THE PLACES OF THE STORY
Since 1991, BOK Financial Corporation has evolved from a bank committed to
unparalleled local service in one state to an integrated financial services
company dedicated to relationship banking region-wide. As always, we remain
resolute in our devotion to creating value for our shareholders, clients,
employees and communities. This is our story ....
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CREATING VALUE
THE BOK FINANCIAL CORPORATION STORY
In an age of interminable change, our story remains the same ... 14 years of
record earnings and superior returns for our investors. As we enter our 15th
year, BOK Financial Corporation remains committed to growth by offering our
clients superior products and services with a steadfast focus on providing
long-term value for our shareholders.
In 2004, BOK Financial delivered record earnings, including net income of
$179 million, or $2.68 per share, an increase of 13 percent over 2003. Our
growth continues to be supported by revenue diversity and geographic expansion.
We are enhancing our reach with the planned acquisition of Valley Commerce Bank
in Phoenix, one of the country's most dynamic markets. With this new entry, we
will have full-service banks in six states and offices in 10. Revenue diversity
helped us overcome the impact of the slowdown in mortgage activity, which
accounted for 18 percent of net income in 2003 but only 1 percent in 2004.
Non-interest revenue from fees and commissions constituted 42 percent of revenue
in 2004 compared with 34 percent for peer banks with assets half to double ours.
Coupled with this is a devotion to improving productivity and efficiency. Our
efficiency ratio of 60 percent compares favorably to peers with a similar mix of
fee revenue. Our credit quality remains very strong, and our success is
bolstered by a commitment to strong local leadership, prudent expense management
and retention and recruitment of accomplished local bankers.
On the following pages, we tell our story. But first, we would like to
acknowledge the dedication of our 3,500 employees. Their commitment to
excellence and achievement with integrity enables BOK Financial to provide
quality relationship banking and financial services that we believe are the best
in the markets we serve. Our employees will continue to provide sophisticated
products and services with a commitment to old-fashioned banking that prizes
close, personal attention and a dedication first and foremost to meeting client
needs.
As we tell our story--and live it--we at BOK Financial will always value
our people, value our clients and remain committed to the communities we serve.
All the while, we will work to generate optimal long-term returns for our
shareholders. And with that, this is our story... it's about creating lasting
value, both now and into the future.
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CREATING VALUE
FOR INVESTORS, CLIENTS AND COMMUNITIES
In 1991, BOK Financial Corporation was a $2 billion bank focused on a single
state. Today, we are a diversified, $15 billion regional financial services
company with a presence in the Southwest, Midwest and the Rockies. Our 20
full-service banking locations have grown to 149 locations in six states, plus
broker-dealer offices in 10. Our emergence as a regional financial force for
businesses, consumers, institutions and investors has provided an annual return
of 28 percent for our shareholders since our founding. A $10,000 investment in
BOK Financial in 1991 was worth $248,773 at the end of 2004.
That's our story. It's about creating value--for our investors, clients,
employees and communities--through a commitment to principles, strategies and
structure that promote prudent growth while keeping a vigilant eye on providing
the best, most responsive service available. Although our results speak for
themselves, we are not content. We continue to enhance the value of our
franchise for all our stakeholders. We are the largest bank in our original
market and have enjoyed solid growth corporate-wide. Regionally, we are not bent
on being the biggest bank, just one that offers the best service in the areas we
choose to compete. We have grown through guidance from a simple vision--to
provide sophisticated products competitive with the largest banks but delivered
with personal, responsive client service characteristic of a local bank putting
the needs of customers first. Our vision is backed by strategies that foster
growth.We aim to:
- - leverage our leadership position in Oklahoma,
- - expand into growing metropolitan markets in the region,
- - diversify and grow non-interest revenue, and
- - focus on opportunities to serve the commercial middle market, small
business and retail clients.
Supporting our strategies is a consistent commitment to credit quality in a
diversified loan portfolio. We also continue to introduce new technologies that
enhance our products and services, creating operating efficiencies as part of
our approach to sensible expense management. While we endeavor to hold down
business costs, our chief aim is to improve client service and maximize
opportunities to generate new revenue.
