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BANCFIRST CORP /OK/ - Quarter Report: 2010 March (Form 10-Q)

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

101 N. Broadway, Oklahoma City, Oklahoma   73102-8405
(Address of principal executive offices)   (Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

N/A

(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  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (sec. 232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨.    No  x.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of April 30, 2010 there were 15,346,800 shares of the registrant’s Common Stock outstanding.


PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

 

     March 31,     December 31,  
     2010     2009     2009  
     (unaudited)     (unaudited)     (see Note 1)  

ASSETS

      

Cash and due from banks

   $ 100,436      $ 123,378      $ 106,856   

Interest-bearing deposits with banks

     989,453        381,381        929,654   

Federal funds sold

     —          —          5,000   

Securities (market value: $431,511, $439,963, and $418,112, respectively)

     430,586        439,220        417,172   

Loans:

      

Total loans (net of unearned interest)

     2,766,304        2,808,499        2,738,654   

Allowance for loan losses

     (36,780     (36,765     (36,383
                        

Loans, net

     2,729,524        2,771,734        2,702,271   

Premises and equipment, net

     91,329        91,806        91,794   

Other real estate owned, net

     10,069        5,245        9,505   

Intangible assets, net

     6,902        7,315        7,144   

Goodwill

     34,684        34,327        34,684   

Accrued interest receivable

     22,672        24,472        21,670   

Other assets

     93,134        79,277        90,365   
                        

Total assets

   $ 4,508,789      $ 3,958,155      $ 4,416,115   
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Deposits:

      

Noninterest-bearing

   $ 1,201,577      $ 1,000,846      $ 1,157,688   

Interest-bearing

     2,807,440        2,470,672        2,771,328   
                        

Total deposits

     4,009,017        3,471,518        3,929,016   

Short-term borrowings

     1,000        1,250        100   

Accrued interest payable

     3,400        4,734        3,886   

Other liabilities

     31,667        37,468        25,559   

Junior subordinated debentures

     26,804        26,804        26,804   
                        

Total liabilities

     4,071,888        3,541,774        3,985,365   
                        

Commitments and contingent liabilities

      

Stockholders’ equity:

      

Senior preferred stock, $1.00 par; 10,000,000 shares authorized; none issued

     —          —          —     

Cumulative preferred stock, $5.00 par; 900,000 shares authorized; none issued

     —          —          —     

Common stock, $1.00 par, 20,000,000 shares authorized; shares issued and outstanding: 15,337,050, 15,291,641 and 15,308,741, respectively

     15,337        15,292        15,309   

Capital surplus

     70,728        68,380        69,725   

Retained earnings

     340,473        319,615        334,693   

Accumulated other comprehensive income, net of income tax of $(5,580), $(7,051) and $(5,915), respectively

     10,363        13,094        11,023   
                        

Total stockholders’ equity

     436,901        416,381        430,750   
                        

Total liabilities and stockholders’ equity

   $ 4,508,789      $ 3,958,155      $ 4,416,115   
                        

The accompanying notes are an integral part of these consolidated financial statements.

 

2


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2010     2009  

INTEREST INCOME

    

Loans, including fees

   $ 37,362      $ 38,268   

Securities:

    

Taxable

     3,010        3,626   

Tax-exempt

     329        381   

Interest-bearing deposits with banks

     574        359   
                

Total interest income

     41,275        42,634   
                

INTEREST EXPENSE

    

Deposits

     6,924        10,380   

Short-term borrowings

     —          10   

Junior subordinated debentures

     489        491   
                

Total interest expense

     7,413        10,881   
                

Net interest income

     33,862        31,753   

Provision for loan losses

     896        3,365   
                

Net interest income after provision for loan losses

     32,966        28,388   
                

NONINTEREST INCOME

    

Trust revenue

     1,398        1,315   

Service charges on deposits

     9,063        8,568   

Securities transactions

     136        339   

Income from sales of loans

     343        325   

Insurance commissions

     1,854        1,934   

Cash management services

     1,576        2,688   

Gain on sale of other assets

     105        15   

Other

     1,485        1,438   
                

Total noninterest income

     15,960        16,622   
                

NONINTEREST EXPENSE

    

Salaries and employee benefits

     19,948        20,117   

Occupancy and fixed assets expense, net

     2,108        2,210   

Depreciation

     1,811        1,771   

Amortization of intangible assets

     242        230   

Data processing services

     1,154        905   

Net expense from other real estate owned

     87        107   

Marketing and business promotion

     1,408        1,452   

Deposit insurance

     1,489        815   

Other

     6,654        6,922   
                

Total noninterest expense

     34,901        34,529   
                

Income before taxes

     14,025        10,481   

Income tax expense

     (4,722     (3,356
                

Net income

     9,303        7,125   

Other comprehensive income, net of tax:

    

Unrealized losses on securities

     (748     (2,774

Reclassification adjustment for gains included in net income

     88        1,191   
                

Comprehensive income

   $ 8,643      $ 5,542   
                

NET INCOME PER COMMON SHARE

    

Basic

   $ 0.61      $ 0.47   
                

Diluted

   $ 0.60      $ 0.46   
                

The accompanying notes are an integral part of these consolidated financial statements.

 

3


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2010     2009  

COMMON STOCK

    

Issued at beginning of period

   $ 15,309      $ 15,281   

Shares issued

     28        11   

Shares acquired and canceled

     —          —     
                

Issued at end of period

   $ 15,337      $ 15,292   
                

CAPITAL SURPLUS

    

Balance at beginning of period

   $ 69,725      $ 67,975   

Common stock issued

     591        106   

Tax effect of stock options

     42        33   

Stock option expense

     370        266   
                

Balance at end of period

   $ 70,728      $ 68,380   
                

RETAINED EARNINGS

    

Balance at beginning of period

   $ 334,693      $ 315,858   

Net income

     9,303        7,125   

Dividends on common stock

     (3,523     (3,368

Common stock acquired and canceled

     —          —     
                

Balance at end of period

   $ 340,473      $ 319,615   
                

ACCUMULATED OTHER COMPREHENSIVE INCOME

    

Unrealized gains on securities

    

Balance at beginning of period

   $ 11,023      $ 14,677   

Net change

     (660     (1,583
                

Balance at end of period

   $ 10,363      $ 13,094   
                

Total stockholders’ equity

   $ 436,901      $ 416,381   
                

The accompanying notes are an integral part of these consolidated financial statements.

