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## Regional Banks 

Regional banks include Bank of Texas, Bank of Arkansas and Bank of Albuquerque. Each of these banks provides a full range of corporate and consumer banking, treasury services and retail investments in its respective market..Small! businesses and middle-market corporations are the regional banks’ primary customer focus. 

Regional banks contributed $31:7 million or 27% to consolidated ‘net income in 2001 compared to $21.7 million or 22% in 2000. Total revenue for. 2001 increased $40.5 million compared to: 2000, while operating expenses increased $23.0-million. The increase in operating expenses included a $5.0 million increase in intangible amortization expense. 

BOK. Financial's operations in Texas, New Mexico and Arkansas contributed $21.0 million, $8.2 million, and $2.5 million, respectively, to consolidated net income for 2001. This compared to net income of $16.1 million, $4.1 million, and $1.5 million for 2000. 

## Other Operating Expense 

Other operating expense totaled $368.8 million for 2001 compared to $302.8 million in 2000. Excluding a $15.6 million provision for impairment of mortgage servicing rights in 2001 compared to $2.9 million in 2000 and $20.7 million of operating expenses from the CNBT acquisition in 2001, other operating expense increased $32.5 million or 11%. The following discussion excludes CNBT operating expenses (most notably personnel of $6.3 million, net occupancy and equipment of $1.7 million and amortization of intangible assets of $7.4 million) to improve comparability. 

Personnel costs increased $11.4 million or 8%. Regular compensation (including overtime and temporary assistance) and benefits increased $9.3 million or 7%. Average staffing ona full time equivalent (“FTE”) basis increased by 141 employees or 5% while average compensation expense per FTE increased by 3%. Incentive compensation increased by $2.0 million or 10% compared to 2000 due to growth in revenue over pre-determined targets. 

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Average equity assigned to the regional banks included both an amount based on management’s assessment of risk and an additional amount based upon BOK Financial’s investment in these entities. Management excludes the amortization of all intangible assets when evaluating the performance of the regional banks on a tangible return basis. 

Professional fees for 2001 increased $3.4 million or 36%, which included $1:5 million in consulting fees for public finance business at BOSC, Inc. and $320 thousand for the Perfect Banking sales and service program. Net occupancy and equipment expense for 2001 increased $5.6 million or 16% due primarily to a $3.2 million increase in depreciation expense. This increase reflects additional investments in facilities and technology improvements over the past two years. Data processing and communications increased $4.4 million or 13% primarily in transaction card servicing and external processing due to increased volumes. Mortgage banking costs increased $8.0 million or 36% due primarily to amortization of mortgage servicing rights, which is caused by an increase in loan prepayments. A provision for impairment of mortgage servicing rights of $15.6 million was taken during 2001 due primarily to the interest rate and prepayment environment. 

