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 March 31, 1997 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 April 30, 1997, there were 6,340,207 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 Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION ------------------------------------------------------ 1. Legal Proceedings Not Applicable 2. Changes in Securities 10 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> March 31, December 31, -------------------------- 1997 1996 1996 ----------- ------------ ------------ <S> <C> <C> <C> ASSETS Cash and due from banks $ 67,421 $ 69,435 $ 76,877 Interest-bearing deposits with banks 62 6 62 Securities 302,760 287,754 283,857 Federal funds sold 32,670 42,555 44,785 Loans: Total loans (net of unearned interest) 783,296 715,290 763,559 Allowance for possible loan losses (11,925) (11,577) (11,945) ---------- ---------- ---------- Loans, net 771,371 703,713 751,614 Premises and equipment, net 33,556 32,889 33,556 Other real estate owned 1,239 1,476 1,101 Intangible assets, net 13,889 15,474 14,871 Accrued interest receivable 11,043 11,266 10,627 Other assets 17,904 17,759 18,361 ---------- ---------- ---------- Total assets $1,251,914 $1,182,327 $1,235,711 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 235,844 $ 230,648 $ 265,209 Interest-bearing 860,442 830,000 840,244 ---------- ---------- ---------- Total deposits 1,096,286 1,060,648 1,105,453 Short-term borrowings 1,291 10,290 3,414 Long-term borrowings 6,587 1,341 6,636 9.65% Capital Securities, Series A 25,000 -- -- Accrued interest payable 4,734 3,803 3,940 Other liabilities 5,056 5,773 4,172 ---------- ---------- ---------- Total liabilities 1,138,953 1,081,855 1,123,615 ---------- ---------- ---------- Commitments and contingent liabilities Stockholders' equity: Common stock 6,339 6,239 6,400 Capital surplus 35,083 34,849 36,218 Retained earnings 71,862 58,794 68,742 Unrealized securities gains (losses), (324) 590 736 net of tax ---------- --------- ---------- Total stockholders' equity 112,960 100,472 112,096 ---------- --------- ---------- Total liabilities and stockholders' equity $1,251,914 $1,182,327 $1,235,711 ========== ========== ========== </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 March 31, ------------------------ 1997 1996 ----------- ---------- <S> <C> <C> INTEREST INCOME Loans, including fees $ 18,164 $ 15,597 Interest-bearing deposits with banks 19 1 Securities: Taxable 4,513 3,784 Tax-exempt 153 151 Federal funds sold 350 442 ---------- ---------- Total interest income 23,199 19,975 ---------- ---------- INTEREST EXPENSE Deposits 8,847 7,714 Short-term borrowings 21 220 Long-term borrowings 96 20 9.65% Capital Securities, Series A 373 0 ---------- ---------- Total interest expense 9,337 7,954 ---------- ---------- Net interest income 13,862 12,021 Provision for possible loan losses 96 98 ---------- ---------- Net interest income after provision for possible loan losses 13,766 11,923 ---------- ---------- NONINTEREST INCOME Service charges on deposits 2,481 1,946 Securities transactions 0 5 Other 1,326 1,410 ---------- ---------- Total noninterest income 3,807 3,361 ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits 6,550 5,726 Occupancy and fixed assets expense, net 763 527 Depreciation 709 499 Amortization 533 387 Data processing services 370 342 Net (income) expense from other real estate owned 62 42 Other 2,527 2,190 ---------- ---------- Total noninterest expense 11,514 9,713 ---------- ---------- Income before taxes 6,059 5,571 Income tax expense (2,298) (2,070) ---------- ---------- Net income $ 3,761 $ 3,501 ========== ========== PER SHARE DATA (PRIMARY AND FULLY DILUTED) Net income $0.57 $0.54 ========== ========== Average common stock and common stock equivalents 6,624,095 6,435,253 =========== ========== </TABLE> See accompanying notes to consolidated financial statements. 2
BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) <TABLE> <CAPTION> THREE MONTHS ENDED March 31, ------------------------- 1997 1996 ---------- ---------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES $ 11,872 $ (3,271) --------- -------- INVESTING ACTIVITIES Cash and due from banks used for acquisitions (4,954) (11,281) Purchases of securities (37,462) (8,244) Maturities of securities 17,054 14,209 Proceeds from sales of securities 105 5,015 Net (increase)/decrease in federal funds sold 12,115 (1,000) Purchases of loans (2,023) (3,940) Proceeds from sales of loans 23,843 19,917 Net other increase in loans (41,810) (32,681) Purchases of premises and equipment (1,624) (1,390) Proceeds from sales of other real estate owned and repossessed assets 307 261 Other, net 1,279 407 -------- -------- Net cash used by investing activities (33,170) (18,727) -------- -------- FINANCING ACTIVITIES Net increase/(decrease) in demand, transaction and savings deposits (27,356) 7,235 Net increase in certificates of deposit 18,189 7,538 Net decrease in short-term borrowings (2,123) (8,705) Net increase/(decrease) in long-term borrowings (49) 423 Net increase in 9.65% Capital Securities, Series A 25,000 -- Issuance