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 March 31, 2002 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 April 30, 2002 there were 8,121,041 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> March 31, ----------------------------------- December 31, 2002 2001 2001 ----------------- ----------------- ----------------- <S> <C> <C> <C> ASSETS Cash and due from banks $ 122,493 $ 132,551 $ 152,577 Interest-bearing deposits with banks 12,692 3,336 12,528 Federal funds sold 182,000 195,000 208,000 Securities (market value: $561,138, and $551,066, and $545,950, respectively) 559,513 548,741 544,291 Loans: Total loans (net of unearned interest) 1,745,173 1,677,812 1,717,433 Allowance for loan losses (24,058) (25,321) (24,531) ----------------- ----------------- ----------------- Loans, net 1,721,115 1,652,491 1,692,902 Premises and equipment, net 62,395 57,981 61,642 Other real estate owned 3,198 1,481 2,132 Intangible assets, net 1,781 2,314 1,914 Goodwill 20,235 21,953 20,235 Accrued interest receivable 22,778 26,158 22,012 Other assets 40,682 34,348 38,812 ----------------- ----------------- ----------------- Total assets $ 2,748,882 $ 2,676,354 $ 2,757,045 ================= ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 570,369 $ 521,296 $ 599,108 Interest-bearing 1,807,732 1,826,183 1,802,220 ----------------- ----------------- ----------------- Total deposits 2,378,101 2,347,479 2,401,328 Short-term borrowings 57,541 34,893 52,091 Long-term borrowings 33,967 25,939 24,090 9.65% Capital Securities 25,000 25,000 25,000 Accrued interest payable 6,398 9,771 9,391 Other liabilities 23,364 25,015 19,837 Minority interest 2,140 1,895 2,140 ----------------- ----------------- ----------------- Total liabilities 2,526,511 2,469,992 2,533,877 ----------------- ----------------- ----------------- Commitments and contingent liabilities Stockholders' equity: Common stock, $1.00 par (shares issued: 8,157,741, 8,322,169 and 8,260,099, respectively) 8,158 8,322 8,260 Capital surplus 57,461 56,619 57,412 Retained earnings 151,086 135,341 148,306 Accumulated other comprehensive income 5,666 6,080 9,190 ----------------- ----------------- ----------------- Total stockholders' equity 222,371 206,362 223,168 ----------------- ----------------- ----------------- Total liabilities and stockholders' equity $ 2,748,882 $ 2,676,354 $ 2,757,045 ================= ================= ================= </TABLE> See accompanying notes to consolidated financial statements. 2
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited) (Dollars in thousands, except per share data) <TABLE> <CAPTION> Three Months Ended March 31, --------------------------- 2002 2001 ------------ ------------ <S> <C> <C> INTEREST INCOME Loans, including fees $ 31,906 $ 38,201 Securities: Taxable 7,059 7,692 Tax-exempt 505 606 Federal funds sold 607 1,639 Interest-bearing deposits with banks 63 42 ------------ ------------- Total interest income 40,140 48,180 ------------ ------------- INTEREST EXPENSE Deposits 12,174 20,558 Short-term borrowings 161 462 Long-term borrowings 434 408 9.65% Capital Securities 612 612 ------------ ------------- Total interest expense 13,381 22,040 ------------ ------------- Net interest income 26,759 26,140 Provision for loan losses 964 332 ------------ ------------- Net interest income after provision for loan losses 25,795 25,808 ------------ ------------- NONINTEREST INCOME Trust revenue 1,059 958 Service charges on deposits 5,345 4,424 Securities transactions -- -- Income from sales of loans 221 189 Other 3,404 2,835 ------------ ------------- Total noninterest income 10,029 8,406 ------------ ------------- NONINTEREST EXPENSE Salaries and employee benefits 13,905 13,064 Occupancy and fixed assets expense, net 1,350 1,560 Depreciation 1,254 1,265 Amortization of intangible assets 161 133 Amortization of goodwill -- 669 Data processing services 514 528 Net expense from other real estate owned 64 (22) Other 6,381 5,964 ------------ ------------- Total noninterest expense 23,629 23,161 ------------ ------------- Income before taxes 12,195 11,053 Income tax expense (4,273) (3,902) ------------ ------------- Net income 7,922 7,151 Other comprehensive income, net of tax: Unrealized gains (losses) on securities (3,524) 4,550 ------------ ------------- Comprehensive income $ 4,398 $ 11,701 ============ ============= NET INCOME PER COMMON SHARE Basic $ 0.97 $ 0.86 ============ ============= Diluted $ 0.96 $ 0.85 ============ ============= </TABLE> See accompanying notes to consolidated financial statements. 3
