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, 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 October 31, 2000 there were 8,321,768 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) <TABLE> <CAPTION> SEPTEMBER 30, ---------------------------- DECEMBER 31, 2000 1999 1999 ---------- ---------- ---------- <S> <C> <C> <C> ASSETS Cash and due from banks $ 120,253 $ 105,006 $ 126,691 Interest-bearing deposits with banks 1,477 189 1,715 Federal funds sold 15,700 63,000 51,666 Securities (market value: $565,021, $564,712 and $595,509, respectively) 565,609 565,438 596,715 Loans: Total loans (net of unearned interest) 1,566,445 1,364,179 1,455,481 Allowance for loan losses (24,076) (20,173) (22,548) ---------- ---------- ---------- Loans, net 1,542,369 1,344,006 1,432,933 Premises and equipment, net 54,172 49,087 52,467 Other real estate owned 2,184 1,099 1,612 Intangible assets, net 21,748 22,243 24,087 Accrued interest receivable 21,795 20,662 20,771 Other assets 31,160 25,266 27,150 ---------- ---------- ---------- Total assets $2,376,467 $2,195,996 $2,335,807 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 491,207 $ 421,886 $ 460,131 Interest-bearing 1,598,665 1,524,623 1,622,565 ---------- ---------- ---------- Total deposits 2,089,872 1,946,509 2,082,696 Short-term borrowings 37,634 20,284 22,091 Long-term borrowings 27,714 23,566 26,392 9.65% Capital Securities 25,000 25,000 25,000 Accrued interest payable 8,525 8,104 8,421 Other liabilities 7,463 7,905 6,493 ---------- ---------- ---------- Total liabilities 2,196,208 2,031,368 2,171,093 ========== ========== ========== Commitments and contingent liabilities Stockholders' equity: Common stock, $1.00 par (shares issued: 8,073,730, 8,166,203 and 8,074 8,166 8,112 8,112,170, respectively) Capital surplus 47,281 46,520 46,766 Retained earnings 127,029 110,754 113,344 Accumulated other comprehensive income (2,125) (812 ) (3,508) ---------- ---------- ---------- Total stockholders' equity 180,259 164,628 164,714 ---------- ---------- ---------- Total liabilities and stockholders' equity $2,376,467 $2,195,996 $2,335,807 ========== ========== ========== See accompanying notes to consolidated financial statements. </TABLE> 2
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 2000 1999 2000 1999 --------- --------- --------- --------- <S> <C> <C> <C> <C> INTEREST INCOME Loans, including fees $ 37,377 $ 30,174 $ 106,266 $ 89,963 Securities: Taxable 8,123 7,696 24,931 22,834 Tax-exempt 525 625 1,605 1,872 Federal funds sold 48 1,163 1,101 4,327 Interest-bearing deposits with banks 20 7 48 28 --------- --------- --------- --------- Total interest income 46,093 39,665 133,951 119,024 --------- --------- --------- --------- INTEREST EXPENSE Deposits 18,497 15,205 53,561 45,346 Short-term borrowings 908 287 1,441 1,366 Long-term borrowings 446 339 1,290 855 9.65% Capital Securities 612 611 1,835 1,835 --------- --------- --------- --------- Total interest expense 20,463 16,442 58,127 49,402 --------- --------- --------- --------- Net interest income 25,630 23,223 75,824 69,622 Provision for loan losses 840 418 3,309 1,823 --------- --------- --------- --------- Net interest income after provision for loan losses 24,790 22,805 72,515 67,799 --------- --------- --------- --------- NONINTEREST INCOME Service charges on deposits 4,354 4,188 12,812 12,174 Securities transactions (1) 248 1 244 Other 3,350 2,825 9,361 9,301 --------- --------- --------- --------- Total noninterest income 7,703 7,261 22,174 21,719 --------- --------- --------- --------- NONINTEREST EXPENSE Salaries and employee benefits 12,156 11,542 36,233 34,360 Occupancy and fixed assets expense, net 1,476 1,371 4,151 3,645 Depreciation 1,273 1,195 3,825 3,599 Amortization 931 912 2,808 2,732 Data processing services 630 542 1,903 1,642 Net expense from other real estate owned 445 91 313 130 Other 5,110 4,817 15,078 14,626 --------- --------- --------- --------- Total noninterest expense 22,021 20,470 64,311 60,734 --------- --------- --------- --------- Income before taxes 10,472 9,596 30,378 28,784 Income tax expense (3,516) (3,566 ) (10,881) (10,664) --------- --------- --------- --------- Net income 6,956 6,030 19,497 18,120 Other comprehensive income, net of tax: Unrealized gains (losses) on securities 2,460 (1,018) 1,383 (6,243) --------- --------- --------- --------- Comprehensive income $ 9,416 $ 5,012 $ 20,880 $ 11,877 ========= ========= ========= ========= NET INCOME PER COMMON SHARE Basic $ 0.86 $0.74 $ 2.41 $ 2.06 ========= ========= ========= ========= Diluted $ 0.85 $0.73 $ 2.39 $ 2.03 ========= ========= ========= ========= See accompanying notes to consolidated financial statements. </TABLE> 3
