SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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 October 31, 2001 there were 8,252,207 shares of the registrant's Common
Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BANCFIRST CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
September 30, December 31,
--------------------------------- --------------
2001 2000 2000
-------------- --------------- --------------
ASSETS
Cash and due from banks $ 141,326 $ 120,253 $ 162,455
Interest-bearing deposits with banks 22,362 1,477 663
Federal funds sold 172,800 15,700 65,900
Securities (market value: $549,807, and $565,021 and $561,434, 547,478 565,609
respectively) 560,551
Loans:
Total loans (net of unearned interest) 1,707,459 1,566,445 1,666,338
Allowance for loan losses (24,993) (24,076) (25,380)
-------------- --------------- --------------
Loans, net 1,682,466 1,542,369 1,640,958
Premises and equipment, net 60,861 54,172 57,795
Other real estate owned 2,285 2,184 1,453
Intangible assets, net 22,865 21,748 25,156
Accrued interest receivable 24,465 21,795 27,288
Other assets 34,490 31,160 28,036
-------------- --------------- --------------
Total assets $2,711,398 $2,376,467 $2,570,255
============== =============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 572,750 $ 491,207 $ 509,770
Interest-bearing 1,800,604 1,598,665 1,757,627
-------------- --------------- --------------
Total deposits 2,373,354 2,089,872 2,267,397
Short-term borrowings 31,204 37,634 37,292
Long-term borrowings 25,477 27,714 26,613
9.65% Capital Securities 25,000 25,000 25,000
Accrued interest payable 9,692 8,525 10,302
Other liabilities 25,030 7,463 6,693
Minority interest 2,095 -- --
-------------- --------------- --------------
Total liabilities 2,491,852 2,196,208 2,373,297
-------------- --------------- --------------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, $1.00 par (shares issued: 8,252,207, 8,073,730
and 8,326,638, respectively) 8,252 8,074 8,327
Capital surplus 57,182 47,281 56,169
Retained earnings 142,899 127,029 130,932
Accumulated other comprehensive income 11,213 (2,125) 1,530
-------------- --------------- --------------
Total stockholders' equity 219,546 180,259 196,958
-------------- --------------- --------------
Total liabilities and stockholders' equity $2,711,398 $2,376,467 $2,570,255
============== =============== ==============
See accompanying notes to consolidated financial statements.
2
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- ---------
INTEREST INCOME
Loans, including fees $35,839 $ 37,377 $111,070 $ 106,266
Securities:
Taxable 7,267 8,123 22,481 24,931
Tax-exempt 527 525 1,699 1,605
Federal funds sold 1,620 48 5,496 1,101
Interest-bearing deposits with banks 168 20 271 48
------- -------- -------- ---------
Total interest income 45,421 46,093 141,017 133,951
------- -------- -------- ---------
INTEREST EXPENSE
Deposits 17,549 18,497 57,658 53,561
Short-term borrowings 531 908 1,443 1,441
Long-term borrowings 410 446 1,232 1,290
9.65% Capital Securities 612 612 1,835 1,835
------- -------- -------- ---------
Total interest expense 19,102 20,463 62,168 58,127
------- -------- -------- ---------
Net interest income 26,319 25,630 78,849 75,824
Provision for loan losses 581 840 1,392 3,309
------- -------- -------- ---------
Net interest income after provision for loan losses 25,738 24,790 77,457 72,515
------- -------- -------- ---------
NONINTEREST INCOME
Trust revenue 929 803 2,688 2,365
Service charges on deposits 5,009 4,354 14,400 12,812
Securities transactions 436 (1) 449 1
Income from sales of loans 272 351 616 841
Other 3,075 2,196 9,154 6,155
------- -------- -------- ---------
Total noninterest income 9,721 7,703 27,307 22,174
------- -------- -------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 13,834 12,156 40,619 36,233
Occupancy and fixed assets expense, net 1,495 1,476 4,420 4,151
Depreciation 1,362 1,273 3,928 3,825
Amortization of intangibles 771 784 2,265 2,352
Data processing services 663 630 1,713 1,903
Net expense from other real estate owned (8) 445 125 313
Other 6,669 5,257 19,076 15,534
------- -------- -------- ---------
Total noninterest expense 24,786 22,021 72,146 64,311
------- -------- -------- ---------
Income before taxes 10,673 10,472 32,618 30,378
Income tax expense (3,793) (3,516) (11,552) (10,881)
------- -------- -------- ---------
Net income 6,880 6,956 21,066 19,497
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities 4,846 2,460 9,683 1,383
------- -------- -------- ---------
Comprehensive income $11,726 $ 9,416 $ 30,749 $ 20,880
------- -------- -------- ---------
NET INCOME PER COMMON SHARE
Basic $ 0.83 $ 0.86 $ 2.54 $ 2.41
------- -------- -------- ---------
Diluted $ 0.82 $ 0.85 $ 2.51 $ 2.39
------- -------- -------- ---------
See accompanying notes to consolidated financial statements.