Our vision and strategies are reinforced by a business model that fosters
communication among our relationship officers across business lines to fully
meet each client's needs. In doing so, we make the most of opportunities before
us and avoid the isolation that shortchanges clients with diverse financial
needs. Our broad, inclusive focus is built on the experience of top executives
averaging more than 25 years of industry experience and 13 years on average at
our company. The percentage of company ownership
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personally maintained by our board of directors is among the highest in the
nation, which helps create strong alignment between management and shareholders.
Executives oversee three divisions dedicated to client care:
- - Consumer and Wealth Management encompasses Consumer, Trust, Private
Financial Services, Mortgage, Community Development and Investment
Services;
- - Oklahoma/Arkansas Commercial includes Commercial, Treasury Services, and
the electronic funds business in our largest Commercial Banking segment;
and
- - Regional Banking, our fastest growing segment, has oversight of banking
activities in Arizona, Colorado, New Mexico and Texas.
Through all our efforts, we stand first and foremost behind local banks
managed by local bankers and local boards of directors who value attention to
client satisfaction and community service through six national affiliate banks
and our broker-dealer. We are:
- - Bank of Albuquerque (Albuquerque and Santa Fe)
- - Bank of Arkansas (Fayetteville and Bentonville)
- - Bank of Oklahoma (Oklahoma City, Tulsa and nine communities)
- - Bank of Texas (Dallas-Fort Worth, Greater Houston and Sherman)
- - Colorado State Bank and Trust (Denver)
- - Valley Commerce Bank (Phoenix and Scottsdale) - closing anticipated April
2005
- - BOSC, Inc. (offices in 10 states)
Our values are aimed at superior client service, our strategies foster
growth and our operational diversity and organization enhance efficiency and
communication. Our attributes bolster a local focus on service quality and
client fulfillment.
Ultimately, our goal is to produce exceptional growth in earnings and
long-term shareholder returns. We plan on keeping it that way, so our story will
remain the same--a chronicle of creating lasting value.
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CREATING VALUE
THROUGH DIVERSE REVENUE STREAMS
For BOK Financial, value equals diversity. Our story is about competing
effectively in any economic environment with the help of diverse sources of
non-interest revenue that fuel growth. Our results?
- - 12.3 percent annual growth over the last five years in fees and commissions
from trust, mortgage, transaction cards, brokerage and trading, and deposit
accounts.
- - Non-interest revenue accounting for 42 percent of total revenue compared
with 34 percent for peer banks.
- - The potential for greater incremental growth in regional markets where our
fee and commission generating lines are relatively new.
Armed with product diversity and innovation, our Trust Division contributes
to this non-interest revenue growth. In 2004, overall Trust revenue grew 26
percent-including 16 percent internal growth-from first-rate services for
retirement and institutional benefits, personal trust, estate planning, mutual
fund advice, corporate trust and trust oil and gas services. In fact, our trust
oil and gas services, which include managing mineral properties for clients and
overseeing assets outsourced from other financial institutions, are considered
among the best nationally. Other cutting-edge products and services garnering
national attention include our self-directed 401 (k) plan utilized by some of
the nation's largest law firms, as well as smaller professional corporations in
which principals want the flexibility to personally select from a broad universe
of investment options. In our mutual fund family, the American Performance
Funds, our short-term income fund is among the top performers in its category
over the last five-year period, according to Lipper. In addition to increased
revenue from new trust and investment products, we are benefiting from
consolidation of our trust, investment management and affluent market brokerage
sales groups. This provides one point of client contact for our full range of
investment services and ensures the most comprehensive service and personal
attention available in any market.
Growth in our Consumer Division continues to be fueled by our commitment to
add full-service locations, utilize innovative marketing approaches and
constantly improve client service through our Perfect Banking initiative. Our
approach has generated:
- - fee growth of 20 percent in 2004 and 21 percent over five years, based on a
compound annual growth rate,
- - 12 percent growth in the number of checking accounts in 2004, and 15
percent annually over five years,
- - overall deposit growth of 15 percent in 2004 and 11 percent annually over
the five-year period.
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While the number of our full-service locations has grown seven-fold since
our founding, we maintain a concerted program of finding new expansion
opportunities for our branch network in all our markets. Last year, through new
in-store and traditional branches, we added 12 locations that appeal to clients
appreciative of service with a personal touch.
