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 June 30, 1995 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) 270-1000 (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 July 31, 1995, there were 6,197,374 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 Not Applicable 3. Defaults Upon Senior Securities Not Applicable 4. Submission of Matters to a Vote of Security Holders 9 5. Other Information Not Applicable 6. Exhibits and Reports on Form 8-K 9 Signatures 10 PART I. FINANCIAL INFORMATION BANCFIRST CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in thousands) June 30, ------------------- December 31, 1995 1994 1994 -------- -------- ------------ ASSETS Cash and due from banks $ 64,049 $ 55,879 $ 53,564 Interest-bearing deposits with banks 38 -- -- Securities: Held for investment, at cost (market value: $34,663, $23,662 and $20,395, respectively) 34,269 23,631 20,779 Available for sale, at market value 217,681 217,609 202,265 Federal funds sold 16,983 37,640 28,260 Loans: Total loans (net of unearned interest) 591,512 488,019 522,314 Allowance for possible loan losses (10,322) (9,339) (9,729) --------- -------- -------- Loans, net 581,190 478,680 512,585 Premises and equipment, net 27,152 26,681 26,462 Other real estate owned 2,635 2,360 2,183 Intangible assets, net 9,268 8,488 7,960 Accrued interest receivable 9,512 7,951 8,518 Other assets 7,979 10,588 10,339 --------- -------- -------- Total assets $970,756 $869,507 $872,915 --------- --------- --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $176,299 $164,088 $168,426 Interest-bearing 696,834 618,126 616,425 --------- -------- -------- Total deposits 873,133 782,214 784,851 Securities sold under repurchase agreements and other short-term borrowings 224 94 117 Accrued interest payable 2,876 1,635 2,089 Other liabilities 3,283 5,266 3,897 Minority interest -- 1,019 -- --------- -------- -------- Total liabilities 879,516 790,228 790,954 --------- -------- -------- Commitments and contingent liabilities Stockholders' equity: Common stock (issued: 6,194,874, 6,202,814 and 6,202,814 shares, respectively) 6,195 6,203 6,203 Capital surplus 34,315 34,259 34,259 Retained earnings 50,089 40,687 45,611 Unrealized securities losses, net of tax 641 (1,870) (4,112) --------- -------- -------- Total stockholders' equity 91,240 79,279 81,961 --------- -------- -------- Total liabilities and stockholders' equity $970,756 $869,507 $872,915 --------- -------- -------- --------- -------- -------- See accompanying notes to consolidated financial statements. 1 BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- INTEREST INCOME Loans, including fees $ 14,621 $ 11,131 $ 27,651 $ 21,254 Interest-bearing deposits with banks 8 -- 8 -- Securities: Taxable 3,624 3,076 6,599 6,055 Tax-exempt 159 151 295 307 Federal funds sold 398 327 863 648 ---------- ---------- --------- ---------- Total interest income 18,810 14,685 35,416 28,264 ---------- ---------- ---------- ---------- INTEREST EXPENSE Deposits 7,885 4,964 14,520 9,629 Securities sold under repurchase agreements and other short-term borrowings 13 (18) 22 12 Line of credit -- 10 16 19 ---------- ---------- ---------- ---------- Total interest expense 7,898 4,956 14,558 9,660 ---------- ---------- ---------- ---------- Net interest income 10,912 9,729 20,858 18,604 Provision for possible loan losses 196 (9) 258 (272) ---------- ---------- ---------- ---------- Net interest income after provision for possible loan losses 10,716 9,738 20,600 18,876 ---------- ---------- ---------- ---------- NONINTEREST INCOME Service charges on deposits 2,017 1,935 3,922 3,783 Securities transactions 56 -- 63 -- Other 1,091 935 2,008 1,831 ---------- ---------- ---------- ---------- Total noninterest income 3,164 2,870 5,993 5,614 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits 5,089 4,434 9,829 8,610 Occupancy and fixed assets expense, net 486 322 926 776 Depreciation 487 461 943 848 Amortization 365 324 674 624 Data processing services 294 327 594 736 Net (income) expense from other real 30 18 55 (325) Other 2,281 2,155 4,300 4,147 ---------- ---------- ---------- ---------- Total noninterest expense 9,032 8,041 17,321 15,416 ---------- ---------- ---------- ---------- Income before taxes 4,848 4,567 9,272 9,074 Income tax expense (1,828) (1,778) (3,497) (3,208) ---------- ---------- ---------- ---------- Net income $ 3,020 $ $2,789 $ 5,775 $ 5,866 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- PER SHARE DATA (PRIMARY AND FULLY DILUTED) Net income $ 0.47 $ 0.44 $ 0.90 $ 0.91 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Average common stock and common stock 6,394,966 6,376,262 6,395,801 6,372,392 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- See accompanying notes to consolidated financial statements. 