3
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
-----------------------------
2001 2000
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 31,510 $ 23,614
------------- ------------
INVESTING ACTIVITIES
Net cash and due from banks used for acquisitions and divestitures (4,856) --
Purchases of securities:
Held for investment (3,000) (14,745)
Available for sale (133,823) (22,667)
Maturities of securities:
Held for investment 17,467 17,895
Available for sale 122,526 51,563
Proceeds from sales and calls of securities:
Held for investment 16,541 1,300
Available for sale 20,080 --
Net (increase) decrease in federal funds sold (106,900) 35,966
Purchases of loans (20,934) (2,354)
Proceeds from sales of loans 91,732 101,623
Net other increase in loans (116,963) (212,720)
Purchases of premises and equipment (7,774) (8,303)
Proceeds from the sale of other real estate owned and repossessed
assets 3,907 948
Other, net 434 2,498
------------- ------------
Net cash used by investing activities (121,563) (48,996)
------------- ------------
FINANCING ACTIVITIES
Net increase (decrease) in demand, transaction and savings
deposits 50,942 23,916
Net increase (decrease) in certificates of deposits 55,015 (16,740)
Net increase (decrease) in short-term borrowings (6,088) 15,543
Net increase (decrease) in long-term borrowings (1,136) 1,322
Issuance of common stock 1,058 548
Acquisition of common stock (4,702) (2,000)
Cash dividends paid (4,466) (3,883)
------------- ------------
Net cash provided by financing activities 90,623 18,706
------------- ------------
Net increase (decrease) in cash and due from banks 570 (6,676)
Cash and due from banks at the beginning of the period 163,118 128,406
------------- ------------
Cash and due from banks at the end of the period $ 163,688 $ 121,730
============= ============
SUPPLEMENTAL DISCLOSURE
Cash paid during the period for interest $ 62,778 $ 58,023
============= ============
Cash paid during the period for income taxes $ 7,743 $ 12,157
============= ============
See accompanying notes to consolidated financial statements.
4
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, Century Life Assurance Company,
Council Oak Capital, Inc., Council Oak Partners, LLC, BancFirst and its
subsidiaries, and First Southwest Bank. 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, 2000, the date of the most recent
annual report. Certain amounts in the 2000 financial statements have been
reclassified to conform to the 2001 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
The Financial Accounting Standards Board (the "FASB") Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by Statements 137 and 138, was adopted by the Company on
January 1, 2001. This Statement established 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. The adoption
of this standard did not have a material effect on the Company's consolidated
financial statements.
In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities -A Replacement of FASB Statement No. 125".
This Statement is effective for transfers occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The adoption of this standard did not
have a material effect on the Company's consolidated financial statements.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations". This Statement is effective for all business
combinations initiated after June 30, 2001, and requires that all business
combinations be accounted for using the purchase method. Also in June 2001, the
FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets". Statement 142 requires that, for fiscal years
beginning after December 15, 2001, goodwill and other indefinite-lived
intangible assets already recognized in an entity's financial statements no
longer be amortized, and that goodwill and other indefinite-lived intangible
assets acquired after June 30, 2001 not be amortized. Instead, goodwill and
other indefinite-lived intangible assets will be tested at least annually for
impairment by comparing the fair value of those assets with their recorded
amounts. Any impairment losses will be reported in the entity's income
statement. The adoption of Statement 142 will have a material effect on the
consolidated financial statements of the Company by eliminating goodwill
amortization from its income statement and from the calculations of net income
per share. Excluding the effects of goodwill amortization, the Company's net
income for the three months and nine months ended September 30, 2001 would have
been $7,344 and $22,636, respectively. Net income per diluted share for the
same periods would have been $0.88 and $2.70, respectively. Management does not
believe that the Company will recognize any impairment charges from the adoption
of Statement 142.
5
(3) RECENT DEVELOPMENTS; MERGERS, ACQUISITIONS AND DISPOSALS
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 October 2000, BancFirst Corporation completed the acquisition of First
Southwest Corporation of Frederick, Oklahoma ("First Southwest") which had total
assets of approximately $118,000. All of the outstanding shares of First
Southwest common stock were exchanged for 266,681 shares of BancFirst
Corporation common stock and approximately $4,335 of cash. The acquisition 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. Total intangible assets of $4,279 were recorded for the
purchase. The acquisition did not have a material effect on the results of
operations of the Company for 2000.
In January 2001, BancFirst Corporation completed the acquisition of 75% of
the outstanding common stock of Century Life Assurance Company ("Century Life")
from Pickard Limited Partnership, a Rainbolt family partnership. Century Life
underwrites credit life insurance, credit accident and health insurance, and
ordinary life insurance. The Rainbolt family is the largest shareholder of
BancFirst Corporation and two members of the family are the Chairman and the CEO
of BancFirst Corporation. The purchase price was $5,429. At December 31, 2000,
Century Life had total assets of $22,964 and total stockholders' equity of
$6,956. The acquisition was accounted for as a book value purchase.