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in thousands) <TABLE> <CAPTION> Three Months Ended March 31, ----------------------- 2002 2001 ----------- ----------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES $ 9,661 $ 14,306 ----------- ----------- INVESTING ACTIVITIES Net cash and due from banks used for acquisitions and divestitures -- (4,856) Purchases of securities: Held for investment (1,353) (2,113) Available for sale (41,528) (20,930) Maturities of securities: Held for investment 8,766 6,621 Available for sale 13,600 43,007 Proceeds from sales and calls of securities: Held for investment 10 3,331 Available for sale -- -- Net (increase) decrease in federal funds sold 26,000 (129,100) Purchases of loans (5,578) (648) Proceeds from sales of loans 25,977 29,098 Net other increase in loans (51,941) (40,455) Purchases of premises and equipment (4,610) (1,340) Proceeds from the sale of other real estate owned and repossessed assets 1,528 1,061 Other, net 2,644 47 ----------- ----------- Net cash used by investing activities (26,485) (116,277) ----------- ----------- FINANCING ACTIVITIES Net increase in demand, transaction and savings deposits 17,240 8,802 Net increase (decrease) in certificates of deposits (40,467) 71,280 Net increase (decrease) in short-term borrowings 5,450 (2,399) Net increase (decrease) in long-term borrowings 9,877 (674) Issuance of common stock 51 418 Acquisition of common stock (3,773) (1,188) Cash dividends paid (1,474) (1,499) ----------- ----------- Net cash provided by financing activities (13,096) 74,740 ----------- ----------- Net decrease in cash and due from banks (29,920) (27,231) Cash and due from banks at the beginning of the period 165,105 163,118 ----------- ----------- Cash and due from banks at the end of the period $ 135,185 $ 135,887 =========== =========== SUPPLEMENTAL DISCLOSURE Cash paid during the period for interest $ 16,374 $ 22,571 =========== =========== Cash paid during the period for income taxes $ -- $ -- =========== =========== </TABLE> 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, and BancFirst and its subsidiaries. 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, 2001, the date of the most recent annual report. Certain amounts in the 2001 financial statements have been reclassified to conform to the 2002 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 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 had 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. The Company did not recognize any impairment charges from the adoption of Statement 142. See note (7) for more information regarding intangible assets and goodwill. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations". This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. Statement 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company does not expect the adoption of this standard to have a material effect on the Company's consolidated financial statements. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This Statement is effective for fiscal years beginning after December 15, 2001, and replaces Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and also replaces the provisions of Accounting Principles Board Opinion No. 30, "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business", for disposals of segments of a business. Statement 144 requires that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Statement 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the ongoing operations of the entity. Since the provisions of this Statement are to be applied prospectively, the adoption of this new standard did not have a material effect on the Company's consolidated financial statements. 5
(3) RECENT DEVELOPMENTS; MERGERS, ACQUISITIONS AND DISPOSALS 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. <TABLE> <CAPTION> March 31, -------------------- December 31, 2002 2001 2001 -------- -------- ----------- <S> <C> <C> <C> Held for investment at cost (market value; $66,067, $102,827 and $73,535, respectively) $ 64,442 $100,502 $ 71,876 Available for sale, at market value 495,071 448,239 472,415 -------- -------- ----------- Total $559,513 $548,741 $ 544,291 ======== ======== =========== </TABLE> (5) LOANS AND ALLOWANCE FOR LOAN LOSSES The following is a schedule of loans outstanding by category: <TABLE> <CAPTION> March 31, December 31 ------------------------------------------------- --------------------- 2002 2001 2001 ----------------------- --------------------- --------------------- Amount Percent Amount Percent