UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended March 31, 2013

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 April 30, 2013 there were 15,230,364 shares of the registrant’s Common Stock outstanding.

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     March 31,
2013
    December 31,
2012
    March 31,
2012
 
     (unaudited)     (see Note 1)     (unaudited)  

ASSETS

      

Cash and due from banks

   $ 130,316      $ 213,103      $ 143,515   

Interest-bearing deposits with banks

     1,585,736        1,732,045        1,693,439   

Federal funds sold

     —          700        —     

Securities (fair value: $565,708, $562,815, and $574,230, respectively)

     565,490        562,542        573,801   

Loans:

      

Total loans (net of unearned interest)

     3,219,967        3,242,427        3,049,376   

Allowance for loan losses

     (38,664     (38,725     (37,633
  

 

 

   

 

 

   

 

 

 

Loans, net

     3,181,303        3,203,702        3,011,743   

Premises and equipment, net

     116,729        115,503        114,115   

Other real estate owned

     9,098        9,227        12,005   

Intangible assets, net

     11,595        12,083        13,703   

Goodwill

     44,545        44,545        44,545   

Accrued interest receivable

     16,294        15,976        17,157   

Other assets

     112,820        112,824        113,971   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 5,773,926      $ 6,022,250      $ 5,737,994   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Deposits:

      

Noninterest-bearing

   $ 1,934,427      $ 2,016,832      $ 1,817,907   

Interest-bearing

     3,240,085        3,423,998        3,334,949   
  

 

 

   

 

 

   

 

 

 

Total deposits

     5,174,512        5,440,830        5,152,856   

Short-term borrowings

     4,891        4,571        7,323   

Accrued interest payable

     2,012        2,170        2,473   

Long-term borrowings

     11,040        9,178        13,403   

Other liabilities

     26,960        19,130        33,899   

Junior subordinated debentures

     26,804        26,804        36,083   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     5,246,219        5,502,683        5,246,037   
  

 

 

   

 

 

   

 

 

 

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: 15,228,277, 15,242,308 and 15,145,280, respectively

     15,228        15,242        15,145   

Capital surplus

     82,956        82,401        78,420   

Retained earnings

     423,637        415,607        390,881   

Accumulated other comprehensive income, net of income tax of $3,169, $3,400 and $4,043, respectively

     5,886        6,317        7,511   
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     527,707        519,567        491,957   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 5,773,926      $ 6,022,250      $ 5,737,994   
  

 

 

   

 

 

   

 

 

 

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
March 31,
 
     2013     2012  

INTEREST INCOME

    

Loans, including fees

   $ 41,174      $ 41,960   

Securities:

    

Taxable

     1,353        2,407   

Tax-exempt

     346        424   

Federal funds sold

     1        1   

Interest-bearing deposits with banks

     977        973   
  

 

 

   

 

 

 

Total interest income

     43,851        45,765   
  

 

 

   

 

 

 

INTEREST EXPENSE

    

Deposits

     3,040        4,249   

Short-term borrowings

     2        8   

Long-term borrowings

     62        105   

Junior subordinated debentures

     491        586   
  

 

 

   

 

 

 

Total interest expense

     3,595        4,948   
  

 

 

   

 

 

 

Net interest income

     40,256        40,817   

Provision for loan losses

     300        173   
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     39,956        40,644   
  

 

 

   

 

 

 

NONINTEREST INCOME

    

Trust revenue

     1,906        1,707   

Service charges on deposits

     12,336        10,607   

Securities transactions

     122        4,032   

Income from sales of loans

     688        572   

Insurance commissions

     4,045        2,993   

Cash management

     1,423        1,939   

Gain on sale of other assets

     217        20   

Other

     1,798        1,567   
  

 

 

   

 

 

 

Total noninterest income

     22,535        23,437   
  

 

 

   

 

 

 

NONINTEREST EXPENSE

    

Salaries and employee benefits

     25,209        24,800   

Occupancy and fixed assets expense, net

     2,580        2,446   

Depreciation

     2,308        2,131   

Amortization of intangible assets

     443        457   

Data processing services

     1,185        1,283   

Net expense from other real estate owned

     122        247   

Marketing and business promotion

     1,507        1,655   

Deposit insurance

     743        719   

Other

     7,847        8,299   
  

 

 

   

 

 

 

Total noninterest expense

     41,944        42,037   
  

 

 

   

 

 

 

Income before taxes

     20,547        22,044   

Income tax expense

     (7,175     (8,039
  

 

 

   

 

 

 

Net income

   $ 13,372      $ 14,005   
  

 

 

   

 

 

 

NET INCOME PER COMMON SHARE

    

Basic

   $ 0.88      $ 0.93   
  

 

 

   

 

 

 

Diluted

   $ 0.86      $ 0.91   
  

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME

    

Unrealized losses on securities, net of tax of $226 and $318, respectively

   $ (421   $ (591

Reclassification adjustment for gains included in net income, net of tax of $5 and $723, respectively

     (10     (1,342
  

 

 

   

 

 

 

Other comprehensive loss, net of tax of $231 and $1,041, respectively

     (431     (1,933
  

 

 

   

 

 

 

Comprehensive income

   $ 12,941      $ 12,072   
  

 

 

   

 

 

 

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
March 31,
 
     2013     2012  

COMMON STOCK

    

Issued at beginning of period

   $ 15,242      $ 15,118   

Shares issued

     9        27   

Shares acquired and canceled

     (23     —     
  

 

 

   

 

 

 

Issued at end of period

   $ 15,228      $ 15,145   
  

 

 

   

 

 

 

CAPITAL SURPLUS

    

Balance at beginning of period

   $ 82,401      $ 77,462   

Common stock issued

     158        455   

Tax effect of stock options

     23        62   

Stock-based compensation arrangements

     374        441   
  

 

 

   

 

 

 

Balance at end of period

   $ 82,956      $ 78,420   
  

 

 

   

 

 

 

RETAINED EARNINGS

    

Balance at beginning of period

   $ 415,607      $ 381,017   

Net income

     13,372        14,005   

Dividends on common stock

     (4,422     (4,141

Common stock acquired and canceled

     (920     —     
  

 

 

   

 

 

 

Balance at end of period

   $ 423,637      $ 390,881   
  

 

