<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 0-14384
BANCFIRST CORPORATION
(Exact name of registrant as specified in charter)
Oklahoma 73-1221379
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 N. Broadway, Suite 200, Oklahoma City, Oklahoma
73102-8401
(Address of principal executive offices)
(Zip Code)
(405) 270-1086
(Registrant's telephone number, including area code)
-----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
As of October 31, 1998 there were 9,286,263 shares of the registrant's
Common Stock outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
BANCFIRST CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------- DECEMBER 31,
1998 1997 1997
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 85,246 $ 104,240 $ 76,662
Interest-bearing deposits with banks 44 183 147
Securities (market value: $402,006, $324,063
and $334,465, respectively) 401,133 323,454 333,746
Federal funds sold 96,640 56,690 44,715
Loans:
Total loans (net of unearned interest) 976,100 869,987 913,916
Allowance for possible loan losses (13,888) (12,432) (12,991)
----------- ----------- -----------
Loans, net 962,212 857,555 900,925
Premises and equipment, net 37,785 36,422 36,617
Other real estate owned 724 1,536 1,162
Intangible assets, net 18,094 12,956 12,553
Accrued interest receivable 15,352 12,355 11,357
Other assets 17,058 20,619 22,415
----------- ----------- -----------
Total assets $ 1,634,288 $ 1,426,010 $ 1,440,299
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 310,976 $ 284,544 $ 284,318
Interest-bearing 1,108,196 966,795 974,091
----------- ----------- -----------
Total deposits 1,419,172 1,251,339 1,258,409
Short-term borrowings 22,386 3,336 7,946
Long-term borrowings 11,598 7,094 7,051
9.65% Capital Securities 25,000 25,000 25,000
Accrued interest payable 6,310 5,720 6,612
Other liabilities 5,239 4,026 3,956
----------- ----------- -----------
Total liabilities 1,489,705 1,296,515 1,308,974
----------- ----------- -----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock 6,764 6,790 6,760
Capital surplus 41,071 40,067 40,720
Retained earnings 92,092 81,625 82,487
Accumulated other comprehensive income 4,656 1,213 1,558
Treasury stock - (200) (200)
----------- ----------- -----------
Total stockholders' equity 144,583 129,495 131,325
----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,634,288 $ 1,426,010 $ 1,440,299
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1998 1997 1998 1997
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 23,550 $ 20,752 $ 68,963 $ 60,369
Interest-bearing deposits with banks 8 1 11 2
Securities:
Taxable 5,998 4,961 17,352 14,835
Tax-exempt 223 205 693 549
Federal funds sold 965 603 2,558 1,578
------------- -------------- -------------- --------------
Total interest income 30,744 26,522 89,577 77,333
------------- -------------- -------------- --------------
INTEREST EXPENSE
Deposits 11,999 10,225 35,290 29,727
Short-term borrowings 362 78 907 282
Long-term borrowings 189 103 406 300
9.65% Capital Securities 612 611 1,838 1,596
------------- -------------- -------------- --------------
Total interest expense 13,162 11,017 38,441 31,905
------------- -------------- -------------- --------------
Net interest income 17,582 15,505 51,136 45,428
Provision for possible loan losses 426 162 1,485 444
------------- -------------- -------------- --------------
Net interest income after provision for
possible loan losses 17,156 15,343 49,651 44,984
------------- -------------- -------------- --------------
NONINTEREST INCOME
Service charges on deposits 2,975 2,728 8,857 8,019
Securities transactions - - - -
Other 2,321 1,474 5,954 4,199
------------- -------------- -------------- --------------
Total noninterest income 5,296 4,202 14,810 12,218
------------- -------------- -------------- --------------
NONINTEREST EXPENSE
Salaries and employee benefits 8,877 7,449 25,412 21,652
Occupancy and fixed assets expense, net 1,190 820 2,855 2,434
Depreciation 931 818 2,728 2,376
Amortization 695 571 1,905 1,683
Data processing services 394 333 1,145 1,032
Net (income) expense from other real estate owned 84 55 (66) 156
Other 3,515 2,901 9,978 8,561
------------- -------------- -------------- --------------
Total noninterest expense 15,686 12,947 43,956 37,894
------------- -------------- -------------- --------------
Income before taxes 6,766 6,598 20,505 19,308
Income tax expense (2,323) (2,217) (7,663) (6,982)