Accordingly, the acquisition was recorded based on the book value of Century
Life and the effects of the acquisition are included in the Company's
consolidated financial statements from the date of the acquisition forward. The
acquisition is not expected to have a material effect on the results of
operations of the Company for 2001.
(4) SECURITIES
The table below summarizes securities held for investment and securities
available for sale.
September 30,
------------------- December 31,
2001 2000 2000
-------- -------- -----------
Held for investment at cost (market value; $80,847,
$90,453 and $107,874, (respectively) $ 78,518 $ 91,041 $106,991
Available for sale, at market value 468,960 474,568 453,560
-------- -------- --------
Total $547,478 $565,609 $560,551
======== ======== ========
6
(5) LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a schedule of loans outstanding by category:
September 30, December 31
-------------------------------------------------- --------------------
2001 2000 2000
---------------------- ------------------------ ---------------------
Amount Percent Amount Percent Amount Percent
---------- --------- ----------- ----------- ---------- ---------
Commercial and industrial $ 395,273 23.15% $ 386,737 24.69% $ 394,534 23.68%
Agriculture 82,836 4.85 51,928 3.32 91,263 5.48
Real Estate:
Construction 90,905 5.32 85,135 5.43 84,637 5.08
Farmland 56,795 3.33 38,153 2.44 56,695 3.40
One to four family residences 384,998 22.55 357,955 22.85 372,460 22.35
Multifamily residential properties 15,122 0.89 21,408 1.37 19,869 1.19
Commercial 351,459 20.58 304,585 19.44 322,759 19.37
Consumer 280,271 16.41 276,016 17.62 275,175 16.51
Other 49,800 2.92 44,528 2.84 48,946 2.94
---------- -------- ---------- ------- ---------- ------
Total loans $1,707,459 100.00% $1,566,445 100.00% $1,666,338 100.00%
========== ======== ========== ======= ========== ======
Loans held for sale (included above) $ 10,930 $ 7,552 $ 5,106
========== ========== ==========
The Company's loans are mostly to customers within Oklahoma and over half of
the loans are secured by real estate. Credit risk on loans is managed through
limits on amounts loaned to individual borrowers, underwriting standards and
loan monitoring procedures. The amounts and types of collateral obtained to
secure loans are based upon the Company's underwriting standards and
management's credit evaluation. Collateral varies, but may include real estate,
equipment, accounts receivable, inventory, livestock and securities. The
Company's interest in collateral is secured through filing mortgages and liens,
and in some cases, by possession of the collateral. The amount of estimated
loss due to credit risk in the Company's loan portfolio is provided for in the
allowance for loan losses. The amount of the allowance required to provide for
all existing losses in the loan portfolio is an estimate based upon evaluations
of loans, appraisals of collateral and other estimates which are subject to
rapid change due to changing economic conditions and the economic prospects of
borrowers. It is reasonably possible that a material change could occur in the
estimated allowance for loan losses in the near term
Changes in the allowance for loan losses are summarized as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Balance at beginning of period $24,998 $24,303 $25,380 $22,548
------- ------- ------- -------
Charge-offs (958) (1,599) (2,588) (3,002)
Recoveries 372 532 809 1,221
------- ------- ------- -------
Net charge-offs (586) (1,067) (1,779) (1,781)
------- ------- ------- -------
Provisions charged to operations 581 840 1,392 3,309
------- ------- ------- -------
Balance at end of period $24,993 $24,076 $24,993 $24,076
======= ======= ======= =======
7
The net charge-offs by category are summarized as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
--------------- -------------- -------------- --------------
Commercial, financial and other $ 57 $ 649 $ 482 $ 535
Real estate - construction -- 45 -- 56
Real estate - mortgage 52 68 74 198
Consumer 476 305 1,223 992
--------------- -------------- -------------- --------------
Total $ 585 $1,067 $1,779 $1,781
=============== ============== ============== ==============
(6) NONPERFORMING AND RESTRUCTURED ASSETS
Below is a summary of nonperforming and restructured assets:
September 30,
------------------------------------------------ December 31,
2001 2000 2000
---------------------- --------------------- ----------------------
Past due over 90 days and still accruing $ 2,934 $ 2,505 $ 2,790
Nonaccrual 8,617 7,189 8,852
Restructured 657 833 569
---------------------- ---------------------- ----------------------
Total nonperforming and restructured loans 12,208 10,527 12,211
Other real estate owned and repossessed assets 2,873 2,755 2,130
---------------------- ---------------------- ----------------------
Total nonperforming and restructured assets $15,081 $13,282 $14,341
====================== ====================== ======================
Nonperforming and restructured loans to total loans 0.71% 0.67% 0.73%
====================== ====================== ======================
Nonperforming and restructured assets to total assets 0.56% 0.56% 0.56%
====================== ====================== ======================
(7) INTANGIBLE ASSETS
The following is a summary of intangible assets, net of accumulated
amortization:
September 30,
--------------------------------- December 31,
2001 2000 2000
--------- --------- ------------
Excess of cost over fair value of assets acquired $20,815 $19,693 $22,704
Core deposit intangibles 2,047 2,051 2,448
Trademarks 3 4 4
--------- --------- ---------
Total $22,865 $21,748 $25,156
--------- --------- ---------
8
(8) CAPITAL
The Company is subject to risk-based capital guidelines issued by the Board
of Governors of the Federal Reserve System. These guidelines are used to
evaluate capital adequacy and involve both quantitative and qualitative
evaluations of the Company's assets, liabilities, and certain off-balance-sheet
items calculated under regulatory practices. Failure to meet the minimum capital
requirements can initiate certain mandatory or discretionary actions by the
regulatory agencies that could have a direct material effect on the Company's
financial statements. The required minimums and the Company's respective ratios
are shown below.