 

   

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME

    

Unrealized gains (losses) on securities:

    

Balance at beginning of period

   $ 6,317      $ 9,444   

Net change

     (431     (1,933
  

 

 

   

 

 

 

Balance at end of period

   $ 5,886      $ 7,511   
  

 

 

   

 

 

 

Total stockholders’ equity

   $ 527,707      $ 491,957   
  

 

 

   

 

 

 

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

 

4


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

     Three Months Ended
March 31,
 
     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income

   $ 13,372      $ 14,005   

Adjustments to reconcile to net cash provided by operating activities:

    

Provision for loan losses

     300        173   

Depreciation and amortization

     2,751        2,588   

Net amortization of securities premiums and discounts

     417        412   

Realized securities gains

     (122     (4,032

Gain on sales of loans

     (688     (572

Cash receipts from the sale of loans originated for sale

     54,540        45,767   

Cash disbursements for loans originated for sale

     (50,479     (48,734

Deferred income tax benefit

     (96     (20

Gains on other assets

     (99     (30

(Increase) decrease in interest receivable

     (318     1,505   

Decrease in interest payable

     (158     (237

Amortization of stock-based compensation arrangements

     374        441   

Other, net

     3,819        3,619   
  

 

 

   

 

 

 

Net cash provided by operating activities

     23,613        14,885   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Net decrease in Federal funds sold

     700        400   

Purchases of securities:

    

Available for sale

     (20,565     (9,785

Maturities of securities:

    

Held for investment

     315        1,099   

Available for sale

     15,317        44,034   

Proceeds from sales and calls of securities:

    

Available for sale

     1,027        6,470   

Purchases of loans

     (26,597     (542

Proceeds from sales of loans

     27,426        11,485   

Net other decrease/(increase) in loans

     17,252        (44,317

Purchases of premises, equipment and computer software

     (3,683     (5,005

Proceeds from the sale of other assets

     988        4,937   
  

 

 

   

 

 

 

Net cash provided by investing activities

     12,180        8,776   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

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

     (239,034     148,109   

Net decrease in time deposits

     (27,284     (32,988

Net in increase/(decrease) in short-term borrowings

     320        (951

Issuance/(paydown) of long-term borrowings

     1,862        (5,073

Issuance of common stock

     190        544   

Common stock acquired

     (943     —     

Cash dividends paid

     —          (4,081
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (264,889     105,560   
  

 

 

   

 

 

 

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

     (229,096     129,221   

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

     1,945,148        1,707,733   
  

 

 

   

 

 

 

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

   $ 1,716,052      $ 1,836,954   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    

Cash paid during the period for interest

   $ 3,753      $ 5,185   
  

 

 

   

 

 

 

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 generally accepted accounting principles and general practice within the banking industry. A summary of significant accounting policies can be found in Footnote (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., and BancFirst and its subsidiaries. The 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 consolidated financial statements.

The accompanying 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, 2012, 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, 2012, 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 net income.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Comprehensive Income (Topic 220).” ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. An entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. The new standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. Adoption of ASU 2013-02 did not have a significant effect on the Company’s financial statements.

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles (Topic 350)—Goodwill and Other.” ASU 2012-02 simplifies the impairment test for indefinite-lived intangible assets other than goodwill. The new guidance gives the option to first assess qualitative factors to determine if it is more likely than not that the fair value of an

 

6


indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative valuation test. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning on or after September 15, 2012. The Company opted to continue to perform quantitative tests for indefinite-lived intangible assets other than goodwill and not to perform qualitative tests for impairment under ASU 2012-02 as of September 15, 2012. Adoption of ASU 2012-02 did not have a significant effect on the Company’s financial statements.

In November 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210)—Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 is an amendment to require an entity to disclose both net and gross information about offsetting assets and liabilities to enable users of its financial statements to understand the effect of those arrangements. Arrangements include derivatives, sale and repurchase agreements and transactions, securities borrowing and securities lending arrangements. ASU 2011-11 was effective for annual and interim periods beginning on January 1, 2013. Adoption of ASU 2011-11 did not have a significant effect on the Company’s financial statements.

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

On January 19, 2012, Council Oak Investment Corporation, a wholly-owned subsidiary of BancFirst, completed the sale of one of its investments that resulted in a pretax gain of approximately $4.5 million. After related expenses and income taxes, the increase in net income approximated $2.6 million. The gain was included in first quarter 2012 earnings.

(3) SECURITIES

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

 

     March 31, 2013  
     (Dollars in thousands)  

Held for investment, at cost (fair value: $16,317)

   $ 16,099   

Available for sale, at fair value

     549,391   
  

 

 

 

Total

   $ 565,490   
  

 

 

 

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

 

     March 31, 2013  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Estimated
Fair
Value
 
     (Dollars in thousands)  

Mortgage backed securities (1)

   $ 740       $ 56       $ —        $ 796   

States and political subdivisions

     15,359         170         (8     15,521   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 16,099       $ 226       $ (8   $ 16,317   
  

 

 

    

 

 

    

 

 

   

 

 

 

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

 

     March 31, 2013  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Estimated
Fair

Value
 
     (Dollars in thousands)  

U.S. treasury and other Federal agencies

   $ 459,301       $ 3,233       $ (155   $ 462,379   

Mortgage backed securities (1)

     17,212         764         (2     17,974   

States and political subdivisions

     52,858         2,646         (11     55,493   

Other securities (2)

     10,965         2,580         —          13,545   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 540,336       $ 9,223       $ (168   $ 549,391   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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

 

7


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.

