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BANCFIRST CORP /OK/ - Quarter Report: 2014 June (Form 10-Q)

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 June 30, 2014

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  x    No  ¨.

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 July 31, 2014 there were 15,423,103 shares of the registrant’s Common Stock outstanding.

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     June 30,     December 31,     June 30,  
     2014     2013     2013  
     (unaudited)     (see Note 1)     (unaudited)  

ASSETS

      

Cash and due from banks

   $ 233,627      $ 196,547      $ 191,734   

Interest-bearing deposits with banks

     1,622,810        1,660,988        1,528,505   

Securities (fair value: $570,518, $527,735, and $520,567, respectively)

     570,429        527,627        520,424   

Loans:

      

Total loans (net of unearned interest)

     3,665,908        3,387,146        3,245,084   

Allowance for loan losses

     (43,297     (39,034     (38,982
  

 

 

   

 

 

   

 

 

 

Loans, net

     3,622,611        3,348,112        3,206,102   

Premises and equipment, net

     121,559        117,862        117,621   

Other real estate owned

     6,114        8,149        7,992   

Intangible assets, net

     11,574        10,273        11,100   

Goodwill

     44,962        44,545        44,545   

Accrued interest receivable and other assets

     134,947        124,871        121,643   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,368,633      $ 6,038,974      $ 5,749,666   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Deposits:

      

Noninterest-bearing

   $ 2,205,257      $ 2,085,753      $ 1,955,723   

Interest-bearing

     3,516,336        3,333,766        3,194,688   
  

 

 

   

 

 

   

 

 

 

Total deposits

     5,721,593        5,419,519        5,150,411   

Short-term borrowings

     12,317        4,590        3,522   

Long-term borrowings

     —          6,938        9,964   

Accrued interest payable and other liabilities

     27,414        24,126        24,004   

Junior subordinated debentures

     26,804        26,804        26,804   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     5,788,128        5,481,977        5,214,705   
  

 

 

   

 

 

   

 

 

 

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: 15,398,603, 15,333,622 and 15,255,864, respectively

     15,399        15,334        15,256   

Capital surplus

     91,447        88,803        84,360   

Retained earnings

     468,761        448,953        431,120   

Accumulated other comprehensive income, net of income tax of $3,090, $2,103 and $2,275, respectively

     4,898        3,907        4,225   
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     580,505        556,997        534,961   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 6,368,633      $ 6,038,974      $ 5,749,666   
  

 

 

   

 

 

   

 

 

 

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

 

2


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2014     2013     2014     2013  

INTEREST INCOME

        

Loans, including fees

   $ 45,855      $ 41,493      $ 88,504      $ 82,667   

Securities:

        

Taxable

     1,502        1,295        2,807        2,648   

Tax-exempt

     273        314        553        660   

Federal funds sold

     —          1        1        2   

Interest-bearing deposits with banks

     1,096        970        2,190        1,947   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     48,726        44,073        94,055        87,924   
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

        

Deposits

     2,733        2,889        5,522        5,929   

Short-term borrowings

     5        1        7        3   

Long-term borrowings

     7        62        25        124   

Junior subordinated debentures

     492        491        983        982   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     3,237        3,443        6,537        7,038   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     45,489        40,630        87,518        80,886   

Provision for loan losses

     3,129        516        4,347        816   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     42,360        40,114        83,171        80,070   
  

 

 

   

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

        

Trust revenue

     2,315        2,015        4,466        3,921   

Service charges on deposits

     14,360        12,924        27,818        25,260   

Securities transactions

     85        129        535        251   

Income from sales of loans

     467        691        818        1,379   

Insurance commissions

     3,262        3,045        7,228        7,090   

Cash management

     1,703        1,626        3,288        3,049   

Gain on sale of other assets

     3        34        8        251   

Other

     1,416        1,269        3,012        3,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     23,611        21,733        47,173        44,268   
  

 

 

   

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

        

Salaries and employee benefits

     27,478        25,085        53,416        50,294   

Occupancy and fixed assets expense, net

     2,784        2,501        5,573        5,081   

Depreciation

     2,375        2,358        4,724        4,666   

Amortization of intangible assets

     458        424        866        867   

Data processing services

     1,185        1,229        2,355        2,414   

Net (income) expense from other real estate owned

     (406     643        144        765   

Marketing and business promotion

     1,661        1,456        3,377        2,963   

Deposit insurance

     873        742        1,646        1,485   

Other

     9,449        8,017        17,592        15,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     45,857        42,455        89,693        84,399   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     20,114        19,392        40,651        39,939   

Income tax expense

     (5,426     (6,799     (11,306     (13,974
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 14,688      $ 12,593      $ 29,345      $ 25,965   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME PER COMMON SHARE

        

Basic

   $ 0.94      $ 0.83      $ 1.90      $ 1.70   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.92      $ 0.82      $ 1.86      $ 1.68   
  

 

 

   

 

 

   

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME

        

Unrealized gains (losses) on securities, net of tax of $(618), $857, $(1,021) and $1,083, respectively

   $ 980      $ (1,593   $ 1,045      $ (2,014

Reclassification adjustment for gains included in net income, net of tax of $14, $37, $34 and $42, respectively

     (22     (68     (54     (78
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax of $(604), $894, $(987) and $1,125, respectively

     958        (1,661     991        (2,092
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 15,646      $ 10,932      $ 30,336      $ 23,873   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

3


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2014     2013     2014     2013  

COMMON STOCK

        

Issued at beginning of period

   $ 15,364      $ 15,228      $ 15,334      $ 15,242   

Shares issued

     35        50        65        59   

Shares acquired and canceled

     —          (22     —          (45
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

   $ 15,399      $ 15,256      $ 15,399      $ 15,256   
  

 

 

   

 

 

   

 

 

   

 

 

 

CAPITAL SURPLUS

        

Balance at beginning of period

   $ 89,951      $ 82,956      $ 88,803      $ 82,401   

Common stock issued

     742        870        1,620        1,028   

Tax effect of stock options

     325        213        248        236   

Stock-based compensation arrangements

     429        321        776        695   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 91,447      $ 84,360      $ 91,447      $ 84,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

RETAINED EARNINGS

        

Balance at beginning of period

   $ 458,857      $ 423,637      $ 448,953      $ 415,607   

Net income

     14,688        12,593        29,345        25,965   

Dividends on common stock

     (4,784     (4,411     (9,537     (8,833

Common stock acquired and canceled

     —          (699     —          (1,619
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 468,761      $ 431,120      $ 468,761      $ 431,120   
  

 

 

   

 

 

   

 

 

   

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME

        

Unrealized gains (losses) on securities:

        

Balance at beginning of period

   $ 3,940      $ 5,886      $ 3,907      $ 6,317   

Net change

     958        (1,661     991        (2,092
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 4,898      $ 4,225      $ 4,898      $ 4,225   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

   $ 580,505      $ 534,961      $ 580,505      $ 534,961   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

4


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

     Six Months Ended
June 30,
 
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income

   $ 29,345      $ 25,965   

Adjustments to reconcile to net cash provided by operating activities:

    

Provision for loan losses

     4,347        816   

Depreciation and amortization

     5,590        5,533   

Net amortization of securities premiums and discounts

     512        839   

Realized securities gains

     (535     (251

Gain on sales of loans

     (818     (1,379

Cash receipts from the sale of loans originated for sale

     71,074        111,609   

Cash disbursements for loans originated for sale

     (73,306     (108,613

Deferred income tax provision

     (2,943     (335

Gain on other assets

     (535     (224

(Increase) decrease in interest receivable

     (411     18   

Decrease in interest payable

     (316     (263

Amortization of stock-based compensation arrangements

     776        695   

Other, net

     (1,619     8,304   
  

 

 

   

 

 

 

Net cash provided by operating activities

     31,161        42,714   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Net decrease in federal funds sold

     4,619        700   

Net cash and due from banks received from acquisitions

     174,283        —     

Purchases of held for investment securities

     —          (252

Purchases of available for sale securities

     (203,890     (20,697

Proceeds from maturities, calls and paydowns of held for investment securities

     2,689        2,642   

Proceeds from maturities, calls and paydowns of available for sale securities

     163,472        56,369   

Proceeds from sales of available for sale securities

     1,951        251   

Purchases of loans

     (43,787     (34,124

Proceeds from sales of loans

     19,257        45,889   

Net other increase in loans

     (141,858     (18,088

Purchases of premises, equipment and computer software

     (5,783     (7,052

Proceeds from the sale of other assets

     3,322        2,178   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (25,725     27,816   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Net increase (decrease) in demand, transaction and savings deposits

     92,966        (244,230

Net decrease in time deposits

     (92,706     (46,189

Net increase (decrease) in short-term borrowings

     7,727        (1,049

(Pay down) issuance of long-term borrowings

     (6,938     786   

Issuance of common stock

     1,933        1,323   

Common stock acquired

     —          (1,664

Cash dividends paid

     (9,516     (4,416
  

 

 

   

 

 

 

Net cash used in financing activities

     (6,534     (295,439
  

 

 

   

 

 

 

Net decrease in cash, due from banks and interest-bearing deposits

     (1,098     (224,909

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

     1,857,535        1,945,148   
  

 

 

   

 

 

 

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

   $ 1,856,437      $ 1,720,239   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    

Cash paid during the period for interest

   $ 6,853      $ 7,301   
  

 

 

   

 

 

 

Cash paid during the period for income taxes

   $ 13,770      $ 12,942   
  

 

 

   

 

 

 

Noncash investing and financing activities:

    

Unpaid common stock dividends declared

   $ 4,765      $ 4,417   
  

 

 

   

 

 

 

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

 

5


BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United State of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc. and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BancFirst Agency, Inc. 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 unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013, should be referred to in connection with these unaudited interim consolidated financial statements.

