<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, 2000
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, 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, 2000 there were 8,075,458 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,
2000 1999 1999
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 112,211 $ 123,314 $ 126,691
Interest-bearing deposits with banks 1,070 24 1,715
Federal funds sold 4,240 90,800 51,666
Securities (market value: $578,119, $569,479 and $595,509, 579,503 569,529
respectively) 596,715
Loans:
Total loans (net of unearned interest) 1,542,682 1,353,778 1,455,481
Allowance for loan losses (24,302) (20,264) (22,548)
---------- ---------- ----------
Loans, net 1,518,380 1,333,514 1,432,933
Premises and equipment, net 54,113 48,559 52,467
Other real estate owned 2,366 1,301 1,612
Intangible assets, net 22,545 23,016 24,087
Accrued interest receivable 23,523 20,754 20,771
Other assets 28,829 24,261 27,150
---------- ---------- ----------
Total assets $2,346,780 $2,235,072 $2,335,807
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 452,353 $ 438,874 $ 460,131
Interest-bearing 1,621,438 1,549,512 1,622,565
---------- ---------- ----------
Total deposits 2,073,791 1,988,386 2,082,696
Short-term borrowings 31,838 23,064 22,091
Long-term borrowings 28,320 23,871 26,392
9.65% Capital Securities 25,000 25,000 25,000
Accrued interest payable 8,794 7,584 8,421
Other liabilities 6,727 6,305 6,493
---------- ---------- ----------
Total liabilities 2,174,470 2,074,210 2,171,093
---------- ---------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, $1.00 par (shares issued: 8,075,108, 8,172,757
and 8,112,170, respectively) 8,075 8,173 8,112
Capital surplus 47,131 46,242 46,766
Retained earnings 121,689 106,241 113,344
Accumulated other comprehensive income (4,585) 206 (3,508)
---------- ---------- ----------
Total stockholders' equity 172,310 160,862 164,714
---------- ---------- ----------
Total liabilities and stockholders' equity $2,346,780 $2,235,072 $2,335,807
========== ========== ==========
</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 Six Months Ended
June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
------- -------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $35,535 $ 30,021 $68,888 $59,789
Securities:
Taxable 8,382 7,431 16,809 15,139
Tax-exempt 529 617 1,080 1,247
Federal funds sold 484 1,440 1,287 3,164
Interest-bearing deposits with banks 10 20 28 20
------- -------- ------- -------
Total interest income 44,940 39,529 88,092 79,359
------- -------- ------- -------
INTEREST EXPENSE
Deposits 17,947 14,950 35,065 30,142
Short-term borrowings 421 421 767 1,079
Long-term borrowings 431 289 844 515
9.65% Capital Securities 612 612 1,224 1,224
------- -------- ------- -------
Total interest expense 19,411 16,272 37,900 32,960
------- -------- ------- -------
Net interest income 25,529 23,257 50,192 46,399
Provision for loan losses 1,180 468 2,469 1,405
------- -------- ------- -------
Net interest income after provision
for loan losses 24,349 22,789 47,723 44,994
------- -------- ------- -------
NONINTEREST INCOME
Service charges on deposits 4,402 4,156 8,458 7,986
Securities transactions -- (4) -- (3)
Other 2,811 2,437 6,013 6,476
------- -------- ------- -------
Total noninterest income 7,213 6,589 14,471 14,459
------- -------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits 12,175 11,420 24,077 22,818
Occupancy and fixed assets expense, net 1,297 1,118 2,675 2,274
Depreciation 1,287 1,185 2,553 2,403
Amortization 931 930 1,877 1,820
Data processing services 610 528 1,272 1,100
Net (income) expense from other real estate owned (63) 18 (133) 39
Other 5,064 5,050 9,968 9,811
------- -------- ------- -------
Total noninterest expense 21,301 20,249 42,289 40,265
------- -------- ------- -------
Income before taxes 10,261 9,129 19,905 19,188
Income tax expense (3,878) (3,261 ) (7,365) (7,098)
------- -------- ------- -------
Net income 6,383 5,868 12,540 12,090
Other comprehensive income, net of tax:
Unrealized losses on securities (69) (2,363) (1,077) (5,225)
------- -------- ------- -------
Comprehensive income $ 6,314 $ 3,505 $11,463 $ 6,865
======= ======== ======= =======
NET INCOME PER COMMON SHARE
Basic $ 0.79 $ 0.66 $ 1.55 $ 1.32
======= ======== ======= =======
Diluted $ 0.78 $ 0.65 $ 1.54 $ 1.31