At our broker-dealer, we continue to experience fee and commission growth
through superior performance by financial consultants with experience seven
times the industry average. The firm offers retail brokerage and institutional
sales, as well as public finance services that rank first in our original
market. We have 165 registered representatives in 10 states. But we are about
performance, not just presence. Our broker-dealer has experienced compound
annual growth in revenue of 20 percent over the past five years. Our
broker-dealer investment revenue per million dollars of deposits is three times
the industry average. To build on our accomplishments, we have introduced
financial risk management services that allow our clients to hedge energy,
interest rate and foreign exchange risks. We have also expanded corporate and
mortgage-backed securities capabilities.
Our electronic funds transfer network, TransFund, continues to experience
revenue growth--14 percent annually over five years--as an ATM network operator,
merchant payment service provider and check card processor. We began with a
single ATM in 1976 and are now the nation's 11th largest EFT network, solely
created by internal growth. TransFund has:
- - almost 1,400 ATMs,
- - 340 financial institution clients in 10 states,
- - 1.7 million cardholders, and
- - 149 million debit card transactions a year.
In Treasury Services, we provide complete deposit services to commercial
clients. Our mortgage company remains a valuable contributor to non-interest
revenue, and our International Department generates a growing portion of fee
income through a broad range of products and services. There are substantial
non-interest revenue growth opportunities throughout our regional markets where
we are still a relatively recent arrival. In our original market, non-interest
revenue was 49 percent of total revenue in 2004. Elsewhere, non-interest revenue
represents just 31 percent of the total, but has grown 40 percent annually over
the past five years. We plan to continue building value for our investors as we
expand our fee services into new markets.
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CREATING VALUE
IN A GROWING, DIVERSE REGION
Our decision in 1996 to expand outside our original market into thriving
metropolitan areas in nearby states signaled the beginning of a new chapter in
our company's history. Since we ventured into neighboring states almost nine
years ago, we have been transformed into a financial services company creating
value and strong returns for shareholders through the inherent diversity of our
markets. As a result, we are less vulnerable to local economic downturns.
More than half of BOK Financial's revenue and profitability growth now
comes from regional banks that provide a relationship-driven alternative for
middle market companies, small business owners, trust clients, investors and
consumers weary of impersonal banking. Our banks are making this difference for
our clients and shareholders in some of the nation's fastest-growing markets
with new opportunities for businesses and rising incomes for residents. U.S.
Census estimates and data from Dun & Bradstreet reveal abundant growth
opportunity. For example:
- - The Dallas-Fort Worth Metroplex is home to almost 5.7 million people and
more than 240,000 locally based businesses. Included are 39 Fortune 1000
headquarters and more than 3,700 middle market companies with revenue from
$10 million to $750 million.
- - Greater Houston includes 5 million residents and 191,000 businesses. Middle
market companies number more than 3,200. The nation's fourth largest city
is home to 41 Fortune 1000 headquarters.
- - The Phoenix area has almost 3.4 million residents and more than 110,000
locally based businesses. The nation's sixth largest city and its suburbs
include more than 1,600 middle market companies and 14 Fortune 1000
headquarters.
- - More than 2.5 million people live in metro Denver, where employers include
more than 100,000 businesses. Among the employers are 1,500 middle market
companies and 15 Fortune 1000 headquarters.
Even small gains in market share are significant in these vibrant markets.
For example, a 1 percent increase in deposit market share in all of Oklahoma
represents $443 million in additional deposits. A 1 percent increase in Houston
is more than twice that amount.
Our formula for regional expansion is simple: We buy well-managed local
banks to gain access to attractive markets. Then we focus on increasing revenue
by hiring talent to enhance competitiveness, adding locations and broadening
product offerings. While our operations and administrative functions are
consolidated system-wide, our client service and marketing functions are handled
locally by bankers who know their markets best. We recruit top management with
deep roots in the community, proven business development and credit skills, and
demonstrated loyalty from clients and employees. We prize
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high-quality franchises that we can develop by introducing new products and
services. The planned addition this year of Valley Commerce Bank, with locations
in Phoenix and Scottsdale, follows our expansion in 2003 into Denver with the
acquisition of Colorado State Bank and Trust.
