<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, 1999
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, 1999 there were 8,166,203 shares of the registrant's
Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BANCFIRST CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
---------------------------
1999 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 105,006 $ 101,481 $ 132,286
Interest-bearing deposits with banks 189 78 11
Securities (market value: $564,712, $567,316 and $584,650,
respectively) 565,438 564,754 582,649
Federal funds sold 63,000 116,596 187,369
Loans:
Total loans (net of unearned interest) 1,364,179 1,283,434 1,338,879
Allowance for possible loan losses (20,173) (18,084) (19,659)
------------ ------------ ------------
Loans, net 1,344,006 1,265,350 1,319,220
Premises and equipment, net 49,087 46,611 47,558
Other real estate owned 1,099 1,126 1,057
Intangible assets, net 22,243 23,890 24,095
Accrued interest receivable 20,662 19,846 19,589
Other assets 25,266 19,375 22,049
------------ ------------ ------------
Total assets $ 2,195,996 $ 2,159,107 $ 2,335,883
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 421,886 $ 376,569 $ 463,391
Interest-bearing 1,524,623 1,490,011 1,561,409
------------ ------------ ------------
Total deposits 1,946,509 1,866,580 2,024,800
Short-term borrowings 20,284 37,618 54,841
Long-term borrowings 23,566 14,598 12,966
9.65% Capital Securities 25,000 25,000 25,000
Accrued interest payable 8,104 8,459 8,315
Other liabilities 7,905 7,839 8,044
------------ ------------ ------------
Total liabilities 2,031,368 1,960,094 2,133,966
------------ ------------ ------------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, $1.00 par (shares issued: 8,166,203, 9,617,190 and
9,291,929, respectively) 8,166 9,618 9,292
Capital surplus 46,520 44,774 45,148
Retained earnings 110,754 144,399 142,046
Accumulated other comprehensive income (812) 5,176 5,431
Treasury stock, at cost (330,804 shares in 1998) -- (4,954) --
------------ ------------ ------------
Total stockholders' equity 164,628 199,013 201,917
------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,195,996 $ 2,159,107 $ 2,335,883
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 30,174 $ 30,609 $ 89,963 $ 91,369
Interest-bearing deposits with banks 7 8 28 12
Securities:
Taxable 7,696 8,558 22,834 24,713
Tax-exempt 625 517 1,872 1,665
Federal funds sold 1,163 1,037 4,327 3,219
---------- ---------- ---------- ----------
Total interest income 39,665 40,729 119,024 120,978
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 15,205 16,058 45,346 47,659
Short-term borrowings 287 447 1,366 1,469
Long-term borrowings 339 227 855 514
9.65% Capital Securities 611 612 1,835 1,838
---------- ---------- ---------- ----------
Total interest expense 16,442 17,344 49,402 51,480
---------- ---------- ---------- ----------
Net interest income 23,223 23,385 69,622 69,498
Provision for possible loan losses 418 596 1,823 1,867
---------- ---------- ---------- ----------
Net interest income after provision
for possible loan losses 22,805 22,789 67,799 67,631
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposits 4,188 3,561 12,174 10,642
Securities transactions 248 -- 244 12
Other 2,825 2,820 9,301 7,677
---------- ---------- ---------- ----------
Total noninterest income 7,261 6,381 21,719 18,331
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 11,542 12,151 34,360 33,645
Occupancy and fixed assets expense, net 1,371 1,262 3,645 3,537
Depreciation 1,195 1,171 3,599 3,487
Amortization 912 885 2,732 2,463
Data processing services 542 561 1,642 1,670
Net (income) expense from other real estate owned 91 80 130 (63)
Other 4,817 4,507 14,626 14,232
---------- ---------- ---------- ----------
Total noninterest expense 20,470 20,617 60,734 58,971
---------- ---------- ---------- ----------
Income before taxes 9,596 8,553 28,784 26,991
Income tax expense (3,566) (2,764) (10,664) (9,995)
---------- ---------- ---------- ----------
Net income 6,030 5,789 18,120 16,996
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities (1,018) 3,452 (6,243) 3,388
---------- ---------- ---------- ----------
Comprehensive income $ 5,012 $ 9,241 $ 11,877 $ 20,384
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
Basic $ 0.74 $ 0.62 $ 2.06 $ 1.83
========== ========== ========== ==========