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES $ 23,614 $ 22,871 -------------- --------------- <S> <C> <C> INVESTING ACTIVITIES Net cash and due from banks used for acquisitions and divestitures -- (12,251) Purchases of securities: Held for investment (14,745) (33,370) Available for sale (22,667) (92,136) Maturities of securities: Held for investment 17,895 50,576 Available for sale 51,563 81,724 Proceeds from sales of held for investment: 1,300 693 Net decrease in federal funds sold 35,966 124,369 Purchases of loans (2,354) (11,251) Proceeds from sales of loans 101,623 120,830 Net other increase in loans (212,720) (139,851) Purchases of premises and equipment (8,303) (7,504) Proceeds from the sale of other real estate owned and repossessed 948 2,210 assets Other, net 2,498 1,860 -------------- --------------- Net cash provided (used) by investing activities (48,996) (85,899) -------------- --------------- FINANCING ACTIVITIES Net increase (decrease) in demand, transaction and savings 23,916 (52,563) deposits Net decrease in certificates of deposits (16,740) (10,184) Net increase (decrease) in short-term borrowings 15,543 (34,557) Net increase in long-term borrowings 1,322 10,600 Issuance of common stock 548 1,453 Acquisition of common stock (2,000) (47,027) Cash dividends paid (3,883) (3,593) -------------- --------------- Net cash used by financing activities 18,706 (135,871) -------------- --------------- Net decrease in cash and due from banks (6,676) (27,101) 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 $ 121,730 $ 105,195 ============== =============== SUPPLEMENTAL DISCLOSURE Cash paid during the period for interest $ 58,023 $ 65,821 ============== =============== Cash paid during the period for income taxes $ 12,157 $ 9,426 ============== =============== See accompanying notes to consolidated financial statements. </TABLE> 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, 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. 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 Company does not expect the adoption of this standard will have a material effect 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 October 2000, BancFirst Corporation completed the acquisition of First Southwest Corporation of Frederick, 5
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 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> SEPTEMBER 30, ------------------------- DECEMBER 31, 2000 1999 1999 -------- -------- -------- <S> <C> <C> <C> Held for investment at cost (market value; $90,453, $ 91,041 $103,788 $129,481 $103,062, and $128,275, respectively) Available for sale, at market value 474,568 461,650 467,234 -------- -------- -------- Total $565,609 $565,438 $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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2000 1999 2000 1999 -------- -------- -------- -------- <S> <C> <C> <C> <C> Unrealized gain (loss) during the period: Before-tax amount $ 3,795 $ 133 $ 2,344 $ (9,543) Tax (expense) benefit (1,335) (1,151) (961) 3,300 -------- -------- -------- -------- Net-of-tax amount $ 2,460 $ (1,018) $ 1,383 $ (6,243) -------- -------- -------- -------- </TABLE> The amount of unrealized gain or loss included in accumulated other comprehensive income is summarized below. <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2000 1999 2000 1999 -------- -------- -------- -------- <S> <C> <C> <C> <C> Unrealized gain (loss) on securities: Beginning balance $ (4,585) $ 206 $ (3,508) $ 5,431 Current period change 2,460 (1,018) 1,383 (6,243) -------- -------- -------- -------- Ending balance $ (2,125) $ (812) $ (2,125) $ (812) ======== ======== ======== ======== </TABLE> 6
