contracts. A separate third party model is used to estimate prepayment speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. The prepayment model is updated daily for changes in market conditions and adjusted to better correlate with actual
performance of BOK Financial’s servicing portfolio. At least annually, we request estimates of fair value from outside sources to corroborate the results of the valuation model. There have been no changes in the techniques used to value mortgage servicing rights.
Stratification of the mortgage loan servicing portfolio and outstanding principal of loans serviced by interest rate at March 31, 2011 follows (in thousands):
| |
|
< 4.50%
|
|
|
|
4.50% - 5.49% |
|
|
|
5.50% - 6.49% |
|
|
> 6.49%
|
|
|
Total
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
$ |
10,247 |
|
|
$ |
65,539 |
|
|
$ |
37,424 |
|
|
$ |
7,135 |
|
|
$ |
120,345 |
|
|
Outstanding principal of loans serviced (1)
|
|
$ |
1,031,091 |
|
|
$ |
5,291,874 |
|
|
$ |
3,493,284 |
|
|
$ |
1,386,377 |
|
|
$ |
11,202,626 |
|
|
(1) Excludes outstanding principal of $822 million for loans serviced for affiliates.
|
|
|
The aging status of our mortgage loans serviced for others by investor at March 31, 2011 follows (in thousands):
| |
|
|
|
|
Past Due
|
|
|
|
|
| |
|
Current
|
|
|
30 to 59 Days
|
|
|
60 to 89 Days
|
|
|
90 Days or More
|
|
|
Total
|
|
|
FHLMC
|
|
$ |
5,550,290 |
|
|
$ |
42,784 |
|
|
$ |
13,664 |
|
|
$ |
67,792 |
|
|
$ |
5,674,530 |
|
|
FNMA
|
|
|
1,263,028 |
|
|
|
18,765 |
|
|
|
6,030 |
|
|
|
25,952 |
|
|
|
1,313,775 |
|
|
GNMA
|
|
|
3,510,316 |
|
|
|
96,163 |
|
|
|
21,357 |
|
|
|
128,387 |
|
|
|
3,756,223 |
|
|
Other
|
|
|
430,719 |
|
|
|
8,535 |
|
|
|
2,722 |
|
|
|
16,122 |
|
|
|
458,098 |
|
|
Total
|
|
$ |
10,754,353 |
|
|
$ |
166,247 |
|
|
$ |
43,773 |
|
|
$ |
238,253 |
|
|
$ |
11,202,626 |
|
The interest rate sensitivity of our mortgage servicing rights and securities held as an economic hedge is modeled over a range of +/- 50 basis points. At March 31, 2011, a 50 basis point increase in mortgage interest rates is expected to increase the fair value of our mortgage servicing rights, net of economic hedge by $3.8 million. A 50 basis point decrease in mortgage interest rates is expected to decrease the fair value of our mortgage servicing rights, net of economic hedge by $9.4 million. In our model, changes in the value of our servicing rights due to changes in interest rates assume stable relationships between mortgage rates and prepayment speeds. Changes in market conditions can cause variations from these assumptions. These factors and others may cause changes in the value of our mortgage servicing rights to differ from our expectations.
The Company has off-balance sheet credit for residential mortgage loans sold with full or partial recourse. These loans consist of first lien, fixed rate residential mortgage loans originated under various community development programs and sold to U.S. government agencies. These loans were underwritten to standards approved by the agencies including full documentation and originated under programs available only for owner-occupied properties. However, these loans have a higher risk of delinquency and loss given default than traditional residential mortgage loans. The principal balance of residential mortgage loans sold subject to recourse obligations totaled $284 million at March 31, 2011, $289 million at December 31, 2010 and $324 million at March 31, 2010. The separate allowance for these off-balance sheet commitments was $16 million at March 31, 2011, $17 million at December 31, 2010 and $14 million at March 31, 2010. Approximately 6% of the loans sold with recourse with an outstanding principal balance of $18 million were either delinquent more than 90 days, in bankruptcy or in foreclosure and 5% with an outstanding balance of $13 million were past due 30 to 89 days. The provision for credit losses on loans sold with recourse is included in Mortgage banking costs in the Consolidated Statements of Earnings.
The activity in the allowance for losses on loans sold with recourse included in Other liabilities in the Consolidated Balance Sheets is summarized as follows (in thousands):
| |
|
Three Months ended
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Beginning balance
|
|
$ |
16,667 |
|
|
$ |
13,781 |
|
|
Provision for recourse losses
|
|
|
794 |
|
|
|
1,299 |
|
|
Loans charged off, net
|
|
|
(974 |
) |
|
|
(1,299 |
) |
|
Ending balance
|
|
$ |
16,487 |
|
|
$ |
13,781 |
|
The Company also has off-balance sheet credit risk for residential mortgage loans sold to government sponsored entities due to standard representations and warranties made under contractual agreements. For the three months ended March 31, 2011, we have repurchased 2 loans for approximately $267 thousand and have incurred no losses on these loans as of March 31, 2011. At March 31, 2011, we have unresolved deficiency requests from the agencies on 124 loans with an aggregate outstanding principal balance of $22 million. During 2010, the Company established an allowance of $2.0 million for credit losses related to potential loan repurchases under representation and warranties which is included in Other liabilities on the Consolidated Balance Sheets and in Mortgage banking costs in the Consolidated Statement of Earnings. No amounts have been charged against this allowance as of March 31, 2011.
(6) Employee Benefits
BOK Financial has sponsored a defined benefit Pension Plan for all employees who satisfied certain age and service requirements. Pension Plan benefits were curtailed as of April 1, 2006. The Company recognized periodic pension cost of $778 thousand and $600 thousand for the three months ended March 31, 2011 and 2010, respectively. The Company made no Pension Plan contributions during the three months ended March 31, 2011 and 2010, respectively.
Management has been advised that the maximum allowable contribution for 2011 is $28 million. No minimum contribution is required for 2011.
(7) Commitments and Contingent Liabilities
BOSC, Inc. has been joined as a defendant in a putative class action brought on behalf of unit holders of SemGroup Energy Partners, LP in the United States District Court for the Northern District of Oklahoma. The lawsuit is brought pursuant to Sections 11 and 12(a)(2) of the Securities Act of 1933 against all of the underwriters of issuances of partnership units in the Initial Public Offering in July 2007 and in a Secondary Offering in January 2008. BOSC underwrote $6.25 million of units in the Initial Public Offering. BOSC was not an underwriter in the Secondary Offering. Counsel for BOSC believes BOSC has valid defenses to the claims asserted in the litigation. A settlement in principle, subject to court approval, among the issuer, the underwriters, and all parties to the litigation has been reached at no material loss to the Company.
In 2010, Bank of Oklahoma, National Association, was named as a defendant in three putative class actions alleging that the manner in which the bank posted charges to its consumer deposit accounts breached an implied obligation of good faith and fair dealing and violates the Oklahoma Consumer Protection Act. The actions also allege that the manner in which the bank posted charges to it consumer demand deposit accounts is unconscionable, constitutes conversion and unjustly enriches the bank. Two of the actions are pending in the District Court of Tulsa County. The third action, originally brought in the United State District Court for the Western District of Oklahoma, has been transferred to Multi-District Litigation in the Southern District of Florida. Each of the three actions seeks to establish a class consisting of all consumer customer of the bank. The amount claimed by the plaintiffs has not been determined, but could be material. Management has been advised by counsel that, in its opinion, the Company’s overdraft policies meet all requirement of law and the Bank has substantial defenses to the claims. Based on currently available information, management has established an accrual within a reasonable range of probable losses and anticipates the claims will be resolved without material loss to the Company.
As a member of Visa, BOK Financial is obligated for a proportionate share of certain covered litigation losses incurred by Visa under a retrospective responsibility plan. A contingent liability was recognized for the Company’s share of Visa’s covered litigation liabilities. This contingent liability totaled $774 thousand at March 31, 2011. Visa funded an escrow account to cover litigation claims, including covered litigation losses under the retrospective responsibility plan, with proceeds from its initial public offering in 2008 and from available cash. BOK Financial recognized a $774 thousand receivable for its proportionate share of this escrow account.
BOK Financial currently owns 251,837 Visa Class B shares which are convertible into Visa Class A shares at the later of three years after the date of Visa’s initial public offering or the final settlement of all covered litigation. The current exchange rate is approximately 0.4881 Class A shares for each Class B share. However, the Company’s Class B shares may be diluted in the future if the escrow fund is not adequate to cover future covered litigation costs. Therefore, no value has been currently assigned to the Class B shares and no value may be assigned until the Class B shares are converted into a known number of Class A shares.
At March 31, 2011, Cavanal Hill Funds’ assets included $790 million of U.S. Treasury, $807 million of cash management and $366 million of tax-free money market funds. Assets of these funds consist of highly-rated, short-term obligations of the U.S. Treasury, corporate issuers and U.S. states and municipalities. The net asset value of units in these funds was $1.00 at March 31, 2011. An investment in these funds is not insured by the Federal Deposit Insurance Corporation or guaranteed by BOK Financial or any of its subsidiaries. BOK Financial may, but is not obligated to purchase assets from these funds to maintain the net asset value at $1.00. No assets were purchased from the funds in 2011 or 2010.
Cottonwood Valley Ventures, Inc. (“CVV, Inc.”), an indirectly wholly-owned subsidiary of BOK Financial, is being audited by the Oklahoma Tax Commission (“OTC”) for tax years 2007 through 2009. CVV, Inc. is a qualified venture capital company under the applicable Oklahoma statute. As authorized by statute, CVV, Inc. guarantees transferable Oklahoma state income tax credits by providing direct debt financing to private companies which qualify as statutory business ventures. Due to certain statutory limitation on utilization of such credits, CVV, Inc. must sell the majority of the credits to provide the economic incentives provided for by the statute. In the event the OTC disallows any such credits, CVV, Inc. would be required to indemnify purchasers for the tax credits disallowed. Management does not anticipate that this audit will have a material adverse impact to the consolidated financial statements.
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.
(8) Shareholders’ Equity
On April 26, 2011, the Board of Directors of BOK Financial Corporation approved a $0.275 per share quarterly common stock dividend. The quarterly dividend will be payable on May 27, 2011 to shareholders of record on May 13, 2011.