of common stock 98 93 Purchase and retirement of common stock (1,277) -- Cash dividends paid (640) (498) --------- -------- Net cash provided by financing activities 11,842 6,086 --------- -------- Net increase in cash and due from banks (9,456) (15,912) Cash and due from banks at the beginning of the period 76,939 85,353 --------- -------- Cash and due from banks at the end of the period $ 67,483 $ 69,441 ========= ======== SUPPLEMENTAL DISCLOSURE Cash paid during the period for interest $ 8,543 $ 7,388 ========= ======== Cash paid during the period for income taxes $ -- $ 70 ========= ======== </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, BFC Capital Trust I, BancFirst, BancFirst Investment Corporation, 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, 1996, the date of the most recent annual report. Certain amounts in the 1996 financial statements have been reclassified to conform with the 1997 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) MERGERS, ACQUISITIONS AND DISPOSALS In March 1996, BancFirst acquired City Bankshares, Inc. of Oklahoma City, Oklahoma ("City Bankshares"), which had $136,251 in total assets. The acquisition was for cash of $19,125, with City Bankshares and its subsidiary bank, 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 paid the CEO of City Bancshares $1,250 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 $7,419 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> Three Months Ended Year Ended March 31, December 31, 1996 1995 -------------- -------------- <S> <C> <C> Net interest income $13,436 $49,226 Net income $ 3,411 $13,122 Net income per common share and common stock equivalent $ 0.53 $ 2.05 </TABLE> In December 1996, the Company's money order subsidiary, National Express, entered into an agreement for the sale of its business. Under the terms of the agreement, National Express received cash of $600 in January 1997, and may receive additional payments of up to $500 over a two-year period based upon specified levels of business retained by the purchaser. The business of National Express was transferred to the purchaser in January and February 1997. The sale was accounted for as a disposal of a segment of business. Consequently, the expected net gain from the disposal will be recognized in the Company's consolidated statement of income when the final proceeds are received. The operations of National Express were not material in relation to the consolidated operations of the Company. The following assets and liabilities of National Express are included in the Company's consolidated balance sheet: 4
<TABLE> <CAPTION> March 31, December 31, 1997 1996 ---------- --------- <S> <C> <C> Cash and due from BancFirst $ 2,281 $ 6,611 Interest-bearing deposit with BancFirst 3,674 3,674 Securities held for investment 786 776 Premises and equipment, net 167 185 Intangible assets, net -- 515 Receivables from money order sales, net 261 7,371 Other assets 11 17 ------- ------- Total assets $ 7,178 $19,149 ======= ======= Outstanding money orders $ 2,008 $13,839 Other liabilities 5 58 ------- ------- Total liabilities $ 2,013 $13,897 ======= ======= </TABLE> Only the intangible assets were acquired by the purchaser and the purchaser did not assume any liabilities of National Express. In March 1997, the Company acquired 22.5% of the common stock outstanding of First Ada Bancshares, Inc. of Ada, Oklahoma for cash of $4,954. This investment will be accounted for under the equity method of accounting. (3) SECURITIES The table below summarizes securities held for investment and securities available for sale. <TABLE> <CAPTION> March 31, December 31, -------------------- 1997 1996 1996 --------- --------- ---------- <S> <C> <C> <C> Held for investment, at cost (market value: $32,527, $61,447 and $33,653, respectively) $ 32,302 $ 61,022 $ 33,289 Available for sale, at market value 270,458 226,732 250,568 -------- -------- -------- Total $302,760 $287,754 $283,857 ======== ======== ======== </TABLE> (4) 9.65% CAPITAL SECURITIES, SERIES A In January 1997, BancFirst Corporation established BFC Capital Trust I (the "Trust"), a trust formed under the Delaware Business Trust Act. In February 1997, the Trust issued $25,000 of aggregate liquidation amount of 9.65% Capital Securities, Series A (the "Capital Securities"). The proceeds from the sale of the Capital Securities were invested in 9.65% Junior Subordinated Deferrable Interest Debentures, Series A (the "Debentures") of BancFirst Corporation. Distributions on the Capital Securities are payable January 15 and July 15 of each year. Such distributions may be deferred for up to ten consecutive semi- annual periods. The stated maturity date of the Capital Securities is January 15, 2027, but they are subject to mandatory redemption pursuant to optional prepayment terms. The Capital Securities represent an undivided interest in the Debentures, are guaranteed by BancFirst Corporation, and will be presented as long-term debt in the Company's consolidated financial statements. During any deferral period or during any event of default, BancFirst Corporation may not declare or pay any dividends on any of its capital stock. 5