(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 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 =========== ============= ========= THREE MONTHS ENDED SEPTEMBER 30, 1999 ------------------------------------- BASIC Income available to common stockholders $ 6,030 8,167,951 $ 0.74 ========= Effect of stock options -- 101,306 ----------- ------------- DILUTED Income available to common stockholders plus assumed exercises of stock options $ 6,030 8,269,257 $ 0.73 =========== ============= ========= NINE MONTHS ENDED SEPTEMBER 30, 2000 ------------------------------------- BASIC Income available to common stockholders $ 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 =========== ============= ========= NINE MONTHS ENDED SEPTEMBER 30, 1999 ------------------------------------ BASIC Income available to common stockholders $ 18,120 8,808,075 $ 2.06 ========= Effect of stock options -- 113,174 ----------- ------------- DILUTED Income available to common stockholders plus assumed exercises of stock options $ 18,120 8,921,249 $ 2.03 =========== ============= ========= </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. AVERAGE EXERCISE SHARES PRICE ------- ---------- Three Months Ended September 30, 2000 234,500 $33.92 Three Months Ended September 30, 1999 125,815 $36.54 Nine Months Ended September 30, 2000 269,555 $33.58 Nine Months Ended September 30, 1999 109,214 $36.80 7
(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: SEPTEMBER 30, 2000 Net interest income (expense) $ 8,337 $ 17,017 $ 475 $ (199) $ -- $ 25,630 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 SEPTEMBER 30, 1999 Net interest income (expense) $ 6,007 $ 17,111 $ 1,037 $ (931) $ (1) $ 23,223 Noninterest income 1,175 3,789 1,569 7,524 (6,796) 7,261 Income before taxes 2,727 9,370 777 3,518 (6,796) 9,596 NINE MONTHS ENDED: SEPTEMBER 30, 2000 Net interest income (expense) $ 24,254 $ 51,184 $ 2,351 $ (1,965) $ -- $ 75,824 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 SEPTEMBER 30, 1999 Net interest income (expense) $ 17,184 $ 50,944 $ 3,524 $ (2,021) $ (9) $ 69,622 Noninterest income 3,394 12,196 4,218 21,340 (19,429) 21,719 Income before taxes 7,571 27,878 2,136 10,495 (19,296) 28,784 TOTAL ASSETS: September 30, 2000 $819,565 $1,598,388 $106,544 $ 371,360 $ (519,390) $2,376,467 September 30, 1999 $566,190 $1,610,299 $ 98,245 $ 111,188 $ (189,926) $2,159,107 </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
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, 2000 was $6.96 million, up from $6.03 million for the third quarter of 1999. Diluted net income per share was $0.85, up from $0.73 for the third 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 nine months of 2000 was $19.5 million, up from $18.1 million for the first nine months of 1999. Diluted net income per share for the nine months was $2.39 and $2.03 for 2000 and 1999, respectively. Total assets at September 30, 2000 were $2.38 billion, up $40 million from December 31, 1999 and $180 million from September 30, 1999. The asset growth compared to the third quarter of 1999 was due in part to the acquisition of First State Bank of Oklahoma City, Oklahoma in December 1999, which added approximately $109 million of assets. Stockholders' equity was $180 million at September 30, 2000, an increase of $15.5 million compared to December 31, 1999, and $15.6 million compared to September 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 October 2000, BancFirst Corporation completed the acquisition of First Southwest Corporation of Frederick, Oklahoma ("First Southwest") which had total assets of approximately $118 million. All of the outstanding shares of First Southwest common stock were exchanged for 266,681 shares of BancFirst Corporation common stock and approximately $4.34 million in 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 $4.28 million were recorded for the purchase. The acquisition is not expected to have a material effect on the results of operations of the Company for 2000. RESULTS OF OPERATIONS THIRD QUARTER Net interest income increased $2.41 million compared to the third quarter of 1999, primarily as a result of an increase in the net interest margin from 4.66% to 4.85%. Average net earning assets increased $31.6 million compared to the third quarter of 1999, while net interest spread increased to 3.91% from 3.88% for the third 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 $840,000 for loan losses in the third quarter, compared to $418,000 for the third quarter of 1999. The higher