Diluted $ 0.73 $ 0.61 $ 2.03 $ 1.78
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 22,871 $ 19,177
------------ ------------
INVESTING ACTIVITIES
Net cash and due from banks provided by (used for) acquisitions
and divestitures (12,251) 47,514
Purchases of securities:
Held for investment (33,370) (24,145)
Available for sale (92,136) (131,135)
Maturities of securities:
Held for investment 50,576 41,373
Available for sale 81,724 59,500
Proceeds from sales of securities:
Held for investment 693 525
Available for sale - 5,487
Net (increase) decrease in federal funds sold 124,369 (51,925)
Purchases of loans (11,251) (7,677)
Proceeds from sales of loans 120,830 111,809
Net other increase in loans (139,851) (115,468)
Purchases of premises and equipment (7,504) (5,768)
Proceeds from the sale of other real estate owned and repossessed
assets 2,210 2,057
Other, net 1,860 1,616
------------ ------------
Net cash used for investing activities 85,899 (66,237)
------------ ------------
FINANCING ACTIVITIES
Net decrease in demand, transaction and savings deposits (52,563) (6,205)
Net increase (decrease) in certificates of deposits (10,184) 38,059
Net increase (decrease) in short-term borrowings (34,557) 15,387
Net increase in long-term borrowings 10,600 4,047
Issuance of common stock 1,453 945
Acquisition of common stock (47,027) (664)
Cash dividends paid (3,593) (2,897)
------------ ------------
Net cash provided by (used for) financing activities (135,871) 48,672
------------ ------------
Net increase (decrease) in cash and due from banks (27,101) 1,612
Cash and due from banks at the beginning of the period 132,296 120,227
------------ ------------
Cash and due from banks at the end of the period $ 105,195 $ 121,839
============ ============
SUPPLEMENTAL DISCLOSURE
Cash paid during the year for interest $ 65,821 $ 47,056
============ ============
Cash paid during the year for income taxes $ 9,426 $ 10,352
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BANCFIRST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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, 1998, the date of the most recent
annual report. Certain amounts in the 1998 financial statements have been
reclassified to conform to the 1999 presentation.
As discussed in note (2), the Company completed mergers with Lawton Security
Bancshares, Inc. ("Lawton Security Bancshares") in May 1998, and AmQuest
Financial Corp ("AmQuest") in October 1998. The mergers were accounted for as a
poolings of interests. Accordingly, the consolidated financial information for
periods prior to the mergers has been restated to combine the consolidated
accounts of Lawton Security Bancshares and AmQuest 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) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those financial
instruments at fair value. The accounting for changes in the fair value of a
derivative instrument depends on the intended use of the derivative and its
resulting designation. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133." This Statement defers the effective date
of FASB Statement No. 133 to all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company does not expect that the adoption of this standard
will have a material impact on its consolidated financial statements.
In October 1998, the FASB issued Statement of Financial Accounting Standards
No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This Statement amends Statement of Financial Accounting Standards
No. 65, "Accounting for Certain Mortgage Banking Activities" to require that
after the securitization of Mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. The Statement is effective for the first fiscal quarter beginning
after December 15, 1998. The Company does not engage in securitization
activities. Consequently, the Company does not expect that the adoption of this
standard will have a material impact on its consolidated financial statements.
5
<PAGE>
(3) MERGERS, ACQUISITIONS AND DISPOSALS
In March 1998, BancFirst completed the purchase of 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. BancFirst subsequently sold an
additional four of the branches during 1998. These branches had loans and other
assets of approximately $2,500, and deposits of approximately $54,000. These
transactions did not have a material effect on the results of operations of the
Company for 1998.