The unaudited interim consolidated 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, 2013, the date of the most recent annual report.

Use of Estimates in the Preparation of Financial Statements

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.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, stockholders’ equity or comprehensive income.

Recent Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-04, “Receivables: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (Topic 310-40).” ASU 2014-04 clarifies that an in-substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. Adoption of ASU 2014-04 is not expected to have a significant effect on the Company’s financial statements.

 

6


In January 2014, the FASB issued ASU No. 2014-01, “Accounting for Investments in Affordable Housing Projects (Topic 323).” ASU 2014-01 revises the necessary criteria that need to be met in order for an entity to account for investments in affordable housing projects net of the provision for income taxes. It also changes the method of recognition from an effective amortization approach to a proportional amortization approach. Additional disclosures were also set forth in this update. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments are required to be applied retrospectively to all periods presented. Early adoption is permitted and adoption of the standard is optional. Management is evaluating whether to adopt the principle and it is not expected to have a significant effect on the Company’s financial statements whether or not it is adopted.

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

On January 24, 2014, BancFirst, a wholly-owned subsidiary of BancFirst Corporation, assumed all of the deposits and purchased certain assets of The Bank of Union, El Reno, Oklahoma (“The Bank of Union”). The Bank of Union was closed on that day by the Oklahoma State Banking Department.

At the time of the closing, The Bank of Union had total deposits of approximately $302 million that were assumed by BancFirst. BancFirst initially purchased approximately $121 million of loans, the majority of which were classified as performing, $4.8 million of securities, and only $10,000 of other real estate. Its bid included a discount for the loans purchased. BancFirst had bid on, but was generally not awarded, loans that were classified as nonperforming. As a result of the acquisition, the Company recorded core deposit intangibles of approximately $2.2 million and goodwill of $417,000. The acquisition did not have a material effect on the Company’s consolidated financial statements.

At June 30, 2014, the balance of acquired loans from the former Bank of Union was approximately $83.6 million, the majority of which are classified as performing, and deposits in acquired branches were approximately $225.6 million.

(3) SECURITIES

The following table summarizes securities held for investment and securities available for sale:

 

     June 30, 2014  
     (Dollars in thousands)  

Held for investment, at cost (fair value: $9,386)

   $ 9,297   

Available for sale, at fair value

     561,132   
  

 

 

 

Total

   $ 570,429   
  

 

 

 

The following table summarizes the amortized cost and estimated fair values of securities held for investment:

 

     June 30, 2014  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair
Value
 
     (Dollars in thousands)  

Mortgage backed securities (1)

   $ 533       $ 37       $ —         $ 570   

States and political subdivisions

     8,764         52         —           8,816   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,297       $ 89       $ —         $ 9,386   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7


The following table summarizes the amortized cost and estimated fair values of securities available for sale:

 

     June 30, 2014  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Estimated
Fair
Value
 
     (Dollars in thousands)  

U.S. treasury and other federal agencies

   $ 458,976       $ 2,061       $ (212   $ 460,825   

Mortgage backed securities (1)

     28,390         678         (508     28,560   

States and political subdivisions

     53,652         1,918         (48     55,522   

Other securities (2)

     12,126         4,276         (177     16,225   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 553,144       $ 8,933       $ (945   $ 561,132   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.
(2) Primarily consists of equity securities.

The maturities of securities held for investment and available for sale are summarized in the following table using contractual maturities. Actual maturities may differ from contractual maturities due to obligations that are called or prepaid. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been presented at their contractual maturity.

 

     June 30, 2014  
     Amortized
Cost
     Estimated
Fair
Value
 
     (Dollars in thousands)  

Held for Investment

     

Contractual maturity of debt securities:

     

Within one year

   $ 1,586       $ 1,595   

After one year but within five years

     7,013         7,053   

After five years but within ten years

     656         693   

After ten years

     42         45   
  

 

 

    

 

 

 

Total

   $ 9,297       $ 9,386   
  

 

 

    

 

 

 

Available for Sale

     

Contractual maturity of debt securities:

     

Within one year

   $ 60,097       $ 60,305   

After one year but within five years

     367,055         368,721   

After five years but within ten years

     25,815         26,668   

After ten years

     91,471         92,697   
  

 

 

    

 

 

 

Total debt securities

     544,438         548,391   

Equity securities

     8,706         12,741   
  

 

 

    

 

 

 

Total

   $ 553,144       $ 561,132   
  

 

 

    

 

 

 

The following table is a summary of the Company’s book value of securities that were pledged as collateral for public funds on deposit, repurchase agreements and for other purposes as required or permitted by law:

 

     June 30, 2014  
     (Dollars in thousands)  

Book value of pledged securities

   $ 415,206   

 

8


(4) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

 

     June 30, 2014     December 31, 2013     June 30, 2013  
     Amount      Percent     Amount      Percent     Amount      Percent  
     (Dollars in thousands)  

Commercial and industrial

   $ 677,425         18.48   $ 605,672         17.88   $ 529,253         16.31

Oil & gas production & equipment

     110,913         3.03        96,907         2.86        145,735         4.49   

Agriculture

     102,693         2.80        111,323         3.29        94,337         2.91   

State and political subdivisions:

         

Taxable

     9,346         0.25        10,217         0.30        9,202         0.28   

Tax-exempt

     10,803         0.29        11,073         0.33        12,392         0.38   

Real estate:

         

Construction

     355,526         9.70        284,808         8.41        247,827         7.64   

Farmland

     144,519         3.94        132,512         3.91        126,233         3.89   

One to four family residences

     748,228         20.41        703,903         20.78        697,927         21.51   

Multifamily residential properties

     60,430         1.65        60,080         1.77        48,128         1.48   

Commercial

     1,160,079         31.65        1,097,484         32.40        1,070,807         33.00   

Consumer

     258,745         7.06        250,588         7.40        243,799         7.51   

Other (not classified above)

     27,201         0.74        22,579         0.67        19,444         0.60   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans

   $ 3,665,908         100.00   $ 3,387,146         100.00   $ 3,245,084         100.00
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Loans held for sale (included above)

   $ 9,519         $ 6,469         $ 10,367      
  

 

 

      

 

 

      

 

 

    

The Company’s loans are mostly to customers within Oklahoma and over 60% 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.

Accounting policies related to appraisals, nonaccruals and charge-offs are disclosed in Footnote (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

 

     June 30,     December 31,     June 30,  
     2014     2013     2013  
     (Dollars in thousands)  

Past due 90 days or more and still accruing

   $ 1,789      $ 1,179      $ 850   

Nonaccrual

     17,268        14,390        18,946   

Restructured

     20,615        17,624        17,903   
  

 

 

   

 

 

   

 

 

 

Total nonperforming and restructured loans

     39,672        33,193        37,699   

Other real estate owned and repossessed assets

     6,406        8,386        8,503   
  

 

 

   

 

 

   

 

 

 

Total nonperforming and restructured assets

   $ 46,078      $ 41,579      $ 46,202   
  

 

 

   

 

 

   

 

 

 

Nonperforming and restructured loans to total loans

     1.08     0.98     1.16
  

 

 

   

 

 

   

 

 

 

Nonperforming and restructured assets to total assets

     0.72     0.69     0.80
  

 

 

   

 

 

   

 

 

 

Nonaccrual loans, accruing loans past due 90 days or more, and restructured loans are shown in the table above. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $481,000 for the six months ended June 30, 2014 and approximately $978,000 for the six months ended June 30, 2013.

 

9


Restructured loans consisted primarily of one relationship restructured to defer principal payments. The relationship was evaluated by management and determined to be well collateralized. Additionally, none of the concessions granted involved a principal reduction or a change from the current market rate of interest. The collateral value is monitored periodically to evaluate possible impairment. The Company charges interest on principal balances outstanding during deferral periods. As a result, the current and future financial effects of the recorded balance of loans considered to be restructured were not considered to be material.

Loans are segregated into classes based upon the nature of the collateral and the borrower. These classes are used to estimate the credit risk component in the allowance for loan losses.

The following table is a summary of amounts included in nonaccrual loans, segregated by class of loans. Residential real estate refers to one-to-four family real estate.