provisions in 2000 were due to loan growth and higher classified and nonperforming loans. Net loan charge-offs were $1.07 million for the third quarter of 2000, compared to $509,000 for the second quarter of 1999. The net charge-offs represent annualized rates of only 0.27% and 0.15% of total loans for the third quarter of 2000 and 1999, respectively. Noninterest income increased $442,000, or 6.08%, compared to the third quarter of 1999. Noninterest expense increased $1.55 million, or 7.58%, compared to the third quarter of 1999, which includes a $400,000 write down on a building held for sale in the third quarter of 2000. These increases were also due in part to the acquisition of First State 9
Bank. Income tax expense decreased $50,000 compared to the third quarter of 1999 due to $290,000 of tax benefits recorded in the third quarter of 2000 in connection with the finalization of the Company's 1999 tax returns. The effective tax rate on income before taxes was 33.57%, down from 37.16% in the third quarter of 1999. YEAR-TO-DATE Net interest income increased $6.20 million compared to the first nine months of 1999, primarily as a result of an increase in the net interest margin to 4.84% from 4.66%. Average net earning assets increased $2.73 million, while net interest spread increased to 3.91% from 3.86%. 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 $3.31 million for loan losses in the first nine months, compared to $1.82 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 $1.78 million for the first nine months of 2000, compared to $1.31 for the first nine months of 1999. The net charge-offs represent annualized rates of only 0.15% and 0.13% of total loans for the first nine months of 2000 and 1999, respectively. Noninterest income increased only $455,000 compared to the first nine 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 $1.36 million, or 6.51%. Noninterest expense increased $3.58 million, or 5.89%, compared to the first nine months of 1999. These increases were due in part to the acquisition of First State Bank. Income tax expense increased $217,000 compared to the first nine months of 1999. The effective tax rate on income before taxes was 35.82%, compared to 37.05% for the same period of 1999. FINANCIAL POSITION Federal funds sold decreased $36 million from December 31, 1999 and $47.3 million from September 30, 1999. Due to loan growth exceeding deposit growth, the Company has become a net borrower of federal funds. Total securities decreased $31.1 million compared to December 31, 1999 and increased $171,000 compared to September 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 $2.80 million at the end of the third quarter of 2000, compared to a loss of $5.14 million at December 31, 1999 and a loss of $1.29 million at September 30, 1999. The average taxable equivalent yield on the securities portfolio for the third quarter increased to 6.21% from 6.02% for the same quarter of 1999. Total loans increased $111 million from December 31, 1999 and $202 million from September 30, 1999, due to internal growth and approximately $60 million of loans acquired from First State Bank. The allowance for loan losses increased $1.53 million from year-end 1999 and $3.90 million from the third quarter of 1999. The allowance as a percentage of total loans was 1.54%, 1.55% and 1.48% at September 30, 2000, December 31, 1999 and September 30, 1999, respectively. The allowance to nonperforming and restructured loans at the same dates was 228.71%, 183.47% and 169.42%, respectively. Nonperforming and restructured assets totaled $13.3 million at September 30, 2000, compared to $14.2 million at December 31, 1999 and $13.2 million at September 30, 1999. Although the ratio of nonperforming and restructured assets to total assets is only 0.56%, 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. 10
