<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 1, 1998
---------------
BANCFIRST CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OKLAHOMA 0-14384 73-1221379
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
101 NORTH BROADWAY, SUITE 200, OKLAHOMA CITY, OKLAHOMA 73102
------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405)270-1086
-------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
The financial statements AmQuest Financial Corp. required by this
item are provided as follows:
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Report of Independent Public Accountants 4
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Consolidated Statements of Financial Condition as of
September 30, 1998, December 31, 1997 and December 31, 1996 5
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Consolidated Statements of Income for the Nine Months Ended
September 30, 1998 and 1997, and for the Years Ended
December 31, 1997, 1996 and 1995 6
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Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995 7
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Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997, and for the Years Ended
December 31, 1997, 1996 and 1995 8
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Notes to Consolidated Financial Statements 10
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(b) Pro forma financial information.
The pro forma financial information required by this item is
provided as follows:
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Unaudited Pro Forma Consolidated Condensed Balance Sheet
as of September 30, 1998 31
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Unaudited Pro Forma Consolidated Condensed Statement of
Income and Comprehensive Income for the Nine Months Ended
September 30, 1998 32
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Unaudited Pro Forma Consolidated Condensed Statement of
Income and Comprehensive Income for the Nine Months Ended
September 30, 1997 33
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Unaudited Pro Forma Consolidated Condensed Statement of
Income and Comprehensive Income for the Year Ended
December 31, 1997 34
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2
<PAGE>
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Unaudited Pro Forma Consolidated Condensed Statement of
Income and Comprehensive Income for the Year Ended
December 31, 1996 35
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Unaudited Pro Forma Consolidated Condensed Statement of
Income and Comprehensive Income for the Year Ended
December 31, 1995 36
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Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements 37
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(c) Exhibits.
EXHIBIT
NUMBER EXHIBIT
------- -------
2.1 Merger Agreement dated May 6, 1998 between BancFirst
Corporation and AmQuest Financial Corp. (filed as Exhibit
2.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 and incorporated herein by
reference).
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of AmQuest Financial Corp.:
We have audited the accompanying consolidated statements of financial condition
of AmQuest Financial Corp. (an Oklahoma corporation) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmQuest Financial
Corp. and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
January 23, 1998 (except with
respect to the matter discussed
in Note 15, as to which the
date is March 2, 1998)
4
<PAGE>
AMQUEST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
September 30, -----------------------
ASSETS 1998 1997 1996
------ --------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 16,235 $ 27,735 $ 19,794
Interest-bearing deposits in other banks 34 21 931
Federal funds sold 19,956 15,662 25,276
Debt and equity securities:
Available-for-sale 72,778 74,329 57,597
Held-to-maturity 88,493 100,079 104,724
Equity, at cost 2,350 2,272 1,834
--------- --------- ---------
Total debt and equity securities 163,621 176,680 164,155
--------- --------- ---------
Loans receivable, net of allowance for loan losses of $2,796 at
September 30, 1998, $3,067 and $2,794 at December 31, 1997
and 1996, respectively 304,538 332,722 311,357
Premises and equipment, net 8,826 9,222 5,350
Accrued interest receivable 4,494 5,017 4,885
Intangibles, net of accumulated amortization of $6,312 at
September 30, 1998, $5,685 and $5,045 at December 31, 1997
and 1996, respectively 5,796 6,499 3,056
Other real estate and assets owned, net 402 431 380
Other assets 1,827 3,085 1,142
--------- --------- ---------
Total assets $ 525,729 $ 577,074 $ 536,326
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 65,593 $ 85,724 $ 68,151
Savings, money market and NOW 160,602 183,025 157,547
Time 221,213 234,052 241,651
--------- --------- ---------
Total deposits 447,408 502,801 467,349
Securities sold under agreements to repurchase and federal
funds purchased 12,732 11,785 12,327
Advances from the Federal Home Loan Bank of Topeka 5,500 6,000 6,000
Accrued interest, taxes and other liabilities 4,749 5,658 3,869
--------- --------- ---------
Total liabilities 470,389 526,244 489,545
--------- --------- ---------
Stockholders' equity:
Common stock, par value $1.67 per share, 6,000,000 shares
authorized and 3,604,296 shares issued 6,019 6,019 6,019
Capital surplus 538 219 180
Retained earnings 53,217 49,569 45,693
Net unrealized gain on investment securities
available-for-sale, net of tax of $319 in 1998, $126 in 1997 520 230 60
and $36 in 1996
Less- Cost of treasury stock of 417,840 shares in 1998, 476,020
shares in 1997 and 478,820 shares in 1996 (4,954) (5,207) (5,171)
--------- --------- ---------
Total stockholders' equity 55,340 50,830 46,781
--------- --------- ---------
Total liabilities and stockholders' equity $ 525,729 $ 577,074 $ 536,326
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
AMQUEST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- ----------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest and dividend income:
Loans, including fees $ 22,406 $ 22,339 $ 29,870 $ 26,925 $ 25,455
Debt securities-
Available-for-sale 3,582 3,020 4,047 3,717 3,121
Held-to-maturity 4,473 4,748 6,372 6,742 6,887
Federal funds sold and other 940 889 1,140 659 500
-------- -------- -------- -------- --------
Total interest and dividend income 31,401 30,996 41,429 38,043 35,963
-------- -------- -------- -------- --------
Interest expense:
Deposits 12,369 13,350 17,740 16,768 16,117
Other borrowings 670 670 913 592 474
-------- -------- -------- -------- --------
Total interest expense 13,039 14,020 18,653 17,360 16,591
-------- -------- -------- -------- --------
Net interest and dividend income 18,362 16,976 22,776 20,683 19,372
Provision for loan losses 382 1,263 1,624 595 650
-------- -------- -------- -------- --------
Net interest and dividend income after
provision for loan losses 17,980 15,713 21,152 20,088 18,722
-------- -------- -------- -------- --------
Noninterest income:
Service charges on deposits 1,785 1,710 2,340 2,076 2,091
Trust fees 1,093 1,144 1,626 1,423 1,273
Net securities gains 12 1 1 31 28
Other 630 658 954 718 771
-------- -------- -------- -------- --------
Total noninterest income 3,520 3,513 4,921 4,248 4,163
-------- -------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits 8,233 7,292 9,797 9,081 8,100
Depreciation and amortization 1,317 1,160 1,602 1,235 1,205
Professional and other services 956 914 1,229 952 913
Supplies and postage 589 725 914 799 726
Occupancy 682 625 868 816 789
Data processing 525 609 806 682 650
Advertising and business development 242 374 516 489 535
Equipment rental and maintenance 250 264 358 342 399
Insurance 97 115 116 145 160
Deposit insurance assessments 45 46 61 3 481
Other 2,078 1,508 3,294 1,773 2,284
-------- -------- -------- -------- --------
Total noninterest expense 15,014 13,632 19,561 16,317 16,242
-------- -------- -------- -------- --------
Income before income tax expense 6,486 5,594 6,512 8,019 6,643
Income tax expense 2,332 1,905 2,136 2,549 2,049
-------- -------- -------- -------- --------
Net income $ 4,154 $ 3,689 $ 4,376 $ 5,470 $ 4,594
======== ======== ======== ======== ========
Per Share Data:
Basic earnings per share $ 1.31 $ 1.18 $ 1.40 $ 1.69 $ 1.34
======== ======== ======== ======== ========
Diluted earnings per share $ 1.29 $ 1.16 $ 1.37 $ 1.67 $ 1.33
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
AMQUEST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Net
Unrealized
Common Capital Retained Gain (Loss) Treasury
Stock Surplus Earnings on Securities Stock Total
----- ------- -------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $6,019 $ 90 $36,701 $(1,204) $ (823) $40,783
Net income - - 4,594 - - 4,594
Dividends paid ($0.16 per share) - - (549) - - (549)
Change in net unrealized loss on
investment securities available-
for-sale, net of income taxes - - - 1,670 - 1,670
Purchase of treasury stock
(30,786 shares) (308) (308)
Sale of treasury stock
(19,400 shares) - 23 - - 84 107
------ ---- ------- ------- ------- -------
Balance, December 31, 1995 6,019 113 40,746 466 (1,047) 46,297
Net income - - 5,470 - - 5,470
Dividends paid ($0.16 per share) - - (523) - - (523)
Change in net unrealized gain on
investment securities available-
for-sale, net of income taxes - - - (406) - (406)
Purchase of treasury stock
(321,816 shares) (4,439) (4,439)
Sale of treasury stock
(23,075 shares) - 67 - - 315 382
------ ---- ------- ------- ------- -------
Balance, December 31, 1996 6,019 180 45,693 60 (5,171) 46,781
Net income - - 4,376 - - 4,376
Dividends paid ($0.16 per share) - - (500) - - (500)
Change in net unrealized gain on
investment securities available-
for-sale, net of income taxes - - - 170 - 170
Purchase of treasury stock
(4,334 shares) - - - - (67) (67)
Sale of treasury stock
(7,134 shares) - 39 - - 31 70
------ ---- ------- ------- ------- -------