 

     June 30, 2014      June 30, 2013  
     (Dollars in thousands)  

Non-residential real estate owner occupied

   $ 323       $ 516   

Non-residential real estate other

     5,436         9,195   

Residential real estate permanent mortgage

     741         741   

Residential real estate all other

     951         2,837   

Non-consumer non-real estate

     1,265         1,268   

Consumer non-real estate

     189         216   

Other loans

     880         1,938   

Acquired loans

     7,483         2,235   
  

 

 

    

 

 

 

Total

   $ 17,268       $ 18,946   
  

 

 

    

 

 

 

The following table presents an age analysis of past due loans, segregated by class of loans:

 

     Age Analysis of Past Due Loans  
     30-89
Days Past
Due
     90 Days
and
Greater
     Total Past
Due Loans
     Current
Loans
     Total
Loans
     Accruing
Loans
90 Days
or More
Past Due
 
     (Dollars in thousands)  

As of June 30, 2014

  

Non-residential real estate owner occupied

   $ 477       $ 264       $ 741       $ 482,081       $ 482,822       $ 60   

Non-residential real estate other

     5,065         825         5,890         920,264         926,154         —     

Residential real estate permanent mortgage

     2,224         656         2,880         282,749         285,629         180   

Residential real estate all other

     1,545         892         2,437         598,454         600,891         538   

Non-consumer non-real estate

     2,059         985         3,044         859,012         862,056         46   

Consumer non-real estate

     2,256         313         2,569         230,774         233,343         219   

Other loans

     1,695         356         2,051         146,218         148,269         —     

Acquired loans

     3,506         4,989         8,495         118,249         126,744         746   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 18,827       $ 9,280       $ 28,107       $ 3,637,801       $ 3,665,908       $ 1,789   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2013

                 

Non-residential real estate owner occupied

   $ 1,848       $ 138       $ 1,986       $ 444,231       $ 446,217       $ 120   

Non-residential real estate other

     230         3,056         3,286         801,821         805,107         51   

Residential real estate permanent mortgage

     1,496         566         2,062         249,671         251,733         102   

Residential real estate all other

     1,494         251         1,745         539,276         541,021         49   

Non-consumer non-real estate

     3,519         816         4,335         745,327         749,662         32   

Consumer non-real estate

     2,382         213         2,595         214,785         217,380         176   

Other loans

     1,850         1,520         3,370         144,135         147,505         —     

Acquired loans

     375         593         968         85,491         86,459         320   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,194       $ 7,153       $ 20,347       $ 3,224,737       $ 3,245,084       $ 850   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

10


Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect the full amount of scheduled principal and interest payments in accordance with the original contractual terms of the loan agreement. If a loan is impaired, a specific valuation allowance may be allocated if necessary so that the loan is reported, net of allowance for loss, at the present value of future cash flows using the loan’s existing rate, or the fair value of collateral if repayment is expected solely from the collateral.

The following table presents impaired loans, segregated by class of loans. No material amount of interest income was recognized on impaired loans subsequent to their classification as impaired.

 

     Impaired Loans  
     Unpaid
Principal
Balance
     Recorded
Investment
with Allowance
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in thousands)  

As of June 30, 2014

  

Non-residential real estate owner occupied

   $ 542       $ 476       $ 22       $ 547   

Non-residential real estate other

     23,886         22,122         1,710         22,305   

Residential real estate permanent mortgage

     1,117         951         86         931   

Residential real estate all other

     1,768         1,581         215         1,310   

Non-consumer non-real estate

     4,407         4,082         512         2,151   

Consumer non-real estate

     568         553         141         542   

Other loans

     1,048         880         153         1,000   

Acquired loans

     19,347         12,872         88         13,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 52,683       $ 43,517       $ 2,927       $ 41,938   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2013

           

Non-residential real estate owner occupied

   $ 814       $ 748       $ 28       $ 623   

Non-residential real estate other

     27,297         25,859         2,363         25,885   

Residential real estate permanent mortgage

     1,510         1,287         64         1,277   

Residential real estate all other

     3,694         3,294         1,189         3,985   

Non-consumer non-real estate

     1,816         1,481         390         1,536   

Consumer non-real estate

     517         495         79         419   

Other loans

     2,253         2,090         278         2,648   

Acquired loans

     10,359         8,230         58         8,511   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 48,260       $ 43,484       $ 4,449       $ 44,884   
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit Risk Monitoring and Loan Grading

The Company considers various factors to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loan loss experience and economic conditions.

An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

11


The following table presents internal loan grading by class of loans:

 

     Internal Loan Grading  
     Grade  
     1      2      3      4      5      Total  
     (Dollars in thousands)  

As of June 30, 2014

  

Non-residential real estate owner occupied

   $ 406,862       $ 69,202       $ 6,375       $ 383       $ —         $ 482,822   

Non-residential real estate other

     736,119         165,012         19,587         5,436         —           926,154   

Residential real estate permanent mortgage

     253,932         24,765         5,967         965         —           285,629   

Residential real estate all other

     501,090         91,707         6,859         1,235         —           600,891   

Non-consumer non-real estate

     704,671         115,925         40,135         1,325         —           862,056   

Consumer non-real estate

     220,053         11,160         1,637         493         —           233,343   

Other loans

     145,004         2,373         615         87         190         148,269   

Acquired loans

     66,721         42,798         8,679         8,137         409         126,744   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,034,452       $ 522,942       $ 89,854       $ 18,061       $ 599       $ 3,665,908   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2013

                 

Non-residential real estate owner occupied

   $ 381,580       $ 58,923       $ 5,077       $ 637       $ —         $ 446,217   

Non-residential real estate other

     650,422         124,831         20,609         9,245         —           805,107   

Residential real estate permanent mortgage

     212,230         33,024         5,593         886         —           251,733   

Residential real estate all other

     454,987         74,982         8,123         2,929         —           541,021   

Non-consumer non-real estate

     649,542         94,045         4,737         1,338         —           749,662   

Consumer non-real estate

     203,408         11,767         1,860         342         3         217,380   

Other loans

     143,653         2,642         864         346         —           147,505   

Acquired loans

     66,234         13,774         3,894         2,557         —           86,459   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,762,056       $ 413,988       $ 50,757       $ 18,280       $ 3       $ 3,245,084   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

12


Allowance for Loan Losses Methodology

The allowance for loan losses (“ALL”) methodology is disclosed in Footnote (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

The following table details activity in the ALL by class of loans for the period presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

     ALL  
     Balance at
beginning
of period
     Charge-
offs
    Recoveries      Net
charge-
offs
    Provisions
charged to
operations
    Balance
at end of
period
 
     (Dollars in thousands)  

Three Months Ended June 30, 2014

  

Non-residential real estate owner occupied

   $ 5,012       $ (18   $ 34       $ 16      $ 213      $ 5,241   

Non-residential real estate other

     10,685         —          —           —          553        11,238   

Residential real estate permanent mortgage

     3,237         (32     31         (1     74        3,310   

Residential real estate all other

     6,485         (44     10         (34     364        6,815   

Non-consumer non-real estate

     9,703         (61     16         (45     2,309        11,967   

Consumer non-real estate

     2,573         (190     46         (144     216        2,645   

Other loans

     2,072         (188     110         (78     (1     1,993   

Acquired loans

     157         (148     678         530        (599     88   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 39,924       $ (681   $ 925       $ 244      $ 3,129      $ 43,297   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2014

              

Non-residential real estate owner occupied

   $ 4,827       $ (22   $ 65       $ 43      $ 371      $ 5,241   

Non-residential real estate other

     11,026         —          3         3        209        11,238   

Residential real estate permanent mortgage

     2,825         (162     41         (121     606        3,310   

Residential real estate all other

     6,708         (93     14         (79     186        6,815   

Non-consumer non-real estate

     8,977         (131     30         (101     3,091        11,967   

Consumer non-real estate

     2,556         (331     108         (223     312        2,645   

Other loans

     1,991         (251     127         (124     126        1,993   

Acquired loans

     124         (165     683         518        (554     88   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 39,034       $ (1,155   $ 1,071       $ (84   $ 4,347      $ 43,297   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

13


     ALL  
     Balance at
beginning
of period
     Charge-
offs
    Recoveries      Net
charge-
offs
    Provisions
charged to
operations
    Balance
at end of
period
 
     (Dollars in thousands)  

Three Months Ended June 30, 2013

  

Allowance for loan losses:

              

Non-residential real estate owner occupied

   $ 4,866       $ (2   $ 1       $ (1   $ (151   $ 4,714   

Non-residential real estate other

     10,465         (1     6         5        396        10,866   

Residential real estate permanent mortgage

     2,756         (40     4         (36     13        2,733   

Residential real estate all other

     7,165         (59     25         (34     218        7,349   

Non-consumer non-real estate

     8,982         (69     18         (51     (180     8,751   

Consumer non-real estate

     2,384         (155     61         (94     99        2,389   

Other loans

     1,822         (20     31         11        128        1,961   

Acquired loans

     224         (1     3         2        (7     219   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 38,664       $ (347   $ 149       $ (198   $ 516      $ 38,982   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2013

              

Non-residential real estate owner occupied

   $ 5,104       $ (2   $ 16       $ 14      $ (404   $ 4,714   

Non-residential real estate other

     9,865         (19     10         (9     1,010        10,866   

Residential real estate permanent mortgage

     2,781         (96     15         (81     33        2,733   

Residential real estate all other

     7,034         (154     27         (127     442        7,349   

Non-consumer non-real estate

     9,385         (105     49         (56     (578     8,751   

Consumer non-real estate

     2,451         (295     137         (158     96        2,389   

Other loans

     1,885         (159     31         (128     204        1,961   

Acquired loans

     220         (50     36         (14     13        219   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 38,725       $ (880   $ 321       $ (559   $ 816      $ 38,982   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The following table details the amount of ALL by class of loans for the period presented, detailed on the basis of the impairment methodology used by the Company.