Dividends declared during the three month periods ended March 31, 2011 and March 31, 2010 were $0.25 per share and $0.24 per share, respectively.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) (“AOCI”) includes unrealized gains and losses on available for sale securities and accumulated gains or losses on effective cash flow hedges, including hedges of anticipated transactions. Gains and losses in AOCI are net of deferred income taxes. Accumulated losses on the rate lock hedge of the 2005 subordinated debenture issuance will be reclassified into income over the ten-year life of the debt. Unrealized losses on employee benefit plans will be reclassified into income as pension plan costs are recognized over the remaining service period of plan participants.
| |
|
Unrealized
|
|
|
Non-Credit
|
|
|
Accumulated
|
|
|
Unrealized
|
|
|
|
|
| |
|
Gain (Loss)
|
|
|
Related
|
|
|
(Loss) on
|
|
|
(Loss)
|
|
|
|
|
| |
|
On Available
|
|
|
Unrealized
|
|
|
Effective
|
|
|
On
|
|
|
|
|
| |
|
For Sale
|
|
|
Losses on
|
|
|
Cash Flow
|
|
|
Employee
|
|
|
|
|
| |
|
Securities
|
|
|
OTTI Securities1
|
|
|
Hedges
|
|
|
Benefit Plans
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$ |
59,772 |
|
|
$ |
(53,000 |
) |
|
$ |
(1,039 |
) |
|
$ |
(16,473 |
) |
|
$ |
(10,740 |
) |
|
Net change in unrealized gains (losses) on securities
|
|
|
79,273 |
|
|
|
4,123 |
|
|
|
– |
|
|
|
– |
|
|
|
83,396 |
|
|
Unrealized loss on newly identified other-than-temporary securities
|
|
|
9,708 |
|
|
|
(9,708 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Credit losses recognized in earnings
|
|
|
|
|
|
|
4,225 |
|
|
|
– |
|
|
|
– |
|
|
|
4,225 |
|
|
Tax benefit (expense) on unrealized gains (losses)
|
|
|
(29,929 |
) |
|
|
677 |
|
|
|
– |
|
|
|
(145 |
) |
|
|
(29,397 |
) |
|
Reclassification adjustment for (gains) losses realized and included in net income
|
|
|
(367 |
) |
|
|
– |
|
|
|
68 |
|
|
|
– |
|
|
|
(299 |
) |
|
Reclassification adjustment for tax expense (benefit)on realized gains (losses)
|
|
|
126 |
|
|
|
– |
|
|
|
(27 |
) |
|
|
– |
|
|
|
99 |
|
|
Unrealized gains on employee benefit plans
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
373 |
|
|
|
373 |
|
|
Balance at March 31, 2010
|
|
$ |
118,583 |
|
|
$ |
(53,683 |
) |
|
$ |
(998 |
) |
|
$ |
(16,245 |
) |
|
$ |
47,657 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$ |
157,770 |
|
|
$ |
(35,276 |
) |
|
$ |
(878 |
) |
|
$ |
(13,777 |
) |
|
$ |
107,839 |
|
|
Net change in unrealized gains (losses) on securities
|
|
|
(2,693 |
) |
|
|
4,133 |
|
|
|
– |
|
|
|
– |
|
|
|
1,440 |
|
|
Credit losses recognized in earnings
|
|
|
– |
|
|
|
4,599 |
|
|
|
– |
|
|
|
– |
|
|
|
4,599 |
|
|
Transfer from Non-Credit Related Unrealized Losses on OTTI Securities to unrealized gain on available for sale securities
|
|
|
180 |
|
|
|
(180 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Tax benefit (expense) on unrealized gains (losses)
|
|
|
151 |
|
|
|
(2,773 |
) |
|
|
– |
|
|
|
– |
|
|
|
(2,622 |
) |
|
Reclassification adjustment for (gains) losses realized and included in net income
|
|
|
(4,902 |
) |
|
|
– |
|
|
|
83 |
|
|
|
– |
|
|
|
(4,819 |
) |
|
Reclassification adjustment for tax expense (benefit) on realized gains (losses)
|
|
|
1,907 |
|
|
|
– |
|
|
|
(32 |
) |
|
|
– |
|
|
|
1,875 |
|
|
Unrealized gains on employee benefit plans
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1 |
|
|
|
1 |
|
|
Balance at March 31, 2011
|
|
$ |
152,413 |
|
|
$ |
(29,497 |
) |
|
$ |
(827 |
) |
|
$ |
(13,776 |
) |
|
$ |
108,313 |
|
|
|
1 Represents changes in unrealized losses recognized in AOCI on available for sale securities for which an other-than-temporary impairment (“OTTI”) was recorded in earnings.
|
| |
|
Three Months Ended
|
|
| |
|
March 31,
2011
|
|
|
March 31,
2010
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income
|
|
$ |
64,774 |
|
|
$ |
60,133 |
|
|
Earnings allocated to participating securities
|
|
|
(461 |
) |
|
|
(333 |
) |
|
Numerator for basic earnings per share – income available to common shareholders
|
|
|
64,313 |
|
|
|
59,800 |
|
|
Effect of reallocating undistributed earnings of participating securities
|
|
|
1 |
|
|
|
1 |
|
|
Numerator for diluted earnings per share – income available to common shareholders
|
|
$ |
64,314 |
|
|
$ |
59,801 |
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
68,387,617 |
|
|
|
67,966,010 |
|
|
Less: Participating securities included in weighted average shares outstanding
|
|
|
(485,895 |
) |
|
|
(373,695 |
) |
|
Denominator for basic earnings per common share
|
|
|
67,901,722 |
|
|
|
67,592,315 |
|
|
Dilutive effect of employee stock compensation plans1
|
|
|
274,805 |
|
|
|
197,734 |
|
|
Denominator for diluted earnings per common share
|
|
|
68,176,527 |
|
|
|
67,790,049 |
|
|
Basic earnings per share
|
|
$ |
0.95 |
|
|
$ |
0.88 |
|
|
Diluted earnings per share
|
|
$ |
0.94 |
|
|
$ |
0.88 |
|
|
1Excludes employee stock options with exercise prices greater than current market price.
|
|
|
756,999 |
|
|
|
1,435,645 |
|
(10) Reportable Segments
Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2011 is as follows (in thousands):
| |
|
Commercial
|
|
|
Consumer
|
|
|
Wealth
Management
|
|
|
Tax-Equivalent Adjustment
|
|
|
Funds Management and Other
|
|
|
BOK
Financial
Consolidated
|
|
|
NIR (expense) from external sources
|
|
$ |
84,854 |
|
|
$ |
18,664 |
|
|
$ |
7,529 |
|
|
$ |
2,321 |
|
|
$ |
57,271 |
|
|
$ |
170,639 |
|
|
NIR (expense) from internal sources
|
|
|
(9,045 |
) |
|
|
9,363 |
|
|
|
2,743 |
|
|
|
– |
|
|
|
(3,061 |
) |
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net interest revenue
|
|
|
75,809 |
|
|
|
28,027 |
|
|
|
10,272 |
|
|
|
2,321 |
|
|
|
54,210 |
|
|
|
170,639 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
35,506 |
|
|
|
43,419 |
|
|
|
39,859 |
|
|
|
– |
|
|
|
4,422 |
|
|
|
123,206 |
|
|
Operating expense
|
|
|
52,518 |
|
|
|
55,139 |
|
|
|
43,187 |
|
|
|
– |
|
|
|
26,403 |
|
|
|
177,247 |
|
|
Provision for credit losses
|
|
|
6,778 |
|
|
|
3,601 |
|
|
|
445 |
|
|
|
– |
|
|
|
(4,574 |
) |
|
|
6,250 |
|
|
Increase in fair value of mortgage
service rights
|
|
|
– |
|
|
|
3,129 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
3,129 |
|
|
Gain (loss) on financial instruments, net
|
|
|
– |
|
|
|
(5,937 |
) |
|
|
18 |
|
|
|
– |
|
|
|
291 |
|
|
|
(5,628 |
) |
|
Loss on repossessed assets, net
|
|
|
(3,585 |
) |
|
|
(192 |
) |
|
|
– |
|
|
|
– |
|
|
|
(554 |
) |
|
|
(4,331 |
) |
|
Income before taxes
|
|
|
48,434 |
|
|
|
9,706 |
|
|
|
6,517 |
|
|
|
2,321 |
|
|
|
36,540 |
|
|
|
103,518 |
|
|
Federal and state income tax
|
|
|
18,841 |
|
|
|
3,776 |
|
|
|
2,535 |
|
|
|
– |
|
|
|
13,600 |
|
|
|
38,752 |
|
|
Net income
|
|
|
29,593 |
|
|
|
5,930 |
|
|
|
3,982 |
|
|
|
2,321 |
|
|
|
22,940 |
|
|
|
64,766 |
|
|
Net loss attributable to non-controlling interest
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(8 |
) |
|
|
(8 |
) |
|
Net income attributable to BOK Financial Corporation
|
|
$ |
29,593 |
|
|
$ |
5,930 |
|
|
$ |
3,982 |
|
|
$ |
2,321 |
|
|
$ |
22,948 |
|
|
$ |
64,774 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
9,171,363 |
|
|
$ |
6,062,395 |
|
|
$ |
3,627,198 |
|
|
$ |
– |
|
|
$ |
4,878,818 |
|
|
$ |
23,739,774 |
|
|
Average invested capital
|
|
|
861,980 |
|
|
|
271,192 |
|
|
|
175,478 |
|
|
|
|
|
|
|
1,256,147 |
|
|
|
2,564,797 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
1.31 |
% |
|
|
0.40 |
% |
|
|
0.45 |
% |
|
|
|
|
|
|
|
|
|
|
1.11 |
% |
|
Return on average invested capital
|
|
|
13.92 |
% |
|
|
8.87 |
% |
|
|
9.20 |
% |
|
|
|
|
|
|
|
|
|
|
10.24 |
% |
|
Efficiency ratio
|
|
|
47.18 |
% |
|
|
77.18 |
% |
|
|
86.15 |
% |
|
|
|
|
|
|
|
|
|
|
61.15 |
% |
Reportable segments reconciliation to the Consolidated Financial Statements for the three months ended March 31, 2010 is as follows (in thousands):
| |
|
Commercial
|
|
|
Consumer
|
|
|
Wealth
Management
|
|
|
Tax-Equivalent Adjustment
|
|
|
Funds Management and Other
|
|
|
BOK
Financial
Consolidated
|
|
|
NIR (expense) from external sources
|
|
$ |
84,897 |
|
|
$ |
19,496 |
|
|
$ |
8,629 |
|
|
$ |
2,416 |
|
|
$ |
67,136 |
|
|
$ |
182,574 |
|
|
NIR (expense) from internal sources
|
|
|
(12,382 |
) |
|
|
11,879 |
|
|
|
3,021 |
|
|
|
– |
|
|
|
(2,518 |