September 30,
Minimum --------------------------------------------- December 31,
Required 2001 2000 2000
----------------- -------------------- -------------------- --------------------
Tier 1 capital $ 210,471 $ 185,638 $ 195,273
Total capital $ 235,307 $ 206,621 $ 217,708
Risk-adjusted assets $1,939,585 $1,625,391 $1,741,664
Leverage ratio 3.00% 7.83% 7.88% 7.67%
Tier 1 capital ratio 4.00% 10.85% 11.42% 11.21%
Total capital ratio 8.00% 12.13% 12.71% 12.50%
To be "well capitalized" under federal bank regulatory agency definitions, a
depository institution must have a Tier 1 ratio of at least 6%, a combined Tier
1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5%. As of
September 30, 2001 and 2000, and December 31, 2000, BancFirst was considered to
be "well capitalized". There are no conditions or events since the most recent
notification of BancFirst's capital category that management believes would
change its category.
(9) STOCK REPURCHASE PLAN
In November 1999, the Company adopted a new Stock Repurchase Program (the
"SRP") authorizing management to repurchase up to 300,000 shares of the
Company's common stock. In May 2001, the SRP was amended to increase the shares
authorized to be repurchased by 277,916 shares. The SRP may be used as a means
to increase earnings per share and return on equity, to purchase treasury stock
for the exercise of stock options or for distributions under the Deferred Stock
Compensation Plan, to provide liquidity for optionees to dispose of stock from
exercises of their stock options, and to provide liquidity for shareholders
wishing to sell their stock. The timing, price and amount of stock repurchases
under the SRP may be determined by management and must be approved by the
Company's Executive Committee. At September 30, 2001 there were 294,235 shares
remaining that could be repurchased under the SRP. Below is a summary of the
shares repurchased under the program.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- -----------------------------------
2001 2000 2001 2000
------------------ --------------- ---------------- ---------------
Number of shares repurchased -- 10,228 119,519 71,434
Average price of shares repurchased $ -- $ 32.60 $ 39.34 $ 28.00
(10) 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.
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2001 2000 2001 2000
--------------- -------------- --------------- --------------
Unrealized gain (loss) during the period:
Before-tax amount $ 6,796 $ 3,795 $13,620 $2,344
Tax (expense) benefit (1,950) (1,335) (3,937) (961)
--------------- -------------- --------------- --------------
Net-of-tax amount $ 4,846 $ 2,460 $ 9,683 $1,383
=============== ============== =============== ==============
9
The amount of unrealized gain or loss included in accumulated other
comprehensive income is summarized below.
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2001 2000 2001 2000
--------------- --------------- --------------- ---------------
Unrealized gain (loss) on securities:
Beginning balance $ 6,367 $(4,585) $ 1,530 $(3,508)
Current period change 4,846 2,460 9,683 1,383
--------------- --------------- --------------- ---------------
Ending balance $11,213 $(2,125) $11,213 $(2,125)
=============== =============== =============== ===============
(11) NET INCOME PER COMMON SHARE
Basic and diluted net income per common share are calculated as follows:
Income Shares Per Share
(Numerator) (Denominator) Amount
------------------ ----------------- ---------------
Three Months Ended September 30, 2001
-------------------------------------
Basic
Income available to common stockholders $ 6,880 8,248,061 $0.83
===============
Effect of stock options -- 111,542
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 6,880 8,359,603 $0.82
================== ================= ===============
Three Months Ended September 30, 2000
-------------------------------------
Basic
Income available to common stockholders $ 6,956 8,074,223 $0.86
===============
Effect of stock options -- 76,340
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $ 6,956 8,150,563 $0.85
================== ================= ===============
Nine Months Ended September 30, 2001
------------------------------------
Basic
Income available to common stockholders
plus assumed exercises of stock options $21,066 8,281,273 $2.54
===============
Effect of stock options -- 106,556
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $21,066 8,387,829 $2.51
================== ================= ===============
Nine Months Ended September 30, 2000
------------------------------------
Basic
Income available to common stockholders
plus assumed exercises of stock options $19,497 8,099,688 $2.41
===============
Effect of stock options -- 71,294
------------------ -----------------
Diluted
Income available to common stockholders
plus assumed exercises of stock options $19,497 8,170,982 $2.39
================== ================= ===============
10
Below is the number and average exercise prices of options that were excluded
from the computation of diluted net income per share for each period because the
options' exercise prices were greater than the average market price of the
common shares.