 

     ALL  
     June 30, 2014      June 30, 2013  
     Individually
evaluated for
impairment
     Collectively
evaluated for
impairment
     Individually
evaluated for
impairment
     Collectively
evaluated for
impairment
 
     (Dollars in thousands)  

Non-residential real estate owner occupied

   $ 372       $ 4,869       $ 217       $ 4,497   

Non-residential real estate other

     1,881         9,357         2,663         8,203   

Residential real estate permanent mortgage

     539         2,771         222         2,511   

Residential real estate all other

     736         6,079         1,794         5,555   

Non-consumer non-real estate

     3,567         8,400         1,124         7,627   

Consumer non-real estate

     417         2,228         265         2,124   

Other loans

     190         1,803         231         1,730   

Acquired loans

     —           88         —           219   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,702       $ 35,595       $ 6,516       $ 32,466   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

14


The following table details the loans outstanding by class of loans for the period presented, on the basis of the impairment methodology used by the Company.

 

    Loans  
    June 30, 2014     June 30, 2013  
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    Loans acquired
with
deteriorated
credit quality
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    Loans acquired
with
deteriorated
credit quality
 
    (Dollars in thousands)  

Non-residential real estate owner occupied

  $ 6,758      $ 476,064      $ —        $ 5,713      $ 440,503      $ —     

Non-residential real estate other

    25,023        901,131        —          29,855        775,253        —     

Residential real estate permanent mortgage

    6,932        278,697        —          6,479        245,254        —     

Residential real estate all other

    8,094        592,797        —          11,052        529,969        —     

Non-consumer non-real estate

    41,460        820,596        —          6,075        743,587        —     

Consumer non-real estate

    2,130        231,213        —          2,205        215,175        —     

Other loans

    324        147,945        —          280        147,225        —     

Acquired loans

    —          109,519        17,225        —          80,008        6,451   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 90,721      $ 3,557,962      $ 17,225      $ 61,659      $ 3,176,974      $ 6,451   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfers from Loans

Transfers from loans to other real estate owned and repossessed assets are non-cash transactions, and are not included in the statements of cash flow.

Transfers from loans to other real estate owned and repossessed assets during the periods presented, are summarized as follows:

 

     Six Months Ended
June 30,
 
     2014      2013  
     (Dollars in thousands)  

Other real estate owned

   $ 525       $ 896   

Repossessed assets

     722         594   
  

 

 

    

 

 

 

Total

   $ 1,247       $ 1,490   
  

 

 

    

 

 

 

(5) INTANGIBLE ASSETS

The following is a summary of intangible assets:

 

     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 
     (Dollars in thousands)  

As of June 30, 2014

       

Core deposit intangibles

   $ 13,198       $ (5,305   $ 7,893   

Customer relationship intangibles

     5,699         (2,518     3,181   

Mortgage servicing intangibles

     672         (172     500   
  

 

 

    

 

 

   

 

 

 

Total

   $ 19,569       $ (7,995   $ 11,574   
  

 

 

    

 

 

   

 

 

 

 

15


The following is a summary of goodwill by business segment:

 

     Metropolitan
Banks
     Community
Banks
     Other
Financial
Services
     Executive,
Operations
& Support
     Consolidated  
     (Dollars in thousands)  

Balance at December 31, 2013

   $ 8,079       $ 30,552       $ 5,464       $ 450       $ 44,545   

Acquisitions

     —           417         —           —           417   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2014

   $ 8,079       $ 30,969       $ 5,464       $ 450       $ 44,962   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

(6) STOCK-BASED COMPENSATION

The Company 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 3,000,000 shares in May 2013. At June 30, 2014, 135,860 shares were available for future grants. The BancFirst ISOP will terminate on December 31, 2019. The options are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of June 30, 2014 will become exercisable through the year 2021. 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.

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 230,000 shares in May 2014. At June 30, 2014, 30,000 shares were 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 June 30, 2014 will become exercisable through the year 2017. 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 Company currently uses newly issued stock to satisfy stock-based exercises, but reserves the right to use treasury stock purchased under the Company’s Stock Repurchase Program (the “SRP”) in the future.

The following table is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:

 

     Options     Wgtd. Avg.
Exercise
Price
     Wgtd. Avg.
Remaining
Contractual
Term
     Aggregate
Intrinsic
Value
 
     (Dollars in thousands, except per share data)  

Six Months Ended June 30, 2014

  

Outstanding at December 31, 2013

     1,158,317      $ 34.45         

Options granted

     10,000        58.61         

Options exercised

     (63,625     25.80         

Options canceled, forfeited, or expired

     —          —           
  

 

 

         

Outstanding at June 30, 2014

     1,104,692        35.16         8.62Yr       $ 29,667   
  

 

 

      

 

 

    

 

 

 

Exercisable at June 30, 2014

     516,042        28.77         4.98Yr       $ 17,094   
  

 

 

      

 

 

    

 

 

 

 

16


The following table has additional information regarding options granted and options exercised under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2014      2013      2014      2013  
     (Dollars in thousands, except per share data)  

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

   $ 12.33       $ 8.74       $ 12.33       $ 8.74   

Total intrinsic value of options exercised

     1,301         1,024         2,046         1,230   

Cash received from options exercised

     776         1,059         1,642         1,201   

Tax benefit realized from options exercised

     503         396         791         476   

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.

The following table is a summary of the Company’s recorded stock-based compensation expense:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2014     2013     2014     2013  
     (Dollars in thousands)  

Stock-based compensation expense

   $ 429      $ 321      $ 776      $ 695   

Tax benefit

     (166     (124     (300     (269
  

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense, net of tax

   $ 263      $ 197      $ 476      $ 426   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company will continue to amortize the remaining fair value of stock options over the remaining vesting period of approximately seven years. The following table shows the remaining fair value of stock options:

 

     June 30, 2014  
     (Dollars in thousands)  

Fair value of stock options

   $ 4,549   

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method:

 

     Six Months Ended
June 30,
 
     2014     2013  

Risk-free interest rate

     2.54     2.53

Dividend yield

     2.00     2.00

Stock price volatility

     18.98     18.36

Expected term

     10Yrs        10Yrs   

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.

 

17


(7) STOCKHOLDERS’ EQUITY

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. All shares repurchased under the SRP have been retired and not held as treasury 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.

The following table is a summary of the shares under the program:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2014      2013      2014      2013  

Number of shares repurchased

     —           17,191         —           40,241   

Average price of shares repurchased

     —         $ 40.83         —         $ 40.88   

Shares remaining to be repurchased

     194,723         194,723         194,723         194,723   

The Company and BancFirst are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and the FDIC. These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s and BancFirst’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. Management believes that as of June 30, 2014, the Company and BancFirst met all capital adequacy requirements to which they are subject. The actual and required capital amounts and ratios are shown in the following table:

 

     Actual     Required
For Capital
Adequacy
Purposes
    To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
 
     Amount      Ratio     Amount      Ratio     Amount      Ratio  
     (Dollars in thousands)  

As of June 30, 2014:

               

Total Capital
(to Risk Weighted Assets)-

               

BancFirst Corporation

   $ 575,607         14.47   $ 325,487         8.00     N/A         N/A   

BancFirst

     553,957         13.55     324,918         8.00   $ 406,147         10.00

Tier 1 Capital
(to Risk Weighted Assets)-

               

BancFirst Corporation

   $ 545,570         13.41   $ 162,744         4.00     N/A         N/A   

BancFirst

     507,016         12.48     162,459         4.00   $ 243,688         6.00

Tier 1 Capital
(to Total Assets)-

               

BancFirst Corporation

   $ 545,570         8.64   $ 191,060         3.00     N/A         N/A   

BancFirst

     507,016         8.05     190,452         3.00   $ 317,420         5.00

As of June 30, 2014, BancFirst was considered to be “well capitalized” and there are no conditions or events since the most recent notification of BancFirst’s capital category that management believes would materially change its category under capital requirements existing as of the report date. To be well capitalized under Federal bank regulatory agency definitions, a depository institution must have a Tier 1 Capital (to Risk-Weighted Assets) of at least 6%, a combined Total Capital (to Risk Weighted Assets) of at least 10%, and a Tier 1 Capital (to Total Assets) of at least 5%. The Company’s trust preferred securities have continued to be included in Tier 1 Capital as the Company’s total assets do not exceed $10 billion.

 

18


Basel III Capital Rules

In July 2013, the three Federal bank regulatory agencies jointly published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework known as “Basel III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. These Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions, compared to the current U.S. risk-based capital rules. The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios. These Rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing risk-weighting approach with a more risk-sensitive approach. The Basel III Capital Rules also implement the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies’ rules. The Basel III Capital Rules are effective for the Company and BancFirst on January 1, 2015 (subject to a 4-year phase-in period).