 

4


BANCFIRST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

     Three Months Ended
March 31,
 
     2010     2009  

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES [1]

   $ (33,416   $ 9,940   
                

INVESTING ACTIVITIES

    

Purchases of securities:

    

Held for investment

     (140     —     

Available for sale

     (34,079     —     

Maturities of securities:

    

Held for investment

     1,388        1,986   

Available for sale

     16,978        10,654   

Proceeds from sales and calls of securities:

    

Held for investment

     7        9   

Available for sale

     1,068        839   

Net decrease in federal funds sold

     5,000        1,000   

Purchases of loans

     (89     (18,879

Proceeds from sales of loans

     2,372        2,061   

Net other decrease (increase) in loans

     16,356        (34,023

Purchases of premises, equipment and other

     (1,531     (2,319

Proceeds from the sale of other assets

     1,426        1,333   
                

Net cash provided by (used in) investing activities

     8,756        (37,339
                

FINANCING ACTIVITIES

    

Net increase in demand, transaction and savings deposits

     95,201        66,975   

Net (decrease) increase in certificates of deposits and IRA’s

     (15,200     26,935   

Net increase (decrease) in short-term borrowings

     900        (11,634

Issuance of common stock

     661        150   

Cash dividends paid

     (3,523     (3,369
                

Net cash provided by financing activities

     78,039        79,057   
                

Net increase in cash, due from banks and interest bearing deposits

     53,379        51,658   

Cash, due from banks and interest bearing deposits at the beginning of the period

     1,036,510        453,101   
                

Cash, due from banks and interest bearing deposits at the end of the period

   $ 1,089,889      $ 504,759   
                

SUPPLEMENTAL DISCLOSURE

    

Cash paid during the period for interest

   $ 7,899      $ 11,975   
                

 

[1] Includes $48.1 million net loan originations of loans held for sale for the three months ended March 31, 2010

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) GENERAL

The accompanying consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., and BancFirst and its subsidiaries (the “Company”). The operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BancFirst Agency, Inc., Lenders Collection Corporation and BancFirst Community Development 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 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, 2009, the date of the most recent annual report.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States inherently involves the use of estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures. These estimates relate principally to the determination of the allowance for loan losses, income taxes, the fair value of financial instruments and the valuation of intangibles. Such estimates and assumptions may change over time and actual amounts realized may differ from those reported.

 

(2) RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, Fair Vale Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Codification Subtopic 820-10 to now require entities to make new disclosures about the different classes of assets and liabilities measured at fair value. The new requirements are as follows: (1) a reporting entity should disclose separately the amounts of significant transfers between Level 1 and Level 2 fair-value measurements and the reasons for the transfers, and (2) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information on purchases, sales, issuances and settlements on a gross basis. The FASB also clarified existing fair-value measurement disclosure guidance about the level of disaggregation of assets and liabilities, and information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair-value measurements. Except for certain detailed Level 3 disclosures, which are effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years, the new guidance is effective for the Company’s financial statements for the periods ending after December 15, 2009. The adoption of this disclosure-only guidance will not have an effect on the Company’s results of operations or financial position. See Note 14 for disclosure.

 

(3) RECENT DEVELOPMENTS: MERGERS, ACQUISITIONS AND DISPOSALS

In April 2010 the Company elected to cease participation in the Transaction Account Guarantee Program for extended coverage of noninterest bearing transaction deposit accounts. As of March 31, 2010, the Company had approximately $600 million of deposits covered under this program. The Company’s participation in the Transaction Account Guarantee Program will expire on June 30, 2010.

On April 1, 2010, the Company’s insurance agency BancFirst Insurance Services, Inc., formerly known as Wilcox, Jones & McGrath, Inc., completed its acquisition of RBC Agency, Inc., which has offices in Shawnee and Stillwater. BancFirst Insurance Services, Inc. has offices in Oklahoma City, Tulsa, Lawton and Muskogee. The acquisition did not have a material effect on the results of operations for the Company.

On March 21, 2010, Congress passed student loan reform centralizing student lending in a governmental agency, which as of June 30, 2010, will result in an end to the student loan programs provided by the Company. As of March 31, 2010, the Company had approximately $198 million of student loans with $136 million held for sale.

 

6


On December 8, 2009, the Company completed the acquisition of First Jones Bancorporation. First State Bank, Jones operated as a subsidiary of BancFirst Corporation until it was merged into the BancFirst system in early March 2010. The acquisition enhanced the presence of BancFirst in eastern Oklahoma County. The acquisition did not have a material effect on the results of operations for the Company.

 

(4) SECURITIES

The following table summarizes securities held for investment and securities available for sale (dollars in thousands):

 

     March 31,    December 31,
     2010    2009    2009

Held for investment, at cost (market value; $29,465, $33,216 and $30,736, respectively)

   $ 28,540    $ 32,473    $ 29,796

Available for sale, at market value

     402,046      406,747      387,376
                    

Total

   $ 430,586    $ 439,220    $ 417,172
                    

The following table summarizes the maturity of securities (dollars in thousands):

 

     March 31,    December 31,
     2010    2009    2009

Contractual maturity of debt securities:

        

Within one year

   $ 162,641    $ 122,977    $ 69,093

After one year but within five years

     245,586      272,772      267,375

After five years

     12,472      27,466      70,196
                    

Total debt securities

     420,699      423,215      406,664

Equity securities

     9,887      16,005      10,508
                    

Total

   $ 430,586    $ 439,220    $ 417,172
                    

The Company held 207 and 221 debt securities available for sale that had unrealized gains as of March 31, 2010 and 2009, respectively. These securities had a market value totaling $293.3 million and $390.0 million, respectively, and unrealized gains totaling $14.5 million and $17.3 million, respectively. The Company also held 26 and 15 debt securities available for sale that had unrealized losses, respectively. These securities had a market value totaling $76.0 million and $1.2 million and unrealized losses totaling $409,000 and $11,000, respectively. The Company has both the intent and ability to hold these debt securities until the unrealized losses are recovered.