In May 1998, the Company completed a merger with Lawton Security Bancshares,
Inc., 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, 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 October 1998, the Company completed a merger with AmQuest Financial Corp.
of Duncan, Oklahoma, which had approximately $526,000 in total assets. The
merger was effected through the exchange of 2,522,594 shares of BancFirst
Corporation common stock for all of the AmQuest common stock outstanding, and
was accounted for as a pooling of interests. Accordingly, the consolidated
accounts of AmQuest have been combined with the accounts of the Company and are
included in the Company's consolidated financial statements for all periods
presented. The Company recorded estimated restructuring charges of $1,912 upon
consummation of the merger in October 1998. These charges consist of
termination benefits of $345 for 37 employees terminated and $1,567 for loss on
facilities and other assets to be sold or abandoned. Other merger and
conversion related expenses estimated at $1,200 were incurred. Additionally,
the Company restated AmQuest's allowance for possible loan losses to conform to
its own methodology; accordingly, the allowance for possible loan losses was
increased by $1,400, which was applied retroactively to prior periods.
In December 1998, the Company completed the acquisition of Kingfisher
Bancorp, Inc. which had total assets of approximately $91,000. The acquisition
was for cash of $12,000 and was accounted for as a purchase. Accordingly, the
effects of the acquisition are included in the Company's consolidated financial
statements from the date of the acquisition forward. A core deposit intangible
of $286 and goodwill of $1,871 were recorded in the acquisition. The acquisition
did not have a material effect on the results of operations of the Company for
1998.
In February 1999, the Company sold a branch in Anadarko, Oklahoma, which had
deposits of approximately $15,500. The sale resulted in a pretax gain of
approximately $900.
In November 1999, the Company entered into an agreement to purchase certain
assets and assume certain liabilities of First State Bank of Oklahoma City,
Oklahoma. Under the terms of the agreement, the Company will organize a new
wholly-owned bank under the First State Bank name that will complete the
purchase and assumption. The transaction is subject to regulatory approval, but
is expected to be completed in December 1999. The new First State Bank will
have approximately $120,000 in total assets, $1,750 in intangible assets and
$8,300 in stockholders' equity. The purchase and assumption 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, and will not have a material effect on the results of operations of the
Company for 1999.
(4) TENDER OFFER
In June 1999, the Company completed a Dutch auction issuer tender offer and
purchased 1,186,502 shares of its common stock for the maximum offer price of
$38.00 per share. Cash on hand and two borrowings totaling $7,600 were used to
pay for the purchase of the stock. The two borrowings under a $12,000 revolving
line of credit were at rates of 6.3% and 6.5%, and matured in July and October
1999.
6
<PAGE>
(5) SECURITIES
The table below summarizes securities held for investment and securities
available for sale.
<TABLE>
<CAPTION>
September 30, December 31,
-------------------------
1999 1998 1998
----------- ----------- ------------
<S> <C> <C> <C>
Held for investment at cost (market value; $103,062,
$132,199, and $132,804, respectively) $103,788 $129,637 $130,803
Available for sale, at market value 461,650 435,117 451,846
----------- ----------- ------------
Total $565,438 $564,754 $582,649
=========== =========== ============
</TABLE>
(6) COMPREHENSIVE INCOME
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,
------------------------------------ -----------------------------------
1999 1998 1999 1998
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Unrealized gain (loss) during the period:
Before-tax amount $ 133 $ 5,329 $(9,543) $ 5,213
Tax (expense) benefit (1,151) (1,877) 3,300 (1,825)
---------------- --------------- --------------- ---------------
Net-of-tax amount $(1,018) $ 3,452 $(6,243) $ 3,388
================ =============== =============== ===============
</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,
------------------------------------ -----------------------------------
1999 1998 1999 1998
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Unrealized gain (loss) on securities:
Beginning balance $ 206 $1,724 $ 5,431 $1,788
Current period change (1,018) 3,452 (6,243) 3,388
---------------- --------------- --------------- ---------------
Ending balance $ (812) $5,176 $ (812) $5,176
================ =============== =============== ===============
</TABLE>
7
<PAGE>
(7) 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, 1999
- -------------------------------------
Basic
Income available to common stockholders $ 6,030 8,167,951 $0.74
===============
Effect of stock options -- 101,306
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 6,030 8,269,257 $0.73
================== ================= ===============
Three Months Ended September 30, 1998
- -------------------------------------
Basic
Income available to common stockholders $ 5,789 9,275,743 $0.62
===============
Effect of stock options -- 278,122
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 5,789 9,553,865 $0.61
================== ================= ===============
Nine Months Ended September 30, 1999
- ------------------------------------
Basic
Income available to common stockholders $18,120 8,808,075 $2.06
===============
Effect of stock options -- 113,174
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $18,120 8,921,249 $2.03
================== ================= ===============
Nine Months Ended September 30, 1998
- ------------------------------------
Basic
Income available to common stockholders $16,996 9,275,681 $1.83
===============
Effect of stock options -- 276,638
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $16,996 9,552,319 $1.78
================== ================= ===============
</TABLE>
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.
