FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 1996 Commission File Number 0-14384 BANCFIRST CORPORATION (Exact name of registrant as specified in charter) OKLAHOMA 73-1221379 (State or other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 N. Broadway, Suite 200 Oklahoma City, Oklahoma 73102-8401 (Address of principal executive offices) (405) 270-1086 (Registrant's area code and telephone number) 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, 1996, there were 6,399,338 shares of Common Stock outstanding.
FORM 10-Q CROSS-REFERENCE INDEX ITEM PART I. FINANCIAL INFORMATION PAGE - ---- -------------------------------------------------- -------------- 1. Financial Statements 1 2. Management's Discussion and Analysis of 6 Financial Condition and Results of Operations PART II. OTHER INFORMATION -------------------------------------------------- 1. Legal Proceedings Not Applicable 2. Changes in Securities Not Applicable 3. Defaults Upon Senior Securities Not Applicable 4. Submission of Matters to a Vote of Security Holders Not Applicable 5. Other Information Not Applicable 6. Exhibits and Reports on Form 8-K 10 Signatures 11
PART I. FINANCIAL INFORMATION ------------------------------
BANCFIRST CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in thousands) <TABLE> <CAPTION> SEPTEMBER 30, --------------------- DECEMBER 31, 1996 1995 1995 ---------- -------- ------------ <S> <C> <C> <C> ASSETS Cash and due from banks $ 89,288 $ 57,919 $ 85,352 Interest-bearing deposits with banks 1 65 1 Securities 281,971 255,349 263,113 Federal funds sold 10,500 17,368 30,085 Loans: Total loans (net of unearned interest) 737,356 604,642 625,162 Allowance for possible loan losses (12,006) (10,338) (10,646) ---------- -------- ---------- Loans, net 725,350 594,304 614,516 Premises and equipment, net 33,503 27,729 28,308 Other real estate owned 1,259 2,149 781 Intangible assets, net 14,637 8,195 8,106 Accrued interest receivable 9,975 10,293 10,403 Other assets 20,094 7,858 7,673 ---------- -------- ---------- Total assets $1,186,578 $981,229 $1,048,338 ========== ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 244,282 $173,346 $ 196,597 Interest-bearing 815,350 693,684 726,572 ---------- -------- ---------- Total deposits 1,059,632 867,030 923,169 Short-term borrowings 10,665 11,532 18,705 Long-term borrowings 1,448 810 918 Accrued interest payable 4,158 3,434 3,237 Other liabilities 4,184 3,629 3,966 ---------- -------- ---------- Total liabilities 1,080,087 886,435 949,995 ---------- -------- ---------- Commitments and contingent liabilities Stockholders' equity: Common stock 6,243 6,211 6,225 Capital surplus 34,870 34,408 34,769 Retained earnings 65,513 53,293 55,792 Unrealized securities gains (losses), net of tax (135) 882 1,557 ---------- -------- ---------- Total stockholders' equity 106,491 94,794 98,343 ---------- -------- ---------- Total liabilities and stockholders' equity $1,186,578 $981,229 $1,048,338 ========== ======== ========== </TABLE> See accompanying notes to consolidated financial statements. 1
BANCFIRST CORPORATION CONSOLIDATED INCOME STATEMENT (Dollars in thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ----------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> INTEREST INCOME Loans, including fees $ 18,031 $ 15,060 $ 50,995 $ 42,711 Interest-bearing deposits with banks -- 1 -- 9 Securities: Taxable 4,214 3,585 12,151 10,184 Tax-exempt 146 151 445 446 Federal funds sold 318 363 1,214 1,226 ---------- ---------- ---------- ---------- Total interest income 22,709 19,160 64,805 54,576 ---------- ---------- ---------- ---------- INTEREST EXPENSE Deposits 8,665 7,809 24,849 22,329 Short-term borrowings 20 20 343 58 Long-term borrowings 24 -- 67 -- ---------- ---------- ---------- ---------- Total interest expense 8,709 7,829 25,259 22,387 ---------- ---------- ---------- ---------- Net interest income 14,000 11,331 39,546 32,189 Provision for possible loan losses 432 150 849 408 ---------- ---------- ---------- ---------- Net interest income after provision for possible loan losses 13,568 11,181 38,697 31,781 ---------- ---------- ---------- ---------- NONINTEREST INCOME Service charges on deposits 2,298 1,987 6,481 5,909 Securities transactions -- 48 180 111 Other 1,468 1,145 4,484 3,153 ---------- ---------- ---------- ---------- Total noninterest