======= ======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 15,735 $ 12,599
--------- ---------
INVESTING ACTIVITIES
Net cash and due from banks used for acquisitions and divestitures -- (12,115)
Purchases of securities:
Held for investment (15,013) (32,611)
Available for sale (18,449) (57,059)
Maturities of securities:
Held for investment 11,473 40,117
Available for sale 37,080 54,625
Proceeds from sales of held for investment 596 421
Net decrease in federal funds sold 47,426 96,569
Purchases of loans (1,892) (11,240)
Proceeds from sales of loans 50,659 80,400
Net other increase in loans (139,319) (88,404)
Purchases of premises and equipment (5,893) (4,727)
Proceeds from the sale of other real estate owned and repossessed assets 1,979 1,323
Other, net 1,592 805
--------- ---------
Net cash provided (used) by investing activities (29,761) 68,104
--------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in demand, transaction and savings 5,414 (15,279)
deposits
Net decrease in certificates of deposits (14,320) (5,591)
Net increase (decrease) in short-term borrowings 9,747 (31,777)
Net increase in long-term borrowings 1,928 10,905
Issuance of common stock 389 1,171
Acquisition of common stock (1,667) (46,640)
Cash dividends paid (2,590) (2,450)
--------- ---------
Net cash used by financing activities (1,099) (89,661)
--------- ---------
Net decrease in cash and due from banks (15,125) (8,958)
Cash and due from banks at the beginning of the period 128,406 132,296
--------- ---------
Cash and due from banks at the end of the period $ 113,281 $ 123,338
========= =========
SUPPLEMENTAL DISCLOSURE
Cash paid during the period for interest $ 37,527 $ 33,691
========= =========
Cash paid during the period for income taxes $ 7,590 $ 3,670
========= =========
</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, and
First State Bank for 2000 and a portion of 1999 (representing the period since
acquisition). 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, 1999, the date of the most recent
annual report. Certain amounts in the 1999 financial statements have been
reclassified to conform to the 2000 presentation.
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. 137,
"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.
(3) RECENT DEVELOPMENTS; MERGERS, ACQUISITIONS AND DISPOSALS
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 December 1999, the Company completed the purchase of certain assets and
assumption of certain liabilities of First State Bank of Oklahoma City,
Oklahoma. Under the terms of the agreement, the Company organized a new wholly-
owned bank under the First State Bank name. The new First State Bank acquired
approximately $106,000 of assets, assumed approximately $109,000 of liabilities,
and recorded $2,615 of intangible assets. The purchase and assumption 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. The acquisition did not have a material effect on the
results of the operations of the Company for 1999.
In March 2000, BancFirst Corporation became a financial holding company
under the new Gramm-Leach-Bliley financial services modernization law. This will
allow the Company to expand into new financial activities such as insurance
underwriting, securities underwriting and dealing, and mutual fund distribution.
In May 2000, BancFirst Corporation entered into a merger agreement with
First Southwest Corporation of Frederick, Oklahoma ("First Southwest") whereby
First Southwest will be merged into BancFirst Corporation. First Southwest has
approximately $124,000 in total assets. Under the terms of the merger agreement,
all of the outstanding shares of First
5
<PAGE>
Southwest common stock will be exchanged for 266,681 shares of BancFirst
Corporation common stock and approximately $4,335 of cash. The merger, which is
subject to regulatory approval, is expected to be completed in September 2000
and will be accounted for as a purchase. Accordingly, the effects of the
acquisition will be included in the Company's consolidated financial statements
from the date of the merger forward. The merger is not expected to have a
material effect on the results of operations of the Company for 2000.
(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.
(5) SECURITIES
The table below summarizes securities held for investment and securities
available for sale.
