SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 21, 2000
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Date of Report (Date of Earliest Event Reported)
BANKFIRST CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Tennessee 001-14417 58-1790903
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(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
625 Market Street
Knoxville, Tennessee 37902
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(Address of Principal Executive Offices) (Zip Code)
(865) 595-1100
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Disclosure of Risk Factors
BankFirst Corporation (the "Company") is filing this Current Report on
Form 8-K to describe various material risk factors that may affect the Company's
business, financial condition and operations.
Some of the information found in the Company's filings under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and its
prospectuses or any prospectus supplements under the Securities Act of 1933, as
amended (the "Securities Act"), may contain "forward-looking" statements. These
include, among others, disclosures made regarding planned capital expenditures,
the Company's financial position, business strategies and other plans and
objectives for future operations; these are forward-looking statements. The
Company cautions readers of its Exchange Act and Securities Act filings that all
forward-looking statements are necessarily speculative and not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made, and to advise readers that various risks and uncertainties, including
without limitation, regional and national economic conditions, changes in levels
of market interest rates, credit risks of lending activities and competitive and
regulatory factors, could affect financial performance and could cause actual
results for future periods to differ materially from those anticipated or
projected. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.
When considering any such forward-looking statements, readers should keep
in mind the following risk factors. These risk factors could cause the Company's
actual results to differ materially and adversely from those contained in or
implied by any forward-looking statement.
The following risk factors are not necessarily exhaustive, particularly as
to possible future events, and new risk factors may emerge periodically. Many
things can happen that can cause the Company's actual results to be very
different than those described in its Securities Act and Exchange Act filings.
Any statements made by the Company that are not historical facts should be
considered to be forward-looking statements. The Company neither undertakes to
update any of its forward-looking statements nor to publicly release the results
if the Company revises any of them.
RISK FACTORS
Economic Conditions; Geographic and Industry Concentration
The Company's primary business segment is banking, which accounted for
approximately 89% of gross revenues as of December 31, 1999, with the majority
of remaining revenues being generated through the Company's BankFirst Trust
Company ("BankFirst Trust") subsidiary and BankFirst's mortgage company
subsidiary, Curtis Mortgage Company, Inc. Although the majority of the remaining
discussion of this Form 8-K will concentrate on the Banks, the associated risk
factors discussed throughout this document are applicable to all of the
Company's operations and subsidiaries.
The operations of the Company's bank subsidiaries, BankFirst ("BankFirst")
and The First National Bank and Trust Company ("Athens") (collectively, the
"Banks"), are located and concentrated primarily in Knox, Sevier, Blount,
Loudon, Jefferson and McMinn Counties in East Tennessee. As a result of this
geographic concentration, the Banks' results depend largely upon economic
conditions in these areas. Deterioration in economic conditions could have a
materially adverse impact on the quality of the Banks' loan portfolios and the
demand for the Banks' products and services, and, accordingly, the Company's
results of operations and financial condition.
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The Company is also exposed to adverse changes in demand for tourist
accommodations in Sevier County, Tennessee, which is immediately adjacent to the
Great Smoky Mountain National Park. A significant percentage of BankFirst's
commercial loans is represented by the hospitality industry referred to above,
which comprises approximately $132 million, or 22.6% as of December 31, 1999, of
the Company's total loan portfolio. A deterioration in the market for lodging,
generally, or for lodging in Sevier County, specifically, could have a
materially adverse impact on BankFirst's and the Company's results of operations
and financial condition.
Competition
The banking and financial services business in East Tennessee, generally,
and in the market areas of the Banks, specifically, is highly competitive. The
competitive environment is primarily a result of changes in regulation, changes
in technology and product delivery systems and the accelerating pace of
consolidation among financial service providers. The Banks compete for loans,
deposits and customers and the delivery of other financial services with other
commercial banks, savings and loan associations, securities and brokerage
companies, mortgage companies, insurance companies, finance companies, money
market funds, credit unions, and other non-bank financial service providers.
Many of these competitors are much larger in total assets and capitalization,
have greater access to capital markets and offer a broader array of financial
services than the Banks. There can be no assurance that the Banks will be able
to compete effectively and the results of operations of the Company could be
adversely affected as circumstances affecting the nature or level of competition
change.
Dependence on Key Personnel
The Company's success depends substantially on certain members of its
senior management and the senior management of the Banks, in particular, Fred R.
Lawson, R. Stephen Hagood and C. David Allen at BankFirst; L. A. Walker, Jr. and
John W. Perdue at Athens; and Michael L. Bevins at the Company's BankFirst Trust
subsidiary. The Company's business and financial condition could be materially
adversely affected by the retirement or other loss of the services of any of
such individuals. The Company does not have employment contracts with, and does
not carry key man insurance on the lives of, any of these officers.
Credit Quality Risks
A significant source of risk for the Banks arises from the possibility
that losses will be sustained because borrowers, guarantors and related parties
fail to perform in accordance with the terms of their loans. The Banks have
adopted underwriting and credit monitoring procedures and credit policies,
including the establishment and review of the allowance for credit losses that
management of each believes are appropriate to minimize this risk by assessing
the likelihood of nonperformance, tracking loan performance and diversifying
each Bank's credit portfolio. Such policies and procedures, however, may not
prevent unexpected losses that could materially adversely affect the results of
operations of the Banks and the Company.