2 BANCFIRST CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Six Months Ended June 30, --------------------- 1995 1994 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES $ 6,961 $ 6,786 --------- --------- INVESTING ACTIVITIES Cash and due from banks from acquisitions (15,542) 166 Purchases of securities (26,758) (45,048) Maturities of securities 8,181 34,868 Proceeds from sales of securities 687 2,085 Net decrease in federal funds sold 21,584 3,901 Purchases of loans (3,017) (3,147) Proceeds from sales of loans 20,971 26,530 Net other increase in loans (44,434) (20,278) Purchases of premises and equipment (1,290) (8,383) Proceeds from sales of other real estate owned 366 2,239 Other, net 330 116 --------- --------- Net cash provided (used) by investing activities 1,078 (6,951) --------- --------- FINANCING ACTIVITIES Net increase (decrease) in demand, transaction and savings deposits (7,949) 10,152 Net increase in certificates of deposit 11,575 2,737 Net increase (decrease) in securities sold under repurchase agreements and other short-term borrowings 107 (841) Issuance of common stock 197 30 Payments to repurchase common stock (577) -- Redemption of 10% Preferred Stock -- (3,953) Cash dividends paid (869) (939) --------- --------- Net cash provided by financing activities 2,484 7,186 --------- --------- Net increase in cash and due from banks 10,523 7,021 Cash and due from banks at the beginning of the period 53,564 48,858 --------- --------- Cash and due from banks at the end of the period $ 64,087 $ 55,879 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURE Cash paid during the period for interest $ 13,771 $ 9,504 --------- --------- --------- --------- Cash paid during the period for income taxes $ 3,475 $ 3,008 --------- --------- --------- --------- See accompanying notes to consolidated financial statements. 3 BANCFIRST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share data) (1) GENERAL The accompanying consolidated financial statements include the accounts of BancFirst Corporation, BancFirst Investment Corporation, BancFirst, Lenders Collection Corporation and National Express Corporation. All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the consolidated financial statements. There have been no significant changes in the accounting policies of the Company since December 31, 1994, the date of the most recent annual report, other than the adoption of Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" as discussed in note (3) below. 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. Certain amounts in the 1994 financial statements have been reclassified to conform with the 1995 presentation. (2) ACQUISITIONS In March 1995, the Company acquired State National Bank of Marlow, Oklahoma, which had total assets of $101,976. The acquisition was for cash of $17,485, with an additional $500 placed in escrow pending the resolution of certain matters. State National Bank was immediately merged into BancFirst. The acquisition was accounted for as a purchase. Accordingly, the effect of the transaction is included in the Company's consolidated financial statements from the date of the acquisition forward. A core deposit intangible of $406 and goodwill of $810 were recorded for the acquisition. Subsequent payments from the escrow, if any, to the former shareholders of State National Bank will increase the goodwill recorded. Pro forma condensed results of operations, as though State National Bank had been acquired January 1, 1994, are as follows: Six Months Ended Year Ended June 30, December 31, 1995 1994 ---------- ------------ Net interest income. . . . . . . . . . . . .$21,541 $42,160 Net income . . . . . . . . . . . . . . . . .$ 5,953 $12,296 Net income per common share and common stock equivalent. . . . . . . . . . . . . .