Balance, December 31, 1997 6,019 219 49,569 230 (5,207) 50,830
Net income - - 4,154 - - 4,154
Dividends paid ($0.16 per share) - - (506) - - (506)
Change in net unrealized
gain on investment securities
available-for-sale, net of
income taxes - - - 290 - 290
Sale of treasury stock
(58,180 shares) - 319 - - 253 572
------ ---- ------- ------- ------- -------
Balance, September 30, 1998 $6,019 $538 $53,217 $ 520 $(4,954) $55,340
====== ==== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
AMQUEST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED (ABSORBED) BY OPERATING
ACTIVITIES:
Net income $ 4,154 $ 3,689 $ 4,376 $ 5,470 $ 4,594
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 1,317 1,160 1,602 1,235 1,205
Provision for loan losses 382 1,263 1,624 595 650
Deferred income tax benefit 208 (140) (432) (193) (427)
Amortization of net premium on debt
securities, net 78 76 94 103 409
Stock dividends on equity securities (89) (76) (130) (98) -
Gain on sale of debt securities, net - - (1) (31) (28)
Loss on sale of other real estate and
assets owned 204 194 201 13 97
Change in accrued interest receivable 523 495 223 (285) (327)
Change in other assets 1,258 (261) (473) (160) 470
Change in accrued interest, taxes and
other liabilities (1,309) (18) 1,042 458 107
-------- -------- -------- -------- --------
Net cash provided by operating activities 6,726 6,382 8,126 7,107 6,750
-------- -------- -------- -------- --------
CASH FLOWS PROVIDED (ABSORBED) BY INVESTING
ACTIVITIES:
Proceeds from sales of debt and equity
securities-
Available-for-sale 5,476 - - 4,060 2,908
Held-to-maturity - - - 2,503 -
Equity 11 11 25 27 -
Proceeds from maturities, paydowns and
calls of debt securities-
Available-for-sale 17,107 11,648 15,803 6,122 9,222
Held-to-maturity 26,545 23,616 28,890 35,712 20,532
Purchases of debt and equity securities-
Available-for-sale (20,627) (6,929) (20,016) (10,312) (12,999)
Held-to-maturity (14,959) (24,314) (24,314) (28,889) (22,296)
Equity - (329) (333) (243) (355)
</TABLE>
8
<PAGE>
AMQUEST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- ------------------------------------
1998 1997 1997 1996 1995
--------- -------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED (ABSORBED) BY INVESTING
ACTIVITIES: (Continued)
Decrease (increase) in loans, net $ 27,234 $ 8,953 $ 12,009 $ (34,259) $ (8,202)
Capital expenditures (1,051) (432) (884) (1,030) (466)
Proceeds from disposal of other real estate
and assets owned and other assets 543 953 1,556 1,279 1,164
Proceeds from disposal of premises and
equipment 442 182 226 20 -
Cash and cash equivalents (paid) received in
bank acquisition, net of cash received - (10,229) (10,229) 16,160 -
Net cash paid in sale of branch deposits (4,150)
--------- -------- --------- --------- ---------
Net cash provided (absorbed) by
investing activities 36,571 (573) 2,733 (8,850) (10,492)
--------- -------- --------- --------- ---------
CASH FLOWS PROVIDED (ABSORBED) BY FINANCING
ACTIVITIES:
Change in deposits, net (50,678) (31,357) (12,403) 13,793 19,485
Change in securities sold under agreements to
repurchase and federal funds purchased 947 2,418 (542) 6,977 (5,150)
Proceeds from Federal Home Loan Bank of
Topeka 3,000 - - 5,000 -
Repayment of long-term debt (3,500) - - - -
Purchase of treasury stock - (69) (67) (4,439) (308)
Proceeds from sale of treasury stock 572 50 70 382 107
Dividends paid (507) (375) (500) (523) (549)
--------- -------- --------- --------- ---------
Net cash provided (absorbed) by
financing activities (50,166) (32,831) (13,442) 21,190 13,585
--------- -------- --------- --------- ---------
Net change in cash and cash
equivalents (6,869) (23,522) (2,583) 19,447 9,843
CASH AND CASH EQUIVALENTS, beginning of year
43,418 46,001 46,001 26,554 16,711
--------- -------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 36,549 $ 22,479 $ 43,418 $46,001 $ 26,554
========= ======== ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 8,547 $ 13,369 $ 20,470 $17,322 $ 16,288
========= ======== ========= ========= =========
Cash paid for income taxes $ 2,335 $ 2,035 $ 2,955 $ 2,764 $ 2,240
========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
AMQUEST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND NATURE OF OPERATIONS:
AmQuest Financial Corp. ("AFC"), an Oklahoma corporation, and its subsidiaries
(collectively referred to as the "Company") provide a full range of banking
services which include accepting deposits, lending funds and providing fiduciary
services for individual and corporate customers primarily in Duncan, Ardmore and
Lawton, Oklahoma, including the contiguous counties thereof. The Company is
subject to competition from other financial service companies and financial
institutions. The Company is also subject to the regulations of certain Federal
agencies and undergoes periodic examinations by these authorities. The
consolidated financial statements for the nine months ended September 30, 1998
and 1997, are unaudited and, in the opinion of management, include all
adjustments necessary (which consist of only normal recurring adjustments) for a
fair presentation of the financial position, results of operations and cash
flows for the interim periods. The financial information and results of
operations of the interim periods are not necessarily indicative of the
financial position and results of operations that may be obtained for a full
fiscal year. The more significant policies are described below.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation and Use of Estimates
The accompanying consolidated financial statements include the accounts of AFC
and its wholly owned subsidiaries, AmQuest Bank, N.A. ("AmQuest") and Exchange
National Bank & Trust Company ("Exchange"). Intercompany transactions and
balances have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions.
Those estimates and assumptions relate primarily to the determination of the
allowance for loan losses, the valuation of other real estate and assets owned,
the provision for income taxes and the estimated fair value of financial
instruments. Actual results could differ from those estimates. The accounting
policies for these items and other significant accounting policies are presented
below.
Certain reclassifications have been made to the 1996 and 1995 balances to
provide consistent financial statement classifications in the periods presented
herein. Such reclassifications had no effect on net income or total assets.
Debt and Equity Securities
Debt securities that management intends to use as part of its asset/liability
management strategy or that may be sold in response to changes in interest rates
or prepayment risk are classified as available-for-sale and are carried at
estimated market value with unrealized gains and losses reported as a separate
component of stockholders' equity, net of income taxes. Debt securities that
management has the ability and intent to hold to maturity are classified as
held-to-maturity and are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Amortization of premiums and accretion of discounts
are recognized in interest income using a method that approximates the effective
interest method over the period to maturity. Equity securities which do not have
a readily determinable market value are carried at cost. Gains and losses on the
sale of investment securities are included as a separate component of
noninterest income. Applicable income taxes, if any, are included in income tax
expense. The basis of the securities sold is determined by the specific
identification method for each security.
10
<PAGE>
Loans Receivable
Interest on substantially all loans is accrued based on the principal amount
outstanding. Loan fees and costs associated with the origination of loans are
not considered to be material and, therefore, are recorded as received and
incurred, respectively. Premiums and discounts on loans are amortized into
interest income using a method that approximates a level yield over the
contractual lives of the loans, adjusted for actual prepayments. Unearned
interest on consumer loans is added to the loan balance upon origination and is
amortized into income over the life of the loans using the Rule of 78th's
method.
Loans are placed on nonaccrual status when they become 90 days past due,
collateral positions are not adequate and the loan is in process of collection.
Previously accrued but uncollected interest on loans placed on nonaccrual status
is reversed unless determined to be fully collectible. Payments received on
nonaccrual loans are applied fully to principal as they are received. Upon full
collection of the principal balance or determination that future collection of
principal is probable, interest income is recognized as received.
The Company makes an assessment of loans for impairment while such loans are
classified as nonaccrual or when the loan has been restructured. When a loan
with unique risk characteristics has been identified as being impaired, the
amount of impairment is measured by the Company using discounted cash flows,
except when it is determined that the sole (remaining) source of repayment for
the loan is the operation or liquidation of the underlying collateral. In such
cases, the estimated fair value of the collateral, reduced by costs to sell,
will be used in place of discounted cash flows.
Allowance for Loan Losses
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. The adequacy of the allowance for
loan losses is periodically reviewed and approved by the Board of Directors.
However, ultimate losses may differ from these estimates. Adjustments to the
allowance for loan losses are reported in earnings in the periods in which they
become known. It is Company policy to charge off any loan or portion thereof
when it is deemed uncollectable in the ordinary course of business. Loan losses
and recoveries are charged or credited directly to the allowance.