While we remain open to attractive opportunities region-wide, our focus is
on ensuring the success of each acquisition by building a strong local bank that
generates new business and long-term value. An example of our successful
approach is Bank of Albuquerque. In December 1998, we acquired 17 branches that
were part of a divestiture from the merger of two large national banks. Included
were consumer-focused locations but little management or back office operations.
From that basic beginning, we quickly built the bank into the fastest growing
financial institution in the market. To accomplish quality growth, we:
- - invested heavily in new talent, recruiting principally from the larger
banks in the market,
- - added commercial lending capabilities, including a solid middle market
team,
- - introduced our full array of fee-based products and services,
- - included our broad base of consumer offerings, and
- - launched trust and private financial services.
The results are a study in success. Over the past six years revenue has
increased from $25 million to $58 million, a compound annual growth rate of more
than 18 percent. We are now the third largest bank in the Albuquerque market.
In 2004, our banks outside of Oklahoma accounted for 33 percent, or $58.6
million, of consolidated net income. Earnings for the regional banks have grown
28 percent annually for the last five years. One of the factors contributing to
this growth is an expanding number of locations.
Bank of Texas marked its 37th location with the opening of a new
full-service location on the west side of Fort Worth's central business district
in 2004. This is the bank's first full-service office in the growing city and a
continuation of its expansion across North Texas.
We continue to anticipate growth in the years ahead in regional markets
with diverse economies and new possibilities for us, our clients and our
shareholders.
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CREATING VALUE
WITH QUALITY LOANS AND LEADERSHIP
In banking, loans and credit quality are integral to value. Our commitment to be
top lenders with sound credits in a diverse portfolio has helped generate
consistent loan growth and a steady increase in net interest revenue in stable
markets. We are committed region-wide to serving middle market and small
business clients through strong local account managers with the flexibility to
accommodate clients. We support our staff with centralized credit oversight that
includes a strong commitment to quality loans. How do we measure our success?
- - By 9.5 percent compound annual growth rate for loans over the past five
years compared with 7.0 percent for peer banks,
- - by 12.9 percent annual revenue growth in corporate banking since 2000, and
- - by net charge-offs that average 31 basis points over the past five years.
Our entire loan portfolio--$7.9 billion at year-end 2004--is bolstered by
quality service for energy clients, manufacturers and commercial real estate
developers, among others. We also allow our clients to lock in cash flows
through our energy hedging program and offer interest rate derivatives that
allow clients to quickly and efficiently change the interest rate
characteristics of their debt.
Our credit standards, which are applied consistently across the region, are
among the most stable in the industry. Attention to the value and quality of our
loan portfolio and prudent management of our credits has been developed through
experiences in the best and worst of economic times.
While we have successfully applied our expertise regionally, we are not
satisfied to rest on our accomplishments in Oklahoma. We are the premier bank in
the state, but we continue to build on our leadership in every segment.
Initially we benefited from disruptions created by mergers and consolidations,
but as consolidation slows, our approach continues to generate new growth.
In 1998, we had 9.8 percent of statewide deposits, which was 3 percentage
points higher than our nearest competitor. Through ongoing growth initiatives,
our statewide deposit share has increased to 13.0 percent, which is more than
twice the market share of our next largest competitor. Industry statistics show
that we are also the leader in commercial and consumer banking, mortgage
origination, trust and ATM/EFT. Our ability to compete against small community
banks and large national banks in Oklahoma gives us confidence we can compete
well in our regional markets. It is hard to win on the road if you cannot win at
home. Our growth in Oklahoma, combined with our regional expansion, is a strong
foundation as we strive to constantly add value.
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EPILOGUE:
VALUE THROUGH A VISION
In 2005, we continue to focus on creating value through superior performance for
our shareholders. We plan to add products and services in Phoenix, which abounds
with growth prospects among middle market companies, as well as small businesses
served well by Valley Commerce. This planned acquisition includes a full-service
location in the upscale Kierland section of Scottsdale, where we plan to
introduce trust and investment services to affluent clients and market private
financial services.
We are also continuing our strategic approach to branch expansion with the
addition of eight new locations. These include six traditional branches in
Dallas, Houston, Denver, Albuquerque, Bentonville and Oklahoma City. We also
plan to open new supermarket locations in the Dallas suburb of Plano and in the
Tulsa area.