income 3,766 3,180 11,145 9,173 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits 6,364 5,141 18,396 14,970 Occupancy and fixed assets expense, net 707 550 1,919 1,475 Depreciation 632 431 1,718 1,374 Amortization 531 397 1,450 1,071 Data processing services 352 284 1,005 878 Net (income) expense from other real estate owned 12 16 174 50 Other 2,536 1,806 7,163 6,128 ---------- ---------- ---------- ---------- Total noninterest expense 11,134 8,625 31,825 25,946 ---------- ---------- ---------- ---------- Income before taxes 6,200 5,736 18,017 15,008 Income tax expense (2,283) (2,097) (6,797 (5,594) ---------- ---------- ---------- ---------- Net income $ 3,917 $ 3,639 $ 11,220 $ 9,414 ========== ========== ========== ========== PER SHARE DATA (PRIMARY AND FULLY DILUTED) Net income $0.61 $0.57 $1.74 $1.47 ========== ========== ========== ========== Average common stock and common stock equivalents 6,446,714 6,408,592 6,442,218 6,388,743 ========== ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements. 2
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 -------------------- 1996 1995 --------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES $ 4,368 $ 11,614 --------- -------- INVESTING ACTIVITIES Cash and due from banks used for acquisitions (10,495) (15,542) Purchases of securities (52,063) (42,263) Maturities of securities 52,330 57,147 Proceeds from sales of securities 15,709 4,043 Net decrease in federal funds sold 31,013 21,199 Purchases of loans (9,251) (9,383) Proceeds from sales of loans 81,587 38,102 Net other increase in loans (111,218) (68,233) Purchases of premises and equipment (3,361) (2,175) Proceeds from sales of other real estate owned and repossessed assets 968 1,130 Other, net (520) 608 --------- -------- Net cash used by investing activities (5,301) (15,367) --------- -------- FINANCING ACTIVITIES Net decrease in demand, transaction and savings deposits (11,272) (17,263) Net increase in certificates of deposit 25,028 14,786 Net increase (decrease) in short-term borrowings (8,039) 11,415 Net increase in long-term borrowings 530 810 Issuance of common stock 118 305 Purchase and retirement of common stock -- (577) Cash dividends paid (1,496) (1,303) --------- -------- Net cash provided by financing activities 4,869 8,173 --------- -------- Net increase in cash and due from banks 3,936 4,420 Cash and due from banks at the beginning of the period 85,353 53,564 --------- -------- Cash and due from banks at the end of the period $ 89,289 $ 57,984 ========= ======== SUPPLEMENTAL DISCLOSURE Cash paid during the period for interest $ 24,338 $ 21,042 ========= ======== Cash paid during the period for income taxes $ 6,967 $ 5,439 ========= ======== </TABLE> See accompanying notes to consolidated financial statements. 3
BANCFIRST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (1) GENERAL The accompanying consolidated financial statements include the accounts of BancFirst Corporation, BancFirst Investment Corporation, BancFirst, Lenders Collection Corporation and National Express Corporation. All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the consolidated financial statements. The 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, 1995, the date of the most recent annual report. Certain amounts in the 1995 financial statements have been reclassified to conform with the 1996 presentation. The preparation of financial statements in conformity with generally accepted accounting principles inherently involves the use of estimates and assumptions which 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) ACQUISITIONS In October 1996, the Company acquired all the assets and assumed all the liabilities of Commerce Bancorporation, Inc. of McLoud, Oklahoma ("Commerce Bancorp"), which had approximately $18,000 in total assets. Commerce Bancorp was controlled by certain executive officers of the Company. The acquisition was accomplished through the exchange of 156,508 shares of common stock of the Company for all of the outstanding common stock of Commerce Bancorp. The minority shares of Commerce Bancorp's subsidiary bank were purchased for $102. The acquisition was accounted for as a book value purchase, which is similar to the pooling of interests method, although the effect of the acquisition is included in the Company's consolidated