Back to GetFilings.com



 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission File Number 0-14384
 
 
BancFirst Corporation
(Exact name of registrant as specified in charter)
 
Oklahoma
  
73-1221379
(State or other Jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
101 N. Broadway, Oklahoma City, Oklahoma
73102-8401
(Address of principal executive offices)
(Zip Code)
 
(405) 270-1086
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨.
 
As of October 31, 2002 there were 8,115,076 shares of the registrant’s Common Stock outstanding.
 
 

 
PART I—FINANCIAL INFORMATION
 
Item 1.    Financial Statements.
 
BANCFIRST CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
 
    
September 30,
     
December 31, 2001
  
    
2002
     
2001
     
ASSETS
                           
Cash and due from banks
   
$
137,530
 
   
$
141,326
 
   
$
152,577
 
Interest-bearing deposits with banks
   
 
4,738
 
   
 
22,362
 
   
 
12,528
 
Federal funds sold
   
 
196,000
 
   
 
172,800
 
   
 
208,000
 
Securities (market value: $567,705, $549,807, and $545,950, respectively)
   
 
565,085
 
   
 
547,478
 
   
 
544,291
 
Loans:
                           
Total loans (net of unearned interest)
   
 
1,785,927
 
   
 
1,707,459
 
   
 
1,717,433
 
Allowance for loan losses
   
 
(23,707
)
   
 
(24,993
)
   
 
(24,531
)
    
  
  
Loans, net
   
 
1,762,220
 
   
 
1,682,466
 
   
 
1,692,902
 
Premises and equipment, net
   
 
61,372
 
   
 
60,861
 
   
 
61,642
 
Other real estate owned
   
 
2,968
 
   
 
2,285
 
   
 
2,132
 
Intangible assets, net
   
 
21,778
 
   
 
22,865
 
   
 
22,149
 
Accrued interest receivable
   
 
21,189
 
   
 
24,465
 
   
 
22,012
 
Other assets
   
 
35,623
 
   
 
34,490
 
   
 
38,812
 
    
  
  
Total assets
   
$
2,808,503
 
   
$
2,711,398
 
   
$
2,757,045
 
    
  
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                           
Deposits:
                           
Noninterest-bearing
   
$
595,887
 
   
$
572,750
 
   
$
599,108
 
Interest-bearing
   
 
1,849,733
 
   
 
1,800,604
 
   
 
1,802,220
 
    
  
  
Total deposits
   
 
2,445,620
 
   
 
2,373,354
 
   
 
2,401,328
 
Short-term borrowings
   
 
32,245
 
   
 
31,204
 
   
 
52,091
 
Long-term borrowings
   
 
31,099
 
   
 
25,477
 
   
 
24,090
 
9.65% Capital Securities
   
 
25,000
 
   
 
25,000
 
   
 
25,000
 
Accrued interest payable
   
 
5,350
 
   
 
9,692
 
   
 
9,391
 
Other liabilities
   
 
22,662
 
   
 
25,030
 
   
 
19,837
 
Minority interest
   
 
2,241
 
   
 
2,095
 
   
 
2,140
 
    
  
  
Total liabilities
   
 
2,564,217
 
   
 
2,491,852
 
   
 
2,533,877
 
    
  
  
Commitments and contingent liabilities
                           
Stockholders’ equity:
                           
Common stock, $1.00 par (shares issued: 8,113,576, 8,252,207 and 8,260,099, respectively)
   
 
8,110
 
   
 
8,252
 
   
 
8,260
 
Capital surplus
   
 
58,051
 
   
 
57,182
 
   
 
57,412
 
Retained earnings
   
 
162,110
 
   
 
142,899
 
   
 
148,306
 
Accumulated other comprehensive income
   
 
16,015
 
   
 
11,213
 
   
 
9,190
 
    
  
  
Total stockholders’ equity
   
 
244,286
 
   
 
219,546
 
   
 
223,168
 
    
  
  
Total liabilities and stockholders’ equity
   
$
2,808,503
 
   
$
2,711,398
 
   
$
2,757,045
 
    
  
  
 
See accompanying notes to consolidated financial statements.