$ 0.93 $ 1.91 In June 1995, the Company announced an agreement of merger with Commerce Bancorporation, Inc. of McLoud, Oklahoma ("Commerce Bancorp"), which has approximately $18 million in total assets. Commerce Bancorp is controlled by certain executive officers of the Company. Under the terms of the agreement, 156,510 shares of BancFirst Corporation common stock would be issued for the 22,573 shares of Commerce Bancorp common stock outstanding. The merger is subject to regulatory and shareholder approvals and is expected to be completed in mid-1996. (3) LOANS The Company adopted Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan", effective January 1, 1995. This new accounting standard requires that impaired loans be measured based upon the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The adoption of FAS 114 did not have a material effect on the financial position or results of operation of the Company. 4 (4) NET INCOME PER SHARE Net income per share is calculated as follows: Three Months Six Months Ended Ended June 30, June 30, -------------- -------------- 1995 1994 1995 1994 ------ ------ ------ ------ Net income. . . . . . . . . . . . . . . . . . . . . . . . $3,020 $2,789 $5,775 $5,866 Less 10% Preferred dividends. . . . . . . . . . . . . . . -- -- -- (55) ------ ------ ------ ------ Net income applicable to common stockholders. . . . . . . $3,020 $2,789 $5,775 $5,811 ------ ------ ------ ------ ------ ------ ------ ------ Average common shares and common stock equivalents outstanding (in thousands). . . . . . . . . . . . . . . . 6,395 6,376 6,396 6,372 ------ ------ ------ ------ ------ ------ ------ ------ Net income per common share and common stock equivalent . $0.47 $ 0.44 $0.90 $0.91 ------ ------ ------ ------ ------ ------ ------ ------ The 10% Preferred dividends for 1994 represent the accumulated dividends paid upon the redemption of the 10% Preferred Stock. Average common shares and common stock equivalents includes shares relating to stock options exercisable within the next five years. (5) STOCK REPURCHASE PROGRAM On March 23, 1995, the Company adopted a Stock Repurchase Program authorizing management to repurchase up to 200,000 shares of the Company's common stock. The program is to be used for purchases of stock by the Company's Employee Stock Ownership and Thrift Plan, and may also be used to enhance earnings per share, provide stock for the exercise of stock options under the Company's Stock Option Plan or to provide additional liquidity for the stock. Stock purchases under the program must satisfy certain criteria regarding effects on earnings per share and book value dilution, resulting equity ratios and the price to book value of comparable size institutions. 5 BANCFIRST CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY The Company reported net income of $3.02 million for the quarter ended June 30, 1995, compared to net income of $2.79 million for the second quarter of 1994. Earnings per share was $0.47 for the second quarter of 1995, compared to $0.44 for the same quarter of the prior year. Net income for the first six months of 1995 was $5.78 million, compared to $5.87 million for the same period of 1994. Year-to-date earnings per share was $0.90, compared to $0.91 for the first half of 1994. Earnings in 1994 benefitted from loan recoveries, gains on sales of other real estate and a lower effective tax rate. Total assets were $971 million at June 30, 1995, an increase of $97.8 million from December 31, 1994 and $101 million from June 30, 1994 due to the acquisition of State National Bank of Marlow, Oklahoma, with total assets of $102 million, in March 1995. Stockholders' equity increased $9.28 million compared to December 31, 1994 and $12 million compared to June 30, 1994. RESULTS OF OPERATIONS SECOND QUARTER -- Net interest income increased for the second quarter of 1995 by $1.18 million, or 12.2%, as compared to the same quarter of 1994. Net interest spread decreased 30 basis points while average net earning assets increased $19.6 million. Net interest margin on a taxable equivalent basis was 5.17% for the second quarter, compared to 5.20% for the same quarter of 1994. The Company provided $196,000 for possible loan losses for the quarter, compared to income recognized from loan recoveries of $9,000 for the same quarter of 1994. Net loan recoveries were $54,000 for the second quarter of 1995 and $18,000 for the second quarter of 1994, representing annualized rates of (0.04)% and (0.01)% of total loans, respectively. Noninterest income increased $294,000, or 10.2%, compared to the second quarter of 1994 due to income added by the bank acquired in 1995 and gains on securities transactions. Noninterest expense increased $991,000, or 12.3%, due to the expenses of the bank acquired. YEAR-TO-DATE -- For the first six months of 1995, net interest income increased by $2.25 million, or 12.1%, as compared to the same period of 1994. Net interest spread decreased 12 basis points while average net earning assets increased $16 million. Net interest margin on a taxable equivalent basis was 5.21% for the six months, compared to 5.07% for the same period of 1994. The Company provided $258,000 for possible loan losses for the first half of 1995, compared to income recognized from loan recoveries of $272,000 for the first half of 1994. Net loan charge-offs were $27,000 in 1995, compared to net loan recoveries of $268,000 in 1994, representing annualized rates of 0.01% and (0.11)% of total loans, respectively. Noninterest income increased $379,000, or 6.75%, compared to the first six months of 1994, due to income of the bank acquired in 1995 and gains on securities transactions. Noninterest expense increased $1.91 million, or 12.4%, compared to 1994, due to the expenses of the bank acquired and the net income on other real estate owned in 1994. Income tax expense of $3.5 million was recognized for the first six months of 1995, compared to $3.21 million for the same period of 1994. The Company's effective tax rate increased from 35% in 1994 to 38% in 1995 due to a higher level of taxable income, lower tax-exempt interest and less tax benefit carryforwards available for utilization. 6 FINANCIAL POSITION Total securities increased $28.9 million compared to December 31, 1994 and $10.7 million compared to June 30, 1994, as a net result of securities added by the bank acquisition and maturities of securities used to fund loan growth. The net unrealized gain on securities available for sale was $986,000 at the end of the second quarter of 1995, compared to net unrealized losses of $6.33 million and $2.73 million at December 31 and June 30, 1994, respectively. The average taxable equivalent yield on the securities portfolio for the second quarter increased to 6.15% from 5.56% in the same quarter of 1994, reflecting the rise in interest rates during that time. Total loans increased $69.2 million since December 31, 1994 and $103 million since June 30, 1994 from both internal loan growth and the bank acquisition. The allowance for possible loan losses increased $593,000 in the first six months of 1995 due to purchased reserves from the acquisition in March and provisions for losses. The allowance as a percentage of total loans was 1.75%, 1.86% and 1.91% at June 30, 1995, December 31, 1994 and June 30, 1994, respectively. Nonperforming and restructured assets increased in the first six months of 1995 to $7.38 million from $6.07 million at both year-end 1994 and the end of the second quarter of 1994, due to the nonperforming assets of the bank acquired in 1995. Although, the ratio of nonperforming and restructured assets to total assets remained at only 0.76%, compared to 0.70% at year-end and the second quarter of 1994, it is reasonable to expect that over the next several years problem loans will rise to historical norms as a result of economic and credit cycles. Total deposits increased $88.3 million since December 31, 1994 and $90.9 million since June 30, 1994 due to the bank acquisition and internal growth. The Company's deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 10% of total deposits at June 30, 1995. Stockholders' equity increased $9.28 million compared to year-end 1994 and $12 million compared to June 30, 1994. These increases were the result of accumulated earnings and a change from net unrealized losses to a net unrealized gain on securities available for sale. Average stockholders' equity to average assets dropped to 9.04% from 9.34% at December 31, 1994 due to the bank acquisition in 1995. The Company's regulatory capital ratios all remain well in excess of the minimum requirements. On March 23, 1995, the Company adopted a Stock Repurchase Program authorizing management to repurchase up to 200,000 shares of the Company's common stock. The program is to be used for purchases of stock by the Company's Employee Stock Ownership and Thrift Plan, and may also be used to enhance earnings per share, provide stock for the exercise of stock options under the Company's Stock Option Plan or to provide additional liquidity for the stock. Stock purchases under the program must satisfy certain criteria regarding effects on earnings per share and book value dilution, resulting equity ratios and the price to book value of comparable size institutions. In June 1995, the Company announced an agreement of merger with Commerce Bancorporation, Inc. of McLoud, Oklahoma ("Commerce Bancorp"), which has approximately $18 million in total assets. Commerce Bancorp is controlled by certain executive officers of the Company. Under the terms of the agreement, 156,510 shares of BancFirst Corporation common stock would be issued for the 22,573 shares of Commerce Bancorp common stock outstanding. The merger is subject to regulatory and shareholder approvals and is expected to be completed in mid-1996. 