 

     March 31, 2013  
     Amortized
Cost
     Estimated
Fair
Value
 
     (Dollars in thousands)  

Held for Investment

     

Contractual maturity of debt securities:

     

Within one year

   $ 4,590       $ 4,627   

After one year but within five years

     9,898         9,999   

After five years but within ten years

     1,179         1,212   

After ten years

     432         479   
  

 

 

    

 

 

 

Total

   $ 16,099       $ 16,317   
  

 

 

    

 

 

 

Available for Sale

     

Contractual maturity of debt securities:

     

Within one year

   $ 191,802       $ 192,015   

After one year but within five years

     219,323         221,790   

After five years but within ten years

     34,426         35,851   

After ten years

     87,206         89,611   
  

 

 

    

 

 

 

Total debt securities

     532,757         539,267   

Equity securities

     7,579         10,124   
  

 

 

    

 

 

 

Total

   $ 540,336       $ 549,391   
  

 

 

    

 

 

 

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:

 

     March 31, 2013  
     (Dollars in thousands)  

Book value of pledged securities

   $ 487,367   

 

8


(4) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

 

     March 31, 2013     December 31, 2012     March 31, 2012  
     Amount      Percent     Amount      Percent     Amount      Percent  
     (Dollars in thousands)  

Commercial and industrial

   $ 518,438         16.10   $ 559,274         17.25   $ 526,028         17.25

Oil & gas production & equipment

     154,392         4.79        154,380         4.76        129,710         4.25   

Agriculture

     96,094         2.98        93,274         2.88        90,659         2.97   

State and political subdivisions:

               

Taxable

     9,272         0.29        9,412         0.29        7,332         0.24   

Tax-exempt

     13,034         0.41        13,194         0.41        15,810         0.52   

Real estate:

               

Construction

     231,770         7.20        226,102         6.97        200,609         6.58   

Farmland

     124,347         3.86        125,033         3.86        107,751         3.53   

One to four family residences

     680,129         21.12        669,230         20.64        660,725         21.67   

Multifamily residential properties

     47,506         1.48        50,721         1.56        40,164         1.32   

Commercial

     1,084,864         33.69        1,068,445         32.95        1,004,596         32.94   

Consumer

     240,600         7.47        253,002         7.80        244,171         8.01   

Other (not classified above)

     19,521         0.61        20,360         0.63        21,821         0.72   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans

   $ 3,219,967         100.00   $ 3,242,427         100.00   $ 3,049,376         100.00
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Loans held for sale (included above)

   $ 10,287         $ 13,661         $ 15,585      
  

 

 

      

 

 

      

 

 

    

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, 2012.

Nonperforming and Restructured Assets

Nonaccrual loans, accruing loans past due 90 days or more, and restructured loans are shown in the table below. Had nonaccrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income of approximately $301,000 for the three months ended March 31, 2013 and approximately $338,000 for the three months ended March 31, 2012.

At March 31, 2013, troubled debt restructurings were primarily due to the principal deferral restructuring from a customer whose loan 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. Collateral value will be 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.

 

9


The following table is a summary of nonperforming and restructured assets:

 

     March 31,     December 31,     March 31,  
     2013     2012     2012  
     (Dollars in thousands)  

Past due 90 days or more and still accruing

   $ 542      $ 537      $ 1,150   

Nonaccrual

     20,933        20,549        20,721   

Restructured

     17,792        17,866        18,483   
  

 

 

   

 

 

   

 

 

 

Total nonperforming and restructured loans

     39,267        38,952        40,354   

Other real estate owned and repossessed assets

     9,424        9,566        12,408   
  

 

 

   

 

 

   

 

 

 

Total nonperforming and restructured assets

   $ 48,691      $ 48,518      $ 52,762   
  

 

 

   

 

 

   

 

 

 

Nonperforming and restructured loans to total loans

     1.22     1.20     1.32
  

 

 

   

 

 

   

 

 

 

Nonperforming and restructured assets to total assets

     0.84     0.81     0.92
  

 

 

   

 

 

   

 

 

 

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.

 

     March 31,
2013
     March 31,
2012
 
     (Dollars in thousands)  

Non-residential real estate

   $ 9,666       $ 9,768   

Residential real estate

     4,335         4,754   

Non-consumer non-real estate

     1,449         1,425   

Consumer non-real estate

     187         143   

Other loans

     3,052         1,464   

Acquired loans

     2,244         3,167   
  

 

 

    

 

 

 

Total

   $ 20,933       $ 20,721   
  

 

 

    

 

 

 

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

 

     Age Analysis of Past Due Receivables  
     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 March 31, 2013

  

Non-residential real estate

   $ 3,293       $ 1,945       $ 5,238       $ 1,238,804       $ 1,244,042       $ 18   

Residential real estate

     4,438         868         5,306         768,487         773,793         268   

Non-consumer non-real estate

     2,100         214         2,314         748,287         750,601         74   

Consumer non-real estate

     1,994         184         2,178         209,142         211,320         126   

Other loans

     2,152         1,406         3,558         140,468         144,026         —     

Acquired loans

     1,993         328         2,321         93,864         96,185         56   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,970       $ 4,945       $ 20,915       $ 3,199,052       $ 3,219,967       $ 542   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2012

  

Non-residential real estate

   $ 3,924       $ 849       $ 4,773       $ 1,097,141       $ 1,101,914       $ 192   

Residential real estate

     3,218         1,915         5,133         690,937         696,070         436   

Non-consumer non-real estate

     1,311         633         1,944         723,144         725,088         132   

Consumer non-real estate

     1,767         220         1,987         198,221         200,208         195   

Other loans

     1,414         1,352         2,766         160,722         163,488         59   

Acquired loans

     2,707         934         3,641         158,967         162,608         136   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,341       $ 5,903       $ 20,244       $ 3,029,132       $ 3,049,376       $ 1,150   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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 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 March 31, 2013

  

Non-residential real estate

   $ 27,949       $ 26,417       $ 2,185       $ 26,814   

Residential real estate

     6,079         5,472         1,337         4,847   

Non-consumer non-real estate

     1,899         1,565         452         2,249   

Consumer non-real estate

     441         421         96         408   

Other loans

     3,736         3,094         267         2,648   

Acquired loans

     10,311         8,261         41         8,893   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 50,415       $ 45,230       $ 4,378       $ 45,859   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2012

           

Non-residential real estate

   $ 28,420       $ 27,558       $ 2,235       $ 22,887   

Residential real estate

     6,185         5,695         1,432         5,557   

Non-consumer non-real estate

     2,062         1,748         605         1,664   

Consumer non-real estate

     567         477         65         452   

Other loans

     1,880         1,524         320         2,666   

Acquired loans

     16,850         14,173         275         15,780   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 55,964       $ 51,175       $ 4,932       $ 49,006   
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit Risk Monitoring and Loan Grading

The Company employs several means to monitor the 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.