------------- -------------- -------------- --------------
Net income 4,443 4,381 12,842 12,326
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities 3,119 643 3,098 467
------------- -------------- -------------- --------------
Comprehensive income $ 7,562 $ 5,024 $ 15,940 $ 12,793
============= ============== ============== ==============
NET INCOME PER COMMON SHARE
Basic $ 0.66 $ 0.65 $ 1.90 $ 1.82
============= ============== ============== ==============
Diluted $ 0.63 $ 0.62 $ 1.83 $ 1.76
============= ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1998 1997
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 12,451 $ 17,875
------------- --------------
INVESTING ACTIVITIES
Cash and due from banks provided (used) from acquisitions 51,664 (5,008)
Purchases of securities:
Held for investment (9,186) (6,248)
Available for sale (110,508) (67,967)
Maturities of securities:
Held for investment 14,828 8,004
Available for sale 42,393 56,587
Proceeds from sales of securities:
Held for investment 525 -
Available for sale - 572
Net (increase) decrease in federal funds sold (51,925) (8,205)
Purchases of loans (7,677) (2,613)
Proceeds from sales of loans 111,809 88,943
Net other increase in loans (142,702) (145,888)
Purchases of premises and equipment (4,717) (3,101)
Proceeds from sales of other real estate owned and repossessed assets 1,514 758
Other, net 1,174 1,678
------------- --------------
Net cash used for investing activities (102,808) (82,488)
------------- --------------
FINANCING ACTIVITIES
Net increase (decrease) in demand, transaction and savings deposits 44,473 11,481
Net increase in certificates of deposit 38,059 52,873
Net increase (decrease) in short-term borrowings 14,440 (2,008)
Net increase (decrease) in long-term borrowings 4,547 458
Issuance of 9.65% Capital Securities - 25,000
Issuance of common stock 373 396
Purchase and retirement of common stock (664) (1,499)
Cash dividends paid (2,390) (1,907)
------------- --------------
Net cash provided by financing activities 98,838 84,794
------------- --------------
Net increase in cash and due from banks 8,481 20,181
Cash and due from banks at the beginning of the period 76,809 84,242
------------- --------------
Cash and due from banks at the end of the period $ 85,290 $ 104,423
============= ==============
SUPPLEMENTAL DISCLOSURE
Cash paid during the period for interest $ 38,509 $ 30,501
============= ==============
Cash paid during the period for income taxes $ 8,017 $ 7,187
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BANCFIRST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(1) GENERAL
The accompanying consolidated financial statements include the accounts of
BancFirst Corporation, BFC Capital Trust I, BancFirst and its subsidiaries
BancFirst Investment Corporation, Lenders Collection Corporation and Express
Financial Corporation (formerly National Express Corporation). All significant
intercompany accounts and transactions have been eliminated. Assets held in a
fiduciary or agency capacity are not assets of the Company and, accordingly, are
not included in the consolidated financial statements.
The unaudited interim financial statements contained herein reflect all
adjustments which are, in the opinion of management, necessary to provide a fair
statement of the financial position and results of operations of the Company for
the interim periods presented. All such adjustments are of a normal and
recurring nature. There have been no significant changes in the accounting
policies of the Company since December 31, 1997, the date of the most recent
annual report. Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
As discussed in note (2), the Company completed a merger with Lawton
Security Bancshares, Inc. ("Lawton Security Bancshares") in May 1998. The merger
was accounted for as a pooling of interests. Accordingly, the consolidated
financial information has been restated to combine the consolidated accounts of
Lawton Security Bancshares with the consolidated accounts of the Company for all
periods presented.
The preparation of financial statements in conformity with generally
accepted accounting principles inherently involves the use of estimates and
assumptions that affect the amounts reported in the financial statements and the
related disclosures. Such estimates and assumptions may change over time and
actual amounts may differ from those reported.
