<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 June 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 July 31, 1999 there were 8,172,757 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>
June 30,
---------------------------------------------
December 31,
1999 1998 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 123,314 $ 139,672 $ 132,286
Interest-bearing deposits with banks 24 81 11
Securities (market value: $569,479, $596,969 and $584,650,
respectively) 569,529 595,105 582,649
Federal funds sold 90,800 22,863 187,369
Loans:
Total loans (net of unearned interest) 1,353,778 1,309,355 1,338,879
Allowance for possible loan losses (20,264) (18,237) (19,659)
-------------------- -------------------- --------------------
Loans, net 1,333,514 1,291,118 1,319,220
Premises and equipment, net 48,559 47,587 47,558
Other real estate owned 1,301 1,010 1,057
Intangible assets, net 23,016 27,313 24,095
Accrued interest receivable 20,754 19,882 19,589
Other assets 24,261 18,928 22,049
-------------------- -------------------- --------------------
Total assets $ 2,235,072 $ 2,163,559 $ 2,335,883
==================== ==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 438,874 $ 405,683 $ 463,391
Interest-bearing 1,549,512 1,476,628 1,561,409
-------------------- -------------------- --------------------
Total deposits 1,988,386 1,882,311 2,024,800
Short-term borrowings 23,064 38,046 54,841
Long-term borrowings 23,871 10,685 12,966
9.65% Capital Securities 25,000 25,000 25,000
Accrued interest payable 7,584 8,477 8,315
Other liabilities 6,305 7,772 8,044
-------------------- -------------------- --------------------
Total liabilities 2,074,210 1,972,291 2,133,966
-------------------- -------------------- --------------------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, $1.00 par (shares issued: 8,172,757,
9,279,500 and 9,291,929, respectively) 8,173 9,632 9,292
Capital surplus 46,242 44,508 45,148
Retained earnings 106,241 140,449 142,046
Accumulated other comprehensive income 206 1,724 5,431
Treasury stock, at cost (352,490 shares in 1998) -- (5,045) --
-------------------- -------------------- --------------------
Total stockholders' equity 160,862 191,268 201,917
-------------------- -------------------- --------------------
Total liabilities and stockholders' equity $ 2,235,072 $ 2,163,559 $ 2,335,883
==================== ==================== ====================
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------
1999 1998 1999 1998
---------- ------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $30,021 $31,200 $59,789 $60,759
Interest-bearing deposits with banks 20 2 20 5
Securities:
Taxable 7,431 8,644 15,139 16,155
Tax-exempt 617 486 1,247 1,148
Federal funds sold 1,440 1,335 3,164 2,182
---------- -------- -------- --------
Total interest income 39,529 41,667 79,359 80,249
---------- -------- -------- --------
INTEREST EXPENSE
Deposits 14,950 16,470 30,142 31,601
Short-term borrowings 421 594 1,079 1,022
Long-term borrowings 289 155 515 287
9.65% Capital Securities 612 612 1,224 1,226
---------- -------- -------- --------
Total interest expense 16,272 17,831 32,960 34,136
---------- -------- -------- --------
Net interest income 23,257 23,836 46,399 46,113
Provision for possible loan losses 468 482 1,405 1,271
---------- -------- -------- --------
Net interest income after provision
for possible loan losses 22,789 23,354 44,994 44,842
---------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposits 4,156 3,731 7,986 7,081
Securities transactions (4) 12 (3) 12
Other 2,437 2,429 6,476 4,857
---------- -------- -------- --------
Total noninterest income 6,589 6,172 14,459 11,950
---------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits 11,420 11,040 22,818 21,494
Occupancy and fixed assets expense, net 1,118 1,156 2,274 2,275
Depreciation 1,185 1,186 2,403 2,316
Amortization 930 829 1,820 1,578
Data processing services 528 539 1,100 1,109
Net expense from other real estate owned 18 (173) 39 (143)
Other 5,050 5,402 9,811 9,725
---------- -------- ------- --------
Total noninterest expense 20,249 19,979 40,265 38,354
---------- -------- ------- --------
Income before taxes 9,129 9,547 19,188 18,438
Income tax expense (3,261) (3,935) (7,098) (7,231)
---------- -------- ------- --------
Net income 5,868 5,612 12,090 11,207