7 BANCFIRST CORPORATION SELECTED FINANCIAL STATISTICS (Dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1995 1994 1995 1994 ------ ------ ------ ------ PER COMMON SHARE DATA: Income before extraordinary item and accounting change $ 0.47 $ 0.44 $ 0.90 $ 0.91 Net income 0.47 0.44 0.90 0.91 Cash dividends declared 0.07 0.06 0.14 0.12 Book value at period end 14.73 12.78 PERFORMANCE RATIOS: Return on average assets 1.24% 1.28% 1.24% 1.38% Return on average common equity 13.73 14.09 13.53 14.62 Noninterest expense/(net interest income + noninterest income) 64.16 64.53 64.51 63.65 June 30, December 31, ------------------- ------------ 1995 1994 1994 ------- ------- -------- BALANCE SHEET RATIOS: Average loans to deposits (year to date) 66.12% 62.70% 63.39% Allowance for possible loan losses to total loans 1.75 1.91 1.86 Allowance for possible loan losses to nonperforming and restructured loans 222.70 259.66 261.53 Nonperforming and restructured assets to total assets 0.76 0.70 0.70 CAPITAL RATIOS: Average stockholders' equity to average assets (year to date) 9.04% 9.10% 9.34% Leverage ratio (regulatory minimum 3%) 8.50 8.40 9.08 Total risk-based capital ratio (regulatory minimum 8%) 15.67 16.58 16.67 Three Months Ended June 30, ------------------------------------------------ 1995 1994 ----------------------- ------------------------ AVERAGE BALANCES AND NET INTEREST Average Average MARGIN ANALYSIS Average Yield Average yield/ (TAXABLE EQUIVALENT BASIS): Balance Rate Balance Rate --------- ------- -------- ------- Loans $580,739 10.15% $490,112 9.19% Investment securities 251,876 6.15 238,799 5.56 Federal funds sold 26,546 6.01 35,873 3.91 --------- -------- Total earning assets 859,161 8.85 764,784 7.81 Nonearning assets 114,093 105,068 --------- -------- Total assets $973,254 $869,852 ========= ========= Interest-bearing deposits $694,496 4.55% $619,680 3.21% Short-term borrowings 479 5.43 523 3.70 --------- --------- Total interest-bearing liabilities 694,976 4.56 620,203 3.22 Demand deposits 183,759 162,035 Other noninterest-bearing liabilities 6,500 8,430 Stockholders' equity 88,019 79,183 --------- --------- Total liabilities and stockholders' equity 973,254 $869,852 ========= ========= Net interest spread 4.29% 4.59% Net interest margin 5.17% 5.20% 8 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. BancFirst Corporation held its Annual Meeting of Shareholders on May 25, 1995. A proposal to re-elect the board of directors in its entirety was passed with 5,205,618 affirmative votes and 3,788 negative votes cast. The directors re-elected were Leslie E. Greathouse, John T. Hannah, J. R. Hutchens, Jr., J. Ralph McCalmont, Melvin Moran, David E. Rainbolt and H. E. Rainbolt. Also, a proposal to ratify Price Waterhouse as independent auditors for 1995 was passed with 5,205,905 affirmative votes and 4,865 negative votes. 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, Oklahoma, and certain shareholders of State National Bank (filed as Exhibit 2.4 to the Company's Report on Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference). 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 June 30, 1995. DATE OF REPORT ITEMS REPORTED ------------------- --------------------------------------------------------- March 24, 1995 Consummation of merger with State National Bank of Marlow, Oklahoma. Financial statements filed: - Audited financial statements of State National Bank for the year ended December 31, 1994 - Unaudited Pro Forma Consolidated Condensed Financial Statements for the year ended December 31, 1994 April 12, 1995 Adoption of Stock Repurchase Program. 9 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. August 14, 1995 BANCFIRST CORPORATION (Registrant) /s/Randy Foraker ------------------------------------ Randy P. Foraker Sr. Vice President, Controller and Secretary/Treasurer (Principal Accounting Officer) 10