financial statements from the date of the acquisition forward. The acquisition will not have a material effect on the results of operations of the Company for 1996. In March 1996, the Company acquired City Bankshares, Inc. of Oklahoma City, Oklahoma ("City Bankshares"), which had $130,000 in total assets. The acquisition was for cash of $19,125, with City Bankshares and its subsidiary, City Bank, being merged into BancFirst. C-Teq, Inc., an 85% owned data processing subsidiary of City Bankshares, was spun off to the shareholders of City Bankshares prior to the acquisition. BancFirst also entered into an agreement with the CEO of City Bankshares whereby BancFirst paid the CEO $1,250 in exchange for an agreement not to compete with BancFirst for a period of four years. The acquisition was accounted for as a purchase. Accordingly, the effect of the acquisition is included in the Company's consolidated financial statements from the date of the acquisition forward. A core deposit intangible of $830 and goodwill of $6,876 were recorded in the acquisition. Pro forma condensed results of operations, as though City Bankshares had been acquired January 1, 1995, are as follows: <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ <S> <C> <C> Net interest income $40,961 $49,226 Net income $11,130 $13,122 Net income per common share and common stock equivalent $ 1.73 $ 2.05 </TABLE> In March 1995, the Company acquired State National Bank of Marlow, Oklahoma, which had total assets of $101,976. The acquisition was for cash of $17,485, with an additional $500 placed in escrow pending the resolution of certain matters. State National Bank was immediately merged into BancFirst. The acquisition was accounted for as a purchase. Accordingly, the effect of the transaction is included in the Company's consolidated financial statements from the date of the acquisition 4
forward. A core deposit intangible of $406 and goodwill of $810 were recorded in the acquisition. Subsequent payments from the escrow, if any, to the former shareholders of State National Bank will increase the goodwill recorded. Pro forma condensed results of operations, as though State National Bank had been acquired January 1, 1994, are as follows: <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ <S> <C> <C> Net interest income $32,850 $42,160 Net income $ 9,593 $12,296 Net income per common share and common stock equivalent $ 1.50 $ 1.91 </TABLE> (2) SECURITIES The table below summarizes securities held for investment and securities available for sale. <TABLE> <CAPTION> SEPTEMBER 30, DECEMBER 31, ------------------- 1996 1995 1995 -------- -------- -------- <S> <C> <C> <C> Held for investment, at cost (market value: $26,154, $42,643 and $42,577, respectively) $ 25,937 $ 42,148 $ 42,005 Available for sale, at market value 256,034 213,201 221,108 -------- -------- -------- Total $281,971 $255,349 $263,113 ======== ======== ======== </TABLE> 5
BANCFIRST CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY The Company reported net income of $3.92 million for the quarter ended September 30, 1996, compared to net income of $3.64 million for the third quarter of 1995. The growth in earnings was the combined result of acquisitions in 1995 and 1996 and internal growth. Earnings per share was $0.61 for the third quarter of 1996, compared to $0.57 per share for the third quarter of 1995. Net income for the first nine months of 1996 was $11.2 million, compared to $9.41 million for the same period of 1995. Year-to-date earnings per share was $1.74, compared to $1.47 for the first nine months of 1995. Total assets increased $138 million from December 31, 1995 and $206 million from September 30, 1995 due to acquisitions having total assets aggregating approximately $140 million, and internal growth. Stockholders' equity rose to $106 million, an increase of $8.15 million compared to December 31, 1995 and $11.7 million compared to September 30, 1995. RESULTS OF OPERATIONS THIRD QUARTER Net interest income increased for the third quarter of 1996 by $2.67 million, or 23.6%, as compared to the same quarter of 1995, primarily as a result of earning asset growth. Net interest spread was 4.55% for the third quarter of 1996, compared to 4.36% for 1995, while average net earning assets increased $42.3 million. Net interest margin on a taxable