11
<PAGE>
Premises and Equipment
Land is stated at cost. Buildings and equipment are stated at cost, less
accumulated depreciation. Depreciation is charged to operating expense and is
computed by use of both the straight-line and accelerated methods over the
estimated useful lives of the assets. Maintenance and repairs are charged to
expense as incurred, while improvements are capitalized.
Intangibles
Intangibles represent the excess of purchase prices paid over the estimated fair
values of the net assets acquired. These intangible assets are being amortized
over their estimated lives (ranging from 5 to 40 years) by the straight-line
method. Amortization expense amounted to $640,000, $424,000 and $417,000 for
1997, 1996 and 1995, respectively.
Other Real Estate and Assets Owned
Other real estate and assets owned consists primarily of real estate and other
assets acquired through loan foreclosure. These assets are carried at estimated
fair value. Estimated fair value is based on independent appraisals and other
relevant factors. At the time of acquisition, any excess of cost over estimated
fair value is charged to the allowance for loan losses. Subsequent losses on
dispositions, declines in estimated fair values and the net operating income and
expenses of such assets are charged to other noninterest expense.
Stock-Based Compensation
The Company accounts for stock options using the intrinsic value based method of
accounting. Pro forma disclosures, as if the fair value based method of
accounting as defined in Statement of Financial Accounting Standards ("SFAS")
No. 123 had been applied, have not been presented since such disclosures would
not result in material differences from the intrinsic value method.
Income Taxes
The Company files a consolidated income tax return. Pursuant to a tax sharing
agreement, AmQuest and Exchange provide for income taxes as if separate returns
were filed, and remit to AFC amounts determined to be currently payable. In
addition, AFC remits to the subsidiaries amounts determined to be currently
receivable by the subsidiaries, which may arise as a result of net operating
losses and tax credits that are utilized in the consolidated income tax return.
Deferred income taxes are provided to reflect the future tax consequences of
differences between the tax bases of assets and liabilities and their reported
amounts in the consolidated statements of financial condition. Deferred income
tax assets and liabilities are reflected at currently enacted income tax rates
applicable to the period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred income tax assets and liabilities are adjusted through income tax
expense.
12
<PAGE>
Earnings Per Share
Basic earnings per share is computed based upon the weighted average number of
shares outstanding. Diluted earnings per share includes shares issuable upon
exercise of stock options. The following is a reconciliation of the numerators
and denominators of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- ----------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income for basic and diluted earnings
per share $ 4,154 $ 3,689 $ 4,376 $ 5,470 $ 4,594
======== ======== ======== ======== ========
Weighted average shares for basic earnings
per share 3,160 3,126 3,126 3,241 3,430
Shares issuable upon exercise of stock
options 52 65 65 44 31
-------- -------- -------- -------- --------
Weighted average shares for diluted
earnings per share 3,212 3,191 3,191 3,285 3,461
======== ======== ======== ======== ========
</TABLE>
3. ACQUISITIONS:
On April 25, 1997, the Company purchased 100% of the stock of American National
Bank of Lawton. The acquisition was accounted for under the purchase method of
accounting. The net purchase price of approximately $12,073,000 was allocated to
the net assets acquired based upon their estimated fair values as of April 25,
1997, resulting in approximately $4,083,000 of intangible assets. These
intangibles are being amortized on a straight-line basis over lives ranging from
ten to fifteen years. Total assets at the date of the acquisition and after
allocation of the purchase price premium totaled approximately $61,018,000.
On March 8, 1996, the Company purchased certain assets and assumed certain
liabilities from the First Southwest Bank, Anadarko, Oklahoma branch. The
acquired branch operates as a branch of AmQuest. The acquisition was accounted
for under the purchase method of accounting. The net purchase price of
approximately $398,000 was allocated to the net assets acquired based upon their
estimated fair values as of March 8, 1996, resulting in approximately $81,000 of
intangible assets. These intangibles are being amortized on a straight-line
basis over a fifteen-year life.
4. CASH AND DUE FROM BANKS:
Aggregate reserves (in the form of vault cash and deposits with the Federal
Reserve Bank of Kansas City) of approximately $7,688,000 and $5,839,000 were
maintained to satisfy Federal regulatory requirements at December 31, 1997 and
1996, respectively.
13
<PAGE>
5. DEBT AND EQUITY SECURITIES:
Debt and equity securities have been classified in the consolidated statements
of financial condition according to management's intent. The amortized cost of
securities and their estimated fair values at December 31, is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------- ---------- ---------- --------------
1997
----
<S> <C> <C> <C> <C>
U.S. Treasury securities:
Available-for-sale $ 18,487 $ 249 $ (12) $ 18,724
Held-to-maturity 25,166 213 (14) 25,365
Obligations of U.S. government agencies and
corporations:
Available-for-sale 29,094 140 (42) 29,192
Held-to-maturity 15,865 116 (24) 15,957
U.S. government agency collateralized mortgage
obligations:
Available-for-sale 16,718 25 (147) 16,596
Held-to-maturity 14,516 27 (18) 14,525
U.S. government agency mortgage-backed
securities:
Available-for-sale 7,475 162 (35) 7,602
Held-to-maturity 17,629 474 (3) 18,100
Obligations of state and political subdivisions:
Available-for-sale 2,199 16 - 2,215
Held-to-maturity 26,903 466 (15) 27,354
Equity securities 2,272 - - 2,272
--------- ------- ------ ---------
Total available-for-sale $ 73,973 $ 592 $ (236) $ 74,329
========= ======= ====== =========
Total held-to-maturity $ 100,079 $ 1,296 $ (74) $ 101,301
========= ======= ====== =========
Total equity securities $ 2,272 $ - $ - $ 2,272
========= ======= ====== =========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------- ---------- ---------- --------------
1996
----
<S> <C> <C> <C> <C>
U.S. Treasury securities:
Available-for-sale $ 21,034 $ 281 $ (41) $ 21,274
Held-to-maturity 33,134 237 (90) 33,281
Obligations of U.S. government agencies and
corporations:
Available-for-sale 11,482 105 (128) 11,459
Held-to-maturity 18,447 43 (399) 18,091
U.S. government agency collateralized mortgage
obligations:
Available-for-sale 16,370 16 (236) 16,150
Held-to-maturity 8,199 9 (23) 8,185
U.S. government agency mortgage-backed
securities:
Available-for-sale 8,615 153 (54) 8,714
Held to maturity 13,192 284 (36) 13,440
Obligations of state and political subdivisions:
Held-to-maturity 31,752 555 (37) 32,270
Equity securities 1,834 - - 1,834
--------- ------- ----- ---------
Total available-for-sale $ 57,501 $ 555 $(459) $ 57,597
========= ======= ===== =========
Total held-to-maturity $ 104,724 $ 1,128 $(585) $ 105,267
========= ======= ===== =========
Total equity securities $ 1,834 $ - $ - $ 1,834
========= ======= ===== =========
</TABLE>
15
<PAGE>
The estimated fair value of debt and equity securities is based upon available
market data and estimates, which often reflect transactions of various sizes,
and are not necessarily indicative of the price at which various amounts of
particular issues could be readily sold.
The amortized cost and estimated fair value of debt securities at December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
repay obligations with or without call or prepayment penalties.
Estimated
Amortized Fair
Cost Value
--------- ---------
(dollars in thousands)
Due in one year or less:
Available-for-sale $ 11,580 $ 11,601
Held-to-maturity 20,867 20,894
Due after one year through five years:
Available-for-sale 35,678 36,008
Held-to-maturity 42,832 43,420
Due after five years through ten years:
Available-for-sale 2,522 2,522
Held-to-maturity 3,915 4,031
Due after ten years:
Held-to-maturity 320 331
Mortgage-backed securities, not due at
a single maturity date:
Available-for-sale 24,193 24,198
Held-to-maturity 32,145 32,625
--------- ---------
Total available-for-sale $ 73,973 $ 74,329
========= =========
Total held-to-maturity $ 100,079 $ 101,301
========= =========
Sales from the held-to-maturity portfolio were sold within ninety-days of the
maturity date. Proceeds and gains and losses on sales of debt securities are
shown below (dollars in thousands):
1997 1996 1995
-------- -------- --------
Proceeds from sales of:
Available-for-sale debt securities $ - $4,060 $2,908
Held-to-maturity debt securities - 2,503 -
Gross gains on sales of:
Available-for-sale debt securities 1 44 28
Gross losses on sales of:
Held-to-maturity debt securities - 13 -
Debt securities having a recorded value of approximately $54,513,000 and
$70,578,000 at December 31, 1997 and 1996, respectively, were pledged to secure
public and trust deposits and for other purposes as required by law.