(2) MERGERS, ACQUISITIONS AND DISPOSALS
In December 1996, the Company's money order subsidiary, Express Financial
Corporation (formerly National Express Corporation) entered into an agreement
for the sale of its business. Under the terms of the agreement, Express
Financial Corporation received cash of $600 in January 1997, and may receive
additional payments of up to $500 over a two-year period based upon specified
levels of business retained by the purchaser. The business and intangible assets
of Express Financial Corporation were transferred to the purchaser in January
and February 1997. The purchaser did not assume any liabilities of Express
Financial Corporation. The sale was accounted for as a disposal of a segment of
business. Consequently, the expected net gain from the disposal will be
recognized in the Company's consolidated statement of income when the final
proceeds are received. The operations of Express Financial Corporation were not
material in relation to the consolidated operations of the Company. In March
1998, the first additional payment from the sale of $243 was received. The final
payment is due in January 1999. The following assets and liabilities of Express
Financial Corporation are included in the Company's consolidated balance sheet:
5
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------------
1998 1997 1997
----------- ------------ ------------
<S> <C> <C> <C>
Cash and due from BancFirst $ 1,165 $ 2,179 $ 2,290
Interest-bearing deposit with BancFirst 3,672 3,674 3,674
Securities held for investment 2,250 785 508
Premises and equipment, net 1 7 6
Intangible assets, net - - -
Receivables from money order sales, net 61 85 283
Other assets 10 13 9
----------- ------------ ------------
Total assets $ 7,159 $ 6,743 $ 6,770
=========== ============ ============
Outstanding money orders $ 1,583 $ 1,721 $ 1,693
Other liabilities - 7 16
----------- ------------ ------------
Total liabilities $ 1,583 $ 1,728 $ 1,709
=========== ============ ============
</TABLE>
In March 1998, BancFirst completed the purchase 13 branches from
NationsBank, N.A and concurrently sold three of the branches to another Oklahoma
financial institution. The purchase and sale resulted in BancFirst purchasing
loans and other assets of approximately $32,800, assuming deposits of
approximately $132,100 and paying a premium on deposits of approximately $9,100.
The transaction was accounted for as a purchase. Accordingly, the effects of the
purchase are included in the Company's consolidated financial statements from
the date of the purchase forward. In April 1998, BancFirst entered into
agreements to sell four additional branches to other Oklahoma financial
institutions on substantially the same terms as BancFirst's purchase of the
branches from NationsBank, N.A. These branches had loans and other assets of
approximately $2,500 and deposits of approximately $54,000. The sales of these
branches were completed in August 1998.
In May 1998, the Company completed a merger with Lawton Security
Bancshares, which had approximately $92,000 in total assets. The merger was
effected through the exchange of 414,790 shares of BancFirst Corporation common
stock for all of the Lawton Security Bancshares common stock outstanding, and
was accounted for as a pooling of interests. Accordingly, for periods reported
subsequent to the completion of the merger, the consolidated accounts of Lawton
Security Bancshares have been combined with the accounts of the Company and are
included in the Company's consolidated financial statements for all periods
presented.
In May 1998, the Company entered into a merger agreement with AmQuest
Financial Corp. ("AmQuest") of Duncan, Oklahoma. The merger was completed in
October 1998 and was effected through the exchange of 2,522,594 shares of
BancFirst Corporation common stock for all of the AmQuest common stock
outstanding, with AmQuest being merged into the Company. AmQuest had
approximately $526,000 in total assets and operated two subsidiary banks,
AmQuest Bank, N.A. and Exchange National Bank & Trust Company. The merger was
accounted for as a pooling of interests. Accordingly, for periods reported
subsequent to the completion of the merger, the consolidated accounts of AmQuest
will be combined with the accounts of the Company and will be included in the
Company's consolidated financial statements for all periods presented. The
Company has estimated that it will incur restructuring charges of approximately
$2,200, which were accrued upon consummation of the merger in October 1998.
Other merger and conversion related expenses are estimated to be $1,200, of
which the Company and AmQuest expensed $300 and $600, respectively, in the third
quarter of 1998. Additionally, the Company will restate AmQuest's allowance for
possible loan losses to conform with its own accounting methodology. This
accounting change will increase AmQuest's allowance for possible loan losses by
$1,400, and will be applied retroactively to prior periods.
In July 1998, the Company entered into an agreement to acquire Kingfisher
Bancorp, Inc. which has total assets of approximately $91,000. The acquisition
is for cash and is expected to be completed in the fourth quarter of 1998. The
transaction will be accounted for as a purchase. Accordingly, the effects of the
purchase will be included in the Company's consolidated financial statements
from the date of the purchase forward. The acquisition is not expected to have a
material effect on the results of operations of the Company for 1998.