Average
Exercise
Shares Price
------------- -----------
Three Months Ended September 30, 2001 -- $ --
Three Months Ended September 30, 2000 234,500 $ 33.92
Nine Months Ended September 30, 2001 16,886 $ 40.10
Nine Months Ended September 30, 2000 269,555 $ 33.58
(12) 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, electronic banking, trust services,
insurance services, merchant banking and brokerage services. 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:
Other Executive,
Metropolitan Community Financial Operations Elimin- Consol-
Banks Banks Services & Support ations idated
------------ --------- --------- ----------- ------- -----------
Three Months Ended:
September 30, 2001
Net interest income $ 7,936 $ 17,942 $ 1,308 $ (867) $ -- $ 26,319
(expense)
Noninterest income 1,575 4,554 2,841 14,805 (14,054) 9,721
Income before taxes 3,298 9,805 809 10,882 (14,121) 10,673
September 30, 2000
Net interest income $ 8,337 $ 17,017 $ 475 $ (199) $ -- $ 25,630
(expense)
Noninterest income 1,428 4,005 1,486 15,101 (14,317) 7,703
Income before taxes 3,844 9,167 689 11,089 (14,317) 10,472
Nine Months Ended:
September 30, 2001
Net interest income $ 23,507 $ 53,423 $ 4,008 $(2,089 ) $ -- $ 78,849
(expense)
Noninterest income 4,562 13,515 7,297 44,320 (42,387) 27,307
Income before taxes 10,588 29,607 2,641 32,358 (42,576) 32,618
September 30, 2000
Net interest income $ 24,254 $ 51,184 $ 2,351 $(1,965 ) $ -- $ 75,824
(expense)
Noninterest income 4,313 11,873 4,070 32,090 (30,172) 22,174
Income before taxes 9,675 29,039 1,763 20,073 (30,172) 30,378
Total Assets:
September 30, 2001 $823,245 $1,796,064 $151,510 $545,957 $ (605,378) $2,711,398
September 30, 2000 $819,565 $1,598,388 $106,544 $371,360 $ (519,390) $2,376,467
11
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.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
BANCFIRST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Net income for the third quarter ended September 30, 2001 was $6.88 million,
compared to $6.96 million for the third quarter of 2000. Diluted net income per
share was $0.82, compared to $0.85 for the third quarter of 2000. For the first
nine months of 2001, net income was $21.1 million, up from $19.5 million for the
first nine months of 2000. Diluted net income per share for the nine months was
$2.51, up from $2.39 for the first nine months of 2000.
Total assets at September 30, 2001 was $2.71 billion, up $141 million from
December 31, 2000 and $335 million from September 30, 2000. The asset growth was
due in part to the acquisition of First Southwest Corporation of Frederick,
Oklahoma ("First Southwest") in October 2000, which added approximately $118
million of assets, and the purchase of 75% of Century Life Assurance Company
("Century Life") in January 2001, which added approximately $23 million of
assets. Stockholders' equity was $220 million at September 30, 2001, an increase
of $22.6 million compared to December 31, 2000, and $39.3 million compared to
September 30, 2000.
In January 2001, BancFirst Corporation completed the purchase of 75% of the
outstanding common stock of Century Life from Pickard Limited Partnership, a
Rainbolt family partnership. Century Life underwrites credit life insurance,
credit accident and health insurance, and ordinary life insurance. The Rainbolt
family is the largest shareholder of BancFirst Corporation and two members of
the family are the Chairman and the CEO of BancFirst Corporation. The purchase
price was $5.43 million. At December 31, 2000, Century Life had total assets of
$23 million and total stockholders' equity of $6.96 million. The acquisition was
accounted for as a book value purchase. Accordingly, the acquisition was
recorded based on the book value of Century Life and the effects of the
acquisition are included in the Company's consolidated financial statements from
the date of the acquisition forward. The acquisition is not expected to have a
material effect on the results of operations of the Company for 2001.
Actions by the Federal Reserve to reduce interest rates during 2001 have
negatively affected many banks' net interest margins, as interest rates on
earning assets have declined more rapidly than rates on interest-bearing
liabilities. The Company believes that the historically low level of interest
rates may continue to have a negative effect on its net interest margin.