 

7


(5) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category (dollars in thousands):

 

     March 31,     December 31,  
     2010     2009     2009  
     Amount    Percent     Amount    Percent     Amount    Percent  

Commercial and industrial

   $ 504,624    18.24   $ 533,837    19.01   $ 515,762    18.83

Oil & gas production & equipment

     83,351    3.01        86,803    3.09        84,199    3.07   

Agriculture

     81,943    2.96        82,947    2.96        83,519    3.05   

State and political subdivisions:

               

Taxable

     10,171    0.37        6,154    0.22        12,066    0.44   

Tax-exempt

     8,329    0.30        8,108    0.29        8,840    0.32   

Real Estate:

               

Construction

     208,136    7.53        237,948    8.47        201,704    7.37   

Farmland

     83,875    3.03        87,610    3.12        85,620    3.13   

One to four family residences

     564,189    20.40        551,645    19.64        569,592    20.80   

Multifamily residential properties

     29,417    1.07        48,575    1.73        29,964    1.09   

Commercial

     767,946    27.76        760,630    27.08        765,911    27.97   

Consumer

     396,024    14.32        374,019    13.32        352,477    12.88   

Other

     28,299    1.01        30,223    1.07        29,000    1.05   
                                       

Total loans

   $ 2,766,304    100.00   $ 2,808,499    100.00   $ 2,738,654    100.00
                                       

Loans held for sale (included above)

   $ 142,903      $ 8,772      $ 94,140   
                           

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, if any, 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.

Loans held for sale included $135.7 million and $82.4 million of student loans as of March 31, 2010 and December 31, 2009, respectively. Student loans are classified as consumer loans in the preceding table and valued at the lower of cost or market.

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 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 (dollars in thousands):

 

     Three Months Ended
March 31,
 
     2010     2009  

Balance at beginning of period

   $ 36,383      $ 34,290   
                

Charge-offs

     (638     (1,068

Recoveries

     139        178   
                

Net charge-offs

     (499     (890
                

Provisions charged to operations

     896        3,365   
                

Balance at end of period

   $ 36,780      $ 36,765   
                

 

8


The net charge-offs by category are summarized as follows (dollars in thousands):

 

     Three Months Ended
March 31,
     2010    2009

Commercial, financial and other

   $ 92    $ 377

Real estate – construction

     4      135

Real estate – mortgage

     274      224

Consumer

     129      154
             

Total

   $ 499    $ 890
             

 

(6) NONPERFORMING AND RESTRUCTURED ASSETS

The following is a summary of nonperforming and restructured assets (dollars in thousands):

 

     March 31,     December 31,  
     2010     2009     2009  

Past due over 90 days and still accruing

   $ 589      $ 867      $ 853   

Nonaccrual

     37,801        25,255        37,133   

Restructured

     1,912        353        1,970   
                        

Total nonperforming and restructured loans

     40,302        26,475        39,956   

Other real estate owned and repossessed assets

     10,272        5,576        9,881   
                        

Total nonperforming and restructured assets

   $ 50,574      $ 32,051      $ 49,837   
                        

Nonperforming and restructured loans to total loans

     1.46     0.94     1.46
                        

Nonperforming and restructured assets to total assets

     1.12     0.81     1.13
                        

 

(7) INTANGIBLE ASSETS AND GOODWILL

The following is a summary of intangible assets (dollars in thousands):

 

     March 31,     December 31,  
     2010     2009     2009  
     Gross          Gross          Gross       
     Carrying    Accumulated     Carrying    Accumulated     Carrying    Accumulated  
     Amount    Amortization     Amount    Amortization     Amount    Amortization  

Core deposit intangibles

   $ 7,222    $ (3,739   $ 6,722    $ (3,054   $ 7,222    $ (3,558

Customer relationship intangibles

     4,448      (1,029     4,429      (782     4,448      (968
                                             

Total

   $ 11,670    $ (4,768   $ 11,151    $ (3,836   $ 11,670    $ (4,526
                                             

Amortization of intangible assets and estimated amortization of intangible assets are as follows: (dollars in thousands):

 

Amortization:

  

Three months ended March 31, 2010

   $ 242

Three months ended March 31, 2009

     230

Year ended December 31, 2009

     920

Estimated Amortization

  

Year ending December 31:

  

2010

   $ 969

2011

     969

2012

     958

2013

     815

2014

     586

 

9


The following is a summary of goodwill by business segment (dollars in thousands):

 

     Metropolitan
Banks
   Community
Banks
   Other
Financial
Services
   Executive,
Operations
& Support
   Consolidated

Three Months Ended March 31, 2010

              

Balance at beginning and end of period

   $ 6,150    $ 23,652    $ 4,258    $ 624    $ 34,684
                                  

Three Months Ended March 31, 2009

              

Balance at beginning and end of period

   $ 6,150    $ 23,295    $ 4,258    $ 624    $ 34,327
                                  

Year Ended December 31, 2009

              

Balance at beginning of period

   $ 6,150    $ 23,295    $ 4,258    $ 624    $ 34,327

Acquisitions

     —        357      —        —        357
                                  

Balance at end of period

   $ 6,150    $ 23,652    $ 4,258    $ 624    $ 34,684
                                  

 

(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 as follows (dollars in thousands):

 

     Minimum     March 31,     December 31,  
     Required     2010     2009     2009  

Tier 1 capital

     $ 410,928      $ 387,622      $ 403,875   

Total capital

     $ 447,621      $ 424,387      $ 440,258   

Risk-adjusted assets

     $ 2,935,332      $ 3,022,808      $ 2,942,152   

Leverage ratio

   3.00     9.20     9.90     9.23

Tier 1 capital ratio

   4.00     14.00     12.82     13.73

Total capital ratio

   8.00     15.25     14.04     14.96

As of March 31, 2010 and 2009, and December 31, 2009, 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 Stock Repurchase Program (the “SRP”). The SRP may be used as a means to increase earnings per 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 stockholders wishing to sell their stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee. At March 31, 2010 there were 560,000 shares remaining that could be repurchased under the SRP. The Company did not repurchase shares under the SRP for the three months ended March 31, 2010 or 2009.

 

10


(10) SHARE-BASED COMPENSATION

BancFirst Corporation adopted a nonqualified incentive stock option plan (the “BancFirst ISOP”) in May 1986. The Company amended the BancFirst ISOP to increase the number of shares to be issued under the plan to 2,650,000 shares in May 2009. At March 31, 2010, 113,860 shares are available for future grants. The BancFirst ISOP will terminate December 31, 2014. The options are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options granted prior to 1996 expire at the end of eleven years from the date of the grant. Options granted after January 1, 1996 expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2010 will become exercisable through the year 2016. The option price must be no less than 100% of the fair market value of the stock relating to such option at the date of grant.