6
<PAGE>
(3) SECURITIES
The table below summarizes securities held for investment and securities
available for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------------
1998 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
Held for investment, at cost (market value:
$42,017, $56,734 and $54,908, respectively) $ 41,144 $ 56,125 $ 54,189
Available for sale, at market value 359,989 267,329 279,557
--------- --------- ---------
Total securities $ 401,133 $ 323,454 $ 333,746
========= ========= =========
</TABLE>
(4) COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" effective January 1, 1998. This Statement
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general-
purpose financial statements. The only component of comprehensive income
reported by the Company is the unrealized gain or loss on securities available
for sale. The amount of this unrealized gain or loss, net of tax, has been
presented in the statement of income for each period as a component of other
comprehensive income. Below is a summary of the tax effects of this unrealized
gain or loss.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Unrealized gain (loss) during the period:
Before-tax amount $ 4,793 $ 982 $ 4,730 $ 720
Tax expense (1,674) (339) (1,632) (253)
------- ------- ------- -------
Net-of-tax amount $ 3,119 $ 643 $ 3,098 $ 467
======= ======= ======= =======
</TABLE>
The amount of unrealized gain or loss included in accumulated other
comprehensive income is summarized below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Unrealized gain (loss) on securities:
Beginning balance $ 1,537 $ 570 $ 1,558 $ 746
Current period change 3,119 643 3,098 467
------- ------- ------- -------
Ending balance $ 4,656 $ 1,213 $ 4,656 $ 1,213
======= ======= ======= =======
</TABLE>
7
<PAGE>
(5) NET INCOME PER COMMON SHARE
Basic and diluted net income per common share are calculated as follows:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- --------------- --------------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1998
BASIC:
Income available to common stockholders $ 4,443 6,773,971 $ 0.66
==============
Effect of stock options - 236,954
---------------- ---------------
DILUTED:
Income available to common stockholders
plus assumed exercises of stock options $ 4,443 7,010,925 $ 0.63
================ =============== ==============
THREE MONTHS ENDED SEPTEMBER 30, 1997
BASIC:
Income available to common stockholders $ 4,381 6,782,067 $ 0.65
==============
Effect of stock options - 229,365
---------------- ---------------
DILUTED:
Income available to common stockholders
plus assumed exercises of stock options $ 4,381 7,011,432 $ 0.62
================ =============== ==============
NINE MONTHS ENDED SEPTEMBER 30, 1998
BASIC:
Income available to common stockholders $ 12,842 6,774,014 $ 1.90
==============
Effect of stock options - 235,064
---------------- ---------------
DILUTED:
Income available to common stockholders
plus assumed exercises of stock options $ 12,842 7,009,078 $ 1.83
================ =============== ==============
NINE MONTHS ENDED SEPTEMBER 30, 1997
BASIC:
Income available to common stockholders $ 12,327 6,769,983 $ 1.82
==============
Effect of stock options - 250,376
---------------- ---------------
DILUTED:
Income available to common stockholders
plus assumed exercises of stock options $ 12,327 7,020,359 $ 1.76
================ =============== ==============
</TABLE>
8
<PAGE>
Below is the number and average exercise prices of options that were
excluded from the computation of diluted net income per share for each period
because the options' exercise prices were greater than the average market price
of the common shares.
AVERAGE
EXERCISE
SHARES PRICE
----------- ------------
Three Months Ended September 30, 1998 - $ -
Three Months Ended September 30, 1997 5,000 $ 32.00
Nine Months Ended September 30, 1998 - $ -
Nine Months Ended September 30, 1997 5,000 $ 32.00
(6) STOCK REPURCHASE PROGRAM
In April 1998, the Company terminated its Stock Repurchase Program. No
repurchases were made under the program during 1998.
9
<PAGE>
BANCFIRST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The Company reported net income of $4.44 million for the quarter ended
September 30, 1998, compared to net income of $4.38 million for the same quarter
of 1997. Diluted net income per share was $0.63 for the third quarter of 1998,
compared to $0.62 per share for the third quarter of 1997.