<TABLE>
<CAPTION>
Average
Exercise
Shares Price
------------- -------------------
<S> <C> <C>
Three Months Ended September 30, 1999 125,815 $ 36.54
Three Months Ended September 30, 1998 -- $ --
Nine Months Ended September 30, 1999 109,214 $ 36.80
Nine Months Ended September 30, 1998 -- $ --
</TABLE>
8
<PAGE>
(8) SEGMENT INFORMATION
The Company evaluates its performance with an internal profitability
measurement system that measures the profitability of its business units on a
pre-tax basis. The four principal business units were metropolitan banks,
community banks, other financial services, and executive, operations and
support. Metropolitan and community banks offer traditional banking products
such as commercial and retail lending, and a full line of deposit accounts.
Metropolitan banks consist of banking locations in the metropolitan Oklahoma
City and Tulsa areas. Community banks consist of banking locations in
communities throughout Oklahoma. Other financial services are specialty product
business units including guaranteed small business lending, guaranteed student
lending, residential mortgage lending, trust services, and electronic banking.
The executive, operations and support groups represent executive management,
operational support and corporate functions that are not allocated to the other
business units. The results of operations and selected financial information for
the four business units are as follows:
<TABLE>
<CAPTION>
Other Executive,
Metropolitan Community Financial Operations
Banks Banks Services & Support Eliminations Consolidated
------------ ----------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended:
September 30, 1999
Net interest income (expense) $ 6,007 $ 17,111 $ 1,037 $ (931) $ (1) $ 23,223
Noninterest income 1,175 3,789 1,569 7,524 (6,796) 7,261
Income before taxes 2,727 9,370 777 3,518 (6,796) 9,596
September 30, 1998
Net interest income (expense) $ 5,175 $ 17,514 $ 1,233 $ (487) $ (50) $ 23,385
Noninterest income 872 3,811 1,343 7,257 (6,902) 6,381
Income before taxes 2,032 7,750 1,919 3,302 (6,450) 8,553
Nine Months Ended:
September 30, 1999
Net interest income (expense) $ 17,184 $ 50,944 $ 3,524 $ (2,021) $ (9) $ 69,622
Noninterest income 3,394 12,196 4,218 21,340 (19,429) 21,719
Income before taxes 7,571 27,878 2,136 10,495 (19,296) 28,784
September 30, 1998
Net interest income (expense) $ 14,786 $ 53,110 $ 2,732 $ (1,029) $ (101) $ 69,498
Noninterest income 2,615 11,300 3,539 21,723 (20,846) 18,331
Income before taxes 5,847 27,012 2,936 11,217 (20,021) 26,991
Total Assets:
September 30, 1999 $ 566,190 $ 1,610,299 $ 98,245 $ 111,188 $ (189,926) $ 2,195,996
September 30, 1998 $ 474,766 $ 1,602,386 $ 101,939 $ 203,272 $ (223,256) $ 2,159,107
</TABLE>
The financial information for each business unit is presented on the basis
used internally by management to evaluate performance and allocate resources.
The Company utilizes a transfer pricing system to allocate the benefit or cost
of funds provided or used by the various business units. Certain services
provided by the support group to other business units, such as item processing,
are allocated at rates approximating the cost of providing the services.