In June 1999, the Company adopted the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”). Each non-employee director is granted an option for 10,000 shares. The Company amended the BancFirst Directors’ Stock Option Plan to increase the number of shares to be issued under the plan to 205,000 shares in May 2009. At March 31, 2010, 50,000 shares are available for future grants. The options are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2010 will become exercisable through the year 2011. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

The following is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan (dollars in thousands, except per share data):

 

     Three Months Ended March 31, 2010
     Options     Wgtd. Avg.
Exercise Price
   Wgtd. Avg.
Remaining
Contractual Term
   Aggregate
Intrinsic
Value

Outstanding at December 31, 2009

   1,209,553      $ 27.41      

Options granted

   —          —        

Options exercised

   (27,972     21.74      

Options canceled

   (6,400     30.53      
              

Outstanding at March 31, 2010

   1,175,181        27.53    8.97    $ 11,181
                    

Exercisable at March 31, 2010

   691,467        21.28    6.76    $ 10,899
                    

The following is additional information regarding options granted and options exercised under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan (dollars in thousands, except per share data):

 

     Three Months Ended
March 31,
     2010    2009

Weighted average grant-date fair value per share of options granted

     N/A      N/A

Total intrinsic value of options exercised

   $ 553    $ 17

Cash received from options exercised

     608      8

Tax benefit realized from options exercised

     213      7

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility, and the expected term. The fair value of each option is expensed over its vesting period.

For the three months ended March 31, 2010 and 2009, the Company recorded share-based employee compensation expense of approximately $227,000 and $163,000, respectively, net of tax.

 

11


The Company will continue to amortize the remaining fair value of these stock options of approximately $5.8 million, over the remaining vesting period of approximately seven years. The following table shows the assumptions used for computing share-based employee compensation expense under the fair value method.

 

     March 31,  
     2010     2009  

Risk-free interest rate

   4.00   2.17

Dividend yield

   1.50   1.50

Stock price volatility

   38.61   68.96

Expected term

   10 Yrs      10 Yrs   

The risk-free interest rate is determined by reference to the spot zero-coupon rate for the U.S. Treasury security with a maturity similar to the expected term of the options. The dividend yield is the expected yield for the expected term. The stock price volatility is estimated from the recent historical volatility of the Company’s stock. The expected term is estimated from the historical option exercise experience.

 

(11) 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. The following is a summary of the tax effects of this unrealized gain or loss (dollars in thousands):

 

     Three Months Ended
March 31,
 
     2010     2009  

Unrealized loss during the period:

    

Before-tax amount

   $ (995   $ (2,436

Tax benefit

     335        853   
                

Net-of-tax amount

   $ (660   $ (1,583
                

The amount of unrealized gain included, net of tax, in accumulated other comprehensive income is summarized in the following table (dollars in thousands):

 

     Three Months Ended
March 31,
 
     2010     2009  

Unrealized gain on securities:

    

Beginning balance

   $ 11,023      $ 14,677   

Current period change

     (748     (2,774

Reclassification adjustment for gains included in net income

     88        1,191   
                

Ending balance

   $ 10,363      $ 13,094   
                

 

12


(12) NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are calculated as follows (dollars in thousands, except per share data):

 

     Income
(Numerator)
   Shares
(Denominator)
   Per  Share
Amount

Three Months Ended March 31, 2010

Basic

Income available to common stockholders

   $ 9,303    15,319,111    $ 0.61
            

Effect of stock options

     —      308,901   
              

Diluted

Income available to common stockholders plus assumed exercises of stock options

   $ 9,303    15,628,012    $ 0.60
                  

Three Months Ended March 31, 2009

Basic

Income available to common stockholders

   $ 7,125    15,291,636    $ 0.47
            

Effect of stock options

     —      287,454   
              

Diluted

Income available to common stockholders plus assumed exercises of stock options

   $ 7,125    15,579,090    $ 0.46
                  

The following table contains 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 proceeds that would be received from the options’ exercise were greater than the average market price of the common shares.

 

     Shares    Average
Exercise
Price

Three Months Ended March 31, 2010

   398,200    $ 40.06

Three Months Ended March 31, 2009

   267,417    $ 36.99

 

(13) SEGMENT INFORMATION

The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The four principal business units are metropolitan banks, community banks, other financial services, and executive, operations and support. Metropolitan and community banks offer traditional banking products such as commercial and retail lending, and a full line of deposit accounts. Metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Other financial services are specialty product business units including guaranteed small business lending, guaranteed student lending, residential mortgage lending, trust services, securities brokerage, electronic banking and insurance. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units.

 

13


The results of operations and selected financial information for the four business units are as follows (dollars in thousands):

 

     Metropolitan
Banks
   Community
Banks
   Other
Financial
Services
   Executive,
Operations
& Support
    Eliminations     Consolidated

Three Months Ended:

               

March 31, 2010

               

Net interest income (expense)

   $ 11,258    $ 21,991    $ 1,451    $ (838   $ —        $ 33,862

Noninterest income

     2,562      8,355      4,342      10,424        (9,723     15,960

Income before taxes

     7,005      11,924      1,619      3,149        (9,672     14,025

March 31, 2009

               

Net interest income (expense)

   $ 9,245    $ 21,337    $ 1,846    $ (675   $ —        $ 31,753

Noninterest income

     2,868      8,298      4,795      8,149        (7,488     16,622

Income before taxes

     4,428      11,577      1,991      (70     (7,445     10,481

Total Assets:

               

March 31, 2010

   $ 1,472,093    $ 2,807,863    $ 280,694    $ 440,146      $ (492,007   $ 4,508,789

March 31, 2009

   $ 1,277,940    $ 2,511,295    $ 272,162    $ 377,807      $ (481,049   $ 3,958,155

December 31, 2009

   $ 1,386,748    $ 2,779,110    $ 221,033    $ 523,350      $ (494,126   $ 4,416,115

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 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. Capital expenditures are generally charged to the business unit using the asset.