16
<PAGE>
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES:
The components of loans receivable in the consolidated statements of financial
condition is as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, -----------------------
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Consumer, net of unearned discounts of $1,961 in 1998,
$3,370 in 1997 and $4,344 in 1996 $ 70,690 $ 85,955 $ 91,710
Residential mortgage 88,788 87,433 71,207
Commercial real estate 60,048 72,466 59,181
Commercial, other 54,165 57,918 62,342
Farmland and agriculture 24,213 24,526 23,899
Construction 9,430 7,491 5,812
---------- --------- ---------
307,334 335,789 314,151
Less-Allowance for loan losses (2,796) (3,067) (2,794)
---------- --------- ---------
Loans receivable, net $ 304,538 $ 332,722 $ 311,357
========== ========= =========
</TABLE>
An analysis of the allowance for loan losses is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
--------------------- ----------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 3,067 $ 2,794 $ 2,794 $ 2,901 $ 2,757
Provision for loan losses 382 1,263 1,624 595 650
Loans charged off (1,040) (999) (1,919) (815) (715)
Recoveries 387 186 260 113 209
Allowance for loan losses of acquired bank - 308 308 - -
-------- -------- -------- -------- --------
Balance, end of period $ 2,796 $ 3,552 $ 3,067 $ 2,794 $ 2,901
======== ======== ======== ======== ========
</TABLE>
Impaired loans receivable totaled approximately $2,679,000 and $3,623,000 at
December 31, 1997 and 1996, respectively. The average recorded investment in
impaired loans during 1997 and 1996, was approximately $3,151,000 and
$2,960,000, respectively. The specific allowance on impaired loans totaled
approximately $471,000 and $722,000 as of December 31, 1997 and 1996,
respectively. The interest income recognized from cash receipts collected on
impaired loans was not material during 1997 or 1996.
Loans receivable having carrying values of approximately $1,808,000 and
$1,075,000 were transferred to other real estate and assets owned in 1997 and
1996, respectively.
Certain executive officers and directors and their affiliated interests had
transactions with the Company in the ordinary course of business. In the opinion
of management, such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions and did not involve more than normal risk.
17
<PAGE>
The aggregate amount and related activity for loans to executive officers and
directors, including their affiliated interests during 1997 are analyzed below
(dollars in thousands):
Balance, January 1, 1997 $ 7,074
Additions 8,588
Payments (5,554)
-------
Balance, December 31, 1997 $10,108
=======
7. PREMISES AND EQUIPMENT:
Premises and equipment at December 31 are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Estimated Useful
Lives 1997 1996
---------------- --------- ---------
<S> <C> <C> <C>
Land - $ 2,166 $ 1,165
Premises and improvements 10-40 years 8,871 6,085
Furniture, fixtures and equipment 3-15 years 6,255 5,471
------- -------
Total cost 17,292 12,721
Less- Accumulated depreciation (8,070) (7,371)
------- -------
Premises and equipment, net $ 9,222 $ 5,350
======= =======
</TABLE>
Depreciation expense was approximately $962,000, $811,000 and $788,000 for 1997,
1996 and 1995, respectively.
Exchange leases its bank building under an operating lease that expires in 2001.
Rent expense was approximately $390,000 per year for 1997, 1996 and 1995. Future
minimum payments under the lease are approximately $357,000 in 1998, $310,000 in
1999 and 2000, and $181,000 in 2001.
8. DEPOSITS:
Included in time deposits at December 31, 1997 and 1996, are approximately
$45,423,000 and $60,614,000, respectively, of time deposits in denominations of
$100,000 or more.
At December 31, 1997, the scheduled maturities of time deposits are as follows
(dollars in thousands):
1998 $ 195,143
1999 25,363
2000 12,522
2001 and thereafter 1,024
---------
Total time deposits $ 234,052
=========
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FEDERAL FUNDS PURCHASED:
Securities sold under agreements to repurchase consist of debt securities
pledged against selected time deposits for the balances greater than $100,000.
At December 31, 1997 and 1996, approximately $11,785,000 and $9,327,000,
respectively, were outstanding under these agreements. Federal funds purchased
totaled approximately $3,000,000 as of December 31, 1996, with a maturity date
of less than 90 days at an interest rate of 5.71%. No federal funds purchased
were outstanding at December 31, 1997.
18
<PAGE>
10. ADVANCES FROM THE FEDERAL HOME LOAN BANK OF TOPEKA:
Advances from the Federal Home Loan Bank of Topeka at December 31 consisted of
the following (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Federal Home Loan Bank of Topeka advance due May 5, 1998, at 5.2%,
interest payable monthly $1,000 $1,000
Federal Home Loan Bank of Topeka advance due June 17, 1998, 5.71%, interest
payable monthly 2,500 2,500
Federal Home Loan Bank of Topeka advance due December 22, 1998, 5.97%, interest
payable monthly 2,500 2,500
------ ------
$6,000 $6,000
====== ======
</TABLE>
11. LINE OF CREDIT:
The Company has a $25 million reducing revolving line of credit which may be
borrowed specifically for the purpose of acquiring other financial institutions,
or a portion of which may be used for corporate purposes. Advances under the
line of credit for purposes of acquiring other financial institutions
automatically convert to term loans at the Bank's reference rate (8.5% at
December 31, 1997). Quarterly principal and interest payments are required and
each term loan will have a maturity date of ten years from the date of the
advance. The total line of credit is secured by the common stock of AmQuest and
Exchange and any other bank subsidiary acquired thereafter. The line of credit
agreement expired January 31, 1998. This line of credit was renewed with another
financial institution during 1998, at substantially the same terms as the
previous line of credit.
12. INCOME TAXES:
The Company files consolidated federal income tax returns on a calendar-year
basis.
Income tax expense (benefit) for the years ended December 31 has been allocated
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income from operations $2,136 $2,549 $2,049
Stockholders' equity 90 (249) 1,024
------ ------ ------
Total $2,226 $2,300 $3,073
====== ====== ======
</TABLE>
Income taxes on income from operations for the years ended December 31 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current expense $2,568 $2,742 $2,476
Deferred benefit (432) (193) (427)
------ ------ ------
Income tax expense $2,136 $2,549 $2,049
====== ====== ======
</TABLE>
19
<PAGE>
The Company's effective income tax rate differs from the statutory rate as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income taxes at statutory rate (34%) $2,214 $2,726 $2,258
Nontaxable interest (565) (635) (614)
State income taxes, net of federal benefit 192 233 216
Nondeductible amortization of intangibles 214 142 142
Other, net 81 83 47
------ ------ ------
Income tax expense $2,136 $2,549 $2,049
====== ====== ======
</TABLE>
At December 31, 1997 and 1996, the net deferred income tax liability included in
accrued interest, taxes and other liabilities in the accompanying consolidated
statements of financial condition, consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Litigation accrual $ 475 $ -
Deferred compensation 308 250
Allowance for loan losses 197 21
Other real estate and assets owned 77 82
Other 25 24
------- -------
1,082 377
------- -------
Deferred income tax liabilities:
Basis difference in premises and equipment (1,189) (40)
-
Loan origination fees (214) (268)
Unrealized gain on debt securities available-for-sale (126) (36)
Premium on investment securities resulting from bank
acquisition (104) (155)
Federal Home Loan Bank Stock of Topeka stock dividend (79) -
------- -------
(1,712) (499)
------- -------
Deferred income tax liability, net $ (630) $ (122)
======= =======
</TABLE>
13. EMPLOYEE BENEFIT PLANS:
The Company has a trusteed profit sharing plan that provides retirement, death
and disability benefits for all full-time employees who have been employed for
one year or more and have attained a specified minimum age. The terms of the
plan provide for annual contributions by the Company, at the discretion of the
Board of Directors. Benefits payable under the plan are limited to the plan
assets allocable to the account of each participant.
The plan also provides a 401(k) provision that allows participants to contribute
up to 12% of their compensation before income taxes are deducted. The Company
will designate annually a percentage of participants' compensation that it will
contribute to match participants' 401(k) contributions. Company contributions
for profit sharing and 401(k) matching approximated $507,000 in 1997, $443,000
in 1996 and $421,000 in 1995. The Company retains the right to amend or
terminate the plan at any time.
20
<PAGE>
The Company has established an incentive compensation plan to reward its key
officers and employees based upon the financial performance of AmQuest, Exchange
and the Company. Participation in the plan is at the discretion of the Board of
Directors. Expense recognized in 1997, 1996 and 1995, in the accompanying
consolidated statements of income was approximately $99,000, $262,000 and
$53,000, respectively. The Company retains the right to amend or terminate the
plan at any time.
The Company has entered into deferred compensation agreements with certain
officers and directors of AmQuest and Exchange. Under the provisions of these
agreements, the officers and directors will receive monthly payments, as
specified in the individual agreements, for ten years upon their retirement. The
liabilities under these agreements are being accrued over the officers'
remaining periods of employment or the directors' assumed retirement ages so
that, on the date of their retirement, the then-present value of the payments
will have been accrued. At December 31, 1997 and 1996, approximately $811,000
and $659,000, respectively, had been accrued for the liability under these
agreements and is included in accrued interest, taxes and other liabilities in
the accompanying consolidated statements of financial condition. Expense
recognized in 1997, 1996 and 1995, was approximately $89,000, $68,000 and
$73,000, respectively, and is included in the accompanying consolidated
statements of income.