equivalent basis was 5.41% for the third quarter, compared to 5.24% for the same quarter of 1995. The Company provided $432,000 for possible loan losses for the quarter, compared to $150,000 for the same quarter of 1995. Net loan charge-offs were $269,000 for the third quarter of 1996, compared to $134,000 for the third quarter of 1995. The net charge-offs in 1996 represent an annualized rate of only 0.15% of total loans. Noninterest income increased $586,000, or 18.4%, compared to the third quarter of 1995 due to income added by acquisitions and from increased mortgage loan activity. Noninterest expense increased $2.51 million, or 29.1%, due to added operating expenses of the banks acquired in 1995 and 1996, and the $542,000 refund of FDIC insurance premiums received in the third quarter of 1995. YEAR-TO-DATE For the first nine months of 1996, net interest income increased by $7.36 million, or 22.9%, as compared to the first nine months of 1995, primarily as a result of earning asset growth. Net interest spread was 4.51% for 1996, compared to 4.36% for 1995, while average net earning assets increased $33.8 million. Net interest margin on a taxable equivalent basis was 5.33% for the first nine months, compared to 5.22% for the same period of 1995. The Company provided $849,000 for possible loan losses for the year-to-date, compared to $408,000 in 1995. Net loan charge-offs were $336,000 for 1996, compared to $162,000 for 1995, representing annualized rates of only 0.06% and 0.04% of total loans, respectively. Noninterest income increased $1.97 million, or 21.5%, compared to the first nine months of 1995 due to income added by acquisitions and from increased mortgage loan activity. Noninterest expense increased $5.88 million, or 22.7%, due to added operating expenses of the banks acquired in 1995 and 1996. 6
FINANCIAL POSITION Total securities increased $18.9 million compared to December 31, 1995 and $26.6 million compared to September 30, 1995, as a net result of securities added by acquisitions and maturities of securities used to fund loan growth. The net unrealized loss on securities available for sale was $204,000 at the end of the third quarter of 1996, compared to a gain of $2.4 million at December 31 and a gain of $1.36 million at September 30, 1995. The average taxable equivalent yield on the securities portfolio for the third quarter increased to 6.35% from 6.07% for the same quarter of 1995. Total loans increased $112 million from December 31, 1995 and $133 million from September 30, 1995 due to both internal loan growth and acquisitions. The allowance for possible loan losses increased $1.36 million in the first nine months of 1996 due primarily to purchased reserves from acquisitions. The allowance as a percentage of total loans was 1.63%, 1.70% and 1.71% at September 30, 1996, December 31, 1995 and September 30, 1995, respectively. Nonperforming and restructured assets increased slightly in the first nine months of 1996 to $7.72 million from $5.77 million at year-end 1995 due to the nonperforming assets of the bank acquired in 1996. Although the ratio of nonperforming and restructured assets to total assets is only 0.65%, it is reasonable to expect that over the next several years nonperforming loans and loan losses will rise to historical norms as a result of economic and credit cycles. Total deposits increased $136 million as compared to December 31, 1995 and $193 million compared to September 30, 1995 due to acquisitions and internal growth. The Company's deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 10% of total deposits at September 30, 1996. Short-term borrowings decreased $8.04 million from December 31, 1995 as the net result of the maturity of $15 million in Federal Home Loan Bank borrowings and an increase in federal funds purchased. Stockholders' equity rose to $106 million, an increase of $8.15 million compared to year-end 1995 and $11.7 million compared to September 30, 1995. These increases were primarily the result of accumulated earnings. Average stockholders' equity to average assets dropped slightly to 8.84% from 9.43% at December 31, 1995 due to an acquisition in March 1996. The Company's regulatory capital ratios all remain well in excess of the minimum requirements. 7