The Basel III Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expand the scope of the deductions/adjustments as compared to existing regulations.

Under the Basel III Capital Rules, the initial minimum capital ratios as of January 1, 2015 will be as follows:

4.5% CET1 to risk-weighted assets.

6.0% Tier 1 capital to risk-weighted assets.

8.0% Total capital to risk-weighted assets.

4.0% Minimum leverage ratio

Implementation of the deductions and other adjustments to CET1 will begin on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). Under the new rule, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements. The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

Management believes that, as of June 30, 2014, the Company and BancFirst would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis as if such requirements were currently in effect.

 

19


(8) NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are calculated as follows:

 

     Income
(Numerator)
     Shares
(Denominator)
     Per Share
Amount
 
     (Dollars in thousands, except per share data)  

Three Months Ended June 30, 2014

        

Basic

        

Income available to common stockholders

   $ 14,688         15,468,511       $ 0.94   
        

 

 

 

Effect of stock options

     —           363,669      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 14,688         15,832,180       $ 0.92   
  

 

 

    

 

 

    

 

 

 

Three Months Ended June 30, 2013

        

Basic

        

Income available to common stockholders

   $ 12,593         15,232,129       $ 0.83   
        

 

 

 

Effect of stock options

     —           247,620      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 12,593         15,479,749       $ 0.82   
  

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2014

        

Basic

        

Income available to common stockholders

   $ 29,345         15,405,847       $ 1.90   
        

 

 

 

Effect of stock options

     —           353,942      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 29,345         15,759,789       $ 1.86   
  

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2013

        

Basic

        

Income available to common stockholders

   $ 25,965         15,235,397       $ 1.70   
        

 

 

 

Effect of stock options

     —           246,473      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 25,965         15,481,870       $ 1.68   
  

 

 

    

 

 

    

 

 

 

The following table shows the number and average exercise price of options that were excluded from the computation of diluted net income per common share for each period because the options’ exercise prices were greater than the average market price of the common shares:

 

     Shares      Average
Exercise Price
 

Three Months Ended June 30, 2014

     59,286       $ 54.89   

Three Months Ended June 30, 2013

     466,159         39.76   

Six Months Ended June 30, 2014

     67,155         54.15   

Six Months Ended June 30, 2013

     475,867         39.69   

(9) FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the price that would be received to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants on the measurement date.

 

20


FASB ASC Topic 820 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 that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes certain impaired loans, foreclosed assets, other real estate, goodwill and other intangible assets.

Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis

A description of the valuation methodologies and key inputs used to measure financial assets and financial liabilities at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to the following categories of the Company’s financial assets and financial liabilities.

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, registered mortgage backed securities and state 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 private label mortgage backed securities and 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.

The Company reviews the prices for Level 1 and Level 2 securities supplied by the independent pricing service for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities that are esoteric or that have complicated structures. The Company’s entire portfolio consists of traditional investments including U.S. Treasury obligations, federal agency mortgage pass-through securities, general obligation municipal bonds and a small amount of municipal revenue bonds. Pricing for such instruments is fairly generic and is easily obtained. For in-state bond issues that have relatively low issue sizes and liquidity, the Company utilizes the same parameters adjusted for the specific issue. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from third party sources.

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.

 

21


Loans Held For Sale

The Company originates mortgage loans to be sold. At the time of origination, the acquiring bank has already been determined and the terms of the loan, including interest rate, have already been set by the acquiring bank, allowing the Company to originate the loan at fair value. Mortgage loans are generally sold within 30 days of origination. Loans held for sale are valued using Level 2 inputs. Gains or losses recognized upon the sale of the loans are determined on a specific identification basis.

Mortgage Servicing Intangibles

The Company acquired mortgage servicing intangibles with the acquisition of 1st Bank Oklahoma on July 12, 2011. Mortgage Servicing Intangibles are amortized based on current prepayment assumptions and are adjusted to fair value quarterly. Fair value is estimated based on the present value of future cash flows over several interest rate scenarios, which are then discounted at risk-adjusted rates. The Company considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. When available, fair value estimates and assumptions are compared to observable market data and the recent market activity and actual portfolio experience.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2014 and 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

     Level 1
Inputs
     Level 2
Inputs
     Level 3
Inputs
     Total Fair
Value
 
     (Dollars in thousands)  

June 30, 2014

           

Securities available for sale:

           

U.S. Treasury

   $ 229,549       $ —         $ —         $ 229,549   

U.S. federal agencies

     —           231,276         —           231,276   

Mortgage-backed securities

     —           11,471         17,089         28,560   

States and political subdivisions

     —           55,522         —           55,522   

Other securities

     —           3,484         12,741         16,225   

Derivative assets

     —           3,653         —           3,653   

Derivative liabilities

     —           2,084         —           2,084   

Loans held for sale

     —           9,519         —           9,519   

Mortgage servicing intangibles

     —           —           500         500   

June 30, 2013

           

Securities available for sale:

           

U.S. Treasury

   $ 20,158       $ —         $ —         $ 20,158   

U.S. federal agencies

     —           404,522         —           404,522   

Mortgage-backed securities

     —           16,031         —           16,031   

States and political subdivisions

     —           51,929         —           51,929   

Other securities

     —           3,446         9,827         13,273   

Derivative assets

     —           2,200         —           2,200   

Derivative liabilities

     —           991         —           991   

Loans held for sale

     —           10,367         —           10,367   

Mortgage servicing intangibles

     —           —           638         638   

 

22


The changes in Level 3 assets measured at estimated fair value on a recurring basis during the six months ended June 30, 2014 and 2013 were as follows:

 

     Six Months Ended
June 30,
 
     2014     2013  
     (Dollars in thousands)  

Balance at the beginning of the year

   $ 32,002      $ 10,779   

Purchases, issuances and settlements

     (2,287     239   

Sales

     (499     (121

Gains included in earnings

     382        5   

Total unrealized gains (losses)

     732        (437
  

 

 

   

 

 

 

Balance at the end of the period

   $ 30,330      $ 10,465   
  

 

 

   

 

 

 

The Company’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting period. During the six months ended June 30, 2014 and 2013, the Company did not transfer any securities between levels in the fair value hierarchy.

Financial Assets and Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities are reported at fair value utilizing Level 3 inputs.

Impaired loans are reported at the fair value of the underlying collateral if repayment is dependent on liquidation of the collateral. In no case does the fair value of an impaired loan exceed the fair value of the underlying collateral. The impaired loans are adjusted to fair value through a specific allocation of the allowance for loan losses or a direct charge-down of the loan.

Foreclosed assets, upon initial recognition, are measured and adjusted to fair value through a charge-off to the allowance for possible loan losses based upon the fair value of the foreclosed asset.

Other real estate owned is revalued at fair value subsequent to initial recognition, with any losses recognized in net expense from other real estate owned.

The following table summarizes assets measured at fair value on a nonrecurring basis and the related gains or losses recognized during the period:

 

     Level 1      Level 2      Level 3      Total Fair
Value
     Gains
(Losses)
 
     (Dollars in thousands)  

Six Months Ended June 30, 2014

  

Impaired loans (less specific allowance)

     —           —         $ 40,590       $ 40,590       $ —     

Foreclosed assets

     —           —           292         292         (23

Other real estate owned

     —           —           6,114         6,114         (71

Six Months Ended June 30, 2013

  

Impaired loans (less specific allowance)

     —           —         $ 39,035       $ 39,035       $ —     

Foreclosed assets

     —           —           511         511         29   

Other real estate owned

     —           —           7,992         7,992         (705

 

23


Estimated Fair Value of Financial Instruments

The Company is required under current authoritative accounting guidance to disclose the estimated fair value of their financial instruments that are not recorded at fair value. For the Company, as for most financial institutions, substantially all of its assets and liabilities are considered financial instruments. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents Include: Cash and Due from Banks; Federal Funds Sold and Interest-Bearing Deposits

The carrying amount of these short-term instruments is a reasonable estimate of fair value.

Securities Held for Investment

For securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities making adjustments for credit or liquidity if applicable.

Loans

For certain homogeneous categories of loans, such as some residential mortgages, fair values are estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair values of other types of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits

The fair values of transaction and savings accounts are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings

The amounts payable on these short-term instruments are reasonable estimates of fair value.

Long-term Borrowings

The fair values of fixed-rate long-term borrowings are estimated using the rates that would be charged for borrowings of similar remaining maturities.

Junior Subordinated Debentures

The fair values of junior subordinated debentures are estimated using the rates that would be charged for junior subordinated debentures of similar remaining maturities.

Loan Commitments and Letters of Credit

The fair values of commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the terms of the agreements. The fair values of letters of credit are based on fees currently charged for similar agreements.