) |
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net interest revenue
|
|
|
72,515 |
|
|
|
31,375 |
|
|
|
11,650 |
|
|
|
2,416 |
|
|
|
64,618 |
|
|
|
182,574 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue
|
|
|
29,681 |
|
|
|
43,221 |
|
|
|
37,320 |
|
|
|
– |
|
|
|
3,703 |
|
|
|
113,925 |
|
|
Operating expense
|
|
|
49,823 |
|
|
|
56,169 |
|
|
|
41,072 |
|
|
|
– |
|
|
|
25,601 |
|
|
|
172,665 |
|
|
Provision for credit losses
|
|
|
28,379 |
|
|
|
3,708 |
|
|
|
2,765 |
|
|
|
– |
|
|
|
7,248 |
|
|
|
42,100 |
|
|
Increase in fair value of mortgage
service rights
|
|
|
– |
|
|
|
13,932 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
13,932 |
|
|
Gain (loss) on financial instruments, net
|
|
|
– |
|
|
|
(211 |
) |
|
|
– |
|
|
|
– |
|
|
|
169 |
|
|
|
(42 |
) |
|
Gain (loss) on repossessed assets, net
|
|
|
(5,023 |
) |
|
|
31 |
|
|
|
– |
|
|
|
– |
|
|
|
(7 |
) |
|
|
(4,999 |
) |
|
Income before taxes
|
|
|
18,971 |
|
|
|
28,471 |
|
|
|
5,133 |
|
|
|
2,416 |
|
|
|
35,634 |
|
|
|
90,625 |
|
|
Federal and state income tax
|
|
|
7,380 |
|
|
|
11,075 |
|
|
|
1,997 |
|
|
|
– |
|
|
|
9,831 |
|
|
|
30,283 |
|
|
Net income
|
|
|
11,591 |
|
|
|
17,396 |
|
|
|
3,136 |
|
|
|
2,416 |
|
|
|
25,803 |
|
|
|
60,342 |
|
|
Net income attributable to non-controlling interest
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
209 |
|
|
|
209 |
|
|
Net income attributable to BOK Financial Corporation
|
|
$ |
11,591 |
|
|
$ |
17,396 |
|
|
$ |
3,136 |
|
|
$ |
2,416 |
|
|
$ |
25,594 |
|
|
$ |
60,133 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$ |
9,175,488 |
|
|
$ |
6,159,190 |
|
|
$ |
3,288,173 |
|
|
$ |
– |
|
|
$ |
5,089,896 |
|
|
$ |
23,712,747 |
|
|
Average invested capital
|
|
|
927,953 |
|
|
|
314,193 |
|
|
|
166,455 |
|
|
|
– |
|
|
|
890,027 |
|
|
|
2,298,628 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.51 |
% |
|
|
1.15 |
% |
|
|
0.39 |
% |
|
|
|
|
|
|
|
|
|
|
1.03 |
% |
|
Return on average invested capital
|
|
|
5.07 |
% |
|
|
22.45 |
% |
|
|
7.64 |
% |
|
|
|
|
|
|
|
|
|
|
10.61 |
% |
|
Efficiency ratio
|
|
|
48.75 |
% |
|
|
75.30 |
% |
|
|
83.87 |
% |
|
|
|
|
|
|
|
|
|
|
59.11 |
% |
(11) Fair Value Measurements
Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market for the given asset or liability. Certain assets and liabilities are recorded in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.
The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of March 31, 2011 (dollars in thousands):
| |
|
|
|
|
Range of
|
|
|
Average
|
|
|
|
|
|
Estimated
|
|
| |
|
Carrying
|
|
|
Contractual
|
|
|
Re-pricing
|
|
|
Discount
|
|
|
Fair
|
|
| |
|
Value
|
|
|
Yields
|
|
|
(in years)
|
|
|
Rate
|
|
|
Value
|
|
|
Cash and cash equivalents
|
|
$ |
808,390 |
|
|
|
|
|
|
|
|
|
|
|
$ |
808,390 |
|
|
Trading securities
|
|
|
80,719 |
|
|
|
|
|
|
|
|
|
|
|
|
80,719 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
185,272 |
|
|
|
|
|
|
|
|
|
|
|
|
189,518 |
|
|
Other debt securities
|
|
|
158,129 |
|
|
|
|
|
|
|
|
|
|
|
|
165,534 |
|
|
Total investment securities
|
|
|
343,401 |
|
|
|
|
|
|
|
|
|
|
|
|
355,052 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
69,859 |
|
|
|
|
|
|
|
|
|
|
|
|
69,859 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
8,925,590 |
|
|
|
|
|
|
|
|
|
|
|
|
8,925,590 |
|
|
Private issue residential mortgage-backed securities
|
|
|
573,285 |
|
|
|
|
|
|
|
|
|
|
|
|
573,285 |
|
|
Other debt securities
|
|
|
5,899 |
|
|
|
|
|
|
|
|
|
|
|
|
5,899 |
|
|
Federal Reserve Bank stock
|
|
|
33,423 |
|
|
|
|
|
|
|
|
|
|
|
|
33,423 |
|
|
Federal Home Loan Bank stock
|
|
|
8,501 |
|
|
|
|
|
|
|
|
|
|
|
|
8,501 |
|
|
Perpetual preferred stock
|
|
|
22,574 |
|
|
|
|
|
|
|
|
|
|
|
|
22,574 |
|
|
Equity securities and mutual funds
|
|
|
68,694 |
|
|
|
|
|
|
|
|
|
|
|
|
68,694 |
|
|
Total Available for sale securities
|
|
|
9,707,825 |
|
|
|
|
|
|
|
|
|
|
|
|
9,707,825 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
326,624 |
|
|
|
|
|
|
|
|
|
|
|
|
326,624 |
|
|
Residential mortgage loans held for sale
|
|
|
127,119 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
127,119 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
6,048,257 |
|
|
|
0.25 – 18.00 |
% |
|
|
0.58 |
|
|
|
0.68 – 4.84 |
% |
|
|
5,949,213 |
|
|
Commercial real estate
|
|
|
2,222,982 |
|
|
|
0.38 – 18.00 |
% |
|
|
1.20 |
|
|
|
0.28 – 3.90 |
% |
|
|
2,166,320 |
|
|
Residential mortgage
|
|
|
1,777,321 |
|
|
|
0.38 – 18.00 |
% |
|
|
3.81 |
|
|
|
0.79 – 4.63 |
% |
|
|
1,805,631 |
|
|
Consumer
|
|
|
541,275 |
|
|
|
0.38 – 21.00 |
% |
|
|
0.60 |
|
|
|
2.07 – 3.98 |
% |
|
|
541,880 |
|
|
Total loans
|
|
|
10,589,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,463,044 |
|
|
Allowance for loan losses
|
|
|
(289,549 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
Net loans
|
|
|
10,300,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,463,044 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
120,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,345 |
|
|
Derivative instruments with positive fair value, net of cash margin
|
|
|
245,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,124 |
|
|
Other assets – private equity funds
|
|
|
25,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,046 |
|
|
Deposits with no stated maturity
|
|
|
14,195,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,195,315 |
|
|
Time deposits
|
|
|
3,677,611 |
|
|
|
0.01 – 9.64 |
% |
|
|
1.80 |
|
|
|
0.80 – 1.59 |
% |
|
|
3,679,337 |
|
|
Other borrowings
|
|
|
1,509,664 |
|
|
|
0.25 – 6.58 |
% |
|
|
0.00 |
|
|
|
0.10 – 2.71 |
% |
|
|
1,509,688 |
|
|
Subordinated debentures
|
|
|
398,744 |
|
|
|
5.19 – 5.82 |
% |
|
|
2.08 |
|
|
|
3.78 |
% |
|
|
410,835 |
|
|
Derivative instruments with negative fair value, net of cash margin
|
|
|
156,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,038 |
|
The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of December 31, 2010 (dollars in thousands):
| |
|
|
|
|
Range of
|
|
|
Average
|
|
|
|
|
|
Estimated
|
|
| |
|
Carrying
|
|
|
Contractual
|
|
|
Re-pricing
|
|
|
Discount
|
|
|
Fair
|
|
| |
|
Value
|
|
|
Yields
|
|
|
(in years)
|
|
|
Rate
|
|
|
Value
|
|
|
Cash and cash equivalents
|
|
$ |
1,269,404 |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,269,404 |
|
|
Trading securities
|
|
|
55,467 |
|
|
|
|
|
|
|
|
|
|
|
|
55,467 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
184,898 |
|
|
|
|
|
|
|
|
|
|
|
|
188,577 |
|
|
Other debt securities
|
|
|
154,655 |
|
|
|
|
|
|
|
|
|
|
|
|
157,528 |
|
|
Total investment securities
|
|
|
339,553 |
|
|
|
|
|
|
|
|
|
|
|
|
346,105 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
72,942 |
|
|
|
|
|
|
|
|
|
|
|
|
72,942 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
8,446,908 |
|
|
|
|
|
|
|
|
|
|
|
|
8,446,908 |
|
|
Privately issued residential mortgage-backed securities
|
|
|
644,210 |
|
|
|
|
|
|
|
|
|
|
|
|
644,210 |
|
|
Other debt securities
|
|
|
6,401 |
|
|
|
|
|
|
|
|
|
|
|
|
6,401 |
|
|
Federal Reserve Bank stock
|
|
|
33,424 |
|
|
|
|
|
|
|
|
|
|
|
|
33,424 |
|
|
Federal Home Loan Bank stock
|
|
|
42,207 |
|
|
|
|
|
|
|
|
|
|
|
|
42,207 |
|
|
Perpetual preferred stock
|
|
|
22,114 |
|
|
|
|
|
|
|
|
|
|
|
|
22,114 |
|
|
Equity securities and mutual funds
|
|
|
43,046 |
|
|
|
|
|
|
|
|
|
|
|
|
43,046 |
|
|
Total available for sale securities
|
|
|
9,311,252 |
|
|
|
|
|
|
|
|
|
|
|
|
9,311,252 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
428,021 |
|
|
|
|
|
|
|
|
|
|
|
|
428,021 |
|
|
Residential mortgage loans held for sale
|
|
|
263,413 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
263,413 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
5,933,996 |
|
|
|
0.25 –18.00 |
% |
|
|
0.57 |
|
|
|
0.72 – 4.67 |
% |
|
|
5,849,443 |
|
|
Commercial real estate
|
|
|
2,277,350 |
|
|
|
0.38 –18.00 |
% |
|
|
1.17 |
|
|
|
0.29 – 3.81 |
% |
|
|
2,221,443 |
|
|
Residential mortgage
|
|
|
1,828,248 |
|
|
|
0.38 –18.00 |
% |
|
|
3.65 |
|
|
|
0.79 – 4.58 |
% |
|
|
1,860,913 |
|
|
Consumer
|
|
|
603,442 |
|
|
|
0.38 –21.00 |
% |
|
|
0.67 |
|
|
|
1.98 – 3.91 |
% |
|
|
605,656 |
|
|
Total loans
|
|
|
10,643,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,537,454 |
|
|
Allowance for loan losses
|
|
|
(292,971 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