Net income for the first nine months of 1998 was $12.8 million, compared to
$12.3 million for the same period of 1997. Diluted net income per share was
$1.83 and $1.76, respectively.
Total assets were $1.63 billion, an increase of $194 million from December
31, 1997 and $402 million from September 30, 1997. The growth since year-end
1997 and the third quarter of 1997 was due to the acquisition of branches from
NationsBank, N.A. and internal growth. Stockholders' equity rose to $1.45
million, an increase of $13.3 million compared to December 31, 1997 and $15.1
million compared to September 30, 1997.
RESULTS OF OPERATIONS
THIRD QUARTER
Net interest income increased for the third quarter of 1998 by $2.08
million, or 13.4%, as compared to the same quarter of 1997, primarily as a
result of earning asset growth. Average net earning assets increased $53
million, or 21.7%, compared to the third quarter of 1997, while net interest
spread was 3.92% for the quarter, compared to 4.45% for the third quarter of
1997. Net interest margin on a taxable equivalent basis was 4.84% for the third
quarter of 1998, compared to 5.06% for the same quarter of 1997. The lower net
interest spread and net interest margin are the result of lower interest rates,
a flatter yield curve and competitive pricing pressures on loans experienced in
1998.
The Company provided $426,000 for possible loan losses for the quarter,
compared to $162,000 for the third quarter of 1997, reflecting slightly higher
net charge-offs and loan growth in 1998. Net loan charge-offs were $243,000 for
the third quarter of 1998, compared to $113,000 for the third quarter of 1997.
The net charge-offs represent an annualized rate of only 0.10% of total loans
for the third quarter of 1998 and 0.05% of total loans for the third quarter of
1997.
Noninterest income increased $1.09 million, or 26.04%, compared to the
third quarter of 1997 due to higher service charges on deposits and other
income, such as trust fees and income from the origination and sale of
residential mortgages. Noninterest expense increased $2.74 million, or 21.2%,
due partly to operating expenses of acquired branches and expenses related to
the merger with AmQuest Financial Corp., but also as a result of increased
staffing and other costs of expanding the Company's management and operational
infrastructure.
Income tax expense increased $106,000 compared to the third quarter of
1997. The effective tax rate on income before taxes was 34.3%, up from 33.6% in
1997, due partially to certain minor adjustments to deferred taxes for 1998 and
the absence of tax benefits recognized in 1997 from the exercise of stock
options.
YEAR TO DATE
Net interest income for the first nine months of 1998 increased by $5.71
million, or 12.6%, as compared to the same period of 1997, primarily as a result
of earning asset growth. Average net earning assets increased $56.7 million, or
23.9%, compared to the first nine months of 1997, while net interest spread was
3.92% for the year to date, compared to 4.22% for the first nine months of 1997.
Net interest margin on a taxable equivalent basis was 4.87% for the first nine
months of 1998, compared to 5.09% for the same period of 1997. The lower net
interest spread and net interest margin are the result of lower interest rates,
a flatter yield curve and competitive pricing pressures on loans experienced in
1998.
The Company provided $1.49 million for possible loan losses for the year to
date, compared to $444,000 for the first nine months of 1997, reflecting higher
net charge-offs and loan growth in 1998. Net loan charge-offs were $615,000 for
1998, compared to $387,000 for the first half of 1997. The net charge-offs in
1998 represent an annualized rate of only 0.08% of total loans, compared to
0.06% for 1997.
10
<PAGE>
Noninterest income increased $2.59 million, or 21.2%, compared to the first
nine months of 1997 due to higher service charges on deposits and other income,
such as trust fees and income from the origination and sale of residential
mortgages. Noninterest expense increased $6.06 million, or 16%, due partly to
operating expenses of acquired branches and expenses related to the merger with
AmQuest Financial Corp., but also as a result of increased staffing and other
costs of expanding the Company's management and operational infrastructure.
Income tax expense increased $681,000 for the first nine months of 1998
compared to the same period in 1997. The effective tax rate on income before
taxes was 37.4%, up from 36.2% in 1997, due partly to the absence of tax
benefits recognized in 1997 from the exercise of stock options.