<TABLE>
<CAPTION>
June 30,
---------------------- December 31,
2000 1999 1999
-------- -------- --------
<S> <C> <C> <C>
Held for investment at cost (market value; $93,751,
$114,183, and $128,275, respectively) $ 95,135 $114,233 $129,481
Available for sale, at market value 484,368 455,296 467,234
-------- -------- --------
Total $579,503 $569,529 $596,715
======== ======== ========
</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,
------------------------ --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unrealized loss during the period:
Before-tax amount $ 137 $ (5,384) $ (1,451) $ (9,676)
Tax (expense) benefit (206) 3,021 374 4,451
-------- -------- -------- --------
Net-of-tax amount $ (69) $ (2,363) $ (1,077) $ (5,225)
======== ======== ======== ========
</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,
------------------------ --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unrealized gain (loss) on securities:
Beginning balance $ (4,516) $ 2,569 $ (3,508) $ 5,431
Current period change (69) (2,363) (1,077) (5,225)
-------- -------- -------- --------
Ending balance $ (4,585) $ 206 $ (4,585) $ 206
======== ======== ======== ========
</TABLE>
6
<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, 2000
--------------------------------
Basic
Income available to common stockholders $ 6,383 8,082,470 $ 0.79
=========
Effect of stock options -- 66,272
----------- -------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 6,383 8,148,742 $ 0.78
=========== ============= =========
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
=========== ============= =========
Six Months Ended June 30, 2000
------------------------------
Basic
Income available to common stockholders $ 12,540 8,093,819 $ 1.55
=========
Effect of stock options -- 69,398
----------- -------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 12,540 8,163,217 $ 1.54
=========== ============= =========
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
=========== ============= =========
</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, 2000 307,049 $ 33.17
Three Months Ended June 30, 1999 98,000 $ 37.03
Six Months Ended June 30, 2000 305,525 $ 33.19
Six Months Ended June 30, 1999 98,000 $ 37.03
</TABLE>
7
<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 are 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 Elimin- Consol-
Banks Banks Services & Support ations idated
------------ ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended:
June 30, 2000
Net interest income (expense) $ 8,385 $ 17,143 $ 914 $ (913) $ -- $ 25,529
Noninterest income 1,448 4,053 1,347 9,573 (9,208) 7,213
Income before taxes 2,944 10,508 567 5,450 (9,208) 10,261
June 30, 1999
Net interest income (expense) $ 5,777 $ 16,961 $ 1,258 $ (730) $ (9) $ 23,257
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
Six Months Ended:
June 30, 2000
Net interest income (expense) $ 15,917 $ 34,167 $ 1,876 $ (1,768) $ -- $ 50,192
Noninterest income 2,885 7,868 2,584 16,989 (15,855) 14,471
Income before taxes 5,831 19,872 1,074 8,983 (15,855) 19,905
June 30, 1999
Net interest income (expense) $ 11,177 $ 33,833 $ 2,487 $ (1,090) $ (8) $ 46,399
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
Total Assets:
June 30, 2000 $ 793,754 $1,627,655 $ 107,795 $ 311,782 $(494,206) $2,346,780
June 30, 1999 $ 547,790 $1,670,928 $ 102,549 $ 100,376 $(186,571) $2,235,072
</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 revenues
related to other financial services are allocated to the banks whose customers
receive the services and, therefor, are not reflected in the income for other
financial services. 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.
8
<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 second quarter ended June 30, 2000 was $6.38 million, up
from $5.87 million for the second quarter of 1999. Diluted net income per share
was $0.78, up from $0.65 for the second quarter of 1999, as the combined result
of the higher earnings and a Dutch auction issuer tender offer completed in June
1999, under which the Company repurchased 1,186,502 shares of its common stock
for $45.1 million. Net income for the first six months of 2000 was $12.5
million, up from $12.1 million for the first six months of 1999. Diluted net
income per share for the six months was $1.54 and $1.31 for 2000 and 1999,
respectively.