Loans are subject to an internal risk grading system which indicates the risk and acceptability of that loan. 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 Footnote (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

 

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 March 31, 2013

                 

Non-residential real estate

   $ 1,043,069       $ 165,295       $ 25,994       $ 9,684       $ —         $ 1,244,042   

Residential real estate

     670,352         84,644         14,140         4,657         —           773,793   

Non-consumer non-real estate

     647,162         97,110         4,800         1,529         —           750,601   

Consumer non-real estate

     198,107         10,912         1,923         374         4         211,320   

Other loans

     139,696         2,304         1,103         923         —           144,026   

Acquired loans

     74,939         14,936         4,009         2,301         —           96,185   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,773,325       $ 375,201       $ 51,969       $ 19,468       $ 4       $ 3,219,967   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2012

                 

Non-residential real estate.

   $ 951,016       $ 112,408       $ 28,721       $ 9,769       $ —         $ 1,101,914   

Residential real estate

     591,818         83,250         15,579         5,423         —           696,070   

Non-consumer non-real estate

     636,582         79,548         7,480         1,478         —           725,088   

Consumer non-real estate

     187,999         9,690         2,132         387         —           200,208   

Other loans

     158,729         2,775         1,725         259         —           163,488   

Acquired loans

     119,165         31,319         8,901         3,223         —           162,608   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,645,309       $ 318,990       $ 64,538       $ 20,539       $ —         $ 3,049,376   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The allowance for loan losses methodology is disclosed in Footnote (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The following table details activity in the ALLL 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.

 

     ALLL  
     Non-
Residential
Real Estate
    Residential
Real  Estate
    Non-
Consumer
Non-Real
Estate
    Consumer
Non-Real
Estate
    Other
Loans
    Acquired
Loans
    Total  
     (Dollars in thousands)  

Three Months Ended March 31, 2013

              

Allowance for loan losses:

              

Balance at December 31, 2012

   $ 14,969      $ 9,815      $ 9,385      $ 2,451      $ 1,885      $ 220      $ 38,725   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

     (18     (151     (36     (140     (139     (49     (533

Recoveries

     19        13        31        76        —          33        172   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     1        (138     (5     (64     (139     (16     (361
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provisions charged to operations

     361        244        (398     (3     76        20        300   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

   $ 15,331      $ 9,921      $ 8,982      $ 2,384      $ 1,822      $ 224      $ 38,664   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for loan losses-ending balances:

              

Individually evaluated for impairment

   $ 2,694      $ 2,123      $ 1,211      $ 290      $ 199      $ —        $ 6,517   

Collectively evaluated for impairment

     12,637        7,798        7,771        2,094        1,623        224        32,147   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

   $ 15,331      $ 9,921      $ 8,982      $ 2,384      $ 1,822      $ 224      $ 38,664   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans-Ending balances:

              

Individually evaluated for impairment

   $ 35,678      $ 18,797      $ 6,329      $ 2,301      $ 246      $ —       $ 63,351   

Collectively evaluated for impairment

     1,208,364        754,996        744,272        209,019        143,780        89,875        3,150,306   

Loans acquired with deteriorated credit quality

     —          —          —         —          —          6,310        6,310   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

   $ 1,244,042      $ 773,793      $ 750,601      $ 211,320      $ 144,026      $ 96,185      $ 3,219,967   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

12


Three Months Ended March 31, 2012

              

Allowance for loan losses:

              

Balance at December 31, 2011

   $ 13,948      $ 9,764      $ 9,156      $ 2,315      $ 1,886      $ 587      $ 37,656   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

     (121     (36     (17     (114     (180     (64     (532

Recoveries

     37        96        98        84        19        2        336   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     (84     60        81        (30     (161     (62     (196
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provisions charged to operations

     245        (62     (39     (2     125        (94     173   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

   $ 14,109      $ 9,762      $ 9,198      $ 2,283      $ 1,850      $ 431      $ 37,633   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for loan losses-ending balances:

              

Individually evaluated for impairment

   $ 3,085      $ 2,692      $ 1,741      $ 300      $ 183      $ —        $ 8,001   

Collectively evaluated for impairment

     11,024        7,070        7,457        1,983        1,667        431        29,632   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

   $ 14,109      $ 9,762      $ 9,198      $ 2,283      $ 1,850      $ 431      $ 37,633   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans-Ending balances:

              

Individually evaluated for impairment

   $ 38,489      $ 21,002      $ 8,958      $ 2,519      $ 147      $ —       $ 71,115   

Collectively evaluated for impairment

     1,063,425        675,068        716,130        197,689        163,341        150,484        2,966,137   

Loans acquired with deteriorated credit quality

     —          —          —         —          —          12,124        12,124   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

   $ 1,101,914      $ 696,070      $ 725,088      $ 200,208      $ 163,488      $ 162,608      $ 3,049,376   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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:

 

     Three Months Ended
March  31,
 
     2013      2012  
     (Dollars in thousands)  

Other real estate owned

   $ 436       $ 659   

Repossessed assets

     209         180   
  

 

 

    

 

 

 

Total

   $ 645       $ 839   
  

 

 

    

 

 

 

(5) INTANGIBLE ASSETS

The following is a summary of intangible assets:

 

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

As of March 31, 2013

       

Core deposit intangibles

   $ 13,473       $ (6,171   $ 7,302   

Customer relationship intangibles

     5,657         (2,073     3,584   

Mortgage servicing intangibles

     823         (114     709   
  

 

 

    

 

 

   

 

 

 

Total

   $ 19,953       $ (8,358   $ 11,595   
  

 

 

    

 

 

   

 

 

 

Additional information for intangible assets can be found in Footnote (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

 

13


(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 2,800,000 shares in May 2011. At March 31, 2013, 15,860 shares were available for future grants. The BancFirst ISOP will terminate on December 31, 2014. The options are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2013 will become exercisable through the year 2019. 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 205,000 shares in May 2009. At March 31, 2013, 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 March 31, 2013 will become exercisable through the year 2015. 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)  

Three Months Ended March 31, 2013

  

Outstanding at December 31, 2012

     1,216,981      $ 31.98        

Options granted

     —          —          

Options exercised

     (8,250     17.22        

Options cancelled, forfeited or expired

     —          —          
  

 

 

        

Outstanding at March 31, 2013

     1,208,731        32.08         8.43  Yrs    $ 11,632   
  

 

 

      

 

 

   

 

 

 

Exercisable at March 31, 2013

     626,031        26.20         5.01  Yrs    $ 9,703   
  

 

 

      

 

 

   

 

 

 

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
March 31,
 
     2013      2012  
     (Dollars in thousands)  

Total intrinsic value of options exercised

   $ 348       $ 1,132   

Cash received from options exercised

     142         483   

Tax benefit realized from options exercised

     135         438   

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.