FINANCIAL POSITION
Total securities increased $67.4 million compared to December 31, 1997 and
$77.7 million compared to September 30, 1997, primarily due to cash received for
the assumption of net liabilities of the branches acquired from NationsBank,
N.A. The net unrealized gain on securities available for sale was $7.16 million
at the end of the third quarter of 1998, compared to a gain of $2.43 million at
December 31 and a gain of $1.9 million at September 30, 1997. The average
taxable equivalent yield on the securities portfolio for the third quarter
decreased to 6.12% from 6.38% for the same quarter of 1997.
Total loans increased $62.2 million from December 31, 1997 and $106 million
from September 30, 1997, due to $30 million of loans acquired with the
NationsBank branches and internal growth. The allowance for possible loan losses
increased $897,000 from year-end 1997 and $1.46 million from the third quarter
of 1997. The allowance as a percentage of total loans was 1.42%, 1.42% and 1.43%
at September 30, 1998, December 31, 1997 and September 30, 1997, respectively.
The allowance to nonperforming and restructured loans ratios at the same dates
were 285.06%, 258.29% and 213.32%, respectively.
Nonperforming and restructured assets totaled $5.8 million, compared to
$6.53 million at year-end 1997 and $7.51 million at September 30, 1997. Although
the ratio of nonperforming and restructured assets to total assets is only
0.35%, it is reasonable to expect nonperforming loans and loan losses to rise
over time to historical norms as a result of economic and credit cycles.
Total deposits increased $161 million as compared to December 31, 1997 and
$168 million compared to September 30, 1997. The increases reflect the
acquisition of the NationsBank branches, which added approximately $132 million
in deposits, $54 million of which were later sold, and internal growth. The
Company's deposit base continues to be comprised substantially of core deposits,
with large denomination certificates of deposit being only 12.6% of total
deposits at September 30, 1998.
Short-term borrowings increased $14.4 million from December 31, 1997 and
$19.1 million from September 30, 1997 as a result of an increase in the
Company's correspondent banking business. Fluctuations in short-term borrowings
are a function of federal funds purchased from correspondent banks, customer
demand for repurchase agreements and liquidity needs of the bank.
Long-term borrowings increased $4.55 million from year-end 1997 and $4.5
million from the third quarter of 1997 due to additional Federal Home Loan Bank
borrowings.
Stockholders' equity rose to $145 million from $131 million at year-end
1997 and $129 million at September 30, 1997. These increases are the result of
accumulated earnings and an increase in the net unrealized gain on securities
available for sale. In April 1998, the Company terminated its Stock Repurchase
Program. No repurchases were made under the program during 1998. Average
stockholders' equity to average assets for the quarter was 8.57%, compared to
9.21% for the same quarter of 1997. The Company's leverage ratio and total risk-
based capital ratio were 9.09% and 16.36%, respectively, at September 30, 1998,
well in excess of the regulatory minimums.
YEAR 2000 EXPOSURE
Many computer systems and devices using embedded computer chips currently
in operation worldwide use only two digits to specify the year. There is a
significant risk that these systems and devices could produce inaccurate
results, or may not function properly, beginning January 1, 2000 when two-digit
year numbers could be processed as being in the previous century. The Company is
exposed to the risk that not only the systems and devices it uses will
malfunction, but also those of its customers, suppliers and other parties with
whom it conducts business. Such malfunctions could expose the Company to losses
from operational errors and failures, as well as customer claims, lawsuits and
regulatory penalties for noncompliance. While the extent of these possible
losses can not be estimated, such losses could have a material adverse effect on
the Company's results of operations, liquidity and financial condition.
11
<PAGE>
During 1997, the Company commenced a Year 2000 Project to conduct a
comprehensive review of its outside data processing services, internal computer
systems and other mechanical and computerized equipment. The purpose of the
project is to determine and plan for necessary changes to assure that its
systems and equipment will function properly in the year 2000. The project also
includes communications with other parties to determine the extent to which the
parties are addressing the issue, and the exposure to the Company in the event
the parties fail to adequately plan for and resolve the issue.