Total assets at June 30, 2000 were $2.35 billion, up $11 million from
December 31, 1999 and $112 million from June 30, 1999. The asset growth compared
to the second quarter of 1999 was due primarily to the acquisition of First
State Bank of Oklahoma City, Oklahoma in December 1999, which added
approximately $109 million of assets. Stockholders' equity was $172 million at
June 30, 2000, an increase of $7.6 million compared to December 31, 1999, and
$11.4 million compared to June 30, 1999.
In March 2000, BancFirst Corporation became a financial holding company
under the new Gramm-Leach-Bliley financial services modernization law. This will
allow the Company to expand into new financial activities such as insurance
underwriting, securities underwriting and dealing, and mutual fund distribution.
In May 2000, BancFirst Corporation entered into a merger agreement with
First Southwest Corporation of Frederick, Oklahoma ("First Southwest") whereby
First Southwest will be merged into BancFirst Corporation. First Southwest has
approximately $124,000 in total assets. Under the terms of the merger agreement,
all of the outstanding shares of First Southwest common stock will be exchanged
for 266,681 shares of BancFirst Corporation common stock and approximately
$4,335 of cash. The merger, which is subject to regulatory approval, is expected
to be completed in September 2000 and will be accounted for as a purchase. The
merger is not expected to have a material effect on the results of operations of
the Company for 2000.
RESULTS OF OPERATIONS
Second Quarter
Net interest income increased $2.27 million compared to the second quarter
of 1999, primarily as a result of an increase in the net interest margin from
4.66% to 4.87%. Average net earning assets decreased $25.7 million compared to
the second quarter of 1999, while net interest spread increased to 4.04% from
3.82% for the second quarter of 1999. The higher net interest spread and net
interest margin are the product of rising interest rates in late 1999 and early
2000, loan growth, and the Company's ability to control its funding costs in the
short run. These conditions have resulted in the Company's yield on its earning
assets rising faster than the rate on its interest-bearing liabilities.
The Company provided $1.18 million for loan losses in the second quarter,
compared to $468,000 for the second quarter of 1999. The higher provisions in
2000 were due to loan growth and higher classified and nonperforming loans. Net
loan charge-offs were only $444,000 for the second quarter of 2000, compared to
$584,000 for the second quarter of 1999. The net charge-offs represent
annualized rates of only 0.12% and 0.17% of total loans for the second quarter
of 2000 and 1999, respectively.
Noninterest income increased $624,000, or 9.47%, compared to the second
quarter of 1999. Noninterest expense increased $1.05 million, or 5.20%, compared
to the second quarter of 1999. These increases were partly due to the
acquisition of First State Bank.
Income tax expense increased $617,000 compared to the second quarter of
1999. The effective tax rate on income
9
<PAGE>
before taxes was 37.79%, up from 35.72% in the second quarter of 1999.
Year-To-Date
Net interest income increased $3.79 million for the first six months of
2000, compared to the first six months of 1999, primarily as a result of an
increase in the net interest margin to 4.82% from 4.65%. Average net earning
assets increased $12.8 million, while net interest spread increased to 3.99%
from 3.84%. The higher net interest spread and net interest margin are the
product of rising interest rates in late 1999 and early 2000, loan growth, and
the Company's ability to control its funding costs in the short run. These
conditions have resulted in the Company's yield on its earning assets rising
faster than the rate on its interest-bearing liabilities.
The Company provided $2.47 million for loan losses in the first six months,
compared to $1.41 million for the same period of 1999. The higher provisions in
2000 were due to loan growth and higher classified and nonperforming loans. Net
loan charge-offs were only $714,000 for the first half of 2000, compared to
$800,000 for the first half of 1999. The net charge-offs represent annualized
rates of only 0.10% and 0.12% of total loans for the first six months of 2000
and 1999, respectively.
Noninterest income increased only $12,000 compared to the first six months
of 1999 due to a gain on the sale of a branch in the first quarter of 1999.
Excluding this gain, noninterest income increased $912,000, or 6.73%.
Noninterest expense increased $2.02 million, or 5.03%, compared to the first six
months of 1999. These increases were partly due to the acquisition of First
State Bank.
Income tax expense increased $267,000 compared to the first half of 1999.
The effective tax rate on income before taxes was 37.00%, compared to 36.99% in
the same period of 1999.