2

 
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
INTEREST INCOME
                                    
Loans, including fees
   
$
31,532
 
   
$
35,839
 
   
$
94,735
 
   
$
111,070
 
Securities:
                                    
Taxable
   
 
6,816
 
   
 
7,267
 
   
 
20,800
 
   
 
22,481
 
Tax-exempt
   
 
467
 
   
 
527
 
   
 
1,460
 
   
 
1,699
 
Federal funds sold
   
 
745
 
   
 
1,620
 
   
 
1,997
 
   
 
5,496
 
Interest-bearing deposits with banks
   
 
3
 
   
 
168
 
   
 
113
 
   
 
271
 
    
  
  
  
Total interest income
   
 
39,563
 
   
 
45,421
 
   
 
119,105
 
   
 
141,017
 
    
  
  
  
INTEREST EXPENSE
                                    
Deposits
   
 
10,270
 
   
 
17,549
 
   
 
33,458
 
   
 
57,658
 
Short-term borrowings
   
 
146
 
   
 
531
 
   
 
488
 
   
 
1,443
 
Long-term borrowings
   
 
478
 
   
 
410
 
   
 
1,407
 
   
 
1,232
 
9.65% Capital Securities
   
 
612
 
   
 
612
 
   
 
1,835
 
   
 
1,835
 
    
  
  
  
Total interest expense
   
 
11,506
 
   
 
19,102
 
   
 
37,188
 
   
 
62,168
 
    
  
  
  
Net interest income
   
 
28,057
 
   
 
26,319
 
   
 
81,917
 
   
 
78,849
 
Provision for loan losses
   
 
1,263
 
   
 
581
 
   
 
3,623
 
   
 
1,392
 
    
  
  
  
Net interest income after provision for loan losses
   
 
26,794
 
   
 
25,738
 
   
 
78,294
 
   
 
77,457
 
    
  
  
  
NONINTEREST INCOME
                                    
Trust revenue
   
 
971
 
   
 
929
 
   
 
3,070
 
   
 
2,688
 
Service charges on deposits
   
 
6,498
 
   
 
5,009
 
   
 
18,384
 
   
 
14,400
 
Securities transactions
   
 
37
 
   
 
436
 
   
 
37
 
   
 
449
 
Income from sales of loans
   
 
453
 
   
 
272
 
   
 
968
 
   
 
616
 
Other
   
 
3,989
 
   
 
3,075
 
   
 
10,937
 
   
 
9,154
 
    
  
  
  
Total noninterest income
   
 
11,948
 
   
 
9,721
 
   
 
33,396
 
   
 
27,307
 
    
  
  
  
NONINTEREST EXPENSE
                                    
Salaries and employee benefits
   
 
14,112
 
   
 
13,834
 
   
 
42,168
 
   
 
40,619
 
Occupancy and fixed assets expense, net
   
 
1,391
 
   
 
1,495
 
   
 
4,073
 
   
 
4,420
 
Depreciation
   
 
1,391
 
   
 
1,362
 
   
 
3,969
 
   
 
3,928
 
Amortization of intangible
   
 
146
 
   
 
219
 
   
 
454
 
   
 
485
 
Amortization of goodwill
   
 
—  
 
   
 
552
 
   
 
—  
 
   
 
1,780
 
Data processing services
   
 
537
 
   
 
663
 
   
 
1,578
 
   
 
1,713
 
Net (income) expense from other real estate owned
   
 
38
 
   
 
(8
)
   
 
279
 
   
 
125
 
Other
   
 
7,760
 
   
 
6,669
 
   
 
21,262
 
   
 
19,076
 
    
  
  
  
Total noninterest expense
   
 
25,375
 
   
 
24,786
 
   
 
73,783
 
   
 
72,146
 
    
  
  
  
Income before taxes
   
 
13,367
 
   
 
10,673
 
   
 
37,907
 
   
 
32,618
 
Income tax expense
   
 
(4,507
)
   
 
(3,793
)
   
 
(12,739
)
   
 
(11,552
)
    
  
  
  
Net income
   
 
8,860
 
   
 
6,880
 
   
 
25,168
 
   
 
21,066
 
Other comprehensive income, net of tax:
                                    
Unrealized gains (losses) on securities
   
 
5,401
 
   
 
4,846
 
   
 
6,825
 
   
 
9,683
 
    
  
  
  
Comprehensive income
   
$
14,261
 
   
$
11,726
 
   
$
31,993
 
   
$
30,749
 
    
  
  
  
NET INCOME PER COMMON SHARE
                                    
Basic
   
$
1.09
 
   
$
0.83
 
   
$
3.09
 
   
$
2.54
 
    
  
  
  
Diluted
   
$
1.07
 
   
$
0.82
 
   
$
3.05
 
   
$
2.51
 
    
  
  
  
 
See accompanying notes to consolidated financial statements.