 

24


The estimated fair values of the Company’s financial instruments that are reported at amortized cost in the Company’s consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows:

 

     June 30,  
     2014      2013  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Dollars in thousands)  

FINANCIAL ASSETS

           

Level 2 inputs:

           

Cash and cash equivalents

   $ 1,856,437       $ 1,856,437       $ 1,720,239       $ 1,720,239   

Securities held for investment

     9,297         9,386         14,511         14,654   

Level 3 inputs:

           

Loans, net

     3,622,611         3,661,752         3,206,102         3,238,652   

FINANCIAL LIABILITIES

           

Level 2 inputs:

           

Deposits

     5,721,593         5,754,876         5,150,411         5,175,528   

Short-term borrowings

     12,317         12,317         3,522         3,522   

Long-term borrowings

     —           —           9,964         9,906   

Junior subordinated debentures

     26,804         28,948         26,804         28,991   

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

           

Loan commitments

        1,791            1,574   

Letters of credit

        426            437   

Non-financial Assets and Non-financial Liabilities Measured at Fair Value

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Certain non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis include intangible assets (excluding mortgage service rights, which are valued quarterly) and other non-financial long-lived assets measured at fair value and adjusted for impairment. These items are evaluated at least annually for impairment. The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were not considered to be significant to the Company at June 30, 2014 or 2013.

(10) 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.

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:

 

     June 30, 2014  

Oil and Natural Gas Swaps and Options

   Notional Units    Notional
Amount
    Estimated
Fair Value
 
     (Notional amounts and dollars in thousands)  

Oil

       

Derivative assets

   Barrels      452      $ 1,701   

Derivative liabilities

   Barrels      (452     (1,207

Natural Gas

       

Derivative assets

   MMBTUs      1,625        1,952   

Derivative liabilities

   MMBTUs      (1,625     (877

Total Fair Value

   Included in             

Derivative assets

   Other assets        3,653   

Derivative liabilities

   Other liabilities        2,084   

 

25


The following table is a summary of the Company’s recognized income related to the activity, which was included in other noninterest income:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2014      2013      2014      2013  
     (Dollars in thousands)  

Derivative income

   $ 149       $ 130       $ 298       $ 238   

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 following table is a summary of the Company’s net credit exposure relating to oil and gas swaps and options with bank customers:

 

     June 30, 2014  
     (Dollars in thousands)  

Credit exposure

   $ 3,499   

Balance Sheet Offsetting

Derivatives may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company’s derivative transactions with upstream financial institution counterparties and bank customers are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments for financial reporting purposes.

(11) 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, 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.

 

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The results of operations and selected financial information for the four business units are as follows:

 

     Metropolitan
Banks
     Community
Banks
     Other
Financial
Services
     Executive,
Operations
& Support
    Eliminations     Consolidated  
     (Dollars in thousands)  

Three Months Ended:

               

June 30, 2014

               

Net interest income (expense)

   $ 15,372       $ 28,955       $ 1,568       $ (406   $ —        $ 45,489   

Noninterest income

     3,463         12,973         6,329         15,919        (15,073     23,611   

Income before taxes

     7,484         17,692         2,292         7,680        (15,034     20,114   

June 30, 2013

               

Net interest income (expense)

   $ 13,943       $ 25,424       $ 1,730       $ (467   $ —        $ 40,630   

Noninterest income

     3,116         11,846         6,073         13,792        (13,094     21,733   

Income before taxes

     8,108         14,512         2,158         7,643        (13,029     19,392   

Six Months Ended:

               

June 30, 2014

               

Net interest income (expense)

   $ 29,159       $ 56,196       $ 2,944       $ (781   $ —        $ 87,518   

Noninterest income

     6,876         25,239         13,385         31,874        (30,201     47,173   

Income before taxes

     15,274         32,769         5,358         17,359        (30,109     40,651   

June 30, 2013

               

Net interest income (expense)

   $ 27,954       $ 50,568       $ 3,295       $ (931   $ —        $ 80,886   

Noninterest income

     6,306         23,391         12,975         28,541        (26,945     44,268   

Income before taxes

     17,045         28,589         5,395         15,737        (26,827     39,939   

Total Assets:

               

June 30, 2014

   $ 2,142,031       $ 4,087,728       $ 116,343       $ 657,743      $ (635,212   $ 6,368,633   

December 31, 2013

     2,079,444         3,764,429         103,656         703,294        (611,849     6,038,974   

June 30, 2013

     1,945,032         3,590,420         93,047         706,501        (585,334     5,749,666   

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.

 

27


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, 2013 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 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 was $14.7 million, or $0.92 diluted earnings per share, for the second quarter of 2014, compared to net income of $12.6 million, or $0.82 diluted earnings per share, for the second quarter of 2013. Net income was $29.3 million, or $1.86 diluted earnings per share for the six months ended June 30, 2014, compared to $26.0 million, or $1.68 diluted earnings per share, for the six months ended June 30, 2013.

Net interest income for the second quarter of 2014 was $45.5 million compared to $40.6 million for the three months ended June 30, 2013. The net interest margin for the quarter remained relatively flat at 3.10% compared to 3.08% a year ago, as interest rates have remained at historically low levels. The provision for loan losses for the second quarter was $3.1 million compared to $516,000 for the second quarter of 2013. The higher provision for loan losses in the second quarter was due in part to an additional $2 million allowance for a single commercial loan that was adversely graded during the quarter. The Company reported net recoveries for the quarter of 0.01% of average loans, compared to net charge-offs 0.01% for the same period the prior year. Noninterest income for the quarter totaled $23.6 million compared to $21.7 million for the second quarter of 2013. Noninterest expense was $45.9 million compared to $42.5 million a year ago. The effective income tax rate for the second quarter of 2014 decreased to 27% compared to 35% for the second quarter of 2013, primarily due to an investment in federal and state historic rehabilitation tax credits.

At June 30, 2014, the Company’s total assets were $6.4 billion, up $329.7 million or 5.5% from $6.0 billion at December 31, 2013. Securities increased $42.8 million to a total of $570.4 million. Loans totaled $3.7 billion, up $278.8 million from December 31, 2013. Deposits totaled $5.7 billion, up $302.1 million. The Company’s total stockholders’ equity was $580.5 million, an increase of $23.5 million or 4.2% over December 31, 2013.

The Company’s asset quality remained strong. Nonperforming and restructured assets were 0.72% of total assets compared to 0.69% at December 31, 2013. The allowance to total loans was 1.18% compared to 1.15% at year end 2013.

On January 24, 2014, BancFirst, a wholly-owned subsidiary of BancFirst Corporation, assumed all of the deposits and purchased certain assets of The Bank of Union, El Reno, Oklahoma (“The Bank of Union”). The Bank of Union was closed on that day by the Oklahoma State Banking Department. At June 30, 2014, the balance of acquired loans was approximately $83.6 million, the majority of which are classified as performing; and deposits in the acquired branches were approximately $225.6 million. As a result of the acquisition, the Company recorded core deposit intangibles of approximately $2.2 million and goodwill of $417,000.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

 

28


SEGMENT INFORMATION

See Note (11) of the Notes to Consolidated Financial Statements for disclosures regarding business segments.

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
June 30,
    Six Months Ended
June 30,
 
     2014     2013     2014     2013  

Income Statement Data

        

Net interest income

   $ 45,489      $ 40,630      $ 87,518      $ 80,866   

Provision for loan losses

     3,129        516        4,347        816   

Securities transactions

     85        129        535        251   

Total noninterest income

     23,611        21,733        47,173        44,268   

Salaries and employee benefits

     27,478        25,085        53,416        50,294   

Total noninterest expense

     45,857        42,455        89,693        84,399   

Net income

     14,688        12,593        29,345        25,965   

Per Common Share Data

        

Net income – basic

   $ 0.94      $ 0.83      $ 1.90      $ 1.70   

Net income – diluted

     0.92        0.82        1.86        1.68   

Cash dividends

     0.31        0.29        0.62        0.58   

Performance Data

        

Return on average assets

     0.92     0.88     0.94     0.91

Return on average stockholders’ equity

     10.20        9.48        10.35        9.89   

Cash dividend payout ratio

     32.99        35.08        32.55        34.03   

Net interest spread

     2.96        2.92        2.90        2.92   

Net interest margin

     3.10        3.08        3.04        3.08   

Efficiency ratio

     66.36        68.08        66.59        67.44   

Net charge-offs to average loans

     (0.01     0.01        —          0.02   

Net Interest Income

For the three months ended June 30, 2014, net interest income, which is the Company’s principal source of operating revenue, increased to $45.5 million compared to $40.6 million for the three months ended June 30, 2013, primarily due to a higher volume of earning assets. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The Company’s net interest margin remained relatively flat for the second quarter of 2014 compared to the second quarter of 2013, due to continued historically low interest rates. If interest rates and/or loan volume do not increase, management expects continued compression of its net interest margin for the remainder of 2014 as higher yielding loans mature and are replaced at current market rates.

Net interest income for the six months ended June 30, 2014 was $87.5 million compared to $80.9 million for the six months ended June 30, 2013. The net interest margin for the year-to-date decreased slightly compared to the same period of the previous year, as shown in the preceding table.