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities (2,363) (305) (5,225) (64)
---------- -------- ------- --------
Comprehensive income $ 3,505 $ 5,307 $ 6,865 $ 11,143
========== ======== ======= ========
NET INCOME PER COMMON SHARE
Basic $ 0.66 $ 0.61 $ 1.32 $ 1.21
========== ======== ======= ========
Diluted $ 0.65 $ 0.59 $ 1.31 $ 1.17
========== ======== ======= ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 12,599 $ 13,024
------------ -------------
INVESTING ACTIVITIES
Net cash and due from banks provided by (used for) acquisitions
and divestitures (12,115) 62,018
Purchases of securities:
Held for investment (32,611) (16,914)
Available for sale (57,059) (130,523)
Maturities of securities:
Held for investment 40,117 24,065
Available for sale 54,625 33,923
Proceeds from sales of securities:
Held for investment 421 3,608
Available for sale -- 5,859
Net decrease in federal funds sold 96,569 37,514
Purchases of loans (11,240) (5,341)
Proceeds from sales of loans 80,400 66,221
Net other increase in loans (88,404) (90,786)
Purchases of premises and equipment (4,727) (3,610)
Proceeds from the sale of other real estate owned and repossessed
assets 1,323 1,415
Other, net 805 7
------------ -------------
Net cash used for investing activities 68,104 (12,544)
------------ -------------
FINANCING ACTIVITIES
Net (decrease) in demand, transaction and savings
deposits (15,279) (5,598)
Net increase (decrease) in certificates of deposits (5,591) 25,603
Net increase (decrease) in short-term borrowings (31,777) 14,245
Net increase in long-term borrowings 10,905 1,704
Issuance of common stock 1,171 647
Acquisition of common stock (46,640) --
Cash dividends paid (2,450) (1,893)
------------ -------------
Net cash provided by (used for ) financing activities (89,661) 34,708
------------ -------------
Net increase (decrease) in cash and due from banks (8,958) 35,188
Cash and due from banks at the beginning of the period 132,296 104,565
------------ -------------
Cash and due from banks at the end of the period $ 123,338 $ 139,753
============ =============
SUPPLEMENTAL DISCLOSURE
Cash paid during the year for interest $ 33,691 $ 31,949
============ =============
Cash paid during the year for income taxes $ 3,670 $ 6,285
============ =============
See accompanying notes to consolidated financial statements.
</TABLE>
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.
(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
5
<PAGE>
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.
(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 are at rates of 6.3% and 6.5%, and mature in July and October
1999.
6
<PAGE>
(5) SECURITIES
The table below summarizes securities held for investment and securities
available for sale.
<TABLE>
<CAPTION>
June 30,
-------------------------
December 31,
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Held for investment at cost (market value; $114,183, $ 114,233 $ 149,299 $ 130,803
$151,163, and $132,804, respectively)
Available for sale, at market value 455,296 445,806 451,846
----------- ----------- -----------
Total $ 569,529 $ 595,105 $ 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 Six Months Ended
June 30, June 30,
------------------------------------ -------------------------------------
1999 1998 1999 1998
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Unrealized gain (loss) during the period:
Before-tax amount $ (5,384) $ (1,179) $ (9,676) $ (116)
Tax (expense) benefit 3,021 874 4,451 52
--------------- ---------------- --------------- -----------------
Net-of-tax amount $ (2,363) $ (305) $ (5,225) $ (64)
=============== ================ =============== =================
</TABLE>
The amount of unrealized gain or loss included in accumulated other
comprehensive income is summarized below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ ------------------------------------
1999 1998 1999 1998
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Unrealized gain (loss) on securities:
Beginning balance $ 2,569 $ 2,029 $ 5,431 $ 1,788
Current period change (2,363) (305) (5,225) (64)
---------------- --------------- ---------------- ---------------
Ending balance $ 206 $ 1,724 $ 206 $ 1,724
================ =============== ================ ===============
</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 June 30, 1999
- --------------------------------
Basic