FINANCIAL POSITION
Federal funds sold decreased $47.4 million from December 31, 1999 and $86.6
million from June 30, 1999. Due to loan growth exceeding deposit growth, the
Company has become a net borrower of federal funds.
Total securities decreased $17.2 million compared to December 31, 1999 and
increased $9.97 million compared to June 30, 1999. 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. The main factors in the changes in
total securities were changes in funding from deposits and use of funds for loan
growth. The net unrealized loss on securities available for sale was $6.6
million at the end of the second quarter of 2000, compared to a loss of $5.14
million at December 31, 1999 and a loss of $1.42 million at June 30, 1999. The
average taxable equivalent yield on the securities portfolio for the second
quarter increased to 6.28% from 5.96% for the same quarter of 1999.
Total loans increased $87.2 million from December 31, 1999 and $189 million
from June 30, 1999, due to internal growth and approximately $60 million of
loans acquired from First State Bank. The allowance for loan losses increased
$1.75 million from year-end 1999 and $4.04 million from the second quarter of
1999. The allowance as a percentage of total loans was 1.58%, 1.55% and 1.50% at
June 30, 2000, December 31, 1999 and June 30, 1999, respectively. The allowance
to nonperforming and restructured loans at the same dates was 210.86%, 183.47%
and 189.05%, respectively.
Nonperforming and restructured assets totaled $14.4 million at June 30,
2000, compared to $14.2 million at December 31, 1999 and $12.3 million at June
30, 1999. Although the ratio of nonperforming and restructured assets to total
assets is only 0.61%, 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 $8.91 million compared to December 31, 1999,
although average deposits for the quarter were $124 million higher than in the
fourth quarter of 1999. The increase in average deposits is the result of
internal growth and the acquisition of First State Bank, which added
approximately $109 million in deposits. Compared to June 30, 1999, total
deposits increased $85.4 million. 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 June 30, 2000.
10
<PAGE>
Short-term borrowings increased $9.75 million from December 31, 1999 and
$8.77 million from June 30, 1999. Fluctuations in short-term borrowings are a
function of federal funds purchased from correspondent banks, customer demand
for repurchase agreements and liquidity needs of the bank.
Long-term borrowings increased $1.93 million from year-end 1999 and $4.45
million from the second quarter of 1999 due to additional Federal Home Loan Bank
borrowings. The Company uses these borrowings primarily to match-fund long-term
fixed-rate loans.
Stockholders' equity increased to $172 million from $165 million at year-
end 1999 and $161 million at June 30, 1999, primarily as a result of accumulated
earnings. Average stockholders' equity to average assets for the quarter was
7.17%, compared to 9.26% for the second quarter of 1999. In June 1999, the
Company repurchased 1,186,502 shares of its common stock, which reduced
stockholders' equity by $45.1 million. The Company's leverage ratio and total
risk-based capital ratio were 7.72% and 12.45%, respectively, at June 30, 2000,
well in excess of the regulatory minimums.
YEAR 2000 EXPOSURE
Since January 1, 2000, the Company has tested its critical systems and the
tests have not revealed any year 2000 problems. In addition, the Company's
operations have not experienced any year 2000-related problems. The Company will
continue to analyze its systems and services that utilize date-embedded codes
that may experience operational problems as various functions are utilized, or
as other potential problem dates arrive throughout the year. The Company will
continue to communicate with third party vendors of systems software and
equipment, suppliers of telecommunications capacity and equipment, customers and
others with which it does business to coordinate year 2000 compliance.
The total cost of addressing the Year 2000 issue was not material. The
Company's core business applications are provided by a data processing company
that devoted substantial resources to assuring that the applications were
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 was not accelerated due the Year 2000
issue. Also, no significant information technology projects were 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.