 

29


Provision for Loan Losses

The Company’s provision for loan losses for the second quarter of 2014 was $3.1 million, compared to $516,000 for the second quarter of 2013. The higher provision for loan losses in the second quarter was due in part to an additional $2 million allowance for a single commercial loan that was adversely graded during the quarter. The Company establishes an allowance as an estimate of the probable inherent losses in the loan portfolio at the balance sheet date. Management believes the allowance for loan losses is appropriate based upon management’s best estimate of probable losses that have been incurred within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the amount of future provisions for loan losses. The Company reported net loan recoveries of $244,000 for the second quarter of 2014, compared to net loan charge-offs of $198,000 for the second quarter of 2013. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a very low level.

For the six months ended June 30, 2014, the Company’s provision for loan losses was $4.3 million, compared to $816,000 for the six months ended June 30, 2013. Net loan charge-offs were $84,000, compared to $559,000 for the same period of the prior year.

Noninterest Income

Noninterest income totaled $23.6 million for the second quarter of 2014 compared to $21.7 million for the second quarter of 2013. Service charges on deposits have increased due primarily to an increase in deposit accounts from internal growth. Fees from debit card usage totaled $5.2 million and $4.4 million during the three months ended June 30, 2014 and 2013, respectively. Trust revenue and cash management revenue also increased due to growth in the number of customers and increased activity.

Noninterest income for the six months ended June 30, 2014 totaled $47.2 million compared to $44.3 million for the six months ended June 30, 2013. Service charges on deposits have increased due primarily to an increase in deposit accounts from internal growth. Fees from debit card usage totaled $10.2 million and $8.5 million during the six months ended June 30, 2014 and 2013, respectively. Trust revenue and cash management revenue also increased due to growth in the number of customers and increased activity.

Noninterest Expense

For the second quarter of 2014, noninterest expense totaled $45.9 million compared to $42.5 million for the second quarter of 2013. The increase in noninterest expense was partly due to the acquisition of The Bank of Union, which added $1.6 million in the quarter partly offset by a gain on sale of other real estate owned property of approximately $500,000.

For the six months ended June 30, 2014, noninterest expense totaled $89.7 million compared to $84.4 million for the six months ended June 30, 2013. The increase in noninterest expense was partly due to the acquisition of The Bank of Union, which added $2.0 million in the first half partly offset by a gain on sale of other real estate owned property of approximately $500,000. Increases in salaries and benefits, primarily due to the impact of standard annual merit increases, were partly offset by lower than anticipated health care costs of approximately $950,000 in the first quarter of 2014.

Income Taxes

The Company’s effective tax rate on income before taxes was 27.0% for the three months ended June 30, 2014, compared to 35.1% for the three months ended June 30, 2013 due primarily to new tax credits utilized.

The Company’s effective tax rate on income before taxes was 27.8% for the first six months of 2014, compared to 35.0% for the first six months of 2013 due primarily to new tax credits utilized in the second quarter and the recognition of state deferred tax benefits in the first quarter.

 

30


FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

 

     June 30,     December 31,     June 30,  
     2014     2013     2013  
     (unaudited)           (unaudited)  

Balance Sheet Data

      

Total assets

   $ 6,368,633      $ 6,038,974      $ 5,749,666   

Total loans

     3,665,908        3,387,146        3,245,084   

Allowance for loan losses

     43,297        39,034        38,982   

Securities

     570,429        527,627        520,424   

Deposits

     5,721,593        5,419,519        5,150,411   

Stockholders’ equity

     580,505        556,997        534,961   

Book value per share

     37.70        36.33        35.07   

Tangible book value per share

     34.03        32.75        31.42   

Average loans to deposits (year-to-date)

     62.39     62.69     62.58

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

     92.57        92.65        92.72   

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

     9.07        9.23        9.21   

Asset Quality Ratios

      

Nonperforming and restructured loans to total loans

     1.08     0.98     1.16

Nonperforming and restructured assets to total assets

     0.72        0.69        0.80   

Allowance for loan losses to total loans

     1.18        1.15        1.20   

Allowance for loan losses to nonperforming and restructured loans

     109.14        117.60        103.40   

Cash, Federal Funds Sold and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks, interest-bearing deposits with banks, and federal funds sold as of June 30, 2014 decreased $1.1 million from December 31, 2013 and increased $136.2 million from June 30, 2013. Federal funds sold consist of overnight investments of excess funds with other financial institutions. Due to the Federal Reserve Bank’s intervention into the funds market that has resulted in near zero overnight federal funds rates, the Company has continued to maintain the majority of 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 which continues to be 0.25%.

Securities

At June 30, 2014, total securities increased $42.8 million compared to December 31, 2013 and increased $50.0 million compared to June 30, 2013. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized gain on securities available for sale, before taxes, was $8.0 million at June 30, 2014, compared to an unrealized gain of $6.0 million at December 31, 2013, and an unrealized gain of $6.5 million at June 30, 2013. These unrealized gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of $4.9 million, $3.9 million and $4.2 million respectively.

Loans (Including Acquired Loans)

At June 30, 2014, total loans were up $278.8 million from December 31, 2013 and up $420.8 million from June 30, 2013, due to internal growth and loans from the Bank of Union acquisition, which had $83.6 million at June 30, 2014.

Allowance for Loan Losses/Fair Value Adjustments on Acquired Loans

At June 30, 2014, the allowance for loan losses represented 1.18% of total loans, compared to 1.15% at December 31, 2013 and 1.20% at June 30, 2013.

 

31


The fair value adjustment on acquired loans consists of an interest rate component to adjust the effective rates on the loans to market rates and a credit component to adjust for estimated credit exposures in the acquired loans. The credit component of the adjustment was $8.6 million at June 30, 2014, $2.3 million at December 31, 2013 and $2.6 million at June 30, 2013, while the acquired loans outstanding were $126.7 million, $65.9 million and $86.5 million, respectively. The increase during 2014 was due to the Bank of Union acquisition. The decrease in 2013 was due to improved credit quality of the loans and loan payoffs.

Nonperforming and Restructured Assets

Nonperforming and restructured assets totaled $46.1 million at June 30, 2014, compared to $41.6 million at December 31, 2013 and $46.2 million at June 30, 2013. The Company’s level of nonperforming and restructured assets has continued to be relatively low.

Nonaccrual loans totaled $17.3 million at June 30, 2014 compared to $14.4 million at the end of 2013. Nonaccrual loans increased in 2014 due primarily to the acquisition of nonperforming loans from The Bank of Union. The Company’s nonaccrual loans are primarily commercial and real estate loans. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of interest or principal or both is in serious doubt. Interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is reasonably expected. Otherwise, interest income is not recognized until the principal balance is fully collected. Total interest income, which was not accrued on nonaccrual loans outstanding, was approximately $481,000 for the six months ended June 30, 2014 and $978,000 for the six months ended June 30, 2013. Only a small amount of this interest is expected to be ultimately collected.

Other real estate owned and repossessed assets declined $6.4 million at June 30, 2014, compared to $8.4 million at December 31, 2013 and $8.5 million at June 30, 2013 due to the sale of a property.

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 $35.3 million of these loans at June 30, 2014 compared to $6.2 million at December 31, 2013 and $3.2 million at June 30, 2013. Potential problem loans are not included in nonperforming and restructured loans. 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 higher level of potential problem loans in the second quarter was due primarily to an additional $28.4 million for a single commercial loan that was experiencing financial difficulty during the quarter, but was not considered impaired.

Liquidity and Funding

Deposits

At June 30, 2014, total deposits increased $302.1 million compared to December 31, 2013 and increased $571.2 million compared to June 30, 2013. The branches acquired from the former Bank of Union had $225.6 million in deposits at June 30, 2014. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 93.7% at June 30, 2014, compared to 93.5% at December 31, 2013 and 93.0% June 30, 2013. Noninterest-bearing deposits to total deposits were 38.5% at June 30, 2014, and December 31, 2013, compared to and 38.0% at June 30, 2013.

Short-Term Borrowings

Short-term borrowings consisting primarily of federal funds purchased and repurchase agreements are another source of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company’s ability to earn a favorable spread on the funds obtained. Short-term borrowings were $12.3 million at June 30, 2014, compared to $4.6 million at December 31, 2013 and $3.5 million at June 30, 2013.

 

32


Long-Term Borrowings

The Company does not have any borrowings from the Federal Home Loan Bank (“FHLB”) of Topeka, Kansas as of June 30, 2014. The Company had $6.9 million of FHLB borrowings at December 31, 2013 and $10.0 million at June 30, 2013, which matured during the first half of 2014.

There have not been material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Capital Resources

Stockholders’ equity totaled $580.5 million at June 30, 2014, compared to $557.0 million at December 31, 2013 and $535.0 million at June 30, 2013. In addition to net income of $29.3 million, other changes in stockholders’ equity during the six months ended June 30, 2014 included $1.9 million related to stock option exercises, $776,000 related to stock-based compensation and an $992,000 increase in other comprehensive income, that were offset by $9.5 million in dividends. The Company’s tier 1 capital (to total assets) and total capital (to risk weighted assets) were 8.64% and 14.47%, respectively, at June 30, 2014, well in excess of the regulatory minimums.

See Note (7) of the Notes to Consolidated Financial Statements for a discussion of capital ratio requirements.