Income available to common stockholders $ 5,868 8,957,488 $ 0.66
===============
Effect of stock options -- 111,471
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 5,868 9,068,959 $ 0.65
================== ================= ===============
Three Months Ended June 30, 1998
- --------------------------------
Basic
Income available to common stockholders $ 5,612 9,262,486 $ 0.61
===============
Effect of stock options -- 267,727
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 5,612 9,530,213 $ 0.59
================== ================= ===============
Six Months Ended June 30, 1999
- ------------------------------
Basic
Income available to common stockholders $ 12,090 9,133,442 $ 1.32
===============
Effect of stock options -- 119,232
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 12,090 9,252,674 $ 1.31
================== ================= ===============
Six Months Ended June 30, 1998
- ------------------------------
Basic
Income available to common stockholders $ 11,207 9,270,661 $ 1.21
===============
Effect of stock options -- 279,346
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 11,207 9,550,007 $ 1.17
================== ================= ===============
</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 June 30, 1999 98,000 $ 37.03
Three Months Ended June 30, 1998 -- $ --
Six Months Ended June 30, 1999 98,000 $ 37.03
Six Months Ended June 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:
June 30, 1999
Net interest income $ 5,777 $ 16,961 $ 1,258 $ (730) $ (9) $ 23,257
(expense)
Noninterest income 1,119 3,770 1,186 6,693 (6,179) 6,589
Income before taxes 2,454 9,047 653 3,132 (6,157) 9,129
June 30, 1998
Net interest income $ 4,935 $ 18,638 $ 752 $ (461) $ (28) $ 23,836
(expense)
Noninterest income 939 3,886 995 7,525 (7,173) 6,172
Income before taxes 2,011 10,593 336 3,589 (6,982) 9,547
Six Months Ended:
June 30, 1999
Net interest income $ 11,177 $ 33,833 $ 2,487 $ (1,090) $ (8) $ 46,399
(expense)
Noninterest income 2,219 8,407 2,649 13,816 (12,632) 14,459
Income before taxes 4,844 18,508 1,359 6,977 (12,500) 19,188
June 30, 1998
Net interest income $ 9,611 $ 35,596 $ 1,499 $ (542) $ (51) $ 46,113
(expense)
Noninterest income 1,743 7,489 2,196 14,466 (13,944) 11,950
Income before taxes 3,815 19,262 1,017 7,915 (13,571) 18,438
Total Assets:
June 30, 1999 $ 547,790 $ 1,670,928 $ 102,549 $ 100,376 $ (186,571) $ 2,235,072
June 30, 1998 458,885 1,674,406 101,288 151,207 (222,227) 2,163,559
</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.
<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
The Company reported net income of $5.87 million for the quarter ended June
30, 1999, compared to net income of $5.61 million for the same quarter of 1998.
Diluted net income per share was $0.65 and $0.59, respectively. Net income for
the first six months of 1999 was $12.1 million, compared to $11.2 million for
the first six months of 1998. Diluted net income per share was $1.31 and $1.17,
respectively.
Total assets at June 30, 1999 were $2.24 billion, a decrease of $101 million
from December 31, 1998, but an increase $71.5 million from June 30, 1998. The
higher total assets at year-end 1998 was partly due to the inflow of temporary
deposits. The asset growth compared to the first quarter of 1998 was due
primarily to the acquisition of Kingfisher Bancorp, Inc. ("Kingfisher Bancorp")
in December 1998. Stockholders' equity was $161 million at June 30, 1999, a
decrease of $41.5 million compared to December 31, 1998 and $30.4 million
compared to June 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.
RESULTS OF OPERATIONS
Second Quarter
Net interest income decreased compared to the second quarter of 1998 by
$579,000, primarily as a result of a decrease in the net interest margin from
4.82% to 4.66%. Average net earning assets decreased $4.55 million compared to
the second quarter of 1998, while net interest spread was 3.82% for the quarter,
down from 3.85% for the second 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 $468,000 for possible loan losses for the quarter,
compared to $482,000 for the first quarter of 1998. Net loan charge-offs were
$584,000 for the second quarter of 1999, compared to $212,000 for the second
quarter of 1998. The net charge-offs represent annualized rates of only 0.17%
of total loans for the second quarter of 1999 and 0.06% of total loans for the
second quarter of 1998.
