Notes to Consolidated Financial Statements (1) Significant Accounting Policies Basis of Presentation Cash Equivalents Securities Nature of Operations Use of Estimates Acquisitions Derivative Instruments The Consolidated Financial Statements of BOK Financial Corporation (“BOK Financial’) have been prepared in conformity with accounting principles generally accepted in the United States, including general practices of the banking industry: The-consolidated financial statements include the accounts of BOK Financial and its subsidiaries, principally Bank of Oklahoma, N.A: and its subsidiaries (“BOX”), Bank of Texas, N.A:, Bank of Arkansas, N.A:, Bank of Albuquerque, N.A. and BOSC, Inc. Certain prior year amounts have been reclassified to conform to current year classifications. Due from banks, funds sold (generally federal funds sold for one-day periods) and resell agreements (which generally mature within one to 30 days) are considered cash equivalents. Securities are identified as trading, investment (held to maturity) or available for sale at the time of purchase based upon the intent of management, liquidity and capital requirements, regulatory limitations and other relevant factors. Trading securities, which are acquired for profit through resale, are carried at market value with unrealized gains and losses included in current period earnings. Investment securities are carried at amortized cost. Amortization is computed by methods that approximate level yield and is adjusted for changes in prepayment estimates. Investment securities may be sold or transferred to trading or available for sale classification in certain limited circumstances specified in generally accepted accounting principles. Securities identified as available for sale are carried at fair value. Unrealized gains and losses are recorded, net of deferred income taxes, as accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sales of securities are based upon the amortized cost of the specific security sold. Available for sale securities are separately identified as pledged to creditors if the creditor has the right to sell or repledge the collateral. BOK Financial, through its subsidiaries, provides a wide range of financial services to commercial and industrial customers, other financial institutions and consumers throughout Oklahoma, Northwest Arkansas, Dallas and Houston, Texas metropolitan areas and New Mexico. These services include depository and cash management; lending and lease financing; mortgage banking; securities brokerage, trading and underwriting; and personal and corporate trust. Preparation of BOK Financial’s consolidated financial statements requires management to make estimates of future economic activities, including interest rates, loan collectibility and prepayments and cash flows from customer accounts. These estimates are based upon current conditions and information available to management. Actual results may differ significantly from these estimates. Assets and liabilities acquired by purchase are recorded at fair values on the acquisition dates. Intangible assets are amortized using straight-line and accelerated methods over the estimated benefit periods.. These periods range from 7 to 25 years for goodwill and other identifiable intangible assets and 7 to 10 years for core deposit intangibles. The net book values-of intangible assets are evaluated for impairment when economic conditions indicate an impairment may exist. These conditions would include an ongoing performance history and a forecast of anticipated performance that is significantly below management’s expectations for acquired entities. Impairment would be determined by a comparison of the fair value of assets and liabilities of the acquired entity plus an estimate of current market premiums paid for similar entities. The Consolidated Statements of Earnings include the results of purchases from the dates of acquisition. The financial statements of companies acquired in pooling-of- interests transactions are combined with the Consolidated Financial Statements of BOK Financial at historical cost as if the mergers occurred at the beginning of the earliest period presented. Derivative instruments, primarily interest rate swaps and forward sales contracts, are used as part of.an interest rate risk management strategy. Interest rate swaps modify the interest income and expense on certain long-term, fixed rate assets and liabilities. Amounts payable.to.or receivable from the counterparties: are reported in interest income and expense using the accrual method. The fair value of the interest rate swaps is included in other assets or liabilities. Changes in the fair value of interest rate swaps are included in other operating revenue. BOK Financial adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) on January 1, 2001. The purchase or sale of securities is recognized on a trade date basis. A net receivable or payable is recognized for subsequent transaction settlement. BOK Financial will periodically commit to purchase or sell to-be-announced (“TBA”) mortgage-backed securities. These commitments are not reflected in BOK Financial’s balance sheet until settlement date, in accordance ‘with the accounting guidance of the Comptroller of the Currency. However, any losses from TBA securities sales are recognized as of the commitment date.