To provide for these benefits, the Company has purchased life insurance
policies, with the Company reflected as the beneficiary of the policies. At
December 31, 1997 and 1996, these policies had a cash surrender value of
approximately $1,966,000 and $488,000, respectively, which is included in other
assets in the accompanying consolidated statements of financial condition.
14. STOCK OPTION PLAN:
The Company has established two primary Incentive Stock Option Plans ("1988
Plan" and "1993 Plan") to provide certain employees with a proprietary interest
in the Company through the granting of options to purchase shares of common
stock at fair market value at the date of the grant but not less than par value.
The 1988 and 1993 Plans allow no more than 60,000 and 150,000 shares,
respectively, to be granted. These Plans will terminate in July 2002 and June
2005, unless terminated earlier by the Board of Directors. Options granted under
the 1988 Plan (as discussed below) vest as granted. There are several different
vesting schedules under the 1993 Plan ranging from immediate vesting to four
years from the grant date.
Various other option plans exist as a result of acquisitions and other option
plans. The options under all plans were granted at option prices ranging from
$3.33 to $13.50 per share and have expiration dates extending to November 2006.
At December 31, 1997, there were approximately 5,000 and 34,000 shares available
for grant under the 1988 and 1993 Plans, respectively. At December 31, 1997,
there were approximately 30,000, 73,000 and 12,000 shares exercisable under the
1988 Plan, 1993 Plan and other plans, respectively.
A summary of option activity is as follows:
<TABLE>
<CAPTION>
Shares Price Range
--------- -------------
<S> <C> <C>
December 31, 1995 108,675 $5.42 - 10.75
Options granted 81,352 13.50
Options exercised (20,575) 5.42 - 10.75
Options canceled (2,225) 10.75
--------- -------------
December 31, 1996 167,227 5.42 - 13.50
Options granted - -
Options exercised (3,750) 5.42
Options canceled (7,400) 5.42 - 13.50
--------- -------------
December 31, 1997 156,077 $5.42 - 13.50
========= =============
</TABLE>
21
<PAGE>
Stock options remaining at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Number of Shares Price Per Share Option Expiration
---------------- --------------- -----------------
<S> <C> <C> <C>
12,000 $5.99 1/14/98
30,000 5.42 7/20/02
35,725 10.75 6/01/05
78,352 13.50 11/18/06
---------
156,077
=========
</TABLE>
During 1995, the Company established a Non-Employee Director Stock Plan
("Director Stock Plan") to provide directors (non-employee directors, community
development board members and community development emeritus board members) an
opportunity to acquire a proprietary interest in the Company through the
granting of options to purchase shares of common stock at fair market value at
the date of the grant but not less than par value. The Director Stock Plan
allows no more than 150,000 shares to be granted, and the Plan will terminate
March 30, 2005, unless it is terminated sooner by the Board of Directors. At
December 31, 1997, there were approximately 106,000 shares available for grant
under this Plan.
A summary of the Director Stock Plan option activity is as follows:
<TABLE>
<CAPTION>
Shares Price Range
---------- --------------
<S> <C> <C>
December 31, 1995 12,500 $ 10.75
Options granted 13,300 13.50
Options exercised (2,500) 13.50
---------- --------------
December 31, 1996 23,300 10.75 - 13.50
Options granted 13,800 16.50
Options exercised (3,300) 10.75 - 16.50
Options expired (300) 13.50
---------- --------------
December 31, 1997 33,500 $10.75 - 16.50
========== ==============
</TABLE>
Options exercisable under this plan as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Number of Shares Price Per Share Option Expiration
---------------- --------------- -----------------
<S> <C> <C> <C>
11,500 $10.75 7/03/05
10,200 13.50 8/01/06
11,800 16.50 5/19/07
--------
33,500
========
</TABLE>
During 1995, the Company also established a Stock Repurchase Plan (the
"Repurchase Plan"), to authorize the purchase of shares required to satisfy the
needs of the Company's Incentive Stock Option Plan's and Non- Employee Director
Stock Option Plan and as a beneficial investment for the stockholders of the
Company. This Repurchase Plan allows issued and outstanding common stock shares
to be repurchased at an established market price. During 1997 and 1996, 4,334
and 321,416 shares, respectively, had been repurchased under this Repurchase
Plan.
15. COMMITMENTS AND CONTINGENT LIABILITIES:
AmQuest has been a defendant, along with five other defendants, in a lawsuit
involving a bond issue filed in December 1989. The lawsuit sought judgment
against the defendants, jointly and severally, in the amount of approximately
$10.7 million. Since the lawsuit's inception, AmQuest has contested the case
vigorously. On March 2, 1998, AmQuest and the other defendants settled the
lawsuit. The Company has established an accrual of approximately $1,250,000,
with a related deferred tax benefit of $475,000 for the settlement, which is
reflected in accrued interest, taxes and other
22
<PAGE>
liabilities in the accompanying consolidated statements of financial condition.
In the normal course of business, the Company is a party to financial
instruments with off-statement of financial condition risk. These financial
instruments include commitments to extend credit and standby letters of credit.
These instruments expose the Company to varying degrees of credit risk in excess
of the amount recognized in the accompanying consolidated statements of
financial condition. To manage this risk, the Company uses the same credit risk
management process for financial instruments with off-statement of financial
condition risk as it does for financial instruments whose risk is reflected on
the consolidated statements of financial condition.
Management does not anticipate any material losses affecting the financial
position or the results of future operations of the Company as a result of these
commitments. There were letters of credit and unfunded loan commitments
outstanding at December 31 as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Commitments to extend credit $35,486 $27,959
Standby letters of credit 1,552 2,393
</TABLE>
In the ordinary course of business, the Company is subject to legal actions and
complaints. In the opinion of management, based in part on the advise of legal
counsel, and based on available facts and proceedings to date, believes the
ultimate liability, if any, arising from such legal actions currently pending
will not have a material adverse effect on the Company's financial position or
future results of operations.
16. CREDIT CONCENTRATIONS:
The Company provides a wide range of banking services to individual and
corporate customers throughout Oklahoma. The Company makes a variety of loans
including commercial, agricultural, real estate and installment. The majority of
these loans are made to borrowers located in Oklahoma. Credit risk is,
therefore, largely dependent upon economic conditions relative to Oklahoma.
However, loans granted within the Company's trade area have been granted to a
wide variety of borrowers and management does not believe that any significant
concentrations of credit exist with respect to individual borrowers or groups of
borrowers which are engaged in similar activities that would be similarly
affected by changes in economic or other conditions. Approximately 48% of the
Company's total loan portfolio is comprised of real estate loans secured by both
commercial and residential real estate. The Company considers the composition of
the loan portfolio in establishing the allowance for loan losses as described in
Note 2.
17. STOCKHOLDERS' EQUITY:
AFC's ability to pay dividends is dependent in part on its ability to derive
dividends from AmQuest and Exchange. AmQuest and Exchange are subject to
regulatory restrictions that place limitations on the amount of dividends which
may be declared. As of January 1, 1998, AmQuest and Exchange had approximately
$3,145,000 and $235,000, respectively, of retained earnings available for
dividends to AFC.
23
<PAGE>
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory -- and possibly additional discretionary --
actions by regulators that, if undertaken, could have a direct material effect
on the Company's consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative measures
of the Company's assets, liabilities and certain off-statement of financial
condition items as calculated under regulatory accounting practices. The
Company's capital amounts and classification are also subject to qualitative
judgments by the regulators regarding components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the
Company meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency categorized the Company as well capitalized under
the regulatory framework for prompt correction action. To be categorized as well
capitalized the Company must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Company's category.