Noninterest income increased $417,000, or 6.76%, compared to the second
quarter of 1998 due to internal growth in deposits and the acquisition of
Kingfisher Bancorp. Noninterest expense increased $270,000, or 1.35%, as a net
result of the acquisition of Kingfisher Bancorp and various cost savings.
Income tax expense decreased $674,000 compared to the second quarter of 1998.
The effective tax rate on income before taxes was 35.7%, down from 41.2% in the
second quarter of 1998.
Year-To-Date
Net interest income increased $286,000 for the six months ended June 30,
1999, compared to the same period of 1998. Average net earning assets increased
$20.4 million compared to 1998, while net interest spread was 3.84% in 1999,
down from 3.95% in 1998. Net interest margin for the first half of 1999 was
4.65%, compared to 4.86% for the first half 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 $1.41 million for possible loan losses for the six
months ended June 30, 1999, compared to $1.27 million for the first half of
1998. Net loan charge-offs were $800,000 in 1999, compared to $787,000 in 1998.
The net charge-offs represent an annualized rate of only 0.12% of total loans
for both 1999 and 1998.
10
<PAGE>
Noninterest income increased $2.51 million, or 21%, compared to the first six
months of 1998, due to internal growth in deposits, the acquisition of
Kingfisher Bancorp and a $890,000 gain on the sale of a branch in Anadarko,
Oklahoma. Noninterest expense increased $1.91 million, or 4.98%, as a net result
of the acquisition of Kingfisher Bancorp and various cost savings.
Income tax expense decreased $133,000 compared to the first six months of
1998. The effective tax rate on income before taxes was 37%, down from 39.2%
for 1998.
FINANCIAL POSITION
Total securities decreased $13.1 million compared to December 31, 1998 and
$25.6 million compared to June 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. At year-end 1998 and at June 30, 1999, the
Company had higher levels of federal funds sold than in the past, reflecting an
increased liquidity position. This, combined with changes in funding from
deposits and use of funds for loan growth, resulted in the decreases in the
securities portfolio. The net unrealized loss on securities available for sale
was $1.42 million at the end of the second quarter of 1999, compared to a gain
of $8.25 million at December 31, 1998 and a gain of $2.67 million at June 30,
1998. The average taxable equivalent yield on the securities portfolio for the
second quarter decreased to 5.96% from 6.17% for the same quarter of 1998.
Total loans increased $14.9 million from December 31, 1998 and $44.4 million
from June 30, 1998, due to internal growth and approximately $50 million of
loans acquired with Kingfisher Bancorp. The allowance for possible loan losses
increased $605,000 from year-end 1998 and $2.03 million from the second quarter
of 1998. The allowance as a percentage of total loans was 1.50%, 1.47% and
1.39% at June 30, 1999, December 31, 1998 and June 30, 1998, respectively. The
allowance to nonperforming and restructured loans ratios at the same dates were
189.05%, 158.69% and 224.40%, respectively.
Nonperforming and restructured assets totaled $12.3 million, compared to $14
million at year-end 1998 and $9.7 million at June 30, 1998. Although the ratio
of nonperforming and restructured assets to total assets is only 0.55%, 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 decreased $36.4 million as compared to December 31, 1998 and
increased $106 million compared to June 30, 1998. The increase compared to the
second 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 11.4% of total deposits at June
30, 1999.
Short-term borrowings decreased $31.8 million from December 31, 1998 and $15
million from June 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 June
30, 1999 or 1998.
Long-term borrowings increased $10.9 million from year-end 1998 and $13.2
million from the second 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.
Stockholders' equity decreased to $161 million from $202 million at year-end
1998 and $191 million at June 30, 1998. These decreases are the result 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 still at 9.26%,
compared to 8.61% for the same quarter of 1998, as the full effect of the stock
repurchase was not yet reflected in average stockholders' equity for the
quarter. The Company's leverage ratio and total risk-based capital ratio were
7.35% and 12.83%, respectively, at June 30, 1999, well in excess of the
regulatory minimums.