3

 
BANCFIRST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 
    
Nine Months Ended
September 30,
  
    
2002
     
2001
  
CASH FLOWS FROM OPERATING ACTIVITIES
   
$
32,554
 
   
$
31,510
 
INVESTING ACTIVITIES
                  
Net cash and due from banks used for acquisitions and divestitures
   
 
—  
 
   
 
(4,856
)
Purchases of securities:
                  
Held for investment
   
 
(3,625
)
   
 
(3,000
)
Available for sale
   
 
(88,243
)
   
 
(133,823
)
Maturities of securities:
                  
Held for investment
   
 
17,091
 
   
 
17,467
 
Available for sale
   
 
61,926
 
   
 
122,526
 
Proceeds from sales and calls of securities:
                  
Held for investment
   
 
372
 
   
 
16,541
 
Available for sale
   
 
1,809
 
   
 
20,080
 
Net (increase) decrease in federal funds sold
   
 
12,000
 
   
 
(106,900
)
Purchases of loans
   
 
(11,217
)
   
 
(20,934
)
Proceeds from sales of loans
   
 
94,361
 
   
 
91,732
 
Net other increase in loans
   
 
(159,247
)
   
 
(116,963
)
Purchases of premises and equipment
   
 
(7,244
)
   
 
(7,774
)
Proceeds from the sale of other real estate owned and repossessed assets
   
 
3,843
 
   
 
3,907
 
Other, net
   
 
2,202
 
   
 
434
 
    
  
Net cash used by investing activities
   
 
(75,972
)
   
 
(121,563
)
    
  
FINANCING ACTIVITIES
                  
Net increase in demand, transaction and savings deposits
   
 
138,902
 
   
 
50,942
 
Net increase (decrease) in certificates of deposits
   
 
(94,610
)
   
 
55,015
 
Net increase (decrease) in short-term borrowings
   
 
(19,846
)
   
 
(6,088
)
Net increase in long-term borrowings
   
 
7,009
 
   
 
(1,136
)
Issuance of common stock
   
 
665
 
   
 
1,058
 
Acquisition of common stock
   
 
(6,824
)
   
 
(4,702
)
Cash dividends paid
   
 
(4,715
)
   
 
(4,466
)
    
  
Net cash provided by financing activities
   
 
20,581
 
   
 
90,623
 
    
  
Net decrease in cash and due from banks
   
 
(22,837
)
   
 
(570
)
Cash and due from banks at the beginning of the period
   
 
165,105
 
   
 
163,118
 
    
  
Cash and due from banks at the end of the period
   
$
142,268
 
   
$
163,688
 
    
  
SUPPLEMENTAL DISCLOSURE
                  
Cash paid during the period for interest
   
$
41,229
 
   
$
62,778
 
    
  
Cash paid during the period for income taxes
   
$
11,398
 
   
$
7,743
 
    
  
 
See accompanying notes to consolidated financial statements.

4

 
BANCFIRST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share data)
 
(1)    GENERAL
 
The accompanying consolidated financial statements include the accounts of BancFirst Corporation, BFC Capital Trust I, Century Life Assurance Company, Council Oak Capital, Inc., Council Oak Partners, LLC, and BancFirst and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the consolidated financial statements.
 
The unaudited interim financial statements contained herein reflect all adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position and results of operations of the Company for the interim periods presented. All such adjustments are of a normal and recurring nature. There have been no significant changes in the accounting policies of the Company since December 31, 2001, the date of the most recent annual report. Certain amounts in the 2001 financial statements have been reclassified to conform to the 2002 presentation.
 
The preparation of financial statements in conformity with generally accepted accounting principles inherently involves the use of estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures. Such estimates and assumptions may change over time and actual amounts may differ from those reported.
 
(2)    RECENT ACCOUNTING PRONOUNCEMENTS
 
In June 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“FAS”) No. 141, “Business Combinations”. This Statement is effective for all business combinations initiated after June 30, 2001, and requires that all business combinations be accounted for using the purchase method. Also in June 2001, the FASB issued FAS No. 142, “Goodwill and Other Intangible Assets”. Statement 142 requires that, for fiscal years beginning after December 15, 2001, goodwill and other indefinite-lived intangible assets already recognized in an entity’s financial statements no longer be amortized, and that goodwill and other indefinite-lived intangible assets acquired after June 30, 2001 not be amortized. Instead, goodwill and other indefinite-lived intangible assets will be tested at least annually for impairment by comparing the fair value of those assets with their recorded amounts. Any impairment losses will be reported in the entity’s income statement. The adoption of Statement 142 had a material effect on the consolidated financial statements of the Company by eliminating goodwill amortization from its income statement and from the calculations of net income per share. The Company did not recognize any impairment charges from the adoption of Statement 142. See note (7) for more information regarding intangible assets and goodwill.
 
In June 2001, the FASB issued FAS No. 143, “Accounting for Asset Retirement Obligations”. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. Statement 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial statements.
 