 

(14) FAIR VALUE MEASUREMENTS

ASC Topic 820 (formerly FAS 157), establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

 

 

Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

 

Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

 

Level 3 Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

 

14


Securities Available for Sale

Securities classified as available for sale are reported at fair value. U.S. Treasuries are valued using Level 1 inputs. Other securities available for sale including U.S. federal agencies, mortgage backed securities, and states and political subdivisions are valued using prices from an independent pricing service utilizing Level 2 data. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The Company also invests in equity securities classified as available for sale for which observable information is not readily available. These securities are reported at fair value utilizing Level 3 inputs. For these securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors.

Derivatives

Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains dealer and market quotations to value its oil and gas swaps and options. The Company utilizes dealer quotes and observable market data inputs to substantiate internal valuation models.

Loans Held For Sale

The Company originates mortgage and student loans to be sold. At the time of origination, the acquiring bank or governmental agency has already been determined and the terms of the loan, including interest rate, have already been set by the acquiring bank or governmental agency, allowing the Company to originate the loan at fair value. Mortgage loans are generally sold within 30 days of origination and student loans are generally sold within one year. Loans held for sale are carried at lower of cost or market. Gains or losses recognized upon the sale of the loans are determined on a specific identification basis.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):

 

     Level 1 Inputs    Level 2 Inputs    Level 3 Inputs    Total Fair Value

Securities Available for Sale

   $ 912    $ 391,247    $ 9,887    $ 402,046

Derivative Assets

     —        10,635      —        10,635

Derivative Liabilities

     —        8,820      —        8,820

Loans Held For Sale

     —        142,903      —        142,903

The changes in Level 3 assets measured at estimated fair value on a recurring basis were as follows (dollars in thousands):

 

     Three Months Ended
March 31,
 
     2010     2009  

Beginning balance

   $ 10,508      $ 16,345   

Purchases

     —          —     

Sales

     (617     —     

Total unrealized losses

     (4     (339
                

Ending balance

   $ 9,887      $ 16,006   
                

 

(15) DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into oil and gas swaps and options contracts to accommodate the business needs of its customers. Upon the origination of an oil or gas swap or option contract with a customer, the Company simultaneously enters into an offsetting contract with a counterparty to mitigate the exposure to fluctuations in oil and gas prices. These derivatives are not designated as hedged instruments and are recorded on the Company’s consolidated balance sheet at fair value.

 

15


The Company utilizes dealer quotations and observable market data inputs to substantiate internal valuation models. The notional amounts and estimated fair values of oil and gas derivative positions outstanding are presented in the following table (notional amounts and dollars in thousands):

 

          March 31,     December 31,  
          2010     2009     2009  

Oil and natural gas swaps and options

   Notional Units    Notional
Amount
    Estimated
Fair Value
    Notional
Amount
    Estimated
Fair Value
    Notional
Amount
    Estimated
Fair Value
 

Oil

               

Derivative assets

   Barrels    302      $ 5,663      256      $ 9,396      286      $ 6,138   

Derivative liabilities

   Barrels    (302     (5,172   (256     (8,725   (286     (5,682

Natural Gas

               

Derivative assets

   MMBTUs    4,174        8,007      7,301        9,862      6,914      $ 4,564   

Derivative liabilities

   MMBTUs    (4,174     (6,683   (7,301     (8,337   (6,914     (3,226

Total fair value

   Included in             

Derivative assets

   Other assets        10,635          19,043          7,544   

Derivative liabilities

   Other liabilities        8,820          16,847          5,750   

The Company recognized income related to this activity, which was included in other noninterest income, of $108,000 and $372,000 for the three months ended March 31, 2010 and 2009, respectively.

The Company’s credit exposure on oil and gas swaps and options varies based on the current market prices of oil and natural gas. Other than credit risk, changes in the fair value of customer positions will be offset by equal and opposite changes in the counterparty positions. The net positive fair value of the contracts is the profit derived from the activity and is unaffected by market price movements.

Customer credit exposure is managed by strict position limits and is primarily offset by first liens on production while the remainder is offset by cash. Counterparty credit exposure is managed by selecting highly rated counterparties (rated A- or better by Standard and Poor’s) and monitoring market information.

The Company had credit exposure relating to oil and gas swaps and options with bank counterparties of approximately $10.0 million at March 31, 2010, $17.6 million at March 31, 2009 and $6.1 million at December 31, 2009.

The Company entered into a $30 million five year guaranty with a counterparty on June 4, 2008 for the timely payment of the obligations of its subsidiary Bank related to the settlement of oil and gas positions.

 

16


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis presents factors that the Company believes are relevant to an assessment and understanding of the Company’s consolidated financial position and results of operations. This discussion and analysis should be read in conjunction with the Company’s December 31, 2009 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and the Company’s consolidated financial statements and the related notes included in Item 1.

FORWARD LOOKING STATEMENTS

The Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. Forward-looking statements include estimates and give management’s current expectations or forecasts of future events. 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.

SUMMARY

BancFirst Corporation’s net income for the first quarter of 2010 was $9.3 million compared to $7.1 million for the first quarter of 2009. Diluted net income per share was $0.60 and $0.46 for the first quarter of 2010 and 2009, respectively.

Net interest income for the first quarter of 2010 was $33.9 million, compared to $31.8 million for the first quarter of 2009. The Company’s net interest margin was 3.38% the first quarter of 2010 down 31 basis points from 3.69% for the first quarter of 2009. The decrease is due to lower interest rates brought about by a slowing national economy, reflected in the national unemployment rate reaching 10%. Provision for loan losses was $896,000 for the first quarter of 2010 compared to $3.4 million for the first quarter of 2009. Noninterest income was $16.0 million for the first quarter of 2010 compared to $16.6 million for the first quarter of 2009, while noninterest expense was $34.9 million for the first quarter of 2010 compared to $34.5 million for the first quarter of 2009.