 

14


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

 

     Three Months Ended
March 31,
 
     2013      2012  
     (Dollars in thousands)  

Stock-based compensation expense

   $ 374       $ 441   

Tax

     145         171   
  

 

 

    

 

 

 

Stock-based compensation expense, net of tax

   $ 229       $ 270   
  

 

 

    

 

 

 

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:

 

     March 31, 2013  
     (Dollars in thousands)  

Fair value of stock options

   $ 5,103   

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

 

     Three Months Ended
March  31,
 
     2013     2012  

Risk-free interest rate

     1.95     1.95

Dividend yield

     2.00     2.00

Stock price volatility

     20.21     38.75

Expected term

     10  Yrs      10  Yrs 

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

(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
March 31,
 
     2013      2012  

Number of shares repurchased

     23,050         —     

Average price of shares repurchased

   $ 40.92         —     

Shares remaining to be repurchased

     211,914         241,751   

The Company and BancFirst are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and 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, as of March 31, 2013, that the Company and BancFirst met all capital adequacy requirements to which they are subject. The required capital amounts and the Company’s and BancFirst’s respective ratios are shown in the following table:

 

15


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

As of March 31, 2013:

               

Total Capital

               

(to Risk Weighted Assets)-

               

BancFirst Corporation

   $ 531,048         14.75   $ 288,098         8.00     N/A         N/A   

BancFirst

     502,497         13.98     287,481         8.00   $ 359,351         10.00

Tier 1 Capital

               

(to Risk Weighted Assets)-

               

BancFirst Corporation

   $ 492,384         13.67   $ 144,049         4.00     N/A         N/A   

BancFirst

     463,833         12.91     143,740         4.00   $ 215,610         6.00

Tier 1 Capital

               

(to Total Assets)-

               

BancFirst Corporation

   $ 492,384         8.61   $ 173,218         3.00     N/A         N/A   

BancFirst

     463,833         8.12     172,641         3.00   $ 287,735         5.00

As of March 31, 2013, 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 Ratio of at least 6%, a combined Tier 1 and Tier 2 Ratio of at least 10%, and a Leverage Ratio of at least 5%. 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.

(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 March 31, 2013

        

Basic

        

Income available to common stockholders

   $ 13,372         15,238,701       $ 0.88   
        

 

 

 

Effect of stock options

     —           243,816      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 13,372         15,482,517       $ 0.86   
  

 

 

    

 

 

    

 

 

 

Three Months Ended March 31, 2012

        

Basic

        

Income available to common stockholders

   $ 14,005         15,134,606       $ 0.93   
        

 

 

 

Effect of stock options

     —           280,905      
  

 

 

    

 

 

    

Diluted

        

Income available to common stockholders plus assumed exercises of stock options

   $ 14,005         15,415,511       $ 0.91   
  

 

 

    

 

 

    

 

 

 

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:

 

16


     Shares      Average
Exercise Price
 

Three Months Ended March 31, 2013

     534,000       $ 39.44   

Three Months Ended March 31, 2012

     607,200       $ 38.70   

(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.

FASB Accounting Standards Codification 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, 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 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.

 

17


Derivatives

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

Loans Held For Sale

The Company originates mortgage 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 these 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, if impaired. 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 March 31, 2013 and 2012, 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)  

March 31, 2013

           

Securities available for sale

   $ 20,304       $ 518,963       $ 10,124       $ 549,391   

Derivative assets

     —           3,424         —           3,424   

Derivative liabilities

     —           1,658         —           1,658   

Loans held for sale

     —           10,287         —           10,287   

Mortgage servicing intangibles

     —           —           709         709   

March 31, 2012

           

Securities available for sale

   $ —         $ 543,069       $ 9,373       $ 552,442   

Derivative assets

     —           10,578         —           10,578   

Derivative liabilities

     —           8,576         —           8,576   

Loans held for sale

     —           15,585         —           15,585   

Mortgage servicing intangibles

     —           —           1,004         1,004   

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the three months ended March 31, 2013 and 2012 were as follows:

 

     Three Months Ended
March 31,
 
     2013     2012  
     (Dollars in thousands)  

Balance at the beginning of the year

   $ 10,779      $ 13,225   

Purchases, issuances and settlements

     116        173   

Sales

     (15     (4,928

(Losses) gains included in earnings

     (30     3,973   

Total unrealized losses

     (17     (2,066
  

 

 

   

 

 

 

Balance at the end of the period

   $ 10,833      $ 10,377   
  

 

 

   

 

 

 

 

18


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 three months ended March 31, 2013 and 2012, 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. The impaired loans are adjusted to fair value through a specific allocation of the allowance for loan losses.

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)  

Three Months Ended March 31, 2013

  

Impaired loans (less specific allowance)

     —           —         $ 40,852       $ 40,852       $ —     

Foreclosed assets

     —           —         $ 326       $ 326       $ 13   

Other real estate owned

     —           —         $ 9,098       $ 9,098       $ (87

Three Months Ended March 31, 2012

              

Impaired loans (less specific allowance)

     —           —         $ 46,243       $ 46,243       $ —     

Foreclosed assets

     —           —         $ 403       $ 403       $ (1

Other real estate owned

     —           —         $ 12,005       $ 12,005       $ (154

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.

 

19


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.