In August 2001, the FASB issued FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This Statement is effective for fiscal years beginning after December 15, 2001, and replaces Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” and also replaces the provisions of Accounting Principles Board Opinion No. 30, “Reporting Results of Operations—Reporting the Effects of Disposal of a Segment of a Business”, for disposals of segments of a business. Statement 144 requires that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Statement 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the ongoing operations of the entity. Since the provisions of this Statement are to be applied prospectively, the adoption of this new standard did not have a material effect on the Company’s consolidated financial statements.

5

 
In June 2002, the FASB issued FAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. This Statement is effective for exit or disposal activities that are initiated after December 31, 2002, and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to exit an Activity (including Certain Costs Incurred in a Restructuring).” Statement 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than when an entity commits to an exit plan. This statement also establishes that fair value is the objective for the initial measurement of the liability. Since the provisions of this statement are to be applied prospectively, the adoption of this new standard did not have a material effect on the Company’s consolidated financial statements.
 
In October 2002, the FASB issued FAS No. 147, “Acquisitions of Certain Financial Institutions – an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9.” This Statement is effective October 1, 2002. FAS No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions”, and FASB Interpretation No. 9, “Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution is Acquired in a Business Combination Accounted for by the Purchase Method”, provide interpretive guidance on the application of the purchase method to acquisitions of financial institutions. This Statement removes acquisitions of financial institutions from the scope of both FAS No. 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FAS No. 141 and FAS No. 142. In addition, this Statement amends FAS 144 to include in its scope long-term customer relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. The adoption of these new standards will not have a material effect on the Company’s consolidated financial statements.
 
(3)    RECENT DEVELOPMENTS; MERGERS, ACQUISITIONS AND DISPOSALS
 
In January 2001, BancFirst Corporation completed the acquisition of 75% of the outstanding common stock of Century Life Assurance Company (“Century Life”) from Pickard Limited Partnership, a Rainbolt family partnership. Century Life underwrites credit life insurance, credit accident and health insurance, and ordinary life insurance. The Rainbolt family is the largest shareholder of BancFirst Corporation and two members of the family are the Chairman and the CEO of BancFirst Corporation. The purchase price was $5,429. At December 31, 2000, Century Life had total assets of $22,964 and total stockholders’ equity of $6,956. The acquisition was accounted for as a book value purchase. Accordingly, the acquisition was recorded based on the book value of Century Life and the effects of the acquisition are included in the Company’s consolidated financial statements from the date of the acquisition forward. The acquisition did not have a material effect on the results of operations of the Company for 2001.
 
(4)    SECURITIES
 
The table below summarizes securities held for investment and securities available for sale.
 
    
September 30,
   
December 31, 2001
    
2002
   
2001
   
Held for investment at cost (market value; $60,579, $80,847 and $73,535, respectively)
   
$
57,959
   
$
78,518
   
$
71,876
Available for sale, at market value
   
 
507,126
   
 
468,960
   
 
472,415
    
  
  
Total
   
$
565,085
   
$
547,478
   
$
544,291
    
  
  

6

 
(5)    LOANS AND ALLOWANCE FOR LOAN LOSSES
 
The following is a schedule of loans outstanding by category:
 
    
September 30,
     
December 31
  
    
2002
     
2001
     
2001
  
    
Amount
   
Percent
     
Amount
   
Percent
     
Amount
   
Percent
  
Commercial and industrial
   
$
356,200
   
19.94
%
   
$
395,273
   
23.15
%
   
$
396,409
   
23.08
%
Agriculture
   
 
84,456
   
4.73
 
   
 
82,836
   
4.85
 
   
 
96,016
   
5.59
 
State and political subdivisions:
                                          
Taxable
   
 
145
   
0.01
 
   
 
1,085
   
0.06
 
   
 
152
   
0.01
 
Tax-exempt
   
 
17,294
   
0.97
 
   
 
18,017
   
1.06
 
   
 
17,602
   
1.02
 
Real Estate:
                                          
Construction
   
 
124,500
   
6.97
 
   
 
90,905
   
5.32
 
   
 
84,445
   
4.92
 
Farmland
   
 
62,923
   
3.52
 
   
 
56,795
   
3.33
 
   
 
58,080
   
3.38
 
One to four family residences
   
 
414,933
   
23.24
 
   
 
384,998
   
22.55
 
   
 
383,793
   
22.34
 
Multifamily residential properties
   
 
16,224
   
0.91
 
   
 
15,122
   
0.89
 
   
 
15,906
   
0.93
 
Commercial
   
 
387,862
   
21.72
 
   
 
351,459
   
20.58
 
   
 