Total assets at March 31, 2010 were $4.5 billion, up $551 million or 13.9% from a year ago. Compared to year end 2009, total assets grew by $93 million from $4.4 billion. Total loans at March 31, 2010 were $2.8 billion, a decrease of $42 million or 1.5% from March 31, 2009, compared to an increase of $28 million from December 31, 2009. At March 31, 2010 total deposits were $4.0 billion, up $538 million or 15.5% from March 31, 2009 and up $80 million from December 31, 2009. The Company’s liquidity remains strong as its average loan-to-deposit ratio was 70.1% at March 31, 2010 compared to 83.3% at March 31, 2009. Stockholders’ equity was $437 million as of March 31, 2010, an increase of $21 million from March 31, 2009 and $6 million from December 31, 2009. Average stockholders’ equity to average assets was 9.86% at March 31, 2010, compared to 10.85% at March 31, 2009. The Company’s borrowings include no brokered deposits and no Federal Home Loan Bank borrowings at March 31, 2010.

Asset quality began to deteriorate in 2009, which resulted in a ratio of nonperforming and restructured assets to total assets of 1.12% at March 31, 2010, compared to 0.81% at March 31, 2009 and 1.13% for the year ended December 31, 2009. The allowance for loan losses equaled 91.3% of nonperforming and restructured loans at March 31, 2010, versus 138.9% at March 31, 2009 and 91.1% at December 31, 2009. Net charge-offs to average loans decreased to 0.07% at March 31, 2010, compared to 0.13% at March 31, 2009. The allowance for loan losses as a percentage of total loans remained fairly constant at 1.33% at March 31, 2010 compared to 1.31% at March 31, 2009 and 1.33% at December 31, 2009.

In April 2010 the Company elected to cease participation in the Transaction Account Guarantee Program (“TAGP”) for extended coverage of noninterest bearing transaction deposit accounts. As of March 31, 2010, the Company had approximately $600 million of deposits covered under this program. The Company’s participation in the TAGP will expire on June 30, 2010.

 

17


On March 21, 2010, Congress passed student loan reform centralizing student lending in a governmental agency, which as of June 30, 2010, will result in an end to the student loan programs provided by the Company. As of March 31, 2010, the Company had approximately $198 million of student loans with $136 million held for sale.

On April 1, 2010, the Company’s insurance agency BancFirst Insurance Services, Inc., formerly known as Wilcox, Jones & McGrath, Inc., completed its acquisition of RBC Agency, Inc., which has offices in Shawnee and Stillwater. BancFirst Insurance Services, Inc. has offices in Oklahoma City, Tulsa, Lawton and Muskogee. The acquisition did not have a material effect on the results of operations for the Company.

RESULTS OF OPERATIONS

Selected income statement data and other selected data for the comparable periods were as follows:

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended March 31,  
     2010     2009  

Income Statement Data

    

Net interest income

   $ 33,862      $ 31,753   

Provision for loan losses

     896        3,365   

Securities transactions

     136        339   

Total noninterest income

     15,960        16,622   

Salaries and employee benefits

     19,948        20,117   

Total noninterest expense

     34,901        34,529   

Net income

     9,303        7,125   

Per Common Share Data

    

Net income – basic

   $ 0.61      $ 0.47   

Net income – diluted

     0.60        0.46   

Cash dividends

     0.23        0.22   

Performance Data

    

Return on average assets

     0.85     0.75

Return on average stockholders’ equity

     8.66        6.92   

Cash dividend payout ratio

     37.70        46.81   

Net interest spread

     3.05        3.06   

Net interest margin

     3.38        3.69   

Efficiency ratio

     70.05        71.38   

Net charge-offs to average loans

     0.07        0.13   

 

     March 31,     December 31,  
     2010     2009     2009  

Balance Sheet Data

      

Total assets

   $ 4,508,789      $ 3,958,155      $ 4,416,115   

Total loans

     2,766,304        2,808,499        2,738,654   

Allowance for loan losses

     (36,780     (36,765     (36,383

Securities

     430,586        439,220        417,172   

Deposits

     4,009,017        3,471,518        3,929,016   

Stockholders’ equity

     436,901        416,381        430,750   

Book value per common share

     28.49        27.23        28.14   

Tangible book value per common share

     25.78        24.51        25.41   

Average loans to deposits (year-to-date)

     70.05     83.29     74.57

Average earning assets to total assets (year-to-date)

     92.62        91.51        92.56   

Average stockholders’ equity to average assets (year-to-date)

     9.86        10.85        10.15   

Asset Quality Ratios

      

Nonperforming and restructured loans to total loans

     1.46     0.94     1.46

Nonperforming and restructured assets to total assets

     1.12        0.81        1.13   

Allowance for loan losses to total loans

     1.33        1.31        1.33   

Allowance for loan losses to nonperforming and restructured loans

     91.26        138.87        91.06   

 

18


Net Interest Income

Net interest income, which is the Company’s principal source of operating revenue, totaled $33.9 million for the first quarter of 2010, an increase of $2.1 million, or 6.6%, compared to the first quarter of 2009. Net interest income for the first quarter of 2010 included nonrecurring interest income on nonaccrual loans of $360,000. The Company’s net interest margin on a taxable equivalent basis for the first quarter of 2010 was 3.38% compared to 3.69% for the same period a year ago. The lower interest rate environment in 2010 compared to a year ago has caused the Company’s net interest margin to decline. In addition, an increase in earning assets and a higher level of overnight investments at lower rates caused further compression of the net interest margin. This compression was somewhat offset by the implementation of interest rate floors on loans implemented during 2009. If interest rates do not increase, the Company could experience continued compression of its net interest margin in 2010 as higher rate assets mature in a continued low interest rate environment. Furthermore, due to the interest rate floors implemented, short-term interest rates would have to increase approximately 100 basis points before the Company’s loan portfolio would experience a measurable increase in yield. From March 31, 2009 earning assets increased $574 million to $4.1 billion. During the quarter, the Company’s net interest margin experienced a volume variance of negative $1.4 million offset by a positive rate variance of $3.5 million due to lower interest expense on deposits.

Provision for Loan Losses

The Company’s provision for loan losses for the first quarter of 2010 was $896,000 compared to $3.4 million during the same period a year ago. The decrease in the loan loss provision was due to minimal net change in the level of nonperforming or potential problem loans. Net loan charge-offs were $499,000 for the first quarter of 2010, compared to $890,000 for the first quarter of 2009. The net charge-offs represent a rate of 0.07% of average total loans for the first quarter of 2010 compared to 0.13% for the same period in 2009.

Noninterest Income

At March 31, 2010, noninterest income was $16.0 million, down $662,000 or 4.0% over noninterest income for the same quarter a year ago. The decrease in noninterest income was due to lower electronic banking fees as deposits in money-markets funds declined. The lower electronic banking fees were offset somewhat by higher service charges on deposits.