Amount Percent ---------- ------- ---------- ------- ---------- ------- <S> <C> <C> <C> <C> <C> <C> Commercial and industrial $ 368,850 21.14% $ 396,525 23.63% $ 396,409 23.08% Agriculture 95,519 5.47 98,627 5.88 96,016 5.59 State and political subdivisions: Taxable 150 0.01 41 0.01 152 0.01 Tax-exempt 18,295 1.05 14,716 0.87 17,602 1.02 Real Estate: Construction 96,931 5.55 80,683 4.81 84,445 4.92 Farmland 62,059 3.56 58,887 3.51 58,080 3.38 One to four family residences 387,018 22.17 374,551 22.32 383,793 22.34 Multifamily residential properties 16,231 0.93 16,284 0.97 15,906 0.93 Commercial 381,872 21.88 330,709 19.71 358,363 20.87 Consumer 272,905 15.64 274,775 16.38 271,475 15.81 Other 45,343 2.60 32,014 1.91 35,192 2.05 ---------- ------- ---------- ------- ---------- ------- Total loans $1,745,173 100.00% $1,677,812 100.00% $1,717,433 100.00% ========== ======= ========== ======= ========== ======= Loans held for sale (included above) $ 7,462 $ 7,472 $ 10,955 ========== ========== ========== </TABLE> 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 6
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: <TABLE> <CAPTION> Three Months Ended March 31, -------------------- 2002 2001 -------- -------- <S> <C> <C> Balance at beginning of period $ 24,531 $ 25,380 -------- -------- Charge-offs (1,711) (643) Recoveries 274 252 -------- -------- Net charge-offs (1,437) (391) -------- -------- Provisions charged to operations 964 332 -------- -------- Balance at end of period $ 24,058 $ 25,321 ======== ======== </TABLE> The net charge-offs by category are summarized as follows: <TABLE> <CAPTION> Three Months Ended March 31, -------------------- 2002 2001 -------- -------- <S> <C> <C> Commercial, financial and other $ 667 $ 137 Real estate - construction 15 -- Real estate - mortgage 263 (33) Consumer 492 287 -------- -------- Total $ 1,437 $ 391 ======== ======== </TABLE> (6) NONPERFORMING AND RESTRUCTURED ASSETS Below is a summary of nonperforming and restructured assets: <TABLE> <CAPTION> March 31, ----------------------------- December 31, 2002 2001 2001 ---------- ---------- ------------ <S> <C> <C> <C> Past due over 90 days and still accruing $ 1,495 $ 6,890 $ 1,742 Nonaccrual 13,193 9,515 10,225 Restructured 694 591 1,348 ---------- ---------- ------------ Total nonperforming and restructured loans 15,382 16,996 13,315 Other real estate owned and repossessed assets 3,690 2,011 2,699 ---------- ---------- ------------ Total nonperforming and restructured assets $ 19,072 $ 19,007 $ 16,014 ========== ========== ============ Nonperforming and restructured loans to total loans 0.88% 1.01% 0.78% ========== ========== ============ Nonperforming and restructured assets to total assets 0.69% 0.71% 0.58% ========== ========== ============ </TABLE> 7
(7) INTANGIBLE ASSETS AND GOODWILL The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002. All intangible assets and goodwill were reassessed and reviewed for impairment as of that date. No changes were made to the estimated useful lives of intangible assets and no impairment charges were recognized from the adoption of this statement. The following is a summary of intangible assets: <TABLE> <CAPTION> March 31, ---------------------------------------------- December 31, 2002 2001 2001 ---------------------- ---------------------- ---------------------- Gross Gross Gross Carrying Accumulated Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Amount Amortization -------- ------------ -------- ------------ -------- ------------ <S> <C> <C> <C> <C> <C> <C> Core deposit intangibles $ 4,552 $ 2,773 $ 4,552 $ 2,242 $ 4,552 $ 2,641 Trademarks 20 18 20 16 20 17 -------- ------- ------- ------- ------- ------- Total $ 4,572 $ 2,791 $ 4,572 $ 2,258 $ 4,572 $ 2,658 ======== ======= ======= ======= ======= ======= </TABLE> Amortization of intangible assets and estimated amortization of intangible assets are as follows: Amortization: Three months ended March 31, 2002 $ 161 Three months ended March 31, 2001 133 Year ended December 31, 2001 649 Estimated Amortization: Year ended December 31, 2002 $ 600 2003 511 2004 310 2005 292 2006 255 The following is a summary of goodwill: <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: March 31, 2002 Balance at beginning and end of period $ 7,144 $ 12,561 $ -- $ 1,713 $ (1,183) $ 20,235 ========= ========== ========= ========= ======== ======== March 31, 2001 Balance at beginning of period $ 7,871 $ 13,782 $ -- $ 2,213 $ (1,170) $ 22,696 Amortization (187) (288) -- (207) 13 (669) Branch closing -- (74) -- -- -- (74) --------- ---------- --------- --------- -------- Balance at end of period $ 7,684 $ 13,420 $ -- $ 2,006 (1,157) $ 21,953 ========= ========== ========= ========= ======== </TABLE> 8