The Banks have emphasized commercial business and commercial real estate
loans to small businesses in their market areas. The Banks attempt to
collateralize all of their commercial loans with real estate or tangible
commercial assets. Loans secured by commercial real estate properties generally
involve a higher degree of risk than the single-family mortgages traditionally
emphasized by banking institutions engaged in residential real estate lending.
Because payments on loans secured by commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to a greater extent than single-family residential
loans to adverse conditions in the real estate market or the economy. The
repayment of commercial loans is typically dependent on the successful operation
and income stream of the borrower. Such loans can be significantly affected by
economic conditions. For these reasons, commercial and commercial real estate
lending generally requires substantially greater oversight efforts as compared
to residential real estate lending. Commercial and commercial real estate loans
may also involve relatively large loan balances to single borrowers or groups of
related borrowers.
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Concentration of Voting Control
As of February 29, 2000, James L. Clayton, Chairman of the Board of the
Banks, had the power to vote 36.1% of the shares of the common stock, $2.50 par
value per share, of the Company (the "Common Stock") on a fully diluted basis.
In addition, Mr. Clayton's wife, relatives and affiliates at such date had the
aggregated power to vote an additional 7.6% of the shares of the Common Stock on
a fully diluted basis. Accordingly, Mr. Clayton has and will have the ability to
significantly influence the management and policies of the Company, and public
shareholders will have correspondingly lesser influence. Mr. Clayton will also
be able to significantly influence the outcome of all matters requiring
shareholder vote including the election of directors, adopting or amending
provisions of the Company's Charter and approving certain mergers or other
similar transactions.
Impact of Regulatory Environment on Operations
The Company's subsidiaries are subject to extensive regulation,
supervision and examination by the Tennessee Department of Financial
Institutions ("TDFI"), in the case of BankFirst and BankFirst Trust, the Office
of Comptroller of the Currency ("OCC") in the case of Athens, and the Federal
Deposit Insurance Corporation ("FDIC") in the case of both Banks. The Company is
regulated by the Federal Reserve Board. The regulatory restrictions require
minimal capital ratios and limit the businesses in which the Company, the Banks
and their subsidiaries may engage, as well as their operations within the
permitted businesses. In addition to regulation by these government agencies,
the business of the Banks and their subsidiaries is subject to extensive
regulation, such as those applicable to various types of consumer lending,
violations of which may result in significant penalties and damages. While the
Company and its subsidiaries are currently operating profitably and are "well
capitalized" for regulatory purposes, the Company has experienced capital
deficiencies in the past and there can be no assurance that the Company's
performance or the regulatory environment will not be materially adversely
affected. Further, a change in applicable federal or state statutes, regulations
or regulatory policies as to such governmental agencies may have a material
adverse effect on the Company's business.
Potentially Adverse Impact of Interest Rates
The results of operations of banking institutions generally and the Banks
specifically are materially affected by general economic conditions, the
monetary and fiscal policies of the federal government and the regulatory
policies of governmental authorities and other factors that affect market rates
of interest. The results of operations of banking institutions depend to a large
extent on their level of "net interest income", which is the difference between
interest income on interest-earning assets, such as loans and investments, and
interest expense on interest-bearing liabilities, such as deposits and
borrowings. Changes in interest rates can adversely affect the Banks' cost of
funds without increasing returns on interest-earning assets, resulting in
reduced net income or even losses. Although the Banks actively manage their
exposure to interest rate changes, these changes are beyond their control and
the Banks cannot fully insulate themselves from the effect of rate changes.
Volatility of Market Price of the Common Stock
From time to time, there may be significant volatility in the market price
of the Common Stock. Quarterly operating results of the Company, changes in
earnings estimates by analysts, changes in general conditions in the economy or
the financial markets, or other developments affecting the Company or its
industry or competitors could cause the market price of the Common Stock to
fluctuate substantially. In addition, recently the national stock markets have
experienced extreme price and volume fluctuations. This volatility has had a
significant effect on the market prices of securities issued by many companies
for reasons unrelated to their operating performance. Therefore, the Company
cannot predict the market price for the Common Stock.
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Risks Associated with Acquisitions
The Company has experienced growth as a result of mergers and acquisitions
of businesses or assets that complement or expand its existing business. The
Company may engage in selected acquisitions or strategic mergers in the future,
although the Company has no present agreements, arrangements or commitments with
respect to any acquisition. As a result, business combination and acquisition
discussions and in some cases, negotiations, may take place in the future, and
transactions involving cash, debt or equity securities may be expected. Any
future business combination or series of business combinations that the Company
might undertake may be material, in terms of assets acquired or liabilities
assumed, to the Company's financial condition. Recent business combinations in
the banking industry have typically involved the payment of a premium over book
and market values. This practice may result in dilution of book value and net
income per share for the acquiring entity.
Acquisitions involve a number of special risks, including the time
associated with identifying and evaluating potential acquisitions; the Company's
ability to finance the acquisition and associated costs; the diversion of
management's attention to the integration of the assets, operations and
personnel of the acquired businesses; the introduction of new products and
services into the Company's business; possible adverse short-term effects on the
Company's results of operations; possible amortization of goodwill associated
with an acquisition; and the risk of loss of key employees of the acquired
businesses. The Company may issue equity securities and other forms of common
stock-based consideration in connection with future acquisitions, which could
cause dilution to the Company's shareholders. With respect to any future
acquisitions, there can be no assurance that the Company's integration efforts
will be successful.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANKFIRST CORPORATION
March 21, 2000 /s/ C. David Allen
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C. David Allen
Chief Financial Officer and Secretary
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