Eliminations are adjustments to consolidate the business units and companies.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
BANCFIRST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Net income for the third quarter ended September 30, 1999 was $6.03
million, up from $5.79 million for the same quarter of the previous year.
Diluted net income per share was $0.74, up from $0.61 for the third quarter of
1998. Net income for the first nine months of 1999 was $18.1 million, compared
to $17 million for the first nine months of 1998. Diluted net income per share
year-to-date was $2.03 and $1.78 for 1999 and 1998, respectively.
Total assets were $2.2 billion at September 30, 1999, down $140 million
from December 31, 1998, but up $36.9 million from September 30, 1998. The higher
total assets at year-end 1998 was due in part to an inflow of temporary
deposits. The asset growth compared to the third quarter of 1998 was due
primarily to the acquisition of Kingfisher Bancorp, Inc. ("Kingfisher Bancorp")
in December 1998. Stockholders' equity was $165 million at September 30, 1999, a
decrease of $37.3 million compared to December 31, 1998 and $34.4 million
compared to September 30, 1998. In June 1999, the Company completed a Dutch
auction issuer tender offer and repurchased 1,186,502 shares of its common stock
for $45.1 million.
In November 1999, the Company entered into an agreement to purchase certain
assets and assume certain liabilities of First State Bank of Oklahoma City,
Oklahoma. Under the terms of the agreement, the Company will organize a new
wholly-owned bank under the First State Bank name that will complete the
purchase and assumption. The transaction is subject to regulatory approval, but
is expected to be completed in December 1999. The new First State Bank will have
approximately $120 million in total assets, $1.75 million in intangible assets
and $8.3million in stockholders' equity.
RESULTS OF OPERATIONS
Third Quarter
Net interest income decreased by $162,000 compared to the third quarter of
1998, primarily as a result of a decrease in the net interest margin from 4.81%
to 4.66%. Average net earning assets decreased $3.12 million compared to the
third quarter of 1998, while net interest spread was 3.88% for the quarter, down
from 3.92% for the third quarter of 1998. 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.
The Company provided $418,000 for possible loan losses for the third
quarter, compared to $596,000 for the third quarter of 1998. Net loan charge-
offs were $509,000 for the third quarter of 1999, compared to $481,000 for the
third quarter of 1998. The net charge-offs represent an annualized rate of only
0.15% of total loans for both the third quarter of 1999 and 1998.
Noninterest income increased $880,000, or 13.8%, compared to the third
quarter of 1998 due to internal growth in service charges on deposits, the
acquisition of Kingfisher Bancorp. and securities gains. Noninterest expense
increased $147,000, or 0.71%, as a net result of the acquisition of Kingfisher
Bancorp and various cost savings.
Income tax expense increased $802,000 compared to the third quarter of
1998. The effective tax rate on income before taxes was 37.2%, up from 32.3% in
the third quarter of 1998.
Year-To-Date
Net interest income increased $124,000 for the nine months ended September
30, 1999, compared to the same period of 1998. Average net earning assets
increased $12.5 million compared to 1998, while net interest spread was 3.86% in
1999, down from 3.98% in 1998. Net interest margin for the first nine months of
1999 was 4.66%, compared to 4.88% for the first nine months of 1998. The lower
net interest spread and net interest margin are the result of lower
10
<PAGE>
interest rates, a flatter yield curve and competitive pricing pressures on
loans.
The Company provided $1.82 million for possible loan losses for the nine
months ended September 30, 1999, compared to $1.87 million for the first nine
months of 1998. Net loan charge-offs were $1.31 million in 1999, compared to
$1.27 million in 1998. The net charge-offs represent an annualized rate of only
0.13% of total loans for both 1999 and 1998.
Noninterest income increased $3.39 million, or 18.5%, compared to the first
nine months of 1998, due to internal growth in service charges on deposits, the
acquisition of Kingfisher Bancorp, securities gains and a $890,000 gain on the
sale of a branch in Anadarko, Oklahoma. Noninterest expense increased $1.76
million, or 2.99%, as a net result of the acquisition of Kingfisher Bancorp and
various cost savings.