Net loans
|
|
|
10,350,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,537,454 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
115,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,723 |
|
|
Derivative instruments with positive fair value, net of cash margin
|
|
|
270,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,445 |
|
|
Other assets – private equity funds
|
|
|
25,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,436 |
|
|
Deposits with no stated maturity
|
|
|
13,669,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,669,893 |
|
|
Time deposits
|
|
|
3,509,168 |
|
|
|
0.01 –9.64 |
% |
|
|
1.85 |
|
|
|
0.82 – 1.56 |
% |
|
|
2,979,505 |
|
|
Other borrowings
|
|
|
3,117,358 |
|
|
|
0.13 –6.58 |
% |
|
|
0.02 |
|
|
|
0.13 – 2.73 |
% |
|
|
2,982,460 |
|
|
Subordinated debentures
|
|
|
398,701 |
|
|
|
5.19 –5.82 |
% |
|
|
2.30 |
|
|
|
3.72 |
% |
|
|
413,328 |
|
|
Derivative instruments with negative fair value, net of cash margin
|
|
|
215,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215,420 |
|
The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of March 31, 2010 (dollars in thousands):
| |
|
|
|
|
Range of
|
|
|
Average
|
|
|
|
|
|
Estimated
|
|
| |
|
Carrying
|
|
|
Contractual
|
|
|
Re-pricing
|
|
|
Discount
|
|
|
Fair
|
|
| |
|
Value
|
|
|
Yields
|
|
|
(in years)
|
|
|
Rate
|
|
|
Value
|
|
|
Cash and cash equivalents
|
|
$ |
931,985 |
|
|
|
|
|
|
|
|
|
|
|
$ |
931,985 |
|
|
Trading securities
|
|
|
115,641 |
|
|
|
|
|
|
|
|
|
|
|
|
115,641 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
236,074 |
|
|
|
|
|
|
|
|
|
|
|
|
241,183 |
|
|
Other debt securities
|
|
|
73,836 |
|
|
|
|
|
|
|
|
|
|
|
|
73,705 |
|
|
Total investment securities
|
|
|
309,910 |
|
|
|
|
|
|
|
|
|
|
|
|
314,888 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
63,325 |
|
|
|
|
|
|
|
|
|
|
|
|
63,325 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
7,855,271 |
|
|
|
|
|
|
|
|
|
|
|
|
7,855,271 |
|
|
Private issue residential mortgage-backed securities
|
|
|
766,105 |
|
|
|
|
|
|
|
|
|
|
|
|
766,105 |
|
|
Other debt securities
|
|
|
17,179 |
|
|
|
|
|
|
|
|
|
|
|
|
17,179 |
|
|
Federal Reserve Bank stock
|
|
|
32,526 |
|
|
|
|
|
|
|
|
|
|
|
|
32,526 |
|
|
Federal Home Loan Bank stock
|
|
|
92,727 |
|
|
|
|
|
|
|
|
|
|
|
|
92,727 |
|
|
Perpetual preferred stock
|
|
|
22,774 |
|
|
|
|
|
|
|
|
|
|
|
|
22,774 |
|
|
Equity securities and mutual funds
|
|
|
54,488 |
|
|
|
|
|
|
|
|
|
|
|
|
54,488 |
|
|
Total available for sale securities
|
|
|
8,904,395 |
|
|
|
|
|
|
|
|
|
|
|
|
8,904,395 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
427,196 |
|
|
|
|
|
|
|
|
|
|
|
|
427,196 |
|
|
Residential mortgage loans held for sale
|
|
|
178,362 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
178,362 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
6,014,739 |
|
|
|
0.16 – 18.00 |
% |
|
|
0.51 |
|
|
|
0.09 – 3.98 |
% |
|
|
5,901,752 |
|
|
Commercial real estate
|
|
|
2,443,848 |
|
|
|
0.38 – 18.00 |
% |
|
|
1.06 |
|
|
|
0.16 – 2.06 |
% |
|
|
2,382,514 |
|
|
Residential mortgage
|
|
|
1,797,711 |
|
|
|
0.38 – 18.00 |
% |
|
|
3.52 |
|
|
|
0.53 – 3.82 |
% |
|
|
1,856,934 |
|
|
Consumer
|
|
|
714,926 |
|
|
|
0.38 – 21.00 |
% |
|
|
0.98 |
|
|
|
0.64 – 1.53 |
% |
|
|
723,271 |
|
|
Total loans
|
|
|
10,971,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,864,471 |
|
|
Allowance for loan losses
|
|
|
(299,717 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
Net loans
|
|
|
10,671,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,864,471 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
119,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,066 |
|
|
Derivative instruments with positive fair value, net of cash margin
|
|
|
325,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,364 |
|
|
Other assets – private equity funds
|
|
|
22,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,825 |
|
|
Deposits with no stated maturity
|
|
|
11,873,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,873,260 |
|
|
Time deposits
|
|
|
3,654,256 |
|
|
|
0.02 – 9.64 |
% |
|
|
1.15 |
|
|
|
0.21 – 1.20 |
% |
|
|
3,150,588 |
|
|
Other borrowings
|
|
|
4,548,197 |
|
|
|
0.25 – 6.58 |
% |
|
|
0.22 |
|
|
|
0.92 – 4.40 |
% |
|
|
4,531,838 |
|
|
Subordinated debentures
|
|
|
398,578 |
|
|
|
5.58 |
% |
|
|
2.83 |
|
|
|
2.83 |
% |
|
|
409,971 |
|
|
Derivative instruments with negative fair value, net of cash margin
|
|
|
311,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311,685 |
|
Because no market exists for certain of these financial instruments and management does not intend to sell these financial instruments, the fair values shown above may not 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 prices for identical instruments in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield curves, volatilities prepayment speeds and loss severities. Fair values for a portion of the securities portfolio are based on significant unobservable inputs, including projected cash flows discounted as rates indicated by comparison to securities with similar credit and liquidity risk.
Derivatives
All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party provided pricing model.
Residential Mortgage Loans Held for Sale
Residential mortgage loans held for sale are carried on the balance sheet at fair value. 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.
Loans
The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates and credit and liquidity spreads currently being offered for loans with similar remaining terms to maturity and risk, adjusted for the impact of interest rate floors and ceilings. The fair values of loans were estimated to approximate their discounted cash flows less allowances for loan losses allocated to these loans of $264 million at March 31, 2011, $266 million at December 31, 2010 and $277 million at March 31, 2010.
Other Assets – Private Equity Funds
The fair value of the portfolio investments of the Company’s two private equity funds are based upon net asset value reported by the underlying funds, as adjusted by the general partner when necessary to represent the price that would be received to sell the assets. Private equity fund assets are long-term, illiquid investments. No secondary market exists for these assets. They may only be realized through cash distributions from the underlying funds.
Deposits
The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions. Estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, is equal to the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, adjusting fair value for the expected benefit of these deposits is prohibited. Accordingly, the positive effect of such deposits is not included in this table.
Other Borrowings and Subordinated Debentures
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 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 March 31, 2011, December 31, 2010 and March 31, 2010.
Assets and liabilities recorded at fair value in the financial statement on a recurring and non-recurring basis are grouped into three broad levels as follows:
Quoted Prices in active Markets for Identical Instruments – Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.
Significant Other Observable Inputs – fair value is based on significant other observable inputs are generally determined based on a single price for each financial instrument provided to us by an applicable third-party pricing service and are based on one or more of the following:
|
·
|
Quoted prices for similar, but not identical, assets or liabilities in active markets;
|
|
·
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
·
|
Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates;
|
|
·
|
Other inputs derived from or corroborated by observable market inputs.
|
Significant Unobservable Inputs – Fair value is based upon model-based valuation techniques for which at least one significant assumption is not observable in the market.
The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers’ quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on this evaluation, we determined that the results represent prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market.