24
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------------- ------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- --------- ------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital
(to Risk Weighted Assets)-
AmQuest Financial Corp. $ 47,168,000 13.7% $27,515,000 8.0% $ N/A N/A
AmQuest Bank, N.A. 26,281,000 11.1% 18,992,000 8.0% 23,740,000 10.0%
Exchange National Bank & Trust 15,404,000 14.8% 8,352,000 8.0% 10,439,000 10.0%
Tier I Capital
(to Risk Weighted Assets)-
AmQuest Financial Corp. 44,101,000 12.8% 13,758,000 4.0% N/A N/A
AmQuest Bank, N.A. 24,074,000 10.1% 9,496,000 4.0% 14,244,000 6.0%
Exchange National Bank & Trust 14,544,000 13.9% 4,176,000 4.0% 6,264,000 6.0%
Tier I Capital
(to Average Assets)-
AmQuest Financial Corp. 44,101,000 8.0% 22,353,000 4.0% N/A N/A
AmQuest Bank, N.A. 24,074,000 6.8% 14,331,000 4.0% 17,913,000 5.0%
Exchange National Bank & Trust 14,544,000 7.4% 7,823,000 4.0% 9,778,000 5.0%
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets)-
AmQuest Financial Corp. 46,465,000 14.7% 25,290,318 8.0% N/A N/A
AmQuest Bank, N.A. 26,369,000 12.3% 17,116,640 8.0% 21,395,800 10.0%
Exchange National Bank & Trust 14,974,000 14.8% 8,120,480 8.0% 10,150,600 10.0%
Tier I Capital
(to Risk Weighted Assets)-
AmQuest Financial Corp. 43,671,000 13.8% 12,645,159 4.0% N/A N/A
AmQuest Bank, N.A. 24,236,000 11.3% 8,558,320 4.0% 12,837,480 6.0%
Exchange National Bank & Trust 14,314,000 14.1% 4,060,240 4.0% 6,090,360 6.0%
Tier I Capital
(to Average Assets)-
AmQuest Financial Corp. 43,671,000 8.7% 20,163,315 4.0% N/A N/A
AmQuest Bank, N.A. 24,236,000 7.9% 12,215,400 4.0% 15,269,250 5.0%
Exchange National Bank & Trust 14,314,000 7.3% 7,822,560 4.0% 9,778,200 5.0%
</TABLE>
Management intends to continue compliance with all regulatory capital
requirements.
25
<PAGE>
18. PARENT COMPANY FINANCIAL INFORMATION:
Following are the condensed statements of financial condition at December 31,
1997 and 1996, and the statements of income and the cash flows for each of the
three years in the period ended December 31, 1997, for AmQuest Financial Corp.
(parent company only):
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
1997 1996
---------- ----------
ASSETS (dollars in thousands)
------
<S> <C> <C>
Cash and due from banks $ 1,725 $ 959
Interest-bearing deposits in subsidiary banks 3,000 3,500
Investments in subsidiaries-
AmQuest Bank, N.A. 29,503 25,869
Exchange National Bank & Trust Company 15,844 15,789
-------- --------
45,347 41,658
-------- --------
Other assets 915 914
-------- --------
Total assets $ 50,987 $ 47,031
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses, taxes and other liabilities $ 157 $ 250
Stockholders' equity 50,830 46,781
-------- --------
Total liabilities and stockholders' equity $ 50,987 $ 47,031
======== ========
</TABLE>
26
<PAGE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $ 4,661 $ 2,960 $ 6,500
Interest 115 216 146
Other 512 440 351
------- ------- -------
5,288 3,616 6,997
------- ------- -------
Expense:
Other 1,437 1,329 1,345
------- ------- -------
Income before income taxes and undistributed earnings
of subsidiaries 3,851 2,287 5,652
Benefit for income taxes 185 143 202
------- ------- -------
Income before undistributed earnings of subsidiaries 4,036 2,430 5,854
Undistributed earnings of subsidiaries 340 3,040 (1,260)
------- ------- -------
Net income $ 4,376 $ 5,470 $ 4,594
======= ======= =======
</TABLE>
27
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS PROVIDED (ABSORBED) BY OPERATING ACTIVITIES:
Net income $ 4,376 $ 5,470 $ 4,594
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 372 603 388
Accretion of debt securities - (92) (45)
Equity in undistributed income of subsidiaries (340) (3,040) -
Distribution in excess of income of subsidiaries - - 1,260
Change in other assets (35) (246) 36
Change in accrued expenses, taxes and other
liabilities (92) (25) (85)
-------- -------- --------
Net cash provided by operating activities 4,281 2,670 6,148
-------- -------- --------
CASH FLOWS PROVIDED (ABSORBED) BY INVESTING ACTIVITIES:
Decrease in loans, net - - 5
Capital expenditures (88) (24) (4)
Purchase of debt securities held-to-maturity - (981) (4,382)
Proceeds from sales of other assets 70 9 -
Proceeds from maturities of held-to-maturity debt securities - 5,000 500
Capital contribution to subsidiary banks (3,500) - -
-------- -------- --------
Net cash provided (absorbed) by investing
activities (3,518) 4,004 (3,881)
-------- -------- --------
CASH FLOWS PROVIDED (ABSORBED) BY FINANCING ACTIVITIES:
Purchase of treasury stock (67) (4,439) (308)
Sale of treasury stock 70 382 107
Dividends paid (500) (523) (549)
-------- -------- --------
Net cash absorbed by financing activities (497) (4,580) (750)
-------- -------- --------
Net change in cash and cash equivalents 266 2,094 1,517
CASH AND CASH EQUIVALENTS, beginning of year 4,459 2,365 848
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 4,725 $ 4,459 $ 2,365
======== ======== ========
</TABLE>
28
<PAGE>
19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of certain information regarding the fair value of an entity's
financial instruments. A financial instrument is defined by SFAS No. 107 as
cash, evidence of an ownership interest in an entity or a contractual
arrangement that involves cash or another financial instrument. Market prices
are the best evidence of the estimated fair value of financial instruments. SFAS
No. 107 further states "if quoted market prices are not available, management's
best estimate of fair value may be based on the quoted market price of a
financial instrument with similar characteristics or on valuation techniques."
Although the fair value of financial instruments with quoted market prices are
generally indicative of the amount at which an instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale, the fair value of financial instruments without an available
quoted market price can vary greatly depending on the method and assumptions
used in the valuation techniques.
The process of determining management's best estimate of the fair value of
financial instruments is complex and requires significant judgments to be made
by management. The computation of fair values for these financial instruments
without an available quoted market price is based upon the computation of the
present value of estimated future cash flows, utilizing a discount rate
commensurate with the risks associated with the various financial instruments.
The discount rate is based upon prevailing market rates at December 31, 1997. It
is management's opinion that these market rates effectively consider credit
risk, prepayment risk and operational costs.
The estimated fair value of a given financial instrument may change
substantially over time as a result of, among other things, changes in scheduled
or forecasted cash flows, changes in the supply or demand for a particular
financial instrument and changes in management's estimates of the related credit
risk or operational costs. Consequently, significant revisions to fair value
estimates may occur during future periods. Management believes it has taken
reasonable efforts to ensure that fair value estimates presented are accurate;
however, adjustments to fair value estimates may occur in the future and actual
amounts realized from financial instruments held as of December 31, 1997 and
1996, may differ from the amounts presented below.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and Cash Equivalents
This category includes cash, interest-bearing deposits in other banks and
federal funds sold. The carrying amount is a reasonable estimate of fair value
because of the relatively short maturity of those instruments.
Debt and Equity Securities
The estimated fair value of debt and equity securities is based on quoted market
prices.
Loans Receivable
Loans were grouped into homogeneous categories, such as commercial, residential
mortgage and consumer. The estimated fair value of these groups of loans is
determined by discounting the future cash flows using the current rates at which
similar loans would be extended to borrowers with similar credit ratings and
maturities. The average discount rates used ranged from 9.25% and 10.26%.
29
<PAGE>
Deposits
The estimated fair value of deposits with no stated maturity, such as demand,
savings, money market and NOW deposits, is the amount payable on demand as of
December 31, 1997 and 1996. The fair value of fixed-rate time deposit is
estimated using the rates currently offered for deposits of similar maturities.
The average discount rate used was based on rates currently offered for similar
duration deposits ranging from 5.21% to 5.61%.
Securities Sold Under Agreements to Repurchase and Federal Funds Purchased and
Advances from Federal Home Loan Bank of Topeka
The carrying amount for securities sold under agreements to repurchase and other
short-term borrowings and advances from Federal Home Loan Bank of Topeka
approximates fair value due to the short maturity of these financial
instruments.
Other
Fees charged for commitments to extend credit or standby letters of credit are
not significant to the Company. As the related fees are not significant and
terms of the commitments are generally consistent with others offered in the
Company's markets, estimates of fair value have not been determined.
The estimated fair values of the Company's financial instruments are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 43,418 $ 43,418 $ 46,001 $ 46,001
Debt and equity securities 176,680 177,902 164,155 164,698
Loans receivable, net 332,722 328,321 311,357 307,997
---------- ---------- ---------- ----------
Total financial assets $ 552,820 $ 549,641 $ 521,513 $ 518,696
========== ========== ========== ==========
Financial liabilities:
Deposits $ 502,801 $ 503,419 $ 467,349 $ 468,193
Securities sold under agreements to
repurchase and federal funds
puchased 11,785 11,785 12,327 12,327
Advances from the Federal Home Loan
Bank of Topeka 6,000 6,000 6,000 6,000
---------- ---------- ---------- ----------
Total financial liabilities $ 520,586 $ 521,204 $ 485,676 $ 486,520
========== ========== ========== ==========
</TABLE>
SFAS No. 107 excludes all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate estimated fair value amounts presented
do not represent the underlying value of the Company.