The estimated fair values of the Company’s financial instruments are as follows:

 

    March 31,  
    2013     2012  
    Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  
    (Dollars in thousands)  

FINANCIAL ASSETS

       

Cash and cash equivalents

  $ 1,716,052      $ 1,716,052      $ 1,836,954      $ 1,836,954   

Securities held for investment

    16,099        16,317        21,359        21,788   

Loans:

       

Loans (net of unearned interest)

    3,219,967          3,049,376     

Allowance for loan losses

    (38,664       (37,633  
 

 

 

     

 

 

   

Loans, net

    3,181,303        3,240,479        3,011,743        3,047,715   

FINANCIAL LIABILITIES

       

Deposits

    5,174,512        5,200,273        5,152,856        5,186,324   

Short-term borrowings

    4,891        4,891        7,323        7,323   

Long-term borrowings

    11,040        11,010        13,403        13,440   

Junior subordinated debentures

    26,804        31,093        36,083        39,289   

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

       

Loan commitments

      1,556          1,197   

Letters of credit

      469          463   

 

20


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 were not considered to be significant to the Company at March 31, 2013 or 2012.

(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:

 

     March 31, 2013  

Oil and Natural Gas Swaps and Options

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

Oil

       

Derivative assets

   Barrels      877      $ 2,174   

Derivative liabilities

   Barrels      (877     (1,215

Natural Gas

       

Derivative assets

   MMBTUs      4,653        1,250   

Derivative liabilities

   MMBTUs      (4,653     (443

Total Fair Value

   Included in     

Derivative assets

   Other assets        3,424   

Derivative liabilities

   Other liabilities        1,658   

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 March 31,  
     2013      2012  
     (Dollars in thousands)  

Derivative income

   $ 108       $ 209   

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 counterparties:

 

     March 31, 2013  
     (Dollars in thousands)  

Credit exposure

   $ 840   

 

21


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

(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.

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 March 31, 2013

  

         

Net interest income (expense)

   $ 14,011       $ 25,144       $ 1,565       $ (464   $ —        $ 40,256   

Noninterest income

     3,190         11,545         6,902         14,749        (13,851     22,535   

Income before taxes

     8,937         14,077         3,237         8,094        (13,798     20,547   

Three Months Ended March 31, 2012

               

Net interest income (expense)

   $ 13,163       $ 26,631       $ 1,713       $ (690   $ —        $ 40,817   

Noninterest income

     2,681         10,135         9,864         15,381        (14,624     23,437   

Income before taxes

     8,432         15,255         6,387         6,533        (14,563     22,044   

Total Assets:

               

March 31, 2013

   $ 1,926,511       $ 3,627,011       $ 109,887       $ 690,318      $ (579,801   $ 5,773,926   

December 31, 2012

   $ 1,996,539       $ 3,801,653       $ 186,473       $ 602,342      $ (564,757   $ 6,022,250   

March 31, 2012

   $ 1,809,836       $ 3,760,533       $ 139,114       $ 590,597      $ (562,086   $ 5,737,994   

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.

 

22


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, 2012 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and the Company’s consolidated financial statements and the related Notes included in Item 1.

FORWARD LOOKING STATEMENTS

The Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. Forward-looking statements include estimates and give management’s current expectations or forecasts of future events. The Company cautions readers that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions; the performance of financial markets and interest rates; legislative and regulatory actions and reforms; competition; as well as other factors, all of which change over time. Actual results may differ materially from forward-looking statements.

SUMMARY

BancFirst Corporation’s net income for the first quarter of 2013 was $13.4 million compared to $14.0 million for the first quarter of 2012. Diluted net income per share was $0.86 and $0.91 for the first quarter of 2013 and 2012, respectively. Included in the 2012 quarter’s net income was a $4.5 million securities gain that was partially offset by merger related expenses and other non-operating costs totaling $2.5 million. Excluding these items, the Company’s net income for the first quarter of 2012 would have been approximately $12.7 million, or approximately $0.83 diluted net income per share.

Net interest income for the first quarter of 2013 was $40.3 million compared to $40.8 million for the first quarter of 2012. The Company’s net interest margin for the quarter was 3.08% compared to 3.18% a year ago, as interest rates have remained at historically low levels. The Company’s provision for loan loss for the first quarter of 2013 was $300,000 compared to $173,000 for the first quarter of 2012. Net charge-offs for the quarter were only 0.01% of average loans, which was the same as for the first quarter of 2012. Noninterest income for the quarter totaled $22.5 million, compared to $23.4 million last year. Noninterest expense for the quarter totaled $41.9 million compared to $42.0 million last year.

At March 31, 2013, the Company’s total assets were $5.8 billion, down $248.3 million, or 4.1%, from $6.0 billion at December 31, 2012. Loans totaled $3.2 billion, down $22.5 million from December 31, 2012. Deposits totaled $5.2 billion, down $266.3 million due to a temporary influx of deposits at year end 2012. Stockholders’ equity was $527.7 million, an increase of $8.1 million, or 1.6%, over December 31, 2012.

Asset quality remained strong and was little changed from the previous quarters. Nonperforming and restructured assets were 0.84% of total assets compared to 0.81% at December 31, 2012. The allowance to total loans was 1.20% compared to 1.19% at year end 2012.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

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

SEGMENT INFORMATION

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

 

23


RESULTS OF OPERATIONS

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

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2013     2012  

Income Statement Data

    

Net interest income

   $ 40,256      $ 40,817   

Provision for loan losses

     300        173   

Securities transactions

     122        4,032   

Total noninterest income

     22,535        23,437   

Salaries and employee benefits

     25,209        24,800   

Total noninterest expense

     41,944        42,037   

Net income

     13,372        14,005   

Per Common Share Data

    

Net income – basic

   $ 0.88      $ 0.93   

Net income – diluted

     0.86        0.91   

Cash dividends

     0.29        0.27   

Performance Data

    

Return on average assets

     0.94     1.00

Return on average stockholders’ equity

     10.31        11.45   

Cash dividend payout ratio

     33.05        29.03   

Net interest spread

     2.91        2.98   

Net interest margin

     3.08        3.18   

Efficiency ratio

     66.80        65.42   

Net charge-offs to average loans

     0.01        0.01   

Net Interest Income

For the three months ended March 31, 2013, net interest income, which is the Company’s principal source of operating revenue, was $40.3 million compared to $40.8 million for the three months ended March 31, 2012. 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 decreased for the three months ended March 31, 2013 compared to the three months ended March 31, 2012, as shown in the preceding table, which was due to continued low interest rates and the maturity or pay down of higher-yielding earning assets. If interest rates and/or loan volume do not increase, management expects continued compression of its net interest margin for the remainder of 2013 as higher yielding loans and securities mature and are replaced at current market rates.