BANCFIRST CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY The Company reported net income of $3.76 million for the quarter ended March 31, 1997, compared to net income of $3.5 million for the first quarter of 1996. The growth in earnings was the combined result of acquisitions in 1996 and internal growth. Earnings per share was $0.57 for the first quarter of 1997, compared to $0.54 per share for the first quarter of 1996. Total assets increased $15.2 million from December 31, 1996 and $69.6 million from March 31, 1996. The growth since year-end 1996 was primarily due to the Company issuing $25 million of 9.65% Capital Securities, Series A (the "Capital Securities"). The growth since the first quarter of 1996 was due to an acquisition having total assets aggregating approximately $18 million, the issuance of the Capital Securities and internal growth. Stockholders' equity rose to $113 million, an increase of $864,000 compared to December 31, 1996 and $12.5 million compared to March 31, 1996. RESULTS OF OPERATIONS Net interest income increased for the first quarter of 1997 by $1.84 million, or 15.3%, as compared to the same quarter of 1996, primarily as a result of earning asset growth. Net interest spread was 4.30% for the quarter compared to 4.41% for the first quarter of 1996, while average net earning assets increased $36.6 million. Net interest margin on a taxable equivalent basis was 5.18% for the first quarter, compared to 5.23% for the same quarter of 1996. Both the net interest spread and net interest margin were impacted by the issuance of the Capital Securities. The Company provided $96,000 for possible loan losses for the quarter, compared to $98,000 for the first quarter of 1996. Net loan charge-offs were $115,000 for the first quarter of 1997, compared to $14,000 for the first quarter of 1996. The net charge-offs in 1997 represent an annualized rate of only 0.06% of total loans. Noninterest income increased $446,000, or 13.3%, compared to the first quarter of 1996 due primarily to income added by acquisitions. Noninterest expense increased $1.8 million, or 18.5%, due to added operating expenses of the banks acquired in 1996, and increased staffing and other costs of improving the Company's management and operational infrastructure. FINANCIAL POSITION Total securities increased $18.9 million compared to December 31, 1996 and $15 million compared to March 31, 1996, as a net result of securities added by acquisitions and internal growth, and maturities of securities used to fund loan growth. The net unrealized loss on securities available for sale was $469,000 at the end of the first quarter of 1997, compared to a gain of $1.16 million at December 31 and a gain of $911,000 at March 31, 1996. The average taxable equivalent yield on the securities portfolio for the firsst quarter increased to 6.45% from 6.10% for the same quarter of 1996. Total loans increased $19.7 million from December 31, 1996 and $68 million from March 31, 1996, due to both internal loan growth and acquisitions. The allowance for possible loan losses increased $348,000 since the first quarter of 1996 due primarily to purchased reserves from acquisitions. The allowance as a percentage of total loans was 1.55%, 1.56% and 1.62% at March 31, 1997, December 31, 1996 and March 31, 1996, respectively. Nonperforming and restructured assets decreased to $5.74 million from $7.01 million at year-end 1996 and $5.79 million from the first quarter of 1996. Although the ratio of nonperforming and restructured assets to total assets is only 0.44%, 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. 6
Total deposits decreased $9.17 million as compared to December 31, 1996 and increased $35.6 million compared to March 31, 1996. These variations reflect seasonal trends and the acquisition in October 1996. The Company's deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 11.5% of total deposits at March 31, 1997. Short-term borrowings decreased $2.12 million from December 31, 1996 and $9 million from March 31, 1996. A $10 million Federal Home Loan Bank borrowing matured in May 1996. Other fluctuations in short-term borrowings are a function of liquidity needs and customer demand for repurchase agreements. Long-term borrowings decreased $49,000 from year-end 1996 as a result of scheduled payments, and increased $5.25 million from the first quarter of 1996 due primarily to a $5 million Federal Home Loan Bank borrowing in December 1996. In January 1997, BancFirst Corporation established BFC Capital Trust I (the "Trust"), which issued $25 million of 9.65% Capital Securities, Series A (the "Capital Securities") in February 1997. The purpose of the issuance of the Capital Securities was to raise additional regulatory capital to support future growth. Distributions on the Capital Securities are payable January 15 and July 15 through the stated maturity date of January 15, 2027. Such distributions may be deferred for up to ten consecutive semi-annual periods. During any deferral period, or during any event of default, BancFirst Corporation may not declare or pay any dividends on any of its capital stock. Stockholders' equity rose to $113 million from $112 milion at year-end 1996 and $100 million at March 31, 1996. These increases were primarily the result of accumulated earnings. Average stockholders' equity to average assets increased to 9.14% from 8.93% at December 31, 1996. The Company's regulatory capital ratios increased substantially in the first quarter of 1997 due to the issuance of the Capital Securities. 7