RESULTS OF OPERATIONS
Third Quarter
Net interest income increased $689,000 compared to the third quarter of 2000
due to growth in earning assets. Average net earning assets increased $93.1
million from the third quarter of 2000. Net interest spread for the third
quarter of 2001 decreased to 3.53% from 3.91% for the third quarter of 2000, and
net interest margin for the third quarter of 2001 decreased to 4.36% from 4.85%
for the third quarter of 2000. The lower net interest spread and net interest
margin are the product of falling interest rates and a relatively flat yield
curve.
The Company provided $581,000 for loan losses in the third quarter, compared
to $840,000 for the third quarter of 2000. The higher provisions in 2000 were
due to loan growth and increases in classified and nonperforming loans. Net loan
charge-offs were $585,000 for the third quarter of 2001, compared to $1.07
million for the third quarter of 2000. The net charge-offs represent annualized
rates of only 0.14% and 0.27% of average total loans for the third quarter of
2001 and 2000, respectively.
Noninterest income increased $2.02 million, or 26.2%, compared to the third
quarter of 2000. In the third quarter of 2001, the Company recognized gains of
$436,000 on bonds that were called early. Noninterest expense increased $2.77
million, or 12.6%, compared to the third quarter of 2000. The increase in
noninterest income, excluding securities gains, and the increase in noninterest
expense were due in part to the acquisitions of First Southwest and Century
Life.
Income tax expense increased $277,000 compared to the third quarter of 2000.
The effective tax rate on income before taxes was 35.54%, up from 33.58% in the
third quarter of 2000.
Year-to-Date
Net interest income increased $2.34 million compared to the first nine months
of 2000 due to growth in earning assets. Average net earning assets increased
$90.7 million from the third quarter of 2000. Net interest spread for the first
nine months of 2001 decreased to 3.56% from 3.97% for the same period of 2000,
and net interest margin for the first nine months of 2001 decreased to 4.46%
from 4.84% for the same period of 2000. The lower net interest spread and net
interest margin are the product of falling interest rates and a relatively flat
to inverted yield curve.
The Company provided $1.39 million for loan losses in the first nine months
of 2001, compared to $3.31 million for the first nine months of 2000. The higher
provisions in 2000 were due to loan growth and increases in classified and
nonperforming loans. Net loan charge-offs were $1.78 million for the year to
date, compared to $1.78 million for the same period of 2000. The net charge-
offs for the year to date represent annualized rates of only 0.14% and 0.16% of
average total loans for 2001 and 2000, respectively.
Noninterest income increased $5.13 million, or 23.2%, compared to the first
nine months of 2000. In the third quarter of 2001, the Company recognized gains
of $436,000 on bonds that were called early. Noninterest expense increased
$7.84 million, or 12.2%, compared to the first nine months of 2000. The
increase in noninterest income, excluding securities gains, and the increase in
noninterest expense were due in part to the acquisitions of First Southwest and
Century Life.
Income tax expense increased $671,000, compared to the first nine months of
2000. The effective tax rate on income before taxes was 35.42%, compared to
35.82% for the first nine months of 2000.
FINANCIAL POSITION
Federal funds sold increased $107 million from December 31, 2000 and $157
million from September 30, 2000 due to increased liquidity from deposit growth
and decreases in the balance of securities.
Total securities decreased $13.1 million compared to December 31, 2000 and
$18.1 million compared to September 30, 2000. 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 net unrealized gain on
securities available for sale was $16.5 million at the end of the third quarter
of 2001, compared to a gain of $2.9 million at December 31, 2000 and a loss of
$2.8 million at September 30, 2000. The average taxable equivalent yield on the
securities portfolio for the third quarter decreased to 5.85% from 6.21% for the
same quarter of 2000.
Total loans increased $41.1 million from December 31, 2000 and $141 million
from September 30, 2000, due to internal growth and approximately $80.2 million
of loans acquired with First Southwest. The allowance for loan losses decreased
$387,000 from year-end 2000 and increased $917,000 from the third quarter of
2000. The acquisition of First Southwest added $1.48 million to the allowance.
The allowance as a percentage of total loans was 1.46%, 1.52% and 1.54% at
September 30, 2001, December 31, 2000 and September 30, 2000, respectively. The
allowance to nonperforming and restructured loans at the same dates was 204.73%,
207.85% and 228.71%, respectively.
Nonperforming and restructured assets totaled $15.1 million at September 30,
2001, compared to $14.3 million at December 31, 2000 and $13.3 million at
September 30, 2000. The ratio of nonperforming and restructured assets to total
assets was 0.56% for all three periods. It is reasonable to expect
nonperforming loans and loan losses to rise over time to historical norms as a
result of economic and credit cycles.
Total deposits increased $106 million compared to December 31, 2000, and $284
million compared to September 30, 2000. The increase in deposits is the result
of internal growth and the acquisition of First Southwest, which added
approximately $105 million in deposits. The Company's deposit base continues to
be comprised substantially of core deposits, with large denomination
certificates of deposit being only 13.7% of total deposits at September 30,
2001.