Income tax expense increased $669,000 compared to the first nine months of
1998. The year-to-date effective tax rate on income before taxes was 37% for
both 1999 and 1998.
FINANCIAL POSITION
Total securities decreased $17.2 million compared to December 31, 1998 and
increased $684,000 compared to September 30, 1998. The size of the Company's
securities portfolio is a function of liquidity management and excess funds
available for investment. The Company has maintained a very liquid securities
portfolio to provide funds for loan growth. Changes in funding from deposits and
use of funds for loan growth resulted in the changes in the securities
portfolio. The net unrealized loss on securities available for sale was $1.29
million at the end of the third quarter of 1999, compared to a gain of $8.25
million at December 31, 1998 and a gain of $8 million at September 30, 1998. The
average taxable equivalent yield on the securities portfolio for the third
quarter decreased to 6.02% from 6.38% for the same quarter of 1998.
Total loans increased $25.3 million from December 31, 1998 and $106 million
from September 30, 1998, due to internal growth and approximately $50 million of
loans acquired with Kingfisher Bancorp. The allowance for possible loan losses
increased $514,000 from year-end 1998 and $2.09 million from the third quarter
of 1998. The allowance as a percentage of total loans was 1.50%, 1.47% and 1.41%
at September 30, 1999, December 31, 1998 and September 30, 1998, respectively.
The allowance to nonperforming and restructured loans ratios at the same dates
were 169.42%, 158.69% and 207.60%, respectively.
Nonperforming and restructured assets totaled $13.2 million, compared to
$14 million at year-end 1998 and $10 million at September 30, 1998. Although the
ratio of nonperforming and restructured assets to total assets is only 0.60%, it
is reasonable to expect nonperforming loans and loan losses to rise over time to
historical norms as a result of future economic and credit cycles.
Total deposits decreased $78.3 million compared to December 31, 1998 and
increased $80 million compared to September 30, 1998. Deposits were higher at
year-end 1998 due to an inflow of temporary deposits. The increase compared to
the third quarter of 1998 is the net result of the acquisition of Kingfisher
Bancorp, which added approximately $76 million in deposits, internal growth and
the sale of approximately $70 million of deposits that were sold with former
NationsBank branches and the Anadarko branch. The Company's deposit base
continues to be comprised substantially of core deposits, with large
denomination certificates of deposit being only 12.3% of total deposits at
September 30, 1999.
Short-term borrowings decreased $34.6 million from December 31, 1998 and
$17.3 million from September 30, 1998. 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. At year-end 1998,
federal funds purchased from correspondent banks were higher than at either
September 30, 1999 or 1998.
Long-term borrowings increased $10.6 million from year-end 1998 and $8.97
million from the third quarter of 1998 due to additional Federal Home Loan Bank
borrowings. The Company uses these borrowings primarily to match-fund long-term
fixed-rate loans.
11
<PAGE>
Stockholders' equity decreased to $165 million from $202 million at year-
end 1998 and $199 million at September 30, 1998. The decrease is the result of a
Dutch auction issuer tender offer completed by the Company in June 1999. The
Company repurchased 1,186,502 shares of its common stock for $45.1 million.
Average stockholders' equity to average assets for the quarter was 7.31%,
compared to 9.02% at year-end 1998 and 8.96% for the third quarter of 1998. The
Company's leverage ratio and total risk-based capital ratio were 7.74% and
13.12%, respectively, at September 30, 1999, 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.
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 five phases:
1. Awareness
2. Assessment
3. Renovation
4. Validation
5. Implementation
All five phases of the plan have been completed. Testing of mission
critical applications was completed in March 1999. An evaluation of Year 2000
credit risk has been completed. Contingency plans have been prepared for each
mission critical application.
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 has devoted substantial resources to assuring 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.
Future Application of Accounting Standards
See note (2) of the Notes to Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
Segment Information
See note (8) of the Notes to Consolidated Financial Statements for
disclosures regarding business segments.