Noninterest Expense

At March 31, 2010, noninterest expense was $34.9 million up $372,000 from $34.5 million for the same period last year. Noninterest expense rose slightly due to higher FDIC insurance premium of $675,000 and acquisition expenses of $389,000 offset by lower other operating expense.

Income Taxes

The Company’s effective tax rate was 33.7% for the quarter compared to 32.0% a year ago due to federal and state tax credits and an increase in pretax earnings.

FINANCIAL POSITION

Cash, Federal Funds Sold and Interest Bearing Balances with Banks

The aggregate of cash and due from banks, interest-bearing deposits with banks, and federal funds sold as of March 31, 2010 increased $48 million from December 31, 2009 and $585 million from March 31, 2009. The increase was mainly from deposit growth. Federal funds sold consists of overnight investments of excess funds with other financial institutions. Due to the Federal Reserve Bank’s intervention into the Federal funds market that has resulted in near zero overnight fed funds rates, the Company has maintained its excess funds with the Federal Reserve Bank. The Federal Reserve Bank pays interest on these funds based upon the lowest target rate for the maintenance period.

 

19


Securities

At March 31, 2010, total securities increased $13 million or 3.2% compared to December 31, 2009 and decreased $9 million or 2.0% compared to March 31, 2009. 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, before taxes, was $15.9 million at the end of the first quarter of 2010, compared to $20.1 million at March 31, 2009.

Loans

For the quarter ended March 31, 2010, total loans were approximately $2.8 billion, up $28 million or 1.0% from December 31, 2009 and down $42 million or 1.5% from March 31, 2009. The allowance for loan losses remained constant at $36.8 million compared to the first quarter of 2009, and increased slightly by $397,000 or 1.1% from year-end 2009. The allowance as a percentage of total loans was 1.33%, 1.33% and 1.31% at March 31, 2010, December 31, 2009 and March 31, 2009, respectively. The allowance to nonperforming and restructured loans at the same dates was 91.3%, 91.1% and 138.9%, respectively.

Nonperforming and Restructured Loans

Nonperforming and restructured loans totaled $40.3 million at March 31, 2010, compared to $40.0 million at December 31, 2009 and $26.5 million at March 31, 2009. The ratio of nonperforming and restructured loans to total loans for the same periods was 1.46%, 1.46% and 0.94%, respectively. The level of nonperforming loans and loan losses may rise over time as a result of economic conditions.

Potential problem loans are performing loans to borrowers with a weakened financial condition, or which are experiencing unfavorable trends in their financial condition, which causes management to have concerns as to the ability of such borrowers to comply with the existing repayment terms. The Company had approximately $75.1 million of these loans at March 31, 2010 compared to $73.6 million at December 31, 2009 and $68.4 million at March 31, 2009. These loans are not included in nonperforming and restructured assets. In general, these loans are adequately collateralized and have no specific identifiable probable loss. Loans which are considered to have identifiable probable loss potential are placed on nonaccrual status, are allocated a specific allowance for loss or are directly charged-down, and are reported as nonperforming. The Company’s nonaccrual loans are primarily commercial and real estate loans.

Deposits

At March 31, 2010 total deposits were $4.0 billion, an increase of $538 million or 15.5% from March 31, 2009 and $80 million or 2.0% from December 31, 2009. The increase from March 31, 2009 was due largely to overnight sweep funds that moved into low-rate interest-bearing transaction accounts due to low interest rates on money market funds. These deposits were insured because the Company participated in the TAGP and will continue to do so until June 30, 2010. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 9.4% of total deposits at March 31, 2010, compared to 9.7% at December 31, 2009 and 10.5% at March 31, 2009. The TAGP will expire on June 30, 2010. At March 31, 2010 the Company held approximately $600 million of deposits covered under TAGP. Some of the deposits currently insured by the TAGP could move back into money market funds or to other depository institutions.

Short-Term Borrowings

Short-term borrowings increased $900,000 from December 31, 2009, and decreased $250,000 from March 31, 2009. 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.

 

20


Capital Resources

Stockholders’ equity was $437 million or 9.7% of total assets as of March 31, 2010, an increase of $6 million from year-end 2009 and an increase of $21 million from the first quarter of 2009 due to accumulated earnings. Average stockholders’ equity to average assets for the first quarter of 2010 was 9.86%, compared to 10.85% for the first quarter of 2009. The Company’s leverage ratio and total risk-based capital ratio were 9.20% and 15.25%, respectively, at March 31, 2010, well in excess of the regulatory minimums.

CONTRACTUAL OBLIGATIONS

There have not been material changes in the resources required for scheduled repayments of contractual obligations from the table of Contractual Cash Obligations included in Management’s Discussion and Analysis included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

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 (13) of the Notes to Consolidated Financial Statements for disclosures regarding business segments.

 

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BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

 

     Three Months Ended March 31,  
     2010     2009  
     Average
Balance
    Interest
Income/
Expense
   Average
Yield/
Rate
    Average
Balance
    Interest
Income/
Expense
   Average
Yield/
Rate
 

ASSETS

              

Earning assets:

              

Loans (1)

   $ 2,755,744      $ 37,442    5.51   $ 2,801,385      $ 38,344    5.55

Securities – taxable

     387,459        3,010    3.15        408,908        3,626    3.60   

Securities – tax exempt

     36,704        507    5.60        41,518        586    5.72   

Interest Bearing Deposits with Banks and Federal funds sold

     916,510        574    0.25        270,854        359    0.54   
                                  

Total earning assets

     4,096,417        41,533    4.11        3,522,665        42,915    4.94   
                                  

Nonearning assets:

              

Cash and due from banks

     109,758             127,832        

Interest receivable and other assets

     253,165             233,479        

Allowance for loan losses

     (36,419          (34,550     
                          

Total nonearning assets

     326,504             326,761        
                          

Total assets

   $ 4,422,921           $ 3,849,426        
                          

LIABILITIES AND STOCKHOLDERS EQUITY

              

Interest-bearing liabilities:

              