20. NEW ACCOUNTING PRONOUNCEMENTS:
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income." This
statement is required to be adopted by the Company in fiscal year 1998.
Management does not anticipate this statement to have a material adverse impact
on the consolidated financial position or the future results of operations of
the Company.
21. MERGER WITH BANCFIRST CORPORATION:
Effective October 1, 1998, the Company was merged into BancFirst Corporation.
Under the terms of the Merger Agreement, each share of common stock outstanding
of the Company was exchanged for .7917 shares of BancFirst Corporation common
stock.
30
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated condensed balance sheet
as of September 30, 1998, and the unaudited pro forma consolidated condensed
statements of income and comprehensive income for the nine months ended
September 30, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1997, give effect to the Merger based on the historical
consolidated financial statements of BancFirst and AmQuest and their
subsidiaries under the assumptions and adjustments set forth in the accompanying
notes to the pro forma financial statements.
The unaudited pro forma consolidated condensed balance sheet assumes the
Merger was consummated on September 30, 1998, and the unaudited pro forma
consolidated condensed statements of income and comprehensive income assume that
the Merger was consummated on January 1 of the earliest period presented. The
pro forma statements may not be indicative of the results that actually would
have occurred if the Merger had been in effect on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be read
in conjunction with the historical consolidated financial statements and notes
thereto of BancFirst and AmQuest.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 85,246 $ 16,235 $ $ 101,481
Interest-bearing deposits with banks 44 34 - 78
Securities 401,133 163,621 - 564,754
Federal funds sold 96,640 19,956 - 116,596
Loans:
Total loans (net of unearned interest) 976,100 307,334 - 1,283,434
Allowance for loan losses (13,888) (2,796) (1,400) (18,084)
---------- -------- -------- ----------
Loans, net 962,212 304,538 - 1,265,350
Premises and equipment, net 37,785 8,826 - 46,611
Other real estate owned 724 402 - 1,126
Intangible assets, net 18,094 5,796 - 23,890
Accrued interest receivable 15,352 4,494 - 19,846
Other assets 17,058 1,827 490 19,375
---------- -------- -------- ----------
Total assets $1,634,288 $525,729 $ (910) $2,159,107
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 310,976 $ 65,593 $ - $ 376,569
Interest-bearing 1,108,196 381,815 - 1,490,011
---------- -------- -------- ----------
Total deposits 1,419,172 447,408 - 1,866,580
Short-term borrowings 22,386 15,232 - 37,618
Long-term borrowings 11,598 3,000 - 14,598
9.65% Capital Securities 25,000 - - 25,000
Accrued interest payable 6,310 2,149 - 8,459
Other liabilities 5,239 2,600 - 7,839
---------- -------- -------- ----------
Total liabilities 1,489,705 470,389 - 1,960,094
---------- -------- -------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock 6,764 6,019 (3,497) 9,286
Capital surplus 41,071 538 2,799 44,408
Retained earnings 92,092 53,217 (5,166) 140,143
Unrealized securities gains, net of tax 4,656 520 - 5,176
Treasury stock - (4,954) 4,954 -
---------- -------- -------- ----------
Total stockholders' equity 144,583 55,340 (910) 199,013
---------- -------- -------- ----------
Total liabilities and stockholders' equity $1,634,288 $525,729 $ (910) $2,159,107
========== ======== ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 68,963 $ 22,406 $ - $ 91,369
Interest-bearing deposits with banks 11 1 - 12
Securities:
Taxable 17,352 7,361 - 24,713
Tax-exempt 693 972 - 1,665
Federal funds sold 2,558 661 - 3,219
---------- ---------- --------- ----------
Total interest income 89,577 31,401 - 120,978
---------- ---------- --------- ----------
INTEREST EXPENSE
Deposits 35,290 12,369 - 47,659
Short-term borrowings 907 562 - 1,469
Long-term borrowings 406 108 - 514
9.65% Capital Securities 1,838 - - 1,838
---------- ---------- --------- ----------
Total interest expense 38,441 13,039 - 51,480
---------- ---------- --------- ----------
Net interest income 51,136 18,362 - 69,498
Provision for loan losses 1,485 382 - 1,867
---------- ---------- --------- ----------
Net interest income after provision for loan
losses 49,651 17,980 - 67,631
---------- ---------- --------- ----------
NONINTEREST INCOME
Service charges on deposits 8,857 1,785 - 10,642
Other 5,954 1,735 - 7,689
---------- ---------- --------- ----------
Total noninterest income 14,811 3,520 - 18,331
---------- ---------- --------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 25,412 8,233 - 33,645
Occupancy and fixed assets expense, net 2,855 682 - 3,537
Depreciation 2,728 759 - 3,487
Amortization 1,905 558 - 2,463
Data processing services 1,145 525 - 1,670
Net (income) expense from other real estate owned (66) 3 - (63)
Other 9,978 4,254 - 14,232
---------- ---------- --------- ----------
Total noninterest expense 43,957 15,014 - 58,971
---------- ---------- --------- ----------
Income before taxes 20,505 6,486 - 26,991
Income tax expense (7,663) (2,332) - (9,995)
---------- ---------- --------- ----------
Net income 12,842 4,154 - 16,996
Other comprehensive income, net of tax:
Unrealized gains on securities 3,098 290 - 3,388
---------- ---------- --------- ----------
Comprehensive income $ 15,940 $ 4,444 $ - $ 20,384
========== ========== ========= ==========
EARNINGS PER COMMON SHARE
Basic $ 1.90 $ 1.31 $ 1.83
========== ========== ==========
Average shares - basic 6,774,014 3,159,867 9,275,681
========== ========== ==========
Diluted $ 1.83 $ 1.29 $ 1.78
========== ========== ==========
Average shares - diluted 7,009,078 3,212,380 9,552,319
========== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 60,369 $ 22,339 $ - $ 82,708
Interest-bearing deposits with banks 2 20 - 22
Securities:
Taxable 14,835 6,728 - 21,563
Tax-exempt 549 1,164 - 1,713
Federal funds sold 1,578 745 - 2,323
---------- ---------- --------- ---------
Total interest income 77,333 30,996 - 108,329
---------- ---------- --------- ---------
INTEREST EXPENSE
Deposits 29,727 13,350 - 43,077
Short-term borrowings 282 465 - 747
Long-term borrowings 300 205 - 505
9.65% Capital Securities 1,596 - - 1,596
---------- ---------- --------- ---------
Total interest expense 31,905 14,020 - 45,925
---------- ---------- --------- ---------
Net interest income 45,428 16,976 - 62,404
Provision for loan losses 444 1,263 - 1,707
---------- ---------- --------- ---------
Net interest income after provision for loan
losses 44,984 15,713 - 60,697
---------- ---------- --------- ---------
NONINTEREST INCOME
Service charges on deposits 8, 019 1,710 - 9,729
Other 4,199 1,803 - 6,002
---------- ---------- --------- ---------
Total noninterest income 12,218 3,513 - 15,731
---------- ---------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 21,652 7,292 - 28,944
Occupancy and fixed assets expense, net 2,434 625 - 3,059
Depreciation 2,376 696 - 3,072
Amortization 1,683 464 - 2,147
Data processing services 1,032 609 - 1,641
Net (income) expense from other real estate owned 156 14 - 170
Other 8,561 3,932 - 12,493
---------- ---------- --------- ---------
Total noninterest expense 37,894 13,632 - 51,526
---------- ---------- --------- ---------
Income before taxes 19,308 5,594 - 24,902
Income tax expense (6,982) (1,905) - (8,887)
---------- ---------- --------- ---------
Net income 12,326 3,689 - 16,015
Other comprehensive income, net of tax:
Unrealized gains on securities 467 125 - 592
---------- ---------- --------- ---------
Comprehensive income $ 12,793 $ 3,814 $ - $ 16,607
========== ========== ========= =========
EARNINGS PER COMMON SHARE
Basic $ 1.82 $ 1.18 $ 1.73
========== ========== =========
Average shares - basic 6,769,983 3,126,234 9,245,022
========== ========== =========
Diluted $ 1.76 $ 1.16 $ 1.68
========== ========== =========
Average shares - diluted 7,020,359 3,191,450 9,547,030
========== ========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
33
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 81,683 $ 29,870 $ - $ 111,553
Interest-bearing deposits with banks 4 2 - 6
Securities:
Taxable 19,858 9,081 - 28,939
Tax-exempt 766 1,548 - 2,314
Federal funds sold 2,221 928 - 3,149
---------- ---------- --------- ---------
Total interest income 104,532 41,429 - 145,961
---------- ---------- --------- ---------
INTEREST EXPENSE
Deposits 40,044 17,740 - 57,784
Short-term borrowings 420 674 - 1,094
Long-term borrowings 409 239 - 648
9.65% Capital Securities 2,214 - - 2,214
---------- ---------- --------- ---------
Total interest expense 43,087 18,653 - 61,740