The plan developed by the Company consists of the following seven phases:
1. Awareness
2. Inventory
3. Assessment
4. Analysis
5. Conversion
6. Implementation
7. Post-Implementation
The first four phases of the plan have been completed. The Conversion phase
will be completed in the first quarter of 1999. Testing of mission critical
applications is in process and is expected to be completed in April 1999. An
evaluation of Year 2000 credit risk is being completed. Contingency plans are
being prepared for each mission critical application and should be completed by
the end of the first quarter of 1999. The Implementation and Post Implementation
phases will be completed in the first quarter of 2000.
The total cost of addressing the Year 2000 issue is not estimated to be
material. The Company's core business applications are provided by a data
processing company that is devoting substantial resources to assure that the
applications are certified as Year 2000 compliant by the end of 1998. Certain of
the other systems either have been replaced, or were already going to be
replaced with newer technology, and their replacement is not being accelerated
due the Year 2000 issue. Also, no significant information technology projects
are being deferred because of the Year 2000 issue.
12
<PAGE>
BANCFIRST CORPORATION
SELECTED CONSOLIDATED FINANCIAL STATISTICS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
PERFORMANCE STATISTICS SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
---------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net income per share - basic $ 0.66 $ 0.65 $ 1.90 $ 1.82
Net income per share - diluted 0.63 0.62 1.83 1.76
Cash dividends per share 0.12 0.10 0.36 0.30
Return on average assets 1.07% 1.26% 1.08% 1.21%
Return on average stockholders' equity 12.52 13.66 12.51 13.42
Efficiency ratio 68.56 65.70 66.65 65.74
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET AND ASSET QUALITY SEPTEMBER 30,
--------------------------------- DECEMBER 31,
STATISTICS 1998 1997 1997
--------------- ---------------- --------------
<S> <C> <C> <C>
Book value per share $ 21.38 $ 19.07 $ 19.43
Tangible book value per share 18.70 17.16 17.57
Average loans to deposits (year-to-date) 69.52% 70.56% 70.90%
Nonperforming and restructured assets to total assets 0.35 0.53 0.45
Allowance for possible loan losses to total loans 1.42 1.43 1.42
Allowance for possible loan losses to nonperforming
and restructured loans 285.06 213.32 258.29
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCE SHEETS THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
AND INTEREST MARGIN ANALYSIS 1998 1997
--------------------------------- ---------------------------------
TAXABLE EQUIVALENT BASIS AVERAGE AVERAGE AVERAGE AVERAGE
Earning assets: BALANCE YIELD/RATE BALANCE YIELD/RATE
---------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Loans $ 981,073 9.55% $ 857,114 9.64%
Securities 411,196 6.12 328,269 6.38
Federal funds sold 63,676 6.01 43,244 5.52
-------------- --------------
Total earning assets 1,455,945 8.43 1,228,627 8.62
-------------- --------------
Nonearning assets:
Cash and due from banks 106,207 77,974
Interest recievable and other assets 94,477 86,789
Allowance for possible loan losses (13,751) (12,418)
-------------- --------------
Total nonearning assets 186,933 152,345
-------------- --------------
Total assets $ 1,642,878 $ 1,380,972
============== ==============
Interest-bearing liabilities:
Interest-bearing deposits $ 1,093,890 4.35% $ 946,840 4.29%
Short-term borrowings 26,883 5.34 5,867 5.31
Long-term borrowings 12,890 5.82 6,610 6.18
9.65% Capital Securities 25,000 9.71 25,000 9.70
-------------- --------------
Total interest-bearing liabilities 1,158,663 4.51 984,317 4.16
-------------- --------------
Interest-free funds:
Noninterest-bearing deposits 332,690 261,361
Interest payable and other liabilities 10,731 8,099
Stockholders' equity 140,794 127,195
-------------- --------------
Total interest-free funds 484,215 396,655
-------------- --------------
Total liabilities and stockholders' equity $ 1,642,878 $ 1,380,972
============== ==============
Net interest spread 3.92% 4.45%
============== ==============
Net interest margin 4.84% 5.06%
============== ==============
</TABLE>
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Stockholders held on September 24, 1998, the
following matters were voted upon, with the votes indicated:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------------------------
BROKER
VOTED NON-
DESCRIPTION OF PROPOSAL VOTED FOR AGAINST ABSTAINED VOTES
--------- ------- --------- -----
<S> <C> <C> <C> <C>
PROPOSAL NO. 1-Approval of Merger
Agreement dated May 6, 1998 between
BancFirst Corporation and AmQuest
Financial Corp. 5,693,969 4,477 5,640 554,107
PROPOSAL NO. 2-Amendment to Certificate
of Incorporation of BancFirst
Corporation to increase from 7,500,000
to 15,000,000 the number of shares of
common stock authorized. 5,894,410 4,937 6,556 352,290
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT
------- ----------------------------------------------------------------
2.1 Purchase and Assumption Agreement between NationsBank, N.A. and
BancFirst dated September 26, 1997 (filed as Exhibit 2.4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and incorporated herein by reference).