12
<PAGE>
Forward Looking Statements
The Company may make forward-looking statements (within the meaning of the
Private Securities Litigation Reform Act of 1995) with respect to earnings,
credit quality, year 2000 compliance, corporate objectives, interest rates and
other financial and business matters. The Company cautions readers that these
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, including economic conditions, the performance of financial
markets and interest rates; legislative and regulatory actions and reforms;
competition; as well as other factors, all of which change over time. Actual
results may differ materially from forward-looking statements.
13
<PAGE>
BANCFIRST CORPORATION
SELECTED CONSOLIDATED FINANCIAL STATISTICS
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
PERFORMANCE STATISTICS 1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income per share - basic $ 0.74 $ 0.62 $ 2.06 $ 1.83
Net income per share - diluted 0.73 0.61 2.03 1.78
Cash dividends per share 0.14 0.12 0.42 0.36
Return on average assets 1.07% 1.06% 1.07% 1.06%
Return on average stockholders' equity 14.68 11.79 12.50 11.95
Efficiency ratio 67.15 69.26 66.49 67.14
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET AND ASSET QUALITY STATISTICS September 30, December 31,
----------------------------
1999 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
Book value per share $ 20.16 $ 21.43 $ 21.73
Tangible book value per share 17.44 18.86 19.14
Average loans to deposits (year-to-date) 68.34% 69.09% 68.83%
Nonperforming and restructured assets to total assets 0.60 0.47 0.60
Allowance for possible loan losses to total loans 1.50 1.41 1.47
Allowance for possible loan losses to nonperforming
and restructured loans 169.42 207.60 158.69
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended September 30,
-------------------------------------------------------------
AND INTEREST MARGIN ANALYSIS 1999 1998
----------------------------- ----------------------------
Taxable Equivalent Basis Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earning assets:
Loans $ 1,350,909 8.90% $ 1,297,880 9.38%
Securities 571,005 6.02 581,288 6.38
Federal funds sold 94,638 4.90 78,438 5.25
------------ ------------
Total earning assets 2,016,552 7.89 1,957,606 8.32
------------ ------------
Nonearning assets:
Cash and due from banks 117,265 122,546
Interest receivable and other assets 115,698 111,080
Allowance for possible loan losses (20,230) (18,156)
------------ ------------
Total nonearning assets 212,733 215,470
------------ ------------
Total assets $ 2,229,285 $ 2,173,076
============ ============
Interest-bearing liabilities:
Interest-bearing deposits $ 1,554,627 3.88% $ 1,481,619 4.30%
Short-term borrowings 24,869 4.58 39,726 4.46
Long-term borrowings 22,300 6.03 18,390 4.90
9.65% Capital Securities 25,000 9.70 25,000 9.71
------------ ------------
Total interest-bearing liabilities 1,626,796 4.01 1,564,735 4.40
------------ ------------
Interest-free funds:
Noninterest-bearing deposits 425,842 400,193
Interest payable and other liabilities 13,636 13,363
Stockholders' equity 163,011 194,785
------------ ------------
Total interest-free funds 602,489 608,341
------------ ------------
Total liabilities and stockholders' equity $ 2,229,285 $ 2,173,076
============ ============
Net interest spread 3.88% 3.92%
============ ============
Net interest margin 4.66% 4.81%
============ ============
</TABLE>
14
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no significant changes in the Registrants disclosures
regarding market risk since December 31, 1998, the date of its annual report to
stockholders.
PART II - OTHER INFORMATION
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).
3.1 Second Amended and Restated Certificate of incorporation (filed
as Exhibit 1 to the Company's Form 8-A/A filed July 23, 1998 and
incorporated herein by reference.
3.2 Certificate of Designations of Preferred Stock (filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 and incorporated herein by
reference).
3.3 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.)
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.
4.4 Rights Agreement, dated as of February 25, 1999, between
BancFirst Corporation and BancFirst, as Rights Agent, including
as Exhibit A the form of Certificate of Designations of the
Company setting forth the terms of the Preferred Stock, as
Exhibit B the form of Right Certificate and as Exhibit C the form
of Summary of Rights Agreement (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated February 25, 1999 and
incorporated herein by reference).