A reconciliation of reported net income to adjusted net income, and the related per share amounts, is as follows: Three Months Ended March 31, -------------------- 2002 2001 ---------- --------- Net Income: Reported net income $ 7,922 $ 7,151 Goodwill amortization -- 606 Equity method goodwill amortization -- 7 ---------- --------- Adjusted net income $ 7,992 $ 7,764 ========== ========= Net Income Per Common Share: Basic Reported net income $ 0.97 $ 0.86 Goodwill amortization -- 0.07 Equity method goodwill amortization -- -- ---------- --------- Adjusted net income $ 0.97 $ 0.93 ========== ========= Diluted Reported net income $ 0.96 $ 0.85 Goodwill amortization -- 0.07 Equity method goodwill amortization -- -- ---------- --------- Adjusted net income $ 0.96 $ 0.92 ========== ========= (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. March 31, Minimum ---------------------------- December 31, Required 2002 2001 2001 -------- ------------ ------------ ------------ Tier 1 capital $ 219,678 $ 201,014 $ 216,832 Total capital $ 244,318 $ 224,194 $ 241,862 Risk-adjusted assets $ 1,994,323 $ 1,805,165 $ 1,955,789 Leverage ratio 3.00% 8.06% 7.58% 7.93% Tier 1 capital ratio 4.00% 11.02% 11.14% 11.09% Total capital ratio 8.00% 12.25% 12.42% 12.37% 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 March 31, 2002 and 2001, and December 31, 2001, 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 9
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 March 31, 2002 there were 189,335 shares remaining that could be repurchased under the SRP. Below is a summary of the shares repurchased under the program. Three Months Ended March 31, ------------------------ 2002 2001 ---------- ---------- Number of shares repurchased 104,900 29,733 Average price of shares repurchased $ 35.97 $ 39.97 (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 March 31, ------------------------ 2002 2001 ---------- ----------- Unrealized gain (loss) during the period: Before-tax amount $ (5,203) $ 6,451 Tax (expense) benefit 1,679 (1,901) ---------- ----------- Net-of-tax amount $ (3,524) $ 4,550 ========== =========== The amount of unrealized gain or loss included in accumulated other comprehensive income is summarized below. Three Months Ended March 31, ------------------------ 2002 2001 ---------- ----------- Unrealized gain (loss) on securities: Beginning balance $ 9,190 $ 1,530 Current period change (3,524) 4,550 ---------- ----------- Ending balance $ 5,666 $ 6,080 ========== =========== 10
(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 March 31, 2002 - --------------------------------- Basic Income available to common stockholders $ 7,922 8,202,021 $ 0.97 Effect of stock options -- 83,329 ========= ---------- ------------ Diluted Income available to common stockholders plus assumed exercises of stock options $ 7,922 8,285,350 $ 0.96 =========== ============= ========= Three Months Ended March 31, 2001 - --------------------------------- Basic Income available to common stockholders $ 7,151 8,322,035 $ 0.86 Effect of stock options -- 108,206 ========= ---------- ------------ Diluted Income available to common stockholders plus assumed exercises of stock options $ 7,151 8,430,241 $ 0.85 =========== ============= ========= 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 March 31, 2002 54,779 $ 38.35 Three Months Ended March 31, 2001 10,000 $ 40.00 11
(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: <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: March 31, 2002 Net interest income (expense) $ 7,343 $ 18,331 $ 1,810 $ (725) $ -- $ 26,759 Noninterest income 1,789 4,991 2,900 14,944 (14,595) 10,029 Income before taxes 3,271 10,608 1,371 11,597 (14,652) 12,195 March 31, 2001 Net interest income (expense) $ 7,932 $ 17,754 $ 1,262 $ (808) $ -- $ 26,140 Noninterest income 1,375 4,356 2,234 15,105 (14,664) 8,406 Income before taxes 3,777 9,666 1,089 11,237 (14,716) 11,053 Total Assets: March 31, 2002 $851,971 $1,796,606 $ 154,277 $546,861 $(600,833) $2,748,882 March 31, 2001 $796,349 $1,819,891 $ 143,141 $473,061 $(556,088) $2,676,354 </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. 