We continue to aggressively reinvest in new technology, products and
services. For example, all our markets will benefit from new offerings in
Treasury Services and Retirement & Institutional Trust. Treasury Services is
introducing an imaged wholesale lockbox project that gives clients quicker
access to records. We are also enhancing fraud protection, introducing
additional check image capabilities and implementing cutting-edge clearing
solutions.
Retirement & Institutional Trust is already reaping benefits from our new
managed allocation portfolios. We are also offering an "Autopilot" 401(k)
program for plan sponsors that makes it easy to save for retirement by
automatically enrolling eligible participants, increasing participant deferral
contributions annually and investing and rebalancing plan accounts based on
targeted retirement dates. New offerings also will reduce employers' workloads
through a very successful program developed jointly by Retirement &
Institutional Trust, BOSC and our American Performance Fund family.
These enhancements will contribute to the diversity of our fee and
commission generating products and services. We will also introduce new lending
capabilities through the initial thrust of a region-wide expansion of indirect
auto lending and floor plan lending for auto dealers.
And while we continue to develop our revenue base and expand commercial and
consumer banking through internal growth, we will look for new acquisitions to
enhance our positions in existing markets and enter growing metropolitan areas
where our products and services can make a difference for clients seeking
relationship banking.
Despite our accomplishments over the past 14 years--indeed, because of
them--we will not rest. Through our vision for success, we remain determined to
stay on course and care for the long-term needs of our shareholders by creating
value that lasts and keeps on growing, for them, for our clients, our employees
and our communities.
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Photograph shown and accompanied by the caption, "BOK Financial's focus on
building long-term value for investors, clients and communities has produced
results: a $10,000 investment in 1991 was worth $248,773 at the end of 2004."
Photograph shown and accompanied by the caption, "Performance off the court has
led to attention on it for Bank of Texas. A partnership with the Houston Rockets
includes a check card logo of the two-time NBA champion."
Photograph shown and accompanied by the caption, "Bank of Texas has emerged as a
strong financial institution in greater Houston through internal growth and
acquisitions in the nation's fourth largest city."
Photograph shown and accompanied by the caption, "Opportunity coupled with
quality local banking and a commitment to value. That's how Bank of Albuquerque
has emerged as a formidable competitor against some of the nation's largest
banks."
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Photograph shown and accompanied by the caption, "The opening in 2004 of a
downtown branch in Fort Worth marked Bank of Texas' 37th location statewide and
a continuation of its expansion across the thriving Dallas-Fort Worth Metroplex.
Additional locations are planned for 2005."
Photograph shown and accompanied by the caption, "An expanded offering of
products and services for middle market commercial, trust and private banking
clients is fueling growth in Denver at Colorado State Bank and Trust."
Photograph shown and accompanied by the caption, "Bank of Arkansas offers
clients the best of both worlds--personal relationship banking and sophisticated
products and services competitive with the largest institutions in the market."
Photograph shown and accompanied by the caption, "A commitment to convenient
banking throughout BOK Financial's markets has led to the dedication of 48
in-store locations and plans for more in 2005."
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Photograph shown and accompanied by the caption, "Adding value to the community
includes a commitment to improving the quality of life. In Houston, Bank of
Texas sponsored a benefit for Houston-area youth sports leagues that provided
much needed field space for thousands of youngsters."
Photograph shown and accompanied by the caption, "Community is an inclusive word
at BOK Financial. In addition to sponsoring multicultural events, Bank of
Albuquerque offers the best service in the market as a part of an initiative to
serve the Hispanic population."
Photograph shown and accompanied by the caption, "Bank of Oklahoma's sponsorship
of the Tulsa Run is a part of an ongoing commitment to add value to the
communities we serve."
Photograph shown and accompanied by the caption, "Mark Funke, president of Bank
of Oklahoma in Oklahoma City, symbolizes the company's commitment to local
leadership and community banking. Mark and his team continue to build on a
reputation as the premier commercial bank in the market."
Photograph shown and accompanied by the caption, "A strong community spirit is
demonstrated throughout our markets by outreaches such as a drive that helped
collect more than 17,000 books to improve literacy for children and adults."