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)
March 31,
----------------------------------- December 31,
2002 2001 2001
----------------- ----------------- -----------------
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
================= ================= =================
See accompanying notes to consolidated financial statements.
2
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
---------------------------
2002 2001
------------ ------------
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
============ =============
See accompanying notes to consolidated financial statements.
3
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
-----------------------
2002 2001
----------- -----------
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 $ -- $ --
=========== ===========
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.
March 31,
-------------------- December 31,
2002 2001 2001
-------- -------- -----------
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
======== ======== ===========
(5) LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a schedule of loans outstanding by category:
March 31, December 31
------------------------------------------------- ---------------------
2002 2001 2001
----------------------- --------------------- ---------------------
Amount Percent Amount Percent Amount Percent
---------- ------- ---------- ------- ---------- -------
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
========== ========== ==========
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:
Three Months Ended
March 31,
--------------------
2002 2001
-------- --------
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
======== ========
The net charge-offs by category are summarized as follows:
Three Months Ended
March 31,
--------------------
2002 2001
-------- --------
Commercial, financial and other $ 667 $ 137
Real estate - construction 15 --
Real estate - mortgage 263 (33)
Consumer 492 287
-------- --------
Total $ 1,437 $ 391
======== ========
(6) NONPERFORMING AND RESTRUCTURED ASSETS
Below is a summary of nonperforming and restructured assets:
March 31,
----------------------------- December 31,
2002 2001 2001
---------- ---------- ------------
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%
========== ========== ============
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:
March 31,
---------------------------------------------- December 31,
2002 2001 2001
---------------------- ---------------------- ----------------------
Gross Gross Gross
Carrying Accumulated Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization Amount Amortization
-------- ------------ -------- ------------ -------- ------------
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
======== ======= ======= ======= ======= =======
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:
Other Executive,
Metropolitan Community Financial Operations Elimin- Consol-
Banks Banks Services & Support ations idated
------------ --------- --------- ---------- ------- -------
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
========= ========== ========= ========= ========
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:
Other Executive,
Metropolitan Community Financial Operations Elimin- Consol-
Banks Banks Services & Support ations idated
------------ ---------- --------- ---------- ---------- ----------
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
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)
Three Months Ended
March 31,
------------------------
2002 2001
---------- ----------
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
15
BANCFIRST CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES
(Unaudited)
Taxable Equivalent Basis (Dollars in thousands)
Three Months Ended March 31,
--------------------------------------------------------------
2002 2001
------------------------------ -----------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
---------- ------- ------- ---------- -------- -------
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%
======= =======
(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