Fair Value of Financial Instruments Measured on a Recurring Basis
The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of March 31, 2011 (in thousands):
| |
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Instruments
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
$ |
80,719 |
|
|
$ |
1,848 |
|
|
$ |
78,871 |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
69,859 |
|
|
|
– |
|
|
|
26,092 |
|
|
|
43,767 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
8,925,590 |
|
|
|
– |
|
|
|
8,925,590 |
|
|
|
– |
|
|
Private issue residential mortgage-backed securities
|
|
|
573,285 |
|
|
|
– |
|
|
|
573,285 |
|
|
|
– |
|
|
Other debt securities
|
|
|
5,899 |
|
|
|
– |
|
|
|
– |
|
|
|
5,899 |
|
|
Federal Reserve Bank stock
|
|
|
33,423 |
|
|
|
– |
|
|
|
33,423 |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
8,501 |
|
|
|
– |
|
|
|
8,501 |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
22,574 |
|
|
|
– |
|
|
|
22,574 |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
68,694 |
|
|
|
47,303 |
|
|
|
21,391 |
|
|
|
– |
|
|
Total available for sale securities
|
|
|
9,707,825 |
|
|
|
47,303 |
|
|
|
9,610,856 |
|
|
|
49,666 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
326,623 |
|
|
|
– |
|
|
|
326,623 |
|
|
|
– |
|
|
Residential mortgage loans held for sale
|
|
|
127,119 |
|
|
|
– |
|
|
|
127,119 |
|
|
|
– |
|
|
Mortgage servicing rights
|
|
|
120,345 |
|
|
|
– |
|
|
|
– |
|
|
|
120,345 |
1 |
|
Derivative contracts, net of cash margin2
|
|
|
245,124 |
|
|
|
– |
|
|
|
245,124 |
|
|
|
– |
|
|
Other assets – private equity funds
|
|
|
25,046 |
|
|
|
– |
|
|
|
– |
|
|
|
25,046 |
|
| |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
Derivative contracts, net of cash margin2
|
|
|
156,038 |
|
|
|
– |
|
|
|
156,038 |
|
|
|
– |
|
|
|
1
|
A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.
|
|
|
2
|
See Note 3 for detail of fair value of derivative contracts by contract type.
|
The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of December 31, 2010 (in thousands):
| |
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Instruments
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
$ |
55,467 |
|
|
$ |
877 |
|
|
$ |
54,590 |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
72,942 |
|
|
|
– |
|
|
|
25,849 |
|
|
|
47,093 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
8,446,908 |
|
|
|
– |
|
|
|
8,446,908 |
|
|
|
– |
|
|
Privately issued residential mortgage-backed securities
|
|
|
644,210 |
|
|
|
– |
|
|
|
644,210 |
|
|
|
– |
|
|
Other debt securities
|
|
|
6,401 |
|
|
|
– |
|
|
|
1 |
|
|
|
6,400 |
|
|
Federal Reserve Bank stock
|
|
|
33,424 |
|
|
|
– |
|
|
|
33,424 |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
42,207 |
|
|
|
– |
|
|
|
42,207 |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
22,114 |
|
|
|
– |
|
|
|
22,114 |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
43,046 |
|
|
|
22,344 |
|
|
|
20,702 |
|
|
|
– |
|
| |
|
|
9,311,252 |
|
|
|
22,344 |
|
|
|
9,235,415 |
|
|
|
53,493 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
428,021 |
|
|
|
– |
|
|
|
428,021 |
|
|
|
– |
|
|
Residential mortgage loans held for sale
|
|
|
263,413 |
|
|
|
– |
|
|
|
263,413 |
|
|
|
– |
|
|
Mortgage servicing rights
|
|
|
115,723 |
|
|
|
– |
|
|
|
– |
|
|
|
115,723 |
1 |
|
Derivative contracts, net of cash margin 2
|
|
|
270,445 |
|
|
|
– |
|
|
|
270,445 |
|
|
|
– |
|
|
Other assets – private equity funds
|
|
|
25,436 |
|
|
|
– |
|
|
|
– |
|
|
|
25,436 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
27,414 |
|
|
|
– |
|
|
|
27,414 |
|
|
|
– |
|
|
Derivative contracts, net of cash margin 2
|
|
|
215,420 |
|
|
|
– |
|
|
|
215,420 |
|
|
|
– |
|
|
|
1
|
A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.
|
|
|
2
|
See Note 3 for detail of fair value of derivative contracts by contract type.
|
The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of March 31, 2010 (in thousands):
| |
|
Total
|
|
|
Quoted Prices in
Active Markets for Identical Instruments
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
$ |
115,641 |
|
|
$ |
3,104 |
|
|
$ |
112,537 |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and other tax-exempt
|
|
|
63,325 |
|
|
|
– |
|
|
|
25,321 |
|
|
|
38,004 |
|
|
U.S. agency residential mortgage-backed securities
|
|
|
7,855,271 |
|
|
|
– |
|
|
|
7,855,271 |
|
|
|
– |
|
|
Privately issued residential mortgage-backed securities
|
|
|
766,105 |
|
|
|
– |
|
|
|
766,105 |
|
|
|
|
|
|
Other debt securities
|
|
|
17,179 |
|
|
|
– |
|
|
|
29 |
|
|
|
17,150 |
|
|
Federal Reserve Bank stock
|
|
|
32,526 |
|
|
|
– |
|
|
|
32,526 |
|
|
|
– |
|
|
Federal Home Loan Bank stock
|
|
|
92,727 |
|
|
|
– |
|
|
|
92,727 |
|
|
|
– |
|
|
Perpetual preferred stock
|
|
|
22,774 |
|
|
|
– |
|
|
|
22,774 |
|
|
|
– |
|
|
Equity securities and mutual funds
|
|
|
54,488 |
|
|
|
27,890 |
|
|
|
26,598 |
|
|
|
– |
|
| |
|
|
8,904,395 |
|
|
|
27,890 |
|
|
|
8,821,351 |
|
|
|
55,154 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage trading securities
|
|
|
427,196 |
|
|
|
– |
|
|
|
427,196 |
|
|
|
– |
|
|
Residential mortgage loans held for sale
|
|
|
178,362 |
|
|
|
– |
|
|
|
178,362 |
|
|
|
– |
|
|
Mortgage servicing rights
|
|
|
119,066 |
|
|
|
– |
|
|
|
– |
|
|
|
119,066 |
1 |
|
Derivative contracts, net of cash margin 2
|
|
|
325,364 |
|
|
|
7,432 |
|
|
|
317,932 |
|
|
|
– |
|
|
Other assets – private equity funds
|
|
|
22,825 |
|
|
|
– |
|
|
|
– |
|
|
|
22,825 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
32,364 |
|
|
|
– |
|
|
|
32,364 |
|
|
|
– |
|
|
Derivative contracts, net of cash margin 2
|
|
|
311,685 |
|
|
|
– |
|
|
|
311,685 |
|
|
|
– |
|
|
|
1
|
A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.
|
|
|
2
|
See Note 3 for detail of fair value of derivative contracts by contract type.
|
The fair value of certain municipal and other debt securities classified as trading or available for sale may be based on significant unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally recognized rating agencies adjusted for a lack trading volume.
These securities may be either investment grade or below investment grade. Taxable securities rated investment grade by all nationally recognized rating agencies are generally valued at par to yield 1.75%. As of March 31, 2011, average yields on comparable short-term taxable securities are generally less than 1%. Tax-exempt securities rated investment grade by all nationally recognized rating agencies are generally valued to yield a range of 1.12% to 1.42% which represents a spread of 75 to 80 basis points over average yields of comparable securities as of March 31, 2011. The resulting estimated fair value of tax-exempt securities rated investment grade ranges from 98.95% to 99.39% of par value at March 31, 2011.
Approximately $14 million of our municipal and other tax-exempt securities are rated below investment grade by at least one of the three nationally recognized rating agencies. The fair value of these securities was determined based on yields ranging from 5.57% to 10.04%. These yields were determined using a spread of 525 basis points over comparable municipal securities of varying durations. The resulting estimated fair value of securities rated below investment grade ranges from 83.12% to 83.39% of par value as of March 31, 2011. All of these securities are currently paying contractual interest in accordance with their respective terms.
The following represents the changes for the three months ended March 31, 2011 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):
| |
|
Available for Sale Securities
|
|
|
|
|
| |
|
Municipal and other tax-exempt
|
|
|
Other debt securities
|
|
|
Other assets – private equity funds
|
|
| |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$ |
47,093 |
|
|
$ |
6,400 |
|
|
$ |
25,436 |
|
|
Purchases and contributions
|
|
|
7,520 |
|
|
|
– |
|
|
|
906 |
|
|
Redemptions and distributions
|
|
|
(9,975 |
) |
|
|
(500 |
) |
|
|
(1,320 |
) |
|
Gain (loss) recognized in earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage and trading revenue
|
|
|
(576 |
) |
|
|
– |
|
|
|
– |
|
|
Gain (loss) on other assets, net
|
|
|
– |
|
|
|
– |
|
|
|
24 |
|
|
Gain on securities, net
|
|
|
18 |
|
|
|
– |
|
|
|
– |
|
|
Other comprehensive (loss)
|
|
|
(313 |
) |
|
|
(1 |
) |
|
|
– |
|
|
Balance March 31, 2011
|
|
$ |
43,767 |
|
|
$ |
5,899 |
|
|
$ |
25,046 |
|
The following represents the changes for the three months ended March 31, 2010 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):
| |
|
|
|
|
Available for Sale Securities
|
|
|
|
|
| |
|
Trading Securities
|
|
|
Municipal and other tax-exempt
|
|
|
Other debt securities
|
|
|
Other assets – private equity funds
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$ |
9,800 |
|
|
$ |
36,598 |
|
|
$ |
17,116 |
|
|
$ |
22,917 |
|
|
Purchases, sales, issuances and settlements, net
|
|
|
(9,731 |
) |
|
|
2,289 |
|
|
|
50 |
|
|
|
(662 |
) |
|
Gain (loss) recognized in earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage and trading revenue
|
|
|
(69 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Gain (loss) on other assets, net
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
570 |
|
|
Gain on securities, net
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Other comprehensive (loss)
|
|
|
– |
|
|
|
(883 |
) |
|
|
(16 |
) |
|
|
– |
|
|
Balance March 31, 2010
|
|
$ |
– |
|
|
$ |
38,004 |
|
|
$ |
17,150 |
|
|
$ |
22,825 |
|
Substantially all trading securities with fair values based on significant unobservable inputs were transferred to available for sale based on sales limitations and banking regulations. There were no transfers from quoted prices in active markets for identical instruments to significant other observable inputs during the first quarter of 2011 or 2010.
Fair Value of Financial Instruments Measured on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis include pension plan assets, which are based on quoted prices in active markets for identical instruments, collateral for certain impaired loans and real property and other assets acquired to satisfy loans, which are based primarily on comparisons to completed sales of similar assets. In addition, goodwill impairment is evaluated based on the fair value of the Company’s reporting units.