Provision for Loan Losses

For the three months ended March 31, 2013, the Company’s provision for loan losses was $300,000, compared to $173,000 for the same period a year ago. Management believes the recorded amount of 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 level of future provisions for loan losses. Net loan charge-offs were $361,000 for the first quarter of 2013 compared to $196,000 for the first quarter of 2012. The rate of net charge-offs to average total loans is presented in the preceding table.

Noninterest Income

Noninterest income totaled $22.5 million for the three months ended March 31, 2013 compared to $23.4 million for the three months ended March 31, 2012. The first quarter of 2012 included a $4.5 million pretax securities gain from the sale of an investment by the Company’s Small Business Investment Corporation, Council Oak Investment Corporation, a wholly-owned subsidiary of BancFirst.

 

24


The Company had income from debit card usage totaling $4.1 million during the three months ended March 31, 2013 and 2012. The Dodd-Frank Act has given the Federal Reserve the authority to establish rules regarding debit card interchange fees charged for electronic debit transactions by payment card issuers. Because of the uncertainty as to any future rulemaking by the Federal Reserve and the inability to forecast competitive responses, the Company cannot provide any assurance as to the ultimate impact of the Dodd-Frank Act on the amount of revenue from debit card usage reported in future periods.

Noninterest Expense

For the three months ended March 31, 2013, noninterest expense totaled $41.9 million compared to $42.0 million for the three months ended March 31, 2012. Included in the 2012 quarter’s noninterest expense is $1.6 million in merger related costs and approximately $500,000 of expenses related to the sale of an investment by the Company’s Small Business Investment Corporation, Council Oak Investment Corporation, a wholly-owned subsidiary of BancFirst.

Income Taxes

The Company’s effective tax rate on income before taxes was 34.9% for the first quarter of 2013 compared to 36.5% for the first quarter of 2012 due primarily to new tax credits utilized.

FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

 

     March 31,     December 31,     March 31,  
     2013     2012     2012  
     (unaudited)           (unaudited)  

Balance Sheet Data

      

Total assets

   $ 5,773,926      $ 6,022,250      $ 5,737,994   

Total loans

     3,219,967        3,242,427        3,049,376   

Allowance for loan losses

     38,664        38,725        37,633   

Securities

     565,490        562,542        573,801   

Deposits

     5,174,512        5,440,830        5,152,856   

Stockholders’ equity

     527,707        519,567        491,957   

Book value per share

     34.65        34.09        32.48   

Tangible book value per share

     30.97        30.37        28.64   

Average loans to deposits (year-to-date)

     62.27     60.27     59.99

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

     92.79        92.73        92.51   

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

     9.14        8.79        8.73   

Asset Quality Ratios

      

Nonperforming and restructured loans to total loans

     1.22     1.20     1.32

Nonperforming and restructured assets to total assets

     0.84        0.81        0.92   

Allowance for loan losses to total loans

     1.20        1.19        1.23   

Allowance for loan losses to nonperforming and restructured loans

     98.47        99.42        93.26   

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 March 31, 2013 decreased $229.8 million from December 31, 2012 and $120.9 million from March 31, 2012. The higher level at year-end 2012 was due primarily to funds provided by the temporary influx of deposits at year-end 2012. 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.

 

25


Securities

At March 31, 2013, total securities increased $2.9 million compared to December 31, 2012 and decreased $8.3 million compared to March 31, 2012. 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 $9.1 million at March 31, 2013, compared to an unrealized gain of $9.7 million at December 31, 2012 and $11.6 million at March 31, 2012. These unrealized gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of $5.9 million, $6.3 million and $7.5 million, respectively.

Loans (Including Acquired Loans)

At March 31, 2013, total loans were down $22.5 million from December 31, 2012 and up $170.6 million from March 31, 2012 due primarily to growth in the fourth quarter of 2012.

Allowance for Loan Losses/Fair Value Adjustments on Acquired Loans

At March 31, 2013, the allowance for loan losses represented 1.20% of total loans, compared to 1.19% at December 31, 2012 and 1.23% at March 31, 2012. The allowance for loan losses as a percentage of total loans and the allowance to nonperforming and restructured loans are shown in the preceding table.

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 $2.7 million at March 31, 2013, $2.8 million at December 31, 2012 and $3.8 million at March 31, 2012, while the acquired loans outstanding were $96.2 million, $108.5 million and $162.6 million, respectively. The decrease from the first quarter of 2012 was due t improved credit quality of the loans, loan payoffs and the early settlement of a loan escrow agreement related to one of the bank acquisitions.

Nonperforming and Restructured Assets

Nonperforming and restructured assets totaled $48.7 million at March 31, 2013 compared to $48.5 million at December 31, 2012 and $52.8 million at March 31, 2012. The Company’s level of nonperforming and restructured assets has continued to be relatively low, as shown in the preceding table.

Nonaccrual loans totaled $20.9 million at March 31, 2013 compared to $20.5 million at the end of 2012. 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 for the quarter, which was not accrued on nonaccrual loans outstanding was approximately $301,000 at March 31, 2013 and $338,000 at March 31, 2012. Only a small amount of this interest is expected to be ultimately collected.

Other real estate owned and repossessed assets totaled $9.4 million at March 31, 2013 compared to $9.6 million at December 31, 2012 and $12.4 million at March 31, 2012. The decrease in 2012 was due in part to the sale of one nonperforming commercial real estate property valued at $3.5 million.

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 $3.3 million of these loans at March 31, 2013 compared to $5.3 million at December 31, 2012 and $7.3 million at March 31, 2012. These 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.

 

26


Liquidity and Funding

Deposits

At March 31, 2013, total deposits decreased $266.3 million compared to December 31, 2012 and increased $21.7 million compared to March 31, 2012. The decrease from December 31, 2012 was due to a temporary influx of deposits at year end 2012. 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 92.8% at March 31, 2013and December 31, 2012 compared to 92.3% at March 31, 2012. Noninterest-bearing deposits to total deposits were 37.4% at March 31, 2013, compared to 37.1% at December 31, 2012 and 35.3% at March 31, 2012.