11
<PAGE>
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.
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.
12
<PAGE>
BANCFIRST CORPORATION
SELECTED CONSOLIDATED FINANCIAL STATISTICS
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------- ---------------------------------------
PERFORMANCE STATISTICS 1999 1998 1999 1998
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net income per share-basic $ 0.66 $ 0.61 $ 1.32 $ 1.21
Net income per share-diluted 0.65 0.59 1.30 1.17
Cash dividends per share 0.14 0.12 0.28 0.24
Return on average assets 1.04% 1.02% 1.07% 1.06%
Return on average
stockholders' equity 11.23 11.84 11.63 11.98
Efficiency ratio 67.84 66.58 66.16 66.06
BALANCE SHEET AND ASSET
QUALITY STATISTICS June 30,
-----------------------------
December 31,
1999 1998 1998
------------- ------------- -------------
Book value per share $ 19.68 $ 20.61 $ 21.73
Tangible book value per share 16.87 17.67 19.14
Average loans to deposits (year-to-date) 68.41% 69.15% 68.83 %
Nonperforming and restructured assets to
total assets 0.55 0.45 0.60
Allowance for possible loan losses to total
loans 1.50 1.39 1.47
Allowance for possible loan losses to nonperforming
and restructured loans 189.05 224.40 158.69
CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended June 30,
-------------------------------------------------------------------------
AND INTEREST MARGIN ANALYSIS 1999 1998
--------------------------------- -------------------------------
Taxable Equivalent Basis Average Average Average Average
Earning assets: Balance Yield/Rate Balance Yield/Rate
-------------- ---------- ------------ ----------
Loans $ 1,351,670 8.94% $ 1,304,542 9.61%
Securities 564,257 5.96 602,001 6.17
Federal funds sold 123,947 4.66 90,576 5.62
-------------- ------------
Total earning assets 2,039,874 7.86 1,997,119 8.40
-------------- ------------
Nonearning assets:
Cash and due from banks 126,908 111,623
Interest receivable and other assets 116,201 117,550
Allowance for possible loan losses (20,360) (18,088)
-------------- ------------
Total nonearning assets 222,749 211,085
-------------- ------------
Total assets $2,262,623 $2,208,204
============== ============
Interest-bearing liabilities:
Interest-bearing deposits $1,539,144 3.90% $1,491,879 4.42%
Short-term borrowings 33,465 5.05 42,851 5.57
Long-term borrowings 19,488 5.95 10,061 6.16
9.65% Capital Securities 25,000 9.82 25,000 9.82
------------- ------------
Total interest-bearing liabilities 1,617,097 4.04 1,569,791 4.55
------------- ------------
Interest-free funds:
Noninterest-bearing deposits 423,325 432,513
Interest payable and other liabilities 12,630 15,794
Stockholders' equity 209,571 190,106
------------- ------------
Total interest-free funds 645,526 638,413
------------- ------------
Total liabilities and stockholders' equity $2,262,623 $2,208,204
============= ============
Net interest spread 3.82% 3.85%
========= =========
Net interest margin 4.66% 4.82%
========= =========
</TABLE>
13
<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 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Stockholders held on June 24, 1999, the
following matters were voted upon, with the votes indicated:
<TABLE>
<CAPTION>
Number of Shares
-----------------------------------------------------------
Broker
Description of Proposal Voted for Withheld non-votes
--------------- ------------ -----------
Proposal No. 1-Election of Directors
Class I Directors
<S> <C> <C> <C>
C. L. Craig, Jr. 7,291,297 85,124 802,812
John T. Hannah 7,290,862 85,559 802,812
John C. Hugon 7,291,297 85,124 802,812
J. Ralph McCalmont 7,293,797 82,624 802,812
Joe T. Shockley, Jr. 7,289,297 87,124 802,812
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
-----------------------------------------------------------
Voted Broker
Voted for against Abstained non-votes
--------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Proposal No. 2- Adoption of the BancFirst Corporation 7,376,421 -- -- 802,812
Non-employee Directors' Stock Option Plan
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ----------- --------------------------------------------------------------------------
<C> <S>
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).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ---------- --------------------------------------------------------------------------
<C> <S>
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 three months ended June 30, 1999.