The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets adjusted to fair value during the three months ended March 31, 2011:
| |
|
Carrying Value at March 31, 2011
|
|
|
Fair Value Adjustment for the Three Months Ended March 31, 2011 Recognized In:
|
|
| |
|
Quoted Prices
in Active Markets for Identical Instruments
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Gross charge-offs against allowance for loan loss
|
|
|
Gross charge-offs against allowance for recourse loans
|
|
|
Net losses and expenses of repossessed assets, net
|
|
|
Other
expense
|
|
|
Impaired loans
|
|
$ |
– |
|
|
$ |
19,751 |
|
|
$ |
– |
|
|
$ |
4,246 |
|
|
$ |
775 |
|
|
$ |
– |
|
|
$ |
– |
|
|
Real estate and other
repossessed assets
|
|
|
– |
|
|
|
30,615 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,552 |
|
|
|
– |
|
The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets adjusted to fair value during the three months ended March 31, 2010:
| |
|
Carrying Value at March 31, 2010
|
|
|
Fair Value Adjustments for the Three Months Ended March 31, 2010 Recognized In:
|
|
| |
|
Quoted Prices
in Active Markets for Identical Instruments
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Gross charge-offs against allowance for loan loss
|
|
|
Net losses and expenses of repossessed assets, net
|
|
|
Impaired loans
|
|
$ |
– |
|
|
$ |
50,786 |
|
|
$ |
– |
|
|
$ |
24,199 |
|
|
$ |
– |
|
|
Real estate and other repossessed assets
|
|
|
– |
|
|
|
19,685 |
|
|
|
– |
|
|
|
– |
|
|
|
5,935 |
|
The fair value of collateral-dependent impaired loans and real estate and other repossessed assets and the related fair value adjustments of impaired are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to be supported by observable inputs derived principally from or corroborated by observable market data. Appraisals that are not based on observable input or that require significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on significant unobservable inputs.
Fair Value Election
Certain certificates of deposit were designated as carried at fair value. This determination is made based on the Company’s intent to convert these certificates from fixed interest rates to variable interest rates based on LIBOR with interest rate swaps that have not been designated as hedging instruments. The fair value election for these liabilities better represents the economic effect of these instruments on the Company. At March 31, 2011, there were no certificates of deposit that were designated as carried at fair value. At March 31, 2010, the fair value and contractual principal amount of these certificates was $32 million and $32 million, respectively. Change in the fair value of these certificates of deposit resulted in an unrealized gain during the three months ended March 31, 2010 of $535 thousand, which is included in Gain (loss) on derivatives, net in the Consolidated Statement of Earnings. Interest expense on these certificates of deposit is included in Interest expense – Deposits in the Consolidated Statement of Earnings.
As more fully disclosed in Note 2 and Note 5 to the Consolidated Financial Statements, the Company has elected to carry certain mortgage-backed securities which have been designated as economic hedges against changes in the fair value of mortgage servicing rights and residential mortgage loans held for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.
(12) Federal and State Income Taxes
The reconciliations of income (loss) attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense are as follows (in thousands):
| |
|
Three Months Ended
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Amount:
|
|
|
|
|
|
|
|
Federal statutory tax
|
|
$ |
36,231 |
|
|
$ |
31,719 |
|
|
Tax exempt revenue
|
|
|
(1,363 |
) |
|
|
(1,405 |
) |
|
Effect of state income taxes, net of federal benefit
|
|
|
2,638 |
|
|
|
1,715 |
|
|
Utilization of tax credits
|
|
|
(499 |
) |
|
|
(1,328 |
) |
|
Bank-owned life insurance
|
|
|
(985 |
) |
|
|
(865 |
) |
|
Other, net
|
|
|
2,730 |
|
|
|
447 |
|
|
Total
|
|
$ |
38,752 |
|
|
$ |
30,283 |
|
| |
|
Three Months Ended
March 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
Percent of pretax income:
|
|
|
|
|
|
|
|
Federal statutory tax
|
|
|
35 |
% |
|
|
35 |
% |
|
Tax exempt revenue
|
|
|
(1 |
) |
|
|
(2 |
) |
|
Effect of state income taxes, net of federal benefit
|
|
|
2 |
|
|
|
2 |
|
|
Utilization of tax credits
|
|
|
– |
|
|
|
(1 |
) |
|
Bank-owned life insurance
|
|
|
(1 |
) |
|
|
(1 |
) |
|
Other, net
|
|
|
2 |
|
|
|
– |
|
|
Total
|
|
|
37 |
% |
|
|
33 |
% |
(13) Subsequent Events
The Company evaluated events from the date of the consolidated financial statements on March 31, 2011 through the issuance of those consolidated financial statements included in this Quarterly Report on Form 10-Q. No events were identified requiring recognition in and/or disclosure in the consolidated financial statements.
Quarterly Financial Summary – Unaudited
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data)
| |
|
Three Months Ended
|
|
| |
|
March 31, 2011
|
|
|
December 31, 2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Average
|
|
|
Revenue/
|
|
|
Yield/
|
|
|
Average
|
|
|
Revenue/
|
|
|
Yield/
|
|
| |
|
Balance
|
|
|
Expense1
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense1
|
|
|
Rate
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable securities3
|
|
$ |
9,910,162 |
|
|
$ |
74,589 |
|
|
|
3.20 |
% |
|
$ |
10,220,359 |
|
|
$ |
64,671 |
|
|
|
2.67 |
% |
|
Tax-exempt securities3
|
|
|
249,378 |
|
|
|
3,120 |
|
|
|
5.07 |
|
|
|
258,368 |
|
|
|
3,224 |
|
|
|
4.95 |
|
|
Total securities3
|
|
|
10,159,540 |
|
|
|
77,709 |
|
|
|
3.25 |
|
|
|
10,478,727 |
|
|
|
67,895 |
|
|
|
2.73 |
|
|
Trading securities
|
|
|
60,768 |
|
|
|
576 |
|
|
|
3.84 |
|
|
|
74,084 |
|
|
|
759 |
|
|
|
4.06 |
|
|
Funds sold and resell agreements
|
|
|
20,680 |
|
|
|
4 |
|
|
|
0.08 |
|
|
|
21,128 |
|
|
|
7 |
|
|
|
0.13 |
|
|
Residential mortgage loans held for sale
|
|
|
125,494 |
|
|
|
1,339 |
|
|
|
4.33 |
|
|
|
282,734 |
|
|
|
2,745 |
|
|
|
3.85 |
|
|
Loans2
|
|
|
10,653,756 |
|
|
|
124,782 |
|
|
|
4.75 |
|
|
|
10,667,193 |
|
|
|
128,005 |
|
|
|
4.76 |
|
|
Less allowance for loan losses
|
|
|
295,014 |
|
|
|
– |
|
|
|
– |
|
|
|
307,223 |
|
|
|
– |
|
|
|
– |
|
|
Loans, net of allowance
|
|
|
10,358,742 |
|
|
|
124,782 |
|
|
|
4.89 |
|
|
|
10,359,970 |
|
|
|
128,005 |
|
|
|
4.90 |
|
|
Total earning assets3
|
|
|
20,725,224 |
|
|
|
204,410 |
|
|
|
4.09 |
|
|
|
21,216,643 |
|
|
|
199,411 |
|
|
|
3.84 |
|
|
Cash and other assets
|
|
|
3,014,550 |
|
|
|
|
|
|
|
|
|
|
|
3,066,308 |
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
23,739,774 |
|
|
|
|
|
|
|
|
|
|
$ |
24,282,951 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction deposits
|
|
$ |
9,632,595 |
|
|
|
7,584 |
|
|
|
0.32 |
|
|
$ |
9,325,573 |
|
|
|
8,772 |
|
|
|
0.37 |
|
|
Savings deposits
|
|
|
203,638 |
|
|
|
187 |
|
|
|
0.37 |
|
|
|
191,235 |
|
|
|
171 |
|
|
|
0.35 |
|
|
Time deposits
|
|
|
3,616,991 |
|
|
|
16,271 |
|
|
|
1.82 |
|
|
|
3,602,150 |
|
|
|
16,147 |
|
|
|
1.78 |
|
|
Total interest-bearing deposits
|
|
|
13,453,224 |
|
|
|
24,042 |
|
|
|
0.72 |
|
|
|
13,118,958 |
|
|
|
25,090 |
|
|
|
0.76 |
|
|
Funds purchased
|
|
|
820,969 |
|
|
|
320 |
|
|
|
0.16 |
|
|
|
775,620 |
|
|
|
479 |
|
|
|
0.25 |
|
|
Repurchase agreements
|
|
|
1,062,359 |
|
|
|
1,041 |
|
|
|
0.40 |
|
|
|
1,201,760 |
|
|
|
1,496 |
|
|
|
0.49 |
|
|
Other borrowings
|
|
|
144,987 |
|
|
|
470 |
|
|
|
1.31 |
|
|
|
829,756 |
|
|
|
767 |
|
|
|
0.37 |
|
|
Subordinated debentures
|
|
|
398,723 |
|
|
|
5,577 |
|
|
|
5.67 |
|
|
|
398,680 |
|
|
|
5,666 |
|
|
|
5.64 |
|
|
Total interest-bearing liabilities
|
|
|
15,880,262 |
|
|
|
31,450 |
|
|
|
0.80 |
|
|
|
16,324,774 |
|
|
|
33,498 |
|
|
|
0.81 |
|
|
Demand deposits
|
|
|
4,265,657 |
|
|
|
|
|
|
|
|
|
|
|
4,171,595 |
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
1,029,058 |
|
|
|
|
|
|
|
|
|
|
|
1,251,025 |
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,564,797 |
|
|
|
|
|
|
|
|
|
|
|
2,535,557 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$ |
23,739,774 |
|
|
|
|
|
|
|
|
|
|
$ |
24,282,951 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-equivalent Net Interest Revenue3
|
|
|
|
|
|
$ |
172,960 |
|
|
|
3.29 |
% |
|
|
|
|
|
$ |
165,913 |
|
|
|
3.03 |
% |
|
Tax-equivalent Net Interest Revenue to Earning Assets3
|
|
|
|
|
|
|
|
|
|
|
3.46 |
|
|
|
|
|
|
|
|
|
|
|
3.19 |
|
|
Less tax-equivalent adjustment1
|
|
|
|
|
|
|
2,321 |
|
|
|
|
|
|
|
|
|
|
|
2,263 |
|
|
|
|
|
|
Net Interest Revenue
|
|
|
|
|
|
|
170,639 |
|
|
|
|
|
|
|
|
|
|
|
163,650 |
|
|
|
|
|
|
Provision for credit losses
|
|
|
|
|
|
|
6,250 |
|
|
|
|
|
|
|
|
|
|
|
6,999 |
|
|
|
|
|
|
Other operating revenue
|
|
|
|
|
|
|
117,578 |
|
|
|
|
|
|
|
|
|
|
|
111,913 |
|
|
|
|
|
|
Other operating expense
|
|
|
|
|
|
|
178,449 |
|
|
|
|
|
|
|
|
|
|
|
178,361 |
|
|
|
|
|
|
Income before taxes
|
|
|
|
|
|
|
103,518 |
|
|
|
|
|
|
|
|
|
|
|
90,203 |
|
|
|
|
|
|
Federal and state income tax
|
|
|
|
|
|
|
38,752 |
|
|
|
|
|
|
|
|
|
|
|
31,097 |
|
|
|
|
|
|
Net income before non-controlling interest
|
|
|
|
|
|
|
64,766 |
|
|
|
|
|
|
|
|
|
|
|
59,106 |
|
|
|
|
|
|
Net income (loss) attributable to non-controlling interest
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
274 |
|
|
|
|
|
|
Net income attributable to BOK Financial Corp.