11
<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 2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income per share - basic $ 0.79 $ 0.66 $ 1.55 $ 1.32
Net income per share - diluted 0.78 0.65 1.54 1.30
Cash dividends per share 0.16 0.14 0.32 0.28
Return on average assets 1.08% 1.04% 1.07% 1.07%
Return on average stockholders' equity 15.05 11.23 14.94 11.63
Efficiency ratio 65.06 67.84 65.40 66.16
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET AND ASSET QUALITY June 30,
--------------------------- December 31,
STATISTICS 2000 1999 1999
---------- ---------- ----------
<S> <C> <C> <C>
Book value per share $ 21.34 $ 19.68 $ 20.30
Tangible book value per share 18.55 16.87 17.34
Average loans to deposits (year-to-date) 71.07% 68.41% 68.61%
Nonperforming and restructured assets to total assets 0.61 0.55 0.61
Allowance for loan losses to total loans 1.58 1.50 1.55
Allowance for loan losses to nonperforming
and restructured loans 210.86 189.05 183.47
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended June 30,
AND INTEREST MARGIN ANALYSIS ------------------------------------------------------------------------
2000 1999
------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Taxable Equivalent Basis Average Average Average Average
Earning assets: Balance Yield/Rate Balance Yield/Rate
---------- ---------- --------- ----------
Loans $1,517,089 9.43% $1,351,670 8.94%
Securities 587,310 6.28 564,257 5.96
Federal funds sold 31,604 6.27 123,947 4.66
---------- ----------
Total earning assets 2,136,003 8.52 2,039,874 7.86
---------- ----------
Nonearning assets:
Cash and due from banks 128,457 126,908
Interest receivable and other assets 130,752 116,201
Allowance for possible loan losses (23,831) (20,360)
---------- ----------
Total nonearning assets 235,378 222,749
---------- ----------
Total assets $2,371,381 $2,262,623
========== ==========
Interest-bearing liabilities:
Interest-bearing deposits $1,659,331 4.34% $1,539,144 3.90%
Short-term borrowings 27,192 6.21 33,465 5.05
Long-term borrowings 27,373 6.32 19,488 5.95
9.65% Capital Securities 25,000 9.82 25,000 9.82
---------- ----------
Total interest-bearing liabilities 1,738,896 4.48 1,617,097 4.04
---------- ----------
Interest-free funds:
Noninterest-bearing deposits 446,263 423,325
Interest payable and other liabilities 16,093 12,630
Stockholders' equity 170,129 209,571
---------- ----------
Total interest-free funds 632,485 645,526
---------- ----------
Total liabilities and stockholders' equity $2,371,381 $2,262,623
========== ==========
Net interest spread 4.04% 3.82%
========== ==========
Net interest margin 4.87% 4.66%
========== ==========
</TABLE>
12
<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, 1999, 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 May 25, 2000, the
following matters were voted upon, with the votes indicated:
<TABLE>
<CAPTION>
Number of Shares
---------------------------------------------------------------------
Description of Proposal Broker
Voted for Withheld non-votes
--------------- -------------- -----------------
Proposal No. 1-Election of Directors
<S> <C> <C> <C> <C>
Class II Directors
Jim Daniel 5,670,153 26,023 233,909
Robert A. Gregory 5,672,653 23,523 233,909
J.R. Hutchens, Jr. 5,671,953 24,223 233,909
T.H. McCasland, Jr. 5,672,653 23,523 233,909
Paul B. Odom, Jr. 5,669,653 26,523 233,909
H.E. Rainbolt 5,499,503 196,673 233,909
Number of Shares
---------------------------------------------------------------------
Voted Broker
Voted for against Abstained non-votes
--------------- -------------- -------------- -----------------
Proposal No. 2-Ratification of Arthur Andersen
as Independent Accountants 5,694,804 1,223 150 233,909
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
------- -----------------------------------------------------------------
2.1 Merger Agreement dated May 6, 1998 between BancFirst Corporation
and AmQuest Financial Corp. (filed as Exhibit 2.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 and incorporated herein by reference).
3.1 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.)
13
<PAGE>
Exhibit
Number Exhibit
------- -----------------------------------------------------------------
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 six months ended June 30, 2000.
--------------------------------------------------------------------------------
*Filed herewith
(b) No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 2000.
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 10, 2000 \s\ Randy P. Foraker
--------------- -----------------------------------
(Signature)
Randy P. Foraker
Senior Vice President and Controller;
Assistant Secretary/Treasurer
(Principal Accounting Officer)
14