BANCFIRST CORPORATION SELECTED FINANCIAL STATISTICS (Dollars in thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------- ------------------ 1996 1995 1996 1995 ------- ------- ------- ------- <S> <C> <C> <C> <C> PER COMMON SHARE DATA: Net income $ 0.61 $ 0.57 $ 1.74 $ 1.47 Cash dividends declared 0.08 0.07 0.24 0.21 Book value at period end 17.06 15.26 Tangible book value at period 14.71 13.94 end PERFORMANCE RATIOS: Return on average assets 1.32% 1.48% 1.32% 1.32% Return on average common equity 14.93 15.76 14.91 14.24 Increase/(decrease) in tangible 18.81 21.47 2.39 22.46 book value (annualized) Noninterest expense/(net 62.67 59.44 62.78 62.73 interest income + noninterest income) </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, DECEMBER 31, ----------------- 1996 1995 1995 ------- ------- ------- <S> <C> <C> <C> BALANCE SHEET RATIOS: Average loans to deposits (year to date) 68.45% 66.66% 67.02% Allowance for possible loan losses to total loans 1.63 1.71 1.70 Allowance for possible loan losses to nonperforming and 189.31 226.41 216.73 restructured loans Nonperforming and restructured assets to total assets 0.65 0.70 0.55 CAPITAL RATIOS: Average stockholders' equity to average assets (year to 8.84% 9.30% 9.43% date) Leverage ratio (regulatory minimum 3%) 7.85 8.84 8.55 Total risk-based capital ratio (regulatory minimum 8%) 14.23 16.14 16.02 </TABLE> <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- 1996 1995 ---------------------- -------------------- AVERAGE BALANCES AND NET AVERAGE AVERAGE INTEREST MARGIN ANALYSIS AVERAGE YIELD/ AVERAGE YIELD/ (TAXABLE EQUIVALENT BASIS): BALANCE RATE BALANCE RATE ------- ------- ------- ------- <S> <C> <C> <C> <C> Loans $ 737,002 9.76% $595,089 10.09% Investment securities 278,193 6.35 249,596 6.07 Federal funds sold 23,807 5.51 24,729 5.83 ---------- -------- Total earning assets 1,039,002 8.75 869,414 8.81 Nonearning assets 134,804 111,036 ---------- -------- Total assets $1,173,806 $980,450 ========== ======== Interest-bearing deposits $ 822,622 4.19% $696,845 4.44% Short-term borrowings 1,708 4.66 1,659 5.02 Long-term borrowings 1,486 6.46 -- -- ---------- -------- Total interest-bearing 825,816 4.20 698,504 4.45 liabilities Demand deposits 236,631 183,676 Other noninterest-bearing 7,301 5,908 liabilities Stockholders' equity 104,058 92,362 ---------- -------- Total liabilities and stockholders' equity $1,173,806 $980,450 ========== ======== Net interest spread 4.55% 4.36% ==== ==== Net interest margin 5.41% 5.24% ==== ==== </TABLE> 8
PART II. OTHER INFORMATION ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. -------------------------------- (a) Exhibits EXHIBIT NUMBER EXHIBIT - ------- -------------------------------------------------------------------- 2.1 Agreement and Plan of Reorganization dated October 28, 1994 among BancFirst, State National Bank, Marlow, and certain shareholders of State National Bank (filed as Exhibit 2.4 to the Company's Report on Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference). 2.2 Agreement and Plan of Reorganization dated September 16, 1995 between BancFirst and City Bankshares, Inc. (filed as Exhibit 2.2 to the Company's Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 2.3 Agreement dated September 16, 1995 between BancFirst and William O. Johnstone (filed as Exhibit 2.3 to the Company's Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 2.4* Agreement and Plan of Reorganization dated September 26, 1996 between BancFirst Corporation and Commerce Bancorporation, Inc. 3.0* Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BancFirst Corporation dated October 25, 1996. 27.1* Financial Data Schedule. - -------------------------------------------------------------------------------- *Filed herewith (b) The following reports on Form 8-K have been filed by the Company during the quarter ended September 30, 1996. DATE OF REPORT ITEMS REPORTED - ------------ ---------------------------------------------------------------- July 1, 1996 Change in Registrant's Certifying Accountant as a result of the sale of Price Waterhouse LLP's Oklahoma City practice to Coopers & Lybrand LLP. 10
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. November 14, 1996 BANCFIRST CORPORATION (Registrant) /s/ Randy Foraker ------------------------------------ Randy P. Foraker Sr. Vice President, Controller and Secretary/Treasurer (Principal Accounting Officer) 11