|
|
|
|
|
|
$ |
64,774 |
|
|
|
|
|
|
|
|
|
|
$ |
58,832 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Average Common Share Equivalent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
|
$ |
0.86 |
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
$ |
0.86 |
|
|
|
|
|
|
1
|
Tax equivalent at the statutory federal and state rates for the periods presented. The taxable equivalent adjustments shown are for comparative purposes.
|
|
2
|
The loan averages included loans on which the accrual of interest has been discontinued and are stated net of unearned income.
|
|
3
|
Yield calculations exclude security trades that have been recorded on trade date with no corresponding interest income.
|
|
Three Months Ended
|
|
|
September 30, 2010
|
|
|
June 30, 2010
|
|
|
March 31, 2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Revenue/
|
|
|
Yield/
|
|
|
Average
|
|
|
Revenue/
|
|
|
Yield/
|
|
|
Average
|
|
|
Revenue/
|
|
|
Yield/
|
|
|
Balance
|
|
|
Expense1
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense1
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense1
|
|
|
Rate
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
9,953,104 |
|
|
$ |
79,472 |
|
|
|
3.28 |
% |
|
$ |
9,366,703 |
|
|
$ |
81,460 |
|
|
|
3.56 |
% |
|
$ |
9,212,677 |
|
|
$ |
82,612 |
|
|
|
3.73 |
% |
| |
256,110 |
|
|
|
3,145 |
|
|
|
4.87 |
|
|
|
296,282 |
|
|
|
3,614 |
|
|
|
4.89 |
|
|
|
294,849 |
|
|
|
3,836 |
|
|
|
5.28 |
|
| |
10,209,214 |
|
|
|
82,617 |
|
|
|
3.32 |
|
|
|
9,662,985 |
|
|
|
85,074 |
|
|
|
3.60 |
|
|
|
9,507,526 |
|
|
|
86,448 |
|
|
|
3.78 |
|
| |
69,315 |
|
|
|
570 |
|
|
|
3.26 |
|
|
|
58,722 |
|
|
|
661 |
|
|
|
4.51 |
|
|
|
70,979 |
|
|
|
792 |
|
|
|
4.53 |
|
| |
18,882 |
|
|
|
4 |
|
|
|
0.08 |
|
|
|
22,776 |
|
|
|
8 |
|
|
|
0.14 |
|
|
|
32,363 |
|
|
|
8 |
|
|
|
0.10 |
|
| |
242,559 |
|
|
|
2,592 |
|
|
|
4.24 |
|
|
|
183,489 |
|
|
|
2,177 |
|
|
|
4.76 |
|
|
|
137,404 |
|
|
|
1,747 |
|
|
|
5.16 |
|
| |
10,861,515 |
|
|
|
133,336 |
|
|
|
4.87 |
|
|
|
10,971,466 |
|
|
|
132,004 |
|
|
|
4.83 |
|
|
|
11,187,320 |
|
|
|
132,791 |
|
|
|
4.81 |
|
| |
308,139 |
|
|
|
– |
|
|
|
– |
|
|
|
312,595 |
|
|
|
– |
|
|
|
– |
|
|
|
309,194 |
|
|
|
– |
|
|
|
– |
|
| |
10,553,376 |
|
|
|
133,336 |
|
|
|
5.01 |
|
|
|
10,658,871 |
|
|
|
132,004 |
|
|
|
4.97 |
|
|
|
10,878,126 |
|
|
|
132,791 |
|
|
|
4.95 |
|
| |
21,093,346 |
|
|
|
219,119 |
|
|
|
4.19 |
|
|
|
20,586,843 |
|
|
|
219,924 |
|
|
|
4.33 |
|
|
|
20,626,398 |
|
|
|
221,786 |
|
|
|
4.41 |
|
| |
3,098,944 |
|
|
|
|
|
|
|
|
|
|
|
2,857,964 |
|
|
|
|
|
|
|
|
|
|
|
3,086,349 |
|
|
|
|
|
|
|
|
|
| $ |
24,192,290 |
|
|
|
|
|
|
|
|
|
|
$ |
23,444,807 |
|
|
|
|
|
|
|
|
|
|
$ |
23,712,747 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
8,699,495 |
|
|
|
9,935 |
|
|
|
0.45 |
|
|
$ |
8,287,296 |
|
|
|
10,044 |
|
|
|
0.49 |
|
|
$ |
7,963,752 |
|
|
$ |
10,135 |
|
|
|
0.52 |
|
| |
189,512 |
|
|
|
185 |
|
|
|
0.39 |
|
|
|
184,376 |
|
|
|
185 |
|
|
|
0.40 |
|
|
|
170,990 |
|
|
|
178 |
|
|
|
0.42 |
|
| |
3,774,136 |
|
|
|
17,146 |
|
|
|
1.80 |
|
|
|
3,701,167 |
|
|
|
16,063 |
|
|
|
1.74 |
|
|
|
3,772,295 |
|
|
|
17,304 |
|
|
|
1.86 |
|
| |
12,663,143 |
|
|
|
27,266 |
|
|
|
0.85 |
|
|
|
12,172,839 |
|
|
|
26,292 |
|
|
|
0.87 |
|
|
|
11,907,037 |
|
|
|
27,617 |
|
|
|
0.94 |
|
| |
1,096,873 |
|
|
|
539 |
|
|
|
0.19 |
|
|
|
1,359,937 |
|
|
|
674 |
|
|
|
0.20 |
|
|
|
1,519,689 |
|
|
|
539 |
|
|
|
0.14 |
|
| |
1,130,215 |
|
|
|
1,469 |
|
|
|
0.52 |
|
|
|
1,131,147 |
|
|
|
1,580 |
|
|
|
0.56 |
|
|
|
1,055,597 |
|
|
|
1,483 |
|
|
|
0.57 |
|
| |
1,465,516 |
|
|
|
1,314 |
|
|
|
0.36 |
|
|
|
1,619,745 |
|
|
|
1,403 |
|
|
|
0.35 |
|
|
|
2,249,470 |
|
|
|
1,591 |
|
|
|
0.29 |
|
| |
398,638 |
|
|
|
5,664 |
|
|
|
5.64 |
|
|
|
398,598 |
|
|
|
5,535 |
|
|
|
5.57 |
|
|
|
398,559 |
|
|
|
5,566 |
|
|
|
5.66 |
|
| |
16,754,385 |
|
|
|
36,252 |
|
|
|
0.86 |
|
|
|
16,682,266 |
|
|
|
35,484 |
|
|
|
0.85 |
|
|
|
17,130,352 |
|
|
|
36,796 |
|
|
|
0.87 |
|
| |
3,831,486 |
|
|
|
|
|
|
|
|
|
|
|
3,660,910 |
|
|
|
|
|
|
|
|
|
|
|
3,485,504 |
|
|
|
|
|
|
|
|
|
| |
1,124,000 |
|
|
|
|
|
|
|
|
|
|
|
722,902 |
|
|
|
|
|
|
|
|
|
|
|
798,263 |
|
|
|
|
|
|
|
|
|
| |
2,482,419 |
|
|
|
|
|
|
|
|
|
|
|
2,378,729 |
|
|
|
|
|
|
|
|
|
|
|
2,298,628 |
|
|
|
|
|
|
|
|
|
| $ |
24,192,290 |
|
|
|
|
|
|
|
|
|
|
$ |
23,444,807 |
|
|
|
|
|
|
|
|
|
|
$ |
23,712,747 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
$ |
182,867 |
|
|
|
3.33 |
% |
|
|
|
|
|
$ |
184,440 |
|
|
|
3.48 |
% |
|
|
|
|
|
$ |
184,990 |
|
|
|
3.54 |
% |
| |
|
|
|
|
|
|
|
|
3.50 |
|
|
|
|
|
|
|
|
|
|
|
3.63 |
|
|
|
|
|
|
|
|
|
|
|
3.68 |
|
| |
|
|
|
|
2,152 |
|
|
|
|
|
|
|
|
|
|
|
2,327 |
|
|
|
|
|
|
|
|
|
|
|
2,416 |
|
|
|
|
|
| |
|
|
|
|
180,715 |
|
|
|
|
|
|
|
|
|
|
|
182,113 |
|
|
|
|
|
|
|
|
|
|
|
182,574 |
|
|
|
|
|
| |
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
36,040 |
|
|
|
|
|
|
|
|
|
|
|
42,100 |
|
|
|
|
|
| |
|
|
|
|
137,673 |
|
|
|
|
|
|
|
|
|
|
|
157,439 |
|
|
|
|
|
|
|
|
|
|
|
113,883 |
|
|
|
|
|
| |
|
|
|
|
205,165 |
|
|
|
|
|
|
|
|
|
|
|
205,912 |
|
|
|
|
|
|
|
|
|
|
|
163,732 |
|
|
|
|
|
| |
|
|
|
|
93,223 |
|
|
|
|
|
|
|
|
|
|
|
97,600 |
|
|
|
|
|
|
|
|
|
|
|
90,625 |
|
|
|
|
|
| |
|
|
|
|
29,935 |
|
|
|
|
|
|
|
|
|
|
|
32,042 |
|
|
|
|
|
|
|
|
|
|
|
30,283 |
|
|
|
|
|
| |
|
|
|
|
63,288 |
|
|
|
|
|
|
|
|
|
|
|
65,558 |
|
|
|
|
|
|
|
|
|
|
|
60,342 |
|
|
|
|
|
| |
|
|
|
|
(979 |
) |
|
|
|
|
|
|
|
|
|
|
2,036 |
|
|
|
|
|
|
|
|
|
|
|
209 |
|
|
|
|
|
| |
|
|
|
$ |
64,267 |
|
|
|
|
|
|
|
|
|
|
$ |
63,522 |
|
|
|
|
|
|
|
|
|
|
$ |
60,133 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
$ |
0.93 |
|
|
|
|
|
|
|
|
|
|
$ |
0.88 |
|
|
|
|
|
| |
|
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
$ |
0.93 |
|
|
|
|
|
|
|
|
|
|
$ |
0.88 |
|
|
|
|
|
|
Quarterly Earnings Trends -- Unaudited
|
|
|
|
|
(In thousands, except share and per share data)
|
|
|
|
| |
|
Three Months Ended
|
|
| |
|
March 31,
2011
|
|
|
Dec. 31,
2010
|
|
|
Sept. 30,
2010
|
|
|
June 30.