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 $4.9 million at March 31, 2013 compared to $4.6 million at December 31, 2012 and $7.3 million at March 31, 2012.

Long-Term Borrowings

The Company has a line of credit from the Federal Home Loan Bank (“FHLB”) of Topeka, Kansas to use for liquidity or to match-fund certain long-term fixed rate loans. The Company’s assets, including residential first mortgages of $535.9 million, are pledged as collateral for the borrowings under the line of credit. As of March 31, 2013, the Company had approximately $11.0 million in advances outstanding compared to $9.2 million at December 31, 2012 and $13.4 million at March 31, 2012. The advances mature at varying dates through 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, 2012.

Capital Resources

Stockholders’ equity totaled $527.7 million at March 31, 2013 compared to $519.6 million at December 31, 2012 and $492.0 million at March 31, 2012. In addition to net income of $13.4 million, other changes in stockholders’ equity during the three months ended March 31, 2013 included $190,000 related to stock option exercises and $374,000 related to stock-based compensation, that were partially offset by $4.4 million in dividends, $943,000 in common stock acquired and canceled, and a $431,000 decrease in other comprehensive income. The Company’s average stockholders’ equity to average assets are presented above. The Company’s leverage ratio and total risk-based capital ratio were 8.61% and 14.75%, respectively, at March 31, 2013, 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, 2012.

 

27


BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

 

     Three Months Ended March 31,  
     2013     2012  
     Average
Balance
    Interest
Income/
Expense
     Average
Yield/
Rate
    Average
Balance
    Interest
Income/
Expense
     Average
Yield/
Rate
 

ASSETS

              

Earning assets:

              

Loans (1)

   $ 3,219,496      $ 41,255         5.20   $ 3,026,473      $ 42,062         5.57

Securities – taxable

     524,384        1,353         1.05        539,563        2,408         1.79   

Securities – tax exempt

     45,006        532         4.80        53,277        652         4.91   

Interest-bearing deposits w/ banks & FFS

     1,551,233        977         0.26        1,580,975        974         0.25   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total earning assets

     5,340,119        44,117         3.35        5,200,288        46,096         3.56   
  

 

 

   

 

 

      

 

 

   

 

 

    

Nonearning assets:

              

Cash and due from banks

     144,940             145,970        

Interest receivable and other assets

     308,532             312,429        

Allowance for loan losses

     (38,646          (37,663     
  

 

 

        

 

 

      

Total nonearning assets

     414,826             420,736        
  

 

 

        

 

 

      

Total assets

   $ 5,754,945           $ 5,621,024        
  

 

 

        

 

 

      

LIABILITIES AND STOCKHOLDERS EQUITY

              

Interest-bearing liabilities:

              

Transaction deposits

   $ 675,854      $ 167         0.10   $ 741,786      $ 274         0.15

Savings deposits

     1,780,675        1,080         0.25        1,706,102        1,543         0.36   

Time deposits

     826,131        1,793         0.88        892,134        2,432         1.09   

Short-term borrowings

     4,770        2         0.14        7,891        8         0.41   

Long-term borrowings

     8,569        62         2.91        14,451        105         2.91   

Junior subordinated debentures

     26,804        491         7.43        36,083        586         6.51   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing liabilities

     3,322,803        3,595         0.44        3,398,447        4,948         0.58   
  

 

 

   

 

 

      

 

 

   

 

 

    

Interest-free funds:

              

Noninterest-bearing deposits

     1,887,883             1,705,026        

Interest payable and other liabilities

     18,489             26,789        

Stockholders’ equity

     525,770             490,762        
  

 

 

        

 

 

      

Total interest free funds

     2,432,142             2,222,577        
  

 

 

        

 

 

      

Total liabilities and stockholders’ equity

   $ 5,754,945           $ 5,621,024        
  

 

 

        

 

 

      

Net interest income

     $ 40,522           $ 41,148      
    

 

 

        

 

 

    

Net interest spread

          2.91          2.98
       

 

 

        

 

 

 

Effect of interest free funds

          0.17          0.20
       

 

 

        

 

 

 

Net interest margin

          3.08          3.18
       

 

 

        

 

 

 

 

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

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, 2012, the date of its most recent annual report to stockholders.

 

28


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 Vice President of Corporate Finance and 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 March 31, 2013, 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, 2012.

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.

 

29


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    Certificate of Designation of Preferred Stock (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 1998 and incorporated herein by reference).
    3.4    Amended By-Laws (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 1992 and incorporated herein by reference).
    3.5    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).
    3.6    Resolution of the Board of Directors amending Article XVI, Section 1 and Article XVII, Section 1 of the Company’s By-Laws (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 28, 2008 and incorporated herein by reference).
    4.1    Instruments defining the rights of securities holders (see Exhibits 3.1, 3.2, 3.3 and 3.4 above).
    4.2    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).
    4.9    Form of Indenture relating to the Union National Bancshares, Inc. (BancFirst Corp. as successor) Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures, Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture, and Form of Certificate to Trustee (filed as Exhibit 4.9 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2010 and incorporated herein by reference).
    4.10    Form of Indenture relating to the FBC Financial Corporation (BancFirst Corp. as successor) Floating Rate Junior Subordinated Deferrable Interest Debentures, Form of Floating Rate Junior Subordinated Deferrable Interest Debenture, and Form of Certificate to Trustee (filed as Exhibit 4.10 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2011 and incorporated herein by reference).
  10.1    Tenth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 4.1 to the Company’s registration statement on Form S-8, File No. 333-175914 dated July 29, 2011, and incorporated herein by reference).

 

30


Exhibit
Number

 

Exhibit

  10.2   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).
  10.3   Second Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option Plan (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
  10.4   Third Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 and incorporated herein by reference).
  10.5   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).
  10.6   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).
  10.7   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).
  10.8   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).
  10.9   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).
  10.10   Amendment to the Amended and Restated BancFirst Corporation Employee 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).
  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.
** Furnished herewith.

 

31


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: May 10, 2013      

/s/David E. Rainbolt

      David E. Rainbolt
      Chief Executive Officer
      (Principal Executive Officer)
Date: May 10, 2013      

/s/ Randy Foraker

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

 

32