Transaction deposits

   $ 609,443      $ 367    0.24   $ 356,831      $ 226    0.26

Savings deposits

     1,326,881        3,073    0.94        1,102,520        4,599    1.69   

Time deposits

     859,118        3,484    1.64        849,815        5,555    2.65   

Short-term borrowings

     763        —      —          8,714        10    0.47   

Junior subordinated debentures

     26,804        489    7.40        26,804        491    7.43   
                                  

Total interest-bearing liabilities

     2,823,009        7,413    1.06        2,344,684        10,881    1.88   
                                  

Interest-free funds:

              

Noninterest-bearing deposits

     1,138,291             1,054,079        

Interest payable and other liabilities

     25,724             32,860        

Stockholders’ equity

     435,897             417,803        
                          

Total interest free funds

     1,599,912             1,504,742        
                          

Total liabilities and stockholders’ equity

   $ 4,422,921           $ 3,849,426        
                          

Net interest income

     $ 34,120        $ 32,034   
                      

Net interest spread

        3.05        3.06
                      

Net interest margin

        3.38        3.69
                      

 

(1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Registrant’s disclosures regarding market risk since December 31, 2009, the date of its annual report to stockholders.

 

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer, Chief Financial Officer and Disclosure Committee, which includes the Company’s Chief Risk Officer, Chief Asset Quality Officer, Chief Internal Auditor, Treasurer, Bank Controller and General Counsel, have evaluated, as of the last day of the period covered by this report, the Company’s disclosure controls and procedures. Based on their evaluation they concluded that the disclosure controls and procedures of the Company are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms. No changes were made to the Company’s internal control over financial reporting during the first fiscal quarter of 2010 that materially affected, or are likely to materially affect, the Company’s internal control over financial reporting. There have been no changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

The Corporation and its subsidiaries are subject to various claims and legal actions that have arisen in the normal course of conducting business. None of these actions are believed by management to involve amounts that will be material to the Company’s consolidated financial position, results of operations or liquidity.

The Company is not currently aware of any additional or material changes to pending or threatened litigation against the Company or its subsidiaries or that involves any of the Company or its subsidiaries property that could have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

 

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 5. Other Information.

None.

 

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Item 6. Exhibits.

 

Exhibit
Number

  

Exhibit

  3.1

   Second Amended and Restated Certificate of Incorporation of BancFirst Corporation (filed as Exhibit 1 to the Company’s 8-A/A filed July 23, 1998 and incorporated herein by reference).

  3.2

   Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation (filed as Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2004 and incorporated herein by reference).

  3.3

   Certificate of Designations of Preferred Stock (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference).

  3.4

   Amended By-Laws (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference).

  3.5

   Amendment to the Second Amended and Restated Certificate of Incorporation (filed as Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 and incorporated herein by reference).

  3.6

   Resolution of the Board of Directors amending Section XXVII of the Company’s By-Laws (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 26, 2004 and incorporated herein by reference).

  3.7

   Resolution of the Board of Directors amending Article XVI, Section 1 and Article XVII, Section 1 of the Company’s By-Laws (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 28, 2008 and incorporated herein by reference).

  4.1

   Instruments defining the rights of securities holders (see Exhibits 3.1, 3.2, 3.3 and 3.4 above).

  4.2

   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).

  4.3

   Form of 9.65% Series B Cumulative Trust Preferred Security Certificate for BFC Capital Trust I (included as Exhibit D to Exhibit 4.2).

  4.4

   Indenture dated as of February 4, 1997, relating to the 9.65% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust I (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference).

  4.5

   Form of Certificate of 9.65% Series B Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (included as Exhibit A to Exhibit 4.4).

  4.6

   Form of Series B Guarantee of BancFirst Corporation relating to the 9.65% Series B Cumulative Trust Preferred Securities of BFC Capital Trust I (filed as Exhibit 4.7 to the Company’s registration statement on Form S-4, File No. 333-25599, and incorporated herein by reference).

  4.7

   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 4.1 to the Company’s 8-K dated January 28, 2009 and incorporated herein by reference).

  4.8

   Amendment No. 1 to Rights Agreement, dated as of February 25, 1999, between BancFirst Corporation and BancFirst, as Rights Agent (filed as Exhibit 4.2 to the Company’s 8-K dated January 28, 2009 and incorporated herein by reference).

  4.9

   Form of Amended and Restated Trust Agreement relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.5 to the Company’s registration statement on Form S-3, File No. 333-112488, and incorporated herein by reference).

 

24


Exhibit
Number

  

Exhibit

  4.10    Form of 7.20% Cumulative Trust Preferred Security Certificate for BFC Capital Trust II (included as Exhibit D to Exhibit 4.8).
  4.11    Form of Indenture relating to the 7.20% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust II (filed as Exhibit 4.1 to the Company’s registration statement on Form S-3, File No. 333-112488, and incorporated herein by reference).
  4.12    Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (included as Section 2.2 and Section 2.3 of Exhibit 4.10).
  4.13    Form of Guarantee of BancFirst Corporation relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.7 to the Company’s registration statement on Form S-3, File No. 333-112488, and incorporated herein by reference).
10.1    Ninth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
10.2    Amended and Restated BancFirst Corporation Employee Stock Ownership and Thrift Plan, as amended by amendments dated September 19, 1992, November 21, 2002 and December 18, 2003 (filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and incorporated herein by reference).
10.3    1988 Incentive Stock Option Plan of Security Corporation as assumed by BancFirst Corporation (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8, File No. 333-65129 and incorporated herein by reference).
10.4    1993 Incentive Stock Option Plan of Security Corporation as assumed by BancFirst Corporation (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8, File No. 333-65129 and incorporated herein by reference).
10.5    1995 Non-Employee Director Stock Plan of AmQuest Financial Corp. as assumed by BancFirst Corporation (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8, File No. 333-65129 and incorporated herein by reference).
10.6    Second Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option Plan (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
10.7    Third Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
10.8    Amendment to the Amended and Restated BancFirst Corporation Employee Stock Ownership Plan and Trust Agreement adopted June 25, 2009 (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
10.9    Amendment to the Amended and Restated BancFirst Corporation Thrift Plan adopted June 25, 2009 (filed as Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
31.1*    Chief Executive Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2*    Chief Financial Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1*    CEO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*    CFO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

* Filed herewith.

 

25


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 10, 2010    

/s/ Joe T. Shockley, Jr.

    Joe T. Shockley, Jr.
    Executive Vice President
    Chief Financial Officer

 

26