27.2* Financial Data Schedule for the three months ended June 30, 1998.
- ---------------------------------------------------------------------------------------
*Filed herewith
</TABLE>
(b) No reports on Form 8-K have been filed by the Company during the quarter
ended June 30, 1999.
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 August 6, 1999 /s/Randy P. Foraker
-------------- -------------------
(Signature)
Randy P. Foraker
Senior Vice President and Controller;
Assistant Secretary/Treasurer
(Principal Accounting Officer)
15
<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 SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 123,314
<INT-BEARING-DEPOSITS> 24
<FED-FUNDS-SOLD> 90,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 455,296
<INVESTMENTS-CARRYING> 114,233
<INVESTMENTS-MARKET> 114,183
<LOANS> 1,353,778
<ALLOWANCE> 20,264
<TOTAL-ASSETS> 2,235,072
<DEPOSITS> 1,988,386
<SHORT-TERM> 23,064
<LIABILITIES-OTHER> 13,889
<LONG-TERM> 48,871
0
0
<COMMON> 8,173
<OTHER-SE> 152,689
<TOTAL-LIABILITIES-AND-EQUITY> 2,235,072
<INTEREST-LOAN> 59,789
<INTEREST-INVEST> 16,386
<INTEREST-OTHER> 3,184
<INTEREST-TOTAL> 79,359
<INTEREST-DEPOSIT> 30,142
<INTEREST-EXPENSE> 32,960
<INTEREST-INCOME-NET> 46,399
<LOAN-LOSSES> 1,405
<SECURITIES-GAINS> (3)
<EXPENSE-OTHER> 40,265
<INCOME-PRETAX> 19,188
<INCOME-PRE-EXTRAORDINARY> 12,090
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,090
<EPS-BASIC> 1.32
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 4.53
<LOANS-NON> 7,498
<LOANS-PAST> 2,083
<LOANS-TROUBLED> 1,138
<LOANS-PROBLEM> 30,484
<ALLOWANCE-OPEN> 19,659
<CHARGE-OFFS> 1,331
<RECOVERIES> 531
<ALLOWANCE-CLOSE> 20,264
<ALLOWANCE-DOMESTIC> 20,264
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,483
</TABLE>
<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 SIX MONTHS
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 139,672
<INT-BEARING-DEPOSITS> 81
<FED-FUNDS-SOLD> 22,863
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 445,806
<INVESTMENTS-CARRYING> 149,299
<INVESTMENTS-MARKET> 151,163
<LOANS> 1,309,355
<ALLOWANCE> 18,237
<TOTAL-ASSETS> 2,163,559
<DEPOSITS> 1,882,311
<SHORT-TERM> 38,046
<LIABILITIES-OTHER> 16,249
<LONG-TERM> 35,685
0
0
<COMMON> 9,632
<OTHER-SE> 181,636
<TOTAL-LIABILITIES-AND-EQUITY> 2,163,559
<INTEREST-LOAN> 60,759
<INTEREST-INVEST> 17,303
<INTEREST-OTHER> 2,187
<INTEREST-TOTAL> 80,249
<INTEREST-DEPOSIT> 31,601
<INTEREST-EXPENSE> 34,136
<INTEREST-INCOME-NET> 46,113
<LOAN-LOSSES> 1,271
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 38,354
<INCOME-PRETAX> 18,438
<INCOME-PRE-EXTRAORDINARY> 11,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,207
<EPS-BASIC> 1.21
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 4.78
<LOANS-NON> 5,951
<LOANS-PAST> 1,754
<LOANS-TROUBLED> 422
<LOANS-PROBLEM> 31,787
<ALLOWANCE-OPEN> 17,458
<CHARGE-OFFS> 1,312
<RECOVERIES> 525
<ALLOWANCE-CLOSE> 18,237
<ALLOWANCE-DOMESTIC> 18,237
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,070
</TABLE>