2.2 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).
2.3 Letter Agreement dated August 5, 1998 between BancFirst
Corporation and AmQuest Financial Corp. (filed as Exhibit 2.2 to
the Company's Registration Statement on Form S-4, File No. 333-
59913 and incorporated herein by reference).
2.4 Letter Agreement dated August 7, 1998 between BancFirst
Corporation and AmQuest Financial Corp. (filed as Exhibit 2.3 to
the Company's Registration Statement on Form S-4, File No. 333-
59913 and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation (filed as
Exhibit No. 1 to the Company's Form 8-A/A filed July 23, 1998 and
incorporated herein by reference).
3.2 Amended By-Laws (filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference).
4.1 Amended and Restated Declaration of Trust of BFC Capital Trust I
dated as of February 4, 1997 (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated February 4, 1997 and
incorporated herein by reference.)
4.2 Indenture dated as of February 4, 1997 (filed as Exhibit 4.2 to
the Company's Current Report on Form 8-K dated February 4, 1997
and incorporated herein by reference.)
14
<PAGE>
EXHIBIT
NUMBER EXHIBIT
------- -----------------------------------------------------------------
4.3 Series A Capital Securities Guarantee Agreement dated as of
February 4, 1997 (filed as Exhibit 4.3 to the Company's Current
Report on Form 8-K dated February 4, 1997 and incorporated herein
by reference.)
27.1* Financial Data Schedule.
*Filed
herewith
(b) The following report on Form 8-K has been filed by the Company during the
quarter ended September 30, 1998.
DATE OF
REPORT ITEMS REPORTED
------- ---------------------------------------------------------
October 1, 1998 Merger of AmQuest Financial Corp. into BancFirst
Corporation effective October 1, 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANCFIRST CORPORATION
---------------------
(Registrant)
Date November 12, 1998 /s/Randy P. Foraker
----------------- ----------------------------------------
(Signature)
Randy P. Foraker
Senior Vice President and Controller;
Assistant Secretary/Treasurer
(Principal Accounting Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS OF THE REGISTRANT FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 85,246
<INT-BEARING-DEPOSITS> 44
<FED-FUNDS-SOLD> 96,640
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 359,989
<INVESTMENTS-CARRYING> 41,144
<INVESTMENTS-MARKET> 42,017
<LOANS> 976,100
<ALLOWANCE> 13,888
<TOTAL-ASSETS> 1,634,288
<DEPOSITS> 1,419,172
<SHORT-TERM> 22,386
<LIABILITIES-OTHER> 11,549
<LONG-TERM> 36,598
0
0
<COMMON> 6,764
<OTHER-SE> 137,819
<TOTAL-LIABILITIES-AND-EQUITY> 1,634,288
<INTEREST-LOAN> 68,963
<INTEREST-INVEST> 18,045
<INTEREST-OTHER> 2,569
<INTEREST-TOTAL> 89,577
<INTEREST-DEPOSIT> 35,290
<INTEREST-EXPENSE> 38,441
<INTEREST-INCOME-NET> 51,136
<LOAN-LOSSES> 1,485
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 43,956
<INCOME-PRETAX> 20,505
<INCOME-PRE-EXTRAORDINARY> 12,842
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,842
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.83
<YIELD-ACTUAL> 4.83
<LOANS-NON> 3,538
<LOANS-PAST> 855
<LOANS-TROUBLED> 478
<LOANS-PROBLEM> 17,238
<ALLOWANCE-OPEN> 12,991
<CHARGE-OFFS> 1,328
<RECOVERIES> 713
<ALLOWANCE-CLOSE> 13,888
<ALLOWANCE-DOMESTIC> 13,888
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,368
</TABLE>