---------- ---------- --------- ---------
Net interest income 61,445 22,776 - 84,221
Provision for loan losses 1,165 1,624 - 2,789
---------- ---------- --------- ---------
Net interest income after provision for loan
losses 60,280 21,152 - 81,432
---------- ---------- --------- ---------
NONINTEREST INCOME
Service charges on deposits 10,815 2,340 - 13,155
Securities transactions 1 1 - 2
Other 5,771 2,580 - 8,351
---------- ---------- --------- ---------
Total noninterest income 16,587 4,921 - 21,508
---------- ---------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 29,580 9,797 - 39,377
Occupancy and fixed assets expense, net 3,315 868 - 4,183
Depreciation 3,223 962 - 4,185
Amortization 2,212 640 - 2,852
Data processing services 1,372 806 - 2,178
Net (income) expense from other real estate owned 249 10 - 259
Other 11,943 6,478 - 18,421
---------- ---------- --------- ---------
Total noninterest expense 51,894 19,561 - 71,455
---------- ---------- --------- ---------
Income before taxes 24,973 6,512 - 31,485
Income tax expense (8,444) (2,136) - (10,580)
---------- ---------- --------- ---------
Net income 16,529 4,376 - 20,905
Other comprehensive income, net of tax:
Unrealized gains on securities 812 170 - 982
---------- ---------- --------- ---------
Comprehensive income $ 17,341 $ 4,546 $ - $ 21,887
========== ========== ========= =========
EARNINGS PER COMMON SHARE
Basic $ 2.44 $ 1.40 $ 2.26
========== ========== =========
Average shares - basic 6,770,032 3,125,814 9,244,739
========== ========== =========
Diluted $ 2.38 $ 1.37 $ 2.21
========== ========== =========
Average shares - diluted 6,947,701 3,190,600 9,473,699
========== ========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
34
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 73,389 $ 26,925 $ - $ 100,314
Interest-bearing deposits with banks 1 49 - 50
Securities:
Taxable 18,288 8,960 - 27,248
Tax-exempt 737 1,648 - 2,385
Federal funds sold 1,773 461 - 2,234
---------- ---------- --------- ---------
Total interest income 94,188 38,043 - 132,231
---------- ---------- --------- ---------
INTEREST EXPENSE
Deposits 36,287 16,768 - 53,055
Short-term borrowings 516 535 - 1,051
Long-term borrowings 103 57 - 160
---------- ---------- --------- ---------
Total interest expense 36,906 17,360 - 54,266
---------- ---------- --------- ---------
Net interest income 57,282 20,683 - 77,965
Provision for loan losses 994 595 592 2,181
---------- ---------- --------- ---------
Net interest income after provision for loan
losses 56,288 20,088 (592) 75,784
---------- ---------- --------- ---------
NONINTEREST INCOME
Service charges on deposits 9,634 2,076 - 11,710
Securities transactions 188 31 - 219
Other 5,931 2,141 - 8,072
---------- ---------- --------- ---------
Total noninterest income 15,753 4,248 - 20,001
---------- ---------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 26,297 9,081 - 35,378
Occupancy and fixed assets expense, net 2,988 816 - 3,804
Depreciation 2,547 811 - 3,358
Amortization 2,008 424 - 2,432
Data processing services 1,347 682 - 2,029
Net (income) expense from other real estate owned 49 69 - 118
Other 10,833 4,434 - 15,267
---------- ---------- --------- ---------
Total noninterest expense 46,069 16,317 - 62,386
---------- ---------- --------- ---------
Income before taxes 25,972 8,019 (592) 33,399
Income tax expense (9,907) (2,549) 207 (12,249)
---------- ---------- --------- ---------
Net income 16,065 5,470 (385) 21,150
Other comprehensive income, net of tax:
Unrealized gains on securities (843) (406) - (1,249)
---------- ---------- --------- ---------
Comprehensive income $ 15,222 $ 5,064 $ (385) $ 19,901
========== ========== ========= =========
EARNINGS PER COMMON SHARE
Basic $ 2.40 $ 1.69 $ 2.29
========== ========== =========
Average shares - basic 6,683,516 3,240,841 9,249,290
========== ========== =========
Diluted $ 2.32 $ 1.67 $ 2.22
========== ========== =========
Average shares - diluted 6,912,828 3,284,628 9,513,268
========== ========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
35
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BANCFIRST AMQUEST ADJUST- BANCFIRST
HISTORICAL HISTORICAL MENTS PRO FORMA
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 61,949 $ 25,455 $ - $ 87,404
Interest-bearing deposits with banks 14 11 - 25
Securities:
Taxable 15,623 8,443 - 24,066
Tax-exempt 735 1,667 - 2,402
Federal funds sold 1,917 387 - 2,304
---------- ---------- --------- ---------
Total interest income 80,238 35,963 - 116,201
---------- ---------- --------- ---------
INTEREST EXPENSE
Deposits 32,694 16,117 - 48,811
Short-term borrowings 253 422 - 675
Line of Credit 16 - - 16
Long-term borrowings 261 52 - 313
---------- ---------- --------- ---------
Total interest expense 33,224 16,591 - 49,815
---------- ---------- --------- ---------
Net interest income 47,014 19,372 - 66,386
Provision for loan losses 855 650 112 1,617
---------- ---------- --------- ---------
Net interest income after provision for loan
losses 46,159 18,722 (112) 64,769
---------- ---------- --------- ---------
NONINTEREST INCOME
Service charges on deposits 8,465 2,091 - 10,556
Securities transactions 111 28 - 139
Other 4,660 2,044 - 6,704
---------- ---------- --------- ---------
Total noninterest income 13,236 4,163 - 17,399
---------- ---------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 21,284 8,100 - 29,384
Occupancy and fixed assets expense, net 2,235 789 - 3,024
Depreciation 2,101 788 - 2,889
Amortization 1,455 417 - 1,872
Data processing services 1,164 650 - 1,814
Net (income) expense from other real estate owned 100 54 - 154
Other 9,344 5,444 - 14,788
---------- ---------- --------- ---------
Total noninterest expense 37,683 16,242 - 53,925
---------- ---------- --------- ---------
Income before taxes 21,712 6,643 (112) 28,243
Income tax expense (7,990) (2,049) 39 (10,000)
---------- ---------- --------- ---------
Net income 13,722 4,594 (73) 18,243
Other comprehensive income, net of tax:
Unrealized gains on securities 6,257 1,670 - 7,927
---------- ---------- --------- ---------
Comprehensive income $ 19,979 $ 6,264 $ (73) $ 26,170
========== ========== ========= =========
EARNINGS PER COMMON SHARE
Basic $ 2.07 $ 1.34 $ 1.95
========== ========== =========
Average shares - basic 6,620,507 3,430,040 9,336,070
========== ========== =========
Diluted $ 2.01 $ 1.33 $ 1.91
========== ========== =========
Average shares - diluted 6,811,449 3,460,996 9,551,520
========== ========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The unaudited pro forma consolidated condensed financial statements are
based upon BancFirst's and AmQuest's unaudited financial statements for the nine
months ended September 30, 1998 and 1997 and their respective audited financial
statements for each of the years in the three-year period ended December 31,
1997. The unaudited pro forma consolidated condensed balance sheet assumes the
Merger was consummated on September 30, 1998, and the unaudited pro forma
consolidated condensed statements of income and comprehensive income assume that
the Merger was consummated on January 1 of the earliest period presented.
(2) PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated condensed balance sheet reflects
the adjustments to stockholders' equity to record the exchange of BancFirst
Common Stock for AmQuest's common stock based upon the exchange ratio of .7917
to 1. The treasury stock of AmQuest will be cancelled at consummation and no
shares of BancFirst Common Stock will be issued for the treasury stock. In
addition, the unaudited pro forma consolidated condensed balance sheet has been
adjusted to reflect the restatement of AmQuest's allowance for possible loan
losses to conform to BancFirst's accounting methodology.
The unaudited pro forma consolidated condensed statements of income and
comprehensive income for the years ended December 31, 1996 and 1995 have been
adjusted to reflect the restatement of AmQuest's provisions for loan losses to
conform to BancFirst's accounting methodology.
(3) ACQUISITION COSTS AND RESTRUCTURING CHARGES
Estimated nonrecurring acquisition costs and restructuring charges of
$1,230,000 and $2,152,000, respectively, have not been included in the unaudited
pro forma consolidated condensed statements of income and comprehensive income.
The estimated tax effects of these charges are $168,000 and $860,000,
respectively.
37
<PAGE>
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 hereunto duly authorized.
Date December 15, 1998 /s/Randy P. Foraker
----------------- ----------------------------------------
Randy P. Foraker
Sr. Vice President and Controller;
Assistant Secretary; Treasurer
(Principal Accounting Officer)
38