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 first quarter ended March 31, 2002 was $7.92 million, compared to $7.15 million for the first quarter of 2001. Diluted net income per share was $0.96, compared to $0.85 for the first quarter of 2001. The 2002 net income reflects the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which eliminated the amortization of goodwill. Comparable net income for the first quarter of 2001, excluding the amortization of goodwill, was $7.76 million, or $0.92 per diluted share. Total assets at March 31, 2002 was $2.75 billion, down $8.16 million from December 31, 2001 and up $72.5 million from March 31, 2001. Stockholders' equity was $222 million at March 31, 2002, down $797,000 from December 31, 2001, and up $16 million compared to March 31, 2001. RESULTS OF OPERATIONS Net interest income increased $619,000 compared to the first quarter of 2001 due to growth in net earning assets. Average net earning assets increased $89.2 million from the first quarter of 2001. Net interest margin for the first quarter of 2002 decreased to 4.43% from 4.59% for the first quarter of 2001. The lower net interest margin in 2002 is the product of falling interest rates throughout 2001, and a relatively flat yield curve. The Company provided $964,000 for loan losses in the first quarter of 2002, compared to $332,000 for the same period of 2001. The higher provisions in 2002 were due to loan growth, increases in classified and nonperforming loans, and higher net charge-offs. Net loan charge-offs were $1.44 million for the first quarter of 2002, compared to $391,000 million for the first quarter of 2001. The net charge-offs represent annualized rates of only 0.33% and 0.10% of average total loans for the first quarter of 2002 and 2001, respectively. Noninterest income increased $1.62 million, or 19.3%, compared to the first quarter of 2001. This increase was the result of growth in deposits and service charges, and growth in revenues from trust, cash management, and other services. Noninterest expense increased $468,000, or 2.02%, compared to the first quarter of 2001. Increases in salaries and employee benefits and other operating expenses were partially offset by a decrease in occupancy expenses and the elimination of goodwill amortization. Income tax expense increased $371,000 compared to the first quarter of 2001 due to higher income in 2002. The effective tax rate on income before taxes was 35.03%, down from 35.30% in the first quarter of 2001. FINANCIAL POSITION Cash and due from banks, interest-bearing deposits with banks, and federal funds sold decreased a combined total of $55.9 million from December 31, 2001 and $13.7 million from March 31, 2001. These decreases were mainly due to growth in securities and loans. Total securities increased $15.2 million compared to December 31, 2001 and $10.8 million compared to March 31, 2001. 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 $5.67 million at the end of the first quarter of 2002, compared to a gain of $9.19 million at December 31, 2001 and a gain of $6.08 million at March 31, 2001. The average taxable equivalent yield on the securities portfolio for the first quarter decreased to 5.69% from 6.33% for the same quarter of 2001. Total loans increased $27.7 million from December 31, 2001 and $67.4 million from March 31, 2001, due to internal growth. The allowance for loan losses decreased $473,000 from year-end 2001 and $1.26 million from the first quarter of 2001. The allowance as a percentage of total loans was 1.38%, 1.43% and 1.51% at March 31, 2002, December 31, 2001 and March 31, 2001, respectively. The allowance to nonperforming and restructured loans at the same dates was 156.40%, 184.24% and 148.98%, respectively. Nonperforming and restructured loans totaled $15.4 million at March 31, 2002, compared to $13.3 million at December 31, 13
2001 and $17 million at March 31, 2001. The ratio of nonperforming and restructured loans to total loans for the same periods was 0.88%, 0.78% and 1.01%, respectively. 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 decreased $23.2 million compared to December 31, 2001, and increased $30.6 million compared to March 31, 2001. The Company's deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 12.28% of total deposits at March 31, 2002. Short-term borrowings increased $5.45 million from December 31, 2001, and $22.6 million from March 31, 2001. 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 $9.88 million from year-end 2001 and $8.03 million from the first quarter of 2001. The Company uses these borrowings from the Federal Home Loan Bank primarily to match-fund long-term fixed-rate loans. Stockholders' equity decreased to $222 million from $223 million at year-end 2001 due to a decrease in the unrealized gain on securities. Compared to March 31, 2001, stockholders' equity increased $16 million. Average stockholders' equity to average assets for the first three months of 2002 was 8.25%, compared to 7.64% for the first three months of 2001. The Company's leverage ratio and total risk-based capital ratio were 8.06% and 12.25%, respectively, at March 31, 2002, 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. 14