Total deposits increased $7.18 million compared to December 31, 1999, although average deposits for the quarter were $92.9 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 September 30, 1999, total deposits increased $143 million. The Company's deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 12% of total deposits at September 30, 2000. Short-term borrowings increased $15.5 million from December 31, 1999 and $17.4 million from September 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 $1.32 million from year-end 1999 and $4.15 million from the third 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 $180 million from $165 million at both year-end 1999 and September 30, 1999, primarily as a result of accumulated earnings. Average stockholders' equity to average assets for the quarter was 7.45%, compared to 7.31% for the third 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 7.88% and 12.71%, respectively, at September 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
BANCFIRST CORPORATION SELECTED CONSOLIDATED FINANCIAL STATISTICS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------- PERFORMANCE STATISTICS 2000 1999 2000 1999 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net income per share - basic $ 0.86 $ 0.74 $ 2.41 $ 2.06 Net income per share - diluted 0.85 0.73 2.39 2.03 Cash dividends per share 0.16 0.14 0.48 0.42 Return on average assets 1.16% 1.07% 1.11% 1.07% Return on average stockholders' equity 15.61 14.68 15.22 12.50 Efficiency ratio 66.06 67.15 65.62 66.49 SEPTEMBER 30, ---------------------------- DECEMBER 31, BALANCE SHEET AND ASSET QUALITY 2000 1999 1999 STATISTICS ---------- ---------- ---------- Book value per share $ 22.33 $ 20.16 $ 20.30 Tangible book value per share 19.63 17.44 17.34 Average loans to deposits (year-to-date) 72.42% 68.34% 68.61% Nonperforming and restructured assets to total assets 0.56 0.60 0.61 Allowance for loan losses to total loans 1.54 1.48 1.55 Allowance for loan losses to nonperforming and restructured loans 228.71 169.42 183.47 THREE MONTHS ENDED SEPTEMBER 30, CONSOLIDATED AVERAGE BALANCE SHEETS ------------------------------------------------------------------------ AND INTEREST MARGIN ANALYSIS 2000 1999 ------------------------------- ------------------------------ TAXABLE EQUIVALENT BASIS AVERAGE AVERAGE AVERAGE AVERAGE Earning assets: BALANCE YIELD/RATE BALANCE YIELD/RATE ------------ ---------- ----------- ---------- Loans $ 1,558,326 9.55% $ 1,350,909 8.90% Securities 570,240 6.21 571,005 6.02 Federal funds sold 4,301 6.27 94,638 4.90 ------------ ----------- Total earning assets 2,132,867 8.65 2,016,552 7.89 ------------ ----------- Nonearning assets: Cash and due from banks 135,892 117,265 Interest receivable and other assets 129,133 115,698 Allowance for possible loan losses (24,294) (20,230) ------------ ----------- Total nonearning assets 240,732 212,733 ------------ ----------- Total assets $ 2,373,598 $ 2,229,285 ============ =========== Interest-bearing liabilities: Interest-bearing deposits $ 1,605,559 4.57% $ 1,554,627 3.88% Short-term borrowings 55,021 6.55 24,869 4.58 Long-term borrowings 25,963 6.82 22,300 6.03 9.65% Capital Securities 25,000 9.71 25,000 9.70 ------------ ----------- Total interest-bearing liabilities 1,711,543 4.74 1,626,796 4.01 ------------ ----------- Interest-free funds: Noninterest-bearing deposits 469,046 425,842 Interest payable and other liabilities 16,274 13,636 Stockholders' equity 176,736 163,011 ------------ ----------- Total interest-free funds 662,055 602,489 ------------ ----------- Total liabilities and stockholders' equity $ 2,373,598 $ 2,229,285 ============ =========== Net interest spread 3.91% 3.88% ========== ========== Net interest margin 4.85% 4.66% ========== ========== </TABLE> 12
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 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits <TABLE> <CAPTION> EXHIBIT NUMBER EXHIBIT - -------- ---------------------------------------------------------------------------------------- <S> <C> 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). 27.1* Financial Data Schedule for the nine months ended September 30, 2000. - ---------------------------------------------------------------------------------------------------- *Filed herewith - ------------------------------------------------------------------------------------------ </TABLE> (b) No reports on Form 8-K were filed by the Company during the quarter ended September 30, 2000. 13
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, 2000 /s/ Randy P. Foraker ----------------- --------------------------------------- (Signature) Randy P. Foraker Senior Vice President and Controller; Assistant Secretary/Treasurer (Principal Accounting Officer) 14