BANCFIRST CORPORATION SELECTED FINANCIAL STATISTICS (Dollars in thousands, except per share data) <TABLE> <CAPTION> Three Months Ended March 31, ------------------------- 1997 1996 ---------- ---------- Per Common Share Data: <S> <C> <C> Net income $ 0.57 $ 0.54 Cash dividends declared 0.1 0.08 Book value at period end 17.82 16.10 Tangible book value at period end 15.63 13.62 Performance Ratios: Return on average assets 1.23% 1.33% Return on average common equity 13.51 14.19 Increase/(decrease) in tangible book 11.71 (24.30) value (annualized) Noninterest expense/(net interest 65.16 63.14 income + noninterest income) </TABLE> <TABLE> <CAPTION> March 31, December 31, ------------------- 1997 1996 1996 ------- --------- ---------- <S> <C> <C> <C> Balance Sheet Ratios: Average loans to deposits (year to date) 70.59% 68.41% 68.81% Allowance for possible loan losses to total loans 1.55 1.62 1.56 Allowance for possible loan losses to nonperforming and restructured loans 216.90 272.40 207.31 Nonperforming and restructured assets to total assets 0.44 0.49 0.57 Capital Ratios: Average stockholders' equity to average assets (year to date) 9.14% 9.38% 8.93% Leverage ratio (regulatory minimum 3%) 10.05 7.24 7.90 Total risk-based capital ratio (regulatory minimum 8%) 17.73 13.41 14.23 </TABLE> <TABLE> <CAPTION> Three Months Ended March 31, ----------------------------------------------------------- 1997 1996 -------------------------- ----------------------- <S> <C> <C> <C> <C> Average Balances and Net Interest Average Average Margin Analysis (Taxable Equivalent Average Yield/ Average Yield/ Basis): Balance Rate Balance Rate ---------- --------- ---------- --------- Loans $ 769,296 9.60% $ 638,406 9.87% Securities 298,672 6.45 264,896 6.10 Federal funds sold 28,183 5.31 33,305 5.34 ---------- ---------- Total earning assets 1,096,151 8.61 936,607 8.64 Nonearning assets 139,216 120,804 ---------- ---------- Total assets $1,235,367 $1,057,411 ========== ========== Interest-bearing deposits $ 854,642 4.17% $ 739,575 4.20% Short-term borrowings 2,131 4.00 15,194 5.94 Long-term borrowings 6,625 5.88 1,249 6.39 9.65% Capital Securities, Series A 15,602 9.70 -- -- ---------- ---------- Total interest-bearing liabilities 879,000 4.31 756,018 4.23 Demand deposits 235,162 193,678 Other noninterest-bearing liabilities 8,316 8,495 Stockholders' equity 112,889 99,220 ---------- ---------- Total liabilities and stockholders' equity $1,235,367 $1,057,411 ========== ========== Net interest spread 4.30% 4.41% ===== ===== Net interest margin 5.18% 5.23% ===== ===== </TABLE> 8
PART II. OTHER INFORMATION ---------------------------
ITEM 2. CHANGES IN SECURITIES. --------------------- In January 1997, BancFirst Corporation established BFC Capital Trust I (the "Trust"), a trust formed under the Delaware Business Trust Act. In February 1997, the Trust issued $25 million of aggregate liquidation amount of 9.65% Capital Securities, Series A (the "Capital Securities"). The proceeds from the sale of the Capital Securities were invested in 9.65% Junior Deferrable Interest Debentures, Series A (the "Debentures") of BancFirst Corporation. Distributions on the Capital Securities are payable January 15 and July 15 of each year. Such distributions may be deferred for up to ten consecutive semi-annual periods. The stated maturity date of the Capital Securities is January 15, 2027, but they are subject to mandatory redemption pursuant to optional prepayment terms. The Capital Securities represent an undivided interest in the Debentures, are guaranteed by BancFirst Corporation, and will be presented as long-term debt in the Company's consolidated financial statements. During any deferral period or during any event of default, BancFirst Corporation may not declare or pay any dividends on any of its capital stock. 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 Quarterly 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 Quarterly 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 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.) 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 March 31, 1997. Date of Report Items Reported - -------------- ----------------------------------------------------------- February 4, 1997 Establishment of BFC Capital Trust I and the issuance of $25 million of 9.65% Capital Securities, Series A. 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. May 14, 1997 BANCFIRST CORPORATION (Registrant) /s/Randy Foraker --------------------------------- Randy P. Foraker Sr. Vice President and Controller; Secretary/Treasurer (Principal Accounting Officer) 11