Short-term borrowings decreased $6.09 million from December 31, 2000, and
$6.43 million from September 30, 2000. 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 decreased $1.14 million from year-end 2000 and $2.24
million from the third quarter of 2000 due to payments on Federal Home Loan Bank
borrowings. The Company uses these borrowings primarily to match-fund long-term
fixed-rate loans.
Stockholders' equity increased to $220 million from $197 million at year-end
2000 and $180 million at September 30, 2000, as a result of accumulated
earnings, unrealized gains on securities and stock issued in the First Southwest
acquisition. Average stockholders' equity to average assets for the first nine
months of 2001 was 7.72%, compared to 7.45% for the first nine months of 2000.
The Company's leverage ratio and total risk-based capital ratio were 7.83% and
12.13%, respectively, at September 30, 2001, well in excess of the regulatory
minimums.
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 (12) 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, corporate objectives, interest rates and other financial and
business matters. The Company cautions readers that these forward-looking
statements are subject to numerous assumptions, risks and uncertainties,
including economic conditions, the performance of financial markets and interest
rates; legislative and regulatory actions and reforms; competition; as well as
other factors, all of which change over time. Actual results may differ
materially from forward-looking statements.
13
BANCFIRST CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ----------------------------
2001 2000 2001 2000
---------- ----------- ---------- ----------
Per Common Share Data
Net income - basic $ 0.83 $ 0.86 $ 2.54 $ 2.41
Net income - diluted 0.82 0.85 2.51 2.39
Cash net income - diluted 0.90 0.94 2.75 2.64
Cash dividends 0.18 0.16 0.54 0.48
Performance Data
Return on average assets 1.01% 1.16% 1.05% 1.11%
Return on average stockholders' equity 12.90 15.61 13.66 15.22
Cash dividend payout ratio 21.69 18.60 21.26 19.92
Net interest spread 3.53 3.91 3.56 3.98
Net interest margin 4.36 4.85 4.46 4.85
Efficiency ratio 68.77 66.06 67.96 65.62
September 30,
----------------------- December 31,
2001 2000 2000
----------- ---------- -----------
Balance Sheet Data
Book value per share $ 26.60 $ 22.33 $ 23.65
Tangible book value per share 23.83 19.63 20.63
Average loans to deposits (year-to-date) 71.85% 72.42% 73.07%
Average earning assets to total assets (year-to-date) 90.02 89.86 90.11
Average stockholders' equity to average assets (year-to-date) 7.72 7.45 7.38
Asset Quality Ratios
Nonperforming and restructured loans to total loans 0.71% 0.67% 0.73%
Nonperforming and restructured assets to total assets 0.56 0.56 0.56
Allowance for loan losses to total loans 1.46 1.54 1.52
Allowance for loan losses to nonperforming and restructured loans 204.73 228.71 207.85
14
BANCFIRST CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES
(Unaudited)
Taxable Equivalent Basis (Dollars in thousands)
Three Months Ended September 30,
---------------------------------------------------------------------------------------------------
2001 2000
--------------------------------------------- ---------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------------- ----------- ----------- -------------- ----------- -----------
ASSETS
Earning assets:
Loans (1) $1,694,379 $36,010 8.43% $1,558,326 $37,511 9.55%
Investments - taxable 492,957 7,267 5.85 524,890 8,123 6.14
Investments - tax exempt 54,980 811 5.85 45,350 808 7.07
Federal funds sold 195,545 1,788 3.63 4,301 68 6.27
-------------- ----------- -------------- -----------
Total earning assets 2,437,861 45,876 7.47 2,132,867 46,510 8.65
-------------- ----------- -------------- -----------
Nonearning assets:
Cash and due from banks 148,041 135,892
Interest receivable and 146,524 129,133
other assets
Allowance for loan losses (24,967) (24,294)
-------------- --------------
Total nonearning assets 269,598 240,731
-------------- --------------
Total assets $2,707,459 $2,373,598
============== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Transaction deposits $ 330,772 1,385 1.66% $ 315,764 1,942 2.44%
Savings deposits 467,533 3,280 2.78 424,101 4,209 3.94
Time deposits 1,018,231 12,884 5.02 865,694 12,346 5.66
Short-term borrowings 56,139 531 3.75 55,021 908 6.55
Long-term borrowings 25,737 410 6.32 25,963 446 6.82
9.65% Capital Securities 25,000 612 9.71 25,000 612 9.71
-------------- ----------- -------------- -----------
Total interest-bearing
liabilities 1,923,412 19,102 3.94 1,711,543 20,463 4.74
-------------- ----------- -------------- -----------
Interest-free funds:
Demand deposits 537,788 469,045
Interest payable and other
liabilities 34,623 16,274
Stockholders' equity 211,636 176,736
-------------- --------------
Total interest free
funds 784,047 662,055
-------------- --------------
Total liabilities
and stockholders'
equity $2,707,459 $2,373,598
============== ==============
Net interest income $26,774 $26,047
=========== ===========
Net interest spread 3.53% 3.91%
=========== ===========
Net interest margin 4.36% 4.85%
=========== ===========
(1) Nonaccrual loans are included in the average loan balances and any interest
on such nonaccrual loans is recognized on a cash basis.