CONTRACTUAL OBLIGATIONS

There have not been any 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 which was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

33


BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

 

     Three Months Ended June 30,  
     2014     2013  
           Interest      Average           Interest      Average  
     Average     Income/      Yield/     Average     Income/      Yield/  
     Balance     Expense      Rate     Balance     Expense      Rate  

ASSETS

              

Earning assets:

              

Loans (1)

   $ 3,602,491      $ 45,929         5.11   $ 3,235,966      $ 41,568         5.15

Securities – taxable

     530,482        1,502         1.14        515,010        1,295         1.01   

Securities – tax exempt

     40,870        421         4.13        42,801        483         4.53   

Interest bearing deposits w/ banks & FFS

     1,748,422        1,096         0.25        1,527,172        971         0.25   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total earning assets

     5,922,265        48,948         3.32        5,320,949        44,317         3.34   
  

 

 

   

 

 

      

 

 

   

 

 

    

Nonearning assets:

              

Cash and due from banks

     184,984             150,781        

Interest receivable and other assets

     323,312             310,034        

Allowance for loan losses

     (40,567          (38,776     
  

 

 

        

 

 

      

Total nonearning assets

     467,729             422,039        
  

 

 

        

 

 

      

Total assets

   $ 6,389,994           $ 5,742,988        
  

 

 

        

 

 

      

LIABILITIES AND STOCKHOLDERS’ EQUITY

              

Interest-bearing liabilities:

              

Transaction deposits

   $ 810,729      $ 208         0.10   $ 657,540      $ 163         0.10

Savings deposits

     1,975,496        1,113         0.23        1,791,912        1,013         0.23   

Time deposits

     804,779        1,412         0.70        803,750        1,713         0.86   

Short-term borrowings

     10,270        5         0.20        3,970        1         0.12   

Long-term borrowings

     1,308        7         2.22        10,957        62         2.27   

Junior subordinated debentures

     26,804        492         7.37        26,804        491         7.35   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest bearing liabilities

     3,629,386        3,237         0.36        3,294,933        3,443         0.42   
  

 

 

   

 

 

      

 

 

   

 

 

    

Interest free funds:

              

Noninterest bearing deposits

     2,159,268             1,892,014        

Interest payable and other liabilities

     23,769             22,988        

Stockholders’ equity

     577,571             533,053        
  

 

 

        

 

 

      

Total interest free funds

     2,760,608             2,448,055        
  

 

 

        

 

 

      

Total liabilities and stockholders’ equity

   $ 6,389,994           $ 5,742,988        
  

 

 

        

 

 

      

Net interest income

     $ 45,711           $ 40,874      
    

 

 

        

 

 

    

Net interest spread

          2.96          2.92
       

 

 

        

 

 

 

Effect of interest free funds

          0.14          0.16
       

 

 

        

 

 

 

Net interest margin

          3.10          3.08
       

 

 

        

 

 

 

 

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

 

34


BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

 

     Six Months Ended June 30,  
     2014     2013  
           Interest      Average           Interest      Average  
     Average     Income/      Yield/     Average     Income/      Yield/  
     Balance     Expense      Rate     Balance     Expense      Rate  

ASSETS

              

Earning assets:

              

Loans (1)

   $ 3,542,572      $ 88,643         5.05   $ 3,227,777      $ 82,823         5.17

Securities – taxable

     507,817        2,807         1.11        519,671        2,648         1.03   

Securities – tax exempt

     41,037        851         4.18        43,897        1,015         4.66   

Interest bearing deposits w/ banks & FFS

     1,744,071        2,191         0.25        1,539,136        1,949         0.26   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total earning assets

     5,835,497        94,492         3.27        5,330,481        88,435         3.35   
  

 

 

   

 

 

      

 

 

   

 

 

    

Nonearning assets:

              

Cash and due from banks

     192,538             147,876        

Interest receivable and other assets

     315,690             309,287        

Allowance for loan losses

     (39,916          (38,711     
  

 

 

        

 

 

      

Total nonearning assets

     468,312             418,452        
  

 

 

        

 

 

      

Total assets

   $ 6,303,809           $ 5,748,933        
  

 

 

        

 

 

      

LIABILITIES AND STOCKHOLDERS’ EQUITY

              

Interest bearing liabilities:

              

Transaction deposits

   $ 785,675      $ 406         0.10   $ 666,646      $ 330         0.10

Savings deposits

     1,966,302        2,216         0.23        1,786,325        2,093         0.24   

Time deposits

     802,927        2,900         0.73        814,879        3,506         0.87   

Short-term borrowings

     7,892        7         0.18        4,367        3         0.13   

Long-term borrowings

     3,297        25         1.53        9,769        124         2.55   

Junior subordinated debentures

     26,804        983         7.39        26,804        982         7.38   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest bearing liabilities

     3,592,897        6,537         0.37        3,308,790        7,038         0.43   
  

 

 

   

 

 

      

 

 

   

 

 

    

Interest free funds:

              

Noninterest-bearing deposits

     2,123,644             1,889,960        

Interest payable and other liabilities

     15,635             20,751        

Stockholders’ equity

     571,633             529,432        
  

 

 

        

 

 

      

Total interest free funds

     2,710,912             2,440,143        
  

 

 

        

 

 

      

Total liabilities and stockholders’ equity

   $ 6,303,809           $ 5,748,933        
  

 

 

        

 

 

      

Net interest income

     $ 87,955           $ 81,397      
    

 

 

        

 

 

    

Net interest spread

          2.90          2.92
       

 

 

        

 

 

 

Effect of interest free funds

          0.14          0.16
       

 

 

        

 

 

 

Net interest margin

          3.04          3.08
       

 

 

        

 

 

 

 

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

 

35


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, 2013, the date of its most recent annual report to stockholders.

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer, Interim Chief Financial Officer and Chief Risk Officer and Disclosure Committee, which includes the Company’s Chief Asset Quality Officer, Chief Internal Auditor, Senior Financial Officer, Treasurer, 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 period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

The Company has been named as a defendant in various legal actions arising from the conduct of its normal business activities. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in the opinion of the Company, any such liability will not have a material adverse effect on the consolidated financial statements of the Company.

Item 1A. Risk Factors.

As of June 30, 2014, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

 

36


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 dated June 15, 2004 (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    Amended By-Laws (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 1992 and incorporated herein by reference).
3.4    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).
3.5    Amendment to Amended By-Laws, 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).
3.6    Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation dated May 23, 2013 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 29, 2013 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    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).
4.3    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).
4.4    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/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
4.5    Form of 7.20% Cumulative Trust Preferred Security Certificate for BFC Capital Trust II (filed as Exhibit D to Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
4.6    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 on Form S-3 to the Company’s registration statement, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).
4.7    Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (filed as Exhibit 4.2 on Form S-3 to the Company’s registration statement, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).
4.8    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/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
10.1    BancFirst Corporation Employee Stock Ownership and Trust Agreement adopted December 21, 2006 effective January 1, 2007 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2008 and incorporated herein by reference).
10.2*    Third Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option Plan.
10.3*    Fourth Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan.

 

37


Exhibit

Number

  

Exhibit

10.4    Amended and Restated BancFirst Corporation Thrift Plan adopted March 25, 2010 effective January 1, 2010 (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2010 and incorporated herein by reference).
10.5    Amendment (Code Section 415 Compliance) to the BancFirst Corporation Employee Stock Ownership Plan and Trust Agreement, adopted July 23, 2009. (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2010 and incorporated herein by reference).
10.6    Amendment (Pension Protection Act, Heart Act and the Worker, Retiree, and Employer Recovery Act) to the BancFirst Corporation Employee Stock Ownership Plan and Trust Agreement, adopted December 17, 2009 (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2010 and incorporated herein by reference).
10.7    Amendment to the Amended and Restated BancFirst Corporation Thrift Plan adopted December 16, 2010 effective January 1, 2011 (filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2010 and incorporated herein by reference).
10.8    Amendment to the Amended and Restated BancFirst Corporation Thrift Plan adopted October 27, 2011 effective October 1, 2011 (filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2011 and incorporated herein by reference).
10.9    Amendment to the Amended and Restated BancFirst Corporation Employee Stock Ownership Plan adopted October 27, 2011 effective October 1, 2011 (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2011 and incorporated herein by reference).
10.10*    Twelfth Amended and Restated BancFirst Corporation Stock Option Plan.
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.
101.INS*    XBRL Instance Document
101.SCH*    XBRL Taxonomy Extension Schema
101.CAL*    XBRL Taxonomy Extension Calculation Linkbase
101.DEF*    XBRL Taxonomy Extension Definition Linkbase
101.LAB*    XBRL Taxonomy Extension Label Linkbase
101.PRE*    XBRL Taxonomy Extension Presentation Linkbase

 

* Filed herewith.

 

38


SIGNATURES

Pursuant to the requirements of the Securities 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: August 8, 2014  

/s/ David E. Rainbolt

  David E. Rainbolt
  President
  Chief Executive Officer
  (Principal Executive Officer)
Date: August 8, 2014  

/s/ Randy Foraker

  Randy Foraker
  Executive Vice President
  Interim Chief Financial Officer
  and Chief Risk Officer
  (Principal Financial and Accounting Officer)

 

39