content_image/23074.jpg
## Assessment of Financial Condition 

## Securities Portfolio 

Securities aré identified as either investment or available for sale based upon asset/liability management strategies, liquidity and profitability objectives and regulatory requirements. Investment securities, which consist primarily of Oklahoma municipal bonds and other short-term instruments, are carried at cost, adjusted for amortization of premiums or accretion of discounts. Available for sale securities, which may be sold prior to maturity based upon asset/liability management decisions, are carried at fair value. Unrealized gains or losses on available for sale securities, less deferred taxes, are recorded as accumulated other comprehensive income in stockholders’ equity. 

During 2001, the amortized cost of available for sale securities increased by $682 million. Mortgage-backed securities increased by $779 million to $3.3 billion. 

Approximately $619 million of the increase in mortgage- backed securities reflected BOK Financial’s strategy of fully utilizing available capital resources by borrowing funds in the capital markets as previously discussed in the Net Interest Revenue section of this report. Additionally, mortgage-backed securities designated as an economic hedge of the mortgage servicing rights increased $159 

million to $362 million. At December 31, 2001, available for sale securities with an amortized cost of $1.3 billion were pledged as collateral for repurchase agreement borrowings. 

BOK Financial realized net gains from securities sales of $30.6 million in 2001 and $2.1 million in 2000. These amounts included net gains from securities designated as hedges of the mortgage servicing portfolio of $12.8 million in 2001 and $5.3 million in 2000. The increase in net realized gains reflected the active management of the securities portfolio as interest rates declined in 2001. Net unrealized gains in the securities portfolio increased from $5.4 million at December 31, 5000 to $9.6 million at December 31, 2001. The expected duration of the mortgage-backed securities portfolio extended to approximately 3.0 years during 2001: Management currently intends to reduce the expected duration of the mortgage-backed securities portfolio to approximately 2.8 years. Additional information about the securities portfolio is presented in Note 3 to the Consolidated Financial Statements. 

<img src='content_image/23074.jpg'>