2010
|
|
|
March 31,
2010
|
|
|
Interest revenue
|
|
$ |
202,089 |
|
|
$ |
197,148 |
|
|
$ |
216,967 |
|
|
$ |
217,597 |
|
|
$ |
219,370 |
|
|
Interest expense
|
|
|
31,450 |
|
|
|
33,498 |
|
|
|
36,252 |
|
|
|
35,484 |
|
|
|
36,796 |
|
|
Net interest revenue
|
|
|
170,639 |
|
|
|
163,650 |
|
|
|
180,715 |
|
|
|
182,113 |
|
|
|
182,574 |
|
|
Provision for credit losses
|
|
|
6,250 |
|
|
|
6,999 |
|
|
|
20,000 |
|
|
|
36,040 |
|
|
|
42,100 |
|
|
Net interest revenue after provision for credit losses
|
|
|
164,389 |
|
|
|
156,651 |
|
|
|
160,715 |
|
|
|
146,073 |
|
|
|
140,474 |
|
|
Other operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage and trading revenue
|
|
|
25,376 |
|
|
|
28,610 |
|
|
|
27,072 |
|
|
|
24,754 |
|
|
|
21,035 |
|
|
Transaction card revenue
|
|
|
28,445 |
|
|
|
29,500 |
|
|
|
28,852 |
|
|
|
28,263 |
|
|
|
25,687 |
|
|
Trust fees and commissions
|
|
|
18,422 |
|
|
|
18,145 |
|
|
|
16,774 |
|
|
|
17,737 |
|
|
|
16,320 |
|
|
Deposit service charges and fees
|
|
|
22,480 |
|
|
|
23,732 |
|
|
|
24,290 |
|
|
|
28,797 |
|
|
|
26,792 |
|
|
Mortgage banking revenue
|
|
|
17,356 |
|
|
|
25,158 |
|
|
|
29,236 |
|
|
|
18,335 |
|
|
|
14,871 |
|
|
Bank-owned life insurance
|
|
|
2,863 |
|
|
|
3,182 |
|
|
|
3,004 |
|
|
|
2,908 |
|
|
|
2,972 |
|
|
Other revenue
|
|
|
8,332 |
|
|
|
7,648 |
|
|
|
7,708 |
|
|
|
7,374 |
|
|
|
7,638 |
|
|
Total fees and commissions
|
|
|
123,274 |
|
|
|
135,975 |
|
|
|
136,936 |
|
|
|
128,168 |
|
|
|
115,315 |
|
|
Gain (loss) on other assets, net
|
|
|
(68 |
) |
|
|
15 |
|
|
|
(1,331 |
) |
|
|
1,545 |
|
|
|
(1,390 |
) |
|
Gain (loss) on derivatives, net
|
|
|
(2,413 |
) |
|
|
(7,286 |
) |
|
|
4,626 |
|
|
|
7,272 |
|
|
|
(341 |
) |
|
Gain (loss) on securities, net
|
|
|
1,384 |
|
|
|
(10,164 |
) |
|
|
11,753 |
|
|
|
23,100 |
|
|
|
4,524 |
|
|
Total other-than-temporary impairment losses
|
|
|
– |
|
|
|
(4,768 |
) |
|
|
(4,525 |
) |
|
|
(10,959 |
) |
|
|
(9,708 |
) |
|
Portion of loss recognized in (reclassified from) other comprehensive income
|
|
|
(4,599 |
) |
|
|
(1,859 |
) |
|
|
(9,786 |
) |
|
|
8,313 |
|
|
|
5,483 |
|
|
Net impairment losses recognized in earnings
|
|
|
(4,599 |
) |
|
|
(6,627 |
) |
|
|
(14,311 |
) |
|
|
(2,646 |
) |
|
|
(4,225 |
) |
|
Total other operating revenue
|
|
|
117,578 |
|
|
|
111,913 |
|
|
|
137,673 |
|
|
|
157,439 |
|
|
|
113,883 |
|
|
Other operating expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
99,994 |
|
|
|
106,770 |
|
|
|
101,216 |
|
|
|
97,054 |
|
|
|
96,824 |
|
|
Business promotion
|
|
|
4,624 |
|
|
|
4,377 |
|
|
|
4,426 |
|
|
|
4,945 |
|
|
|
3,978 |
|
|
Professional fees and services
|
|
|
7,458 |
|
|
|
9,527 |
|
|
|
7,621 |
|
|
|
6,668 |
|
|
|
6,401 |
|
|
Net occupancy and equipment
|
|
|
15,604 |
|
|
|
16,331 |
|
|
|
16,436 |
|
|
|
15,691 |
|
|
|
15,511 |
|
|
Insurance
|
|
|
6,186 |
|
|
|
6,139 |
|
|
|
6,052 |
|
|
|
5,596 |
|
|
|
6,533 |
|
|
Data processing and communications
|
|
|
22,503 |
|
|
|
23,902 |
|
|
|
21,601 |
|
|
|
21,940 |
|
|
|
20,309 |
|
|
Printing, postage and supplies
|
|
|
3,082 |
|
|
|
3,170 |
|
|
|
3,648 |
|
|
|
3,525 |
|
|
|
3,322 |
|
|
Net losses and operating expenses of repossessed assets
|
|
|
6,015 |
|
|
|
6,966 |
|
|
|
7,230 |
|
|
|
13,067 |
|
|
|
7,220 |
|
|
Amortization of intangible assets
|
|
|
896 |
|
|
|
1,365 |
|
|
|
1,324 |
|
|
|
1,323 |
|
|
|
1,324 |
|
|
Mortgage banking costs
|
|
|
6,471 |
|
|
|
11,999 |
|
|
|
9,093 |
|
|
|
10,380 |
|
|
|
9,267 |
|
|
Change in fair value of mortgage servicing rights
|
|
|
(3,129 |
) |
|
|
(25,111 |
) |
|
|
15,924 |
|
|
|
19,458 |
|
|
|
(13,932 |
) |
|
Visa retrospective responsibility obligation
|
|
|
– |
|
|
|
(1,103 |
) |
|
|
1,103 |
|
|
|
– |
|
|
|
– |
|
|
Other expense
|
|
|
8,745 |
|
|
|
14,029 |
|
|
|
9,491 |
|
|
|
6,265 |
|
|
|
6,975 |
|
|
Total other operating expense
|
|
|
178,449 |
|
|
|
178,361 |
|
|
|
205,165 |
|
|
|
205,912 |
|
|
|
163,732 |
|
|
Income before taxes
|
|
|
103,518 |
|
|
|
90,203 |
|
|
|
93,223 |
|
|
|
97,600 |
|
|
|
90,625 |
|
|
Federal and state income tax
|
|
|
38,752 |
|
|
|
31,097 |
|
|
|
29,935 |
|
|
|
32,042 |
|
|
|
30,283 |
|
|
Net income before non-controlling interest
|
|
|
64,766 |
|
|
|
59,106 |
|
|
|
63,288 |
|
|
|
65,558 |
|
|
|
60,342 |
|
|
Net income (loss) attributable to non-controlling interest
|
|
|
(8 |
) |
|
|
274 |
|
|
|
(979 |
) |
|
|
2,036 |
|
|
|
209 |
|
|
Net income attributable to BOK Financial Corp.
|
|
$ |
64,774 |
|
|
$ |
58,832 |
|
|
$ |
64,267 |
|
|
$ |
63,522 |
|
|
$ |
60,133 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.95 |
|
|
$ |
0.86 |
|
|
$ |
0.94 |
|
|
$ |
0.93 |
|
|
$ |
0.88 |
|
|
Diluted
|
|
$ |
0.94 |
|
|
$ |
0.86 |
|
|
$ |
0.94 |
|
|
$ |
0.93 |
|
|
$ |
0.88 |
|
|
Average shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
67,901,722 |
|
|
|
67,685,434 |
|
|
|
67,625,378 |
|
|
|
67,605,807 |
|
|
|
67,592,315 |
|
|
Diluted
|
|
|
68,176,527 |
|
|
|
67,888,950 |
|
|
|
67,765,344 |
|
|
|
67,880,587 |
|
|
|
67,790,049 |
|
PART II. Other Information
Item 1. Legal Proceedings
See discussion of legal proceedings at Note 7 to the Consolidated Financial Statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended March 31, 2011.
|
Period
|
|
Total Number of Shares Purchased2
|
|
|
Average Price Paid per Share
|
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1
|
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans
|
|
|
January 1, 2011 to January 31, 2011
|
|
|
23,575 |
|
|
$ |
55.39 |
|
|
|
– |
|
|
|
1,215,927 |
|
|
February 1, 2011 to February 28, 2011
|
|
|
3,909 |
|
|
$ |
51.34 |
|
|
|
– |
|
|
|
1,215,927 |
|
|
March 1, 2011 to March 31, 2011
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,215,927 |
|
|
Total
|
|
|
27,484 |
|
|
|
|
|
|
|
– |
|
|
|
|
|
|
1
|
On April 26, 2005, the Company’s board of directors authorizing the Company to repurchase up to two million shares of the Company’s common stock. As of March 31, 2011, the Company had repurchased 784,073 shares under this plan.
|
|
2
|
The Company routinely repurchases mature shares from employees to cover the exercise price and taxes in connection with employee stock option exercises.
|
Item 6. Exhibits
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statement of Earnings, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text*
Items 1A, 3, 4 and 5 are not applicable and have been omitted.
* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934
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 10, 2011
/s/ Steven E. Nell
Steven E. Nell
Executive Vice President and
Chief Financial Officer
/s/ John C. Morrow
John C. Morrow
Senior Vice President and
Chief Accounting Officer
- 92 -