27.1* Financial Data Schedule for the nine months ended September 30,
1999.
27.2* Financial Data Schedule for the nine months ended September 30,
1998.
- --------------------------------------------------------------------------------
*Filed herewith
15
<PAGE>
(b) The following report on Form 8-K was filed by the Company during the
quarter ended September 30, 1999.
Date of Report Items Reported
-------------- --------------
September 23, 1999 Change in independent accountants from
PricewaterhouseCoopers LLP to Arthur Andersen LLP
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 15, 1999 \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
UNAUDITED INTERIM FINANCIAL STATEMENTS OF THE REGISTRANT FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 105,006
<INT-BEARING-DEPOSITS> 189
<FED-FUNDS-SOLD> 63,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 461,650
<INVESTMENTS-CARRYING> 103,788
<INVESTMENTS-MARKET> 103,062
<LOANS> 1,364,179
<ALLOWANCE> 20,173
<TOTAL-ASSETS> 2,195,996
<DEPOSITS> 1,946,509
<SHORT-TERM> 20,284
<LIABILITIES-OTHER> 16,009
<LONG-TERM> 48,566
0
0
<COMMON> 8,166
<OTHER-SE> 156,462
<TOTAL-LIABILITIES-AND-EQUITY> 2,195,996
<INTEREST-LOAN> 89,963
<INTEREST-INVEST> 24,706
<INTEREST-OTHER> 4,355
<INTEREST-TOTAL> 119,024
<INTEREST-DEPOSIT> 45,346
<INTEREST-EXPENSE> 49,402
<INTEREST-INCOME-NET> 69,622
<LOAN-LOSSES> 1,823
<SECURITIES-GAINS> 244
<EXPENSE-OTHER> 60,734
<INCOME-PRETAX> 28,784
<INCOME-PRE-EXTRAORDINARY> 18,120
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,120
<EPS-BASIC> 2.06
<EPS-DILUTED> 2.03
<YIELD-ACTUAL> 4.57
<LOANS-NON> 8,561
<LOANS-PAST> 2,212
<LOANS-TROUBLED> 1,134
<LOANS-PROBLEM> 32,837
<ALLOWANCE-OPEN> 19,659
<CHARGE-OFFS> 2,098
<RECOVERIES> 789
<ALLOWANCE-CLOSE> 20,173
<ALLOWANCE-DOMESTIC> 20,173
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,363
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 101,481
<INT-BEARING-DEPOSITS> 78
<FED-FUNDS-SOLD> 116,596
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 435,117
<INVESTMENTS-CARRYING> 129,637
<INVESTMENTS-MARKET> 132,199
<LOANS> 1,283,434
<ALLOWANCE> 18,084
<TOTAL-ASSETS> 2,159,107
<DEPOSITS> 1,866,580
<SHORT-TERM> 37,618
<LIABILITIES-OTHER> 16,298
<LONG-TERM> 39,598
0
0
<COMMON> 9,618
<OTHER-SE> 189,395
<TOTAL-LIABILITIES-AND-EQUITY> 2,159,107
<INTEREST-LOAN> 91,369
<INTEREST-INVEST> 26,378
<INTEREST-OTHER> 3,231
<INTEREST-TOTAL> 120,978
<INTEREST-DEPOSIT> 47,659
<INTEREST-EXPENSE> 51,480
<INTEREST-INCOME-NET> 69,498
<LOAN-LOSSES> 1,867
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 58,971
<INCOME-PRETAX> 26,991
<INCOME-PRE-EXTRAORDINARY> 16,996
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,996
<EPS-BASIC> 1.83
<EPS-DILUTED> 1.78
<YIELD-ACTUAL> 4.79
<LOANS-NON> 6,621
<LOANS-PAST> 1,611
<LOANS-TROUBLED> 478
<LOANS-PROBLEM> 32,840
<ALLOWANCE-OPEN> 17,458
<CHARGE-OFFS> 2,365
<RECOVERIES> 1,095
<ALLOWANCE-CLOSE> 18,084
<ALLOWANCE-DOMESTIC> 18,084
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,297
</TABLE>