BANCFIRST CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share data) <TABLE> <CAPTION> Three Months Ended March 31, ------------------------ 2002 2001 ---------- ---------- <S> <C> <C> <C> <C> Per Common Share Data Net income - basic $ 0.97 $ 0.86 Net income - diluted 0.96 0.85 Cash dividends 0.18 0.18 Performance Data Return on average assets 1.18% 1.11% Return on average stockholders' equity 14.26 14.54 Cash dividend payout ratio 18.56 20.93 Net interest spread 3.79 3.65 Net interest margin 4.43 4.59 Efficiency ratio 64.23 67.04 March 31, ------------------------ December 31, 2002 2001 2001 ---------- ---------- ----------- Balance Sheet Data Book value per share $ 27.17 $ 24.80 $ 27.02 Tangible book value per share 24.48 21.88 24.34 Average loans to deposits (year-to-date) 73.29% 72.83% 72.12% Average earning assets to total assets (year-to-date) 90.38 90.00 90.11 Average stockholders' equity to average assets (year-to-date) 8.25 7.64 7.86 Asset Quality Ratios Nonperforming and restructured loans to total loans 0.88% 1.01% 0.78% Nonperforming and restructured assets to total assets 0.69 0.71 0.58 Allowance for loan losses to total loans 1.38 1.51 1.43 Allowance for loan losses to nonperforming and restructured loans 156.40 148.98 184.24 </TABLE> 15
BANCFIRST CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES (Unaudited) Taxable Equivalent Basis (Dollars in thousands) <TABLE> <CAPTION> Three Months Ended March 31, -------------------------------------------------------------- 2002 2001 ------------------------------ ----------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ---------- ------- ------- ---------- -------- ------- <S> <C> <C> <C> <C> <C> <C> ASSETS Earning assets: Loans (1) $1,747,340 $31,874 7.40% $1,670,297 $38,338 9.31% Investments - taxable 512,446 7,059 5.59 499,962 7,692 6.24 Investments - tax exempt 45,757 777 6.89 52,990 932 7.13 Federal funds sold 163,918 670 1.66 125,978 1,681 5.41 ---------- ------- ---------- ------- Total earning assets 2,469,461 40,380 6.63 2,349,227 48,643 8.40 ---------- ------- ---------- ------- Nonearning assets: Cash and due from banks 140,962 142,330 Interest receivable and other assets 146,025 144,191 Allowance for loan losses (24,145) (25,405) ---------- ---------- Total nonearning assets 262,842 261,116 ---------- ---------- Total assets $2,732,303 $2,610,343 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Transaction deposits $ 368,605 850 0.94% $ 341,306 1,777 2.11% Savings deposits 505,572 2,600 2.09 462,289 4,248 3.73 Time deposits 947,045 8,724 3.74 993,634 14,533 5.93 Short-term borrowings 38,919 161 1.68 34,359 462 5.45 Long-term borrowings 28,556 434 6.16 26,115 408 6.34 9.65% Capital Securities 25,000 612 9.93 25,000 612 9.93 ---------- ------- ---------- ------- Total interest-bearing liabilities 1,913,697 13,381 2.84 1,882,703 22,040 4.75 ---------- ------- ---------- ------- Interest-free funds: Noninterest-bearing deposits 562,803 496,302 Interest payable and other liabilities 30,493 31,920 Stockholders' equity 225,310 199,418 ---------- ---------- Total interest free funds 818,606 727,640 ---------- ---------- Total liabilities and stockholders' equity $2,732,303 $2,610,343 ========== ========== Net interest income $26,999 $26,603 ======= ======= Net interest spread 3.79% 3.65% ======= ======= Net interest margin 4.43% 4.59% ======= ======= </TABLE> (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, 2001, 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 -------- ---------------------------------------------------------------------- 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 3.2 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 3.3 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 February 28, 2002 was filed by the Company to disclose certain financial information under Item 9. Regulation FD Disclosure. 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 May 15, 2002 /s/ Randy P. Foraker ------------ -------------------------------------- (Signature) Randy P. Foraker Senior Vice President and Controller; Assistant Secretary/Treasurer (Principal Accounting Officer) 18