15
BANCFIRST CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES
(Unaudited)
Taxable Equivalent Basis (Dollars in thousands)
Nine Months Ended September 30,
---------------------------------------------------------------------------------------------------
2001 2000
--------------------------------------------- ---------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------------- ----------- ----------- -------------- ----------- -----------
ASSETS
Earning assets:
Loans (1) $1,678,887 $111,590 8.89% $1,512,950 $106,650 9.39%
Investments - taxable 498,749 22,481 6.03 538,336 24,931 6.17
Investments - tax exempt 50,748 2,614 6.89 45,802 2,469 7.18
Federal funds sold 175,917 5,767 4.38 25,832 1,149 5.93
-------------- ----------- -------------- -----------
Total earning assets 2,404,301 142,452 7.92 2,122,920 135,199 8.48
-------------- ----------- -------------- -----------
Nonearning assets:
Cash and due from banks 145,964 130,391
Interest receivable and
other assets 145,807 129,034
Allowance for loan losses (25,234) (23,662)
-------------- --------------
Total nonearning assets 266,537 235,763
-------------- --------------
Total assets $2,670,838 $2,358,683
============== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Transaction deposits $ 349,933 4,830 1.85% $ 355,095 5,983 2.24%
Savings deposits 449,286 11,114 3.31 400,659 11,912 3.96
Time deposits 1,014,683 41,714 5.50 878,719 35,666 5.41
Short-term borrowings 42,819 1,443 4.51 30,883 1,441 6.22
Long-term borrowings 26,011 1,232 6.33 26,674 1,290 6.44
9.65% Capital Securities 25,000 1,835 9.81 25,000 1,835 9.78
-------------- ----------- -------------- -----------
Total interest-bearing
liabilities 1,907,732 62,168 4.36 1,717,030 58,127 4.51
-------------- ----------- -------------- -----------
Interest-free funds:
Demand deposits 522,882 454,789
Interest payable and other
liabilities 34,029 15,743
Stockholders' equity 206,195 171,121
-------------- --------------
Total interest free funds 763,106 641,653
-------------- --------------
Total liabilities
and stockholders'
equity $2,670,838 $2,358,683
============== ==============
Net interest income $ 80,284 $ 77,072
=========== ===========
Net interest spread 3.56% 3.97%
=========== ===========
Net interest margin 4.46% 4.84%
=========== ===========
(1) Nonaccrual loans are included in the average loan balances and any interest
on such nonaccrual loans is recognized on a cash basis.
16
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, 2000, the date of its annual report to
stockholders.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
--------- -----------------------------------------------------------------
2.1 Merger Agreement dated May 6, 1998 between BancFirst Corporation and
AmQuest Financial Corp. (filed as Exhibit 2.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and incorporated herein by reference).
3.1 Second Amended and Restated Certificate of Incorporation (filed as
Exhibit 1 to the Company's Form 8-A/A filed July 23, 1998 and
incorporated herein by reference).
3.2 Certificate of Designations of Preferred Stock (filed as Exhibit 3.2
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 and incorporated herein by reference).
3.3 Amended By-Laws (filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
4.1 Amended and Restated Declaration of Trust of BFC Capital Trust I
dated as of February 4, 1997 (filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K dated February 4, 1997 and incorporated
herein by reference.)
4.2 Indenture dated as of February 4, 1997 (filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K dated February 4, 1997 and
incorporated herein by reference.)
4.3 Series A Capital Securities Guarantee Agreement dated as of February
4, 1997 (filed as Exhibit 4.3 to the Company's Current Report on
Form 8-K dated February 4, 1997 and incorporated herein by
reference.
4.4 Rights Agreement, dated as of February 25, 1999, between BancFirst
Corporation and BancFirst, as Rights Agent, including as Exhibit A
the form of Certificate of Designations of the Company setting forth
the terms of the Preferred Stock, as Exhibit B the form of Right
Certificate and as Exhibit C the form of Summary of Rights Agreement
(filed as Exhibit 1 to the Company's Current Report on Form 8-K
dated February 25, 1999 and incorporated herein by reference).
--------------------------------------------------------------------------------
(b) A report on Form 8-K dated May 24, 2001 was filed by the Company to
disclose certain amendments to the BancFirst Corporation Stock Option
Plan and the Company's Stock Repurchase Program.
17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANCFIRST CORPORATION
---------------------
(Registrant)
Date November 14, 2001 /s/ Randy P. Foraker
----------------- --------------------
(Signature)
Randy P. Foraker
Senior Vice President and Controller;
Assistant Secretary/Treasurer
(Principal Accounting Officer)
18