358,363
   
20.87
 
Consumer
   
 
269,371
   
15.08
 
   
 
280,271
   
16.41
 
   
 
271,475
   
15.81
 
Other
   
 
52,019
   
2.91
 
   
 
30,698
   
1.80
 
   
 
35,192
   
2.05
 
    
  
  
  
  
  
Total loans
   
$
1,785,927
   
100.00
%
   
$
1,707,459
   
100.00
%
   
$
1,717,433
   
100.00
%
    
  
  
  
  
  
Loans held for sale (included above)
   
$
10,597
          
$
10,930
          
$
10,955
       
    
         
         
      
 
The Company’s loans are mostly to customers within Oklahoma and over half of the loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral. The amount of estimated loss due to credit risk in the Company’s loan portfolio is provided for in the allowance for loan losses. The amount of the allowance required to provide for all existing losses in the loan portfolio is an estimate based upon evaluations of loans, appraisals of collateral and other estimates which are subject to rapid change due to changing economic conditions and the economic prospects of borrowers. It is reasonably possible that a material change could occur in the estimated allowance for loan losses in the near term.
 
Changes in the allowance for loan losses are summarized as follows:
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Balance at beginning of period
   
$
24,730
 
   
$
24,998
 
   
$
24,531
 
   
$
25,380
 
    
  
  
  
Charge-offs
   
 
(2,521
)
   
 
(957
)
   
 
(5,263
)
   
 
(2,588
)
Recoveries
   
 
235
 
   
 
372
 
   
 
816
 
   
 
809
 
    
  
  
  
Net charge-offs
   
 
(2,286
)
   
 
(585
)
   
 
(4,447
)
   
 
(1,779
)
    
  
  
  
Provisions charged to operations
   
 
1,263
 
   
 
581
 
   
 
3,623
 
   
 
1,392
 
    
  
  
  
Balance at end of period
   
$
23,707
 
   
$
24,993
 
   
$
23,707
 
   
$
24,993
 
    
  
  
  

7

 
The net charge-offs by category are summarized as follows:
 
    
Three Months Ended September 30,
   
Nine Months Ended September 30,
    
  2002  
   
  2001  
   
2002
   
2001
Commercial, financial and other
   
$
1,258
   
$
57
   
$
2,240
   
$
482
Real estate – construction
   
 
—  
   
 
—  
   
 
15
   
 
—  
Real estate – mortgage
   
 
478
   
 
52
   
 
767
   
 
74
Consumer
   
 
550
   
 
476
   
 
1,425
   
 
1,223
    
  
  
  
Total
   
$
2,286
   
$
585
   
$
4,447
   
$
1,779
    
  
  
  
 
(6)    NONPERFORMING AND RESTRUCTURED ASSETS
 
Below is a summary of nonperforming and restructured assets:
 
    
September 30,
     
December 31,
  
    
2002
     
2001
     
2001
  
Past due over 90 days and still accruing
   
$
1,484
 
   
$
2,934
 
   
$
1,742
 
Nonaccrual
   
 
10,603
 
   
 
8,617
 
   
 
10,225
 
Restructured
   
 
1,117
 
   
 
657
 
   
 
1,348
 
    
  
  
Total nonperforming and restructured loans
   
 
13,204
 
   
 
12,208
 
   
 
13,315
 
Other real estate owned and repossessed assets
   
 
3,337
 
   
 
2,873
 
   
 
2,699
 
    
  
  
Total nonperforming and restructured assets
   
$
16,541
 
   
$
15,081
 
   
$
16,014
 
    
  
  
Nonperforming and restructured loans to total loans
   
 
0.74
%
   
 
0.71
%
   
 
0.78
%
    
  
  
Nonperforming and restructured assets to total assets
   
 
0.59
%
   
 
0.56
%
   
 
0.58
%
    
  
  
 
(7)    INTANGIBLE ASSETS AND GOODWILL
 
The Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” effective January 1, 2002. All intangible assets and goodwill were reassessed and reviewed for impairment as of that date. No changes were made to the estimated useful lives of intangible assets and no impairment charges were recognized from the adoption of this statement.
 
The following is a summary of intangible assets:
 
    
September 30,
          
    
2002
   
2001
   
December 31, 2001
    
Gross Carrying Amount
   
Accumulated Amortization
   
Gross Carrying Amount
   
Accumulated Amortization
   
Gross Carrying Amount
   
Accumulated Amortization
Core deposit intangibles
   
$
4,552
   
$
3,010
   
$
4,552
   
$
2,505
   
$
4,552
   
$
2,641
Trademarks
   
 
20
   
 
18
   
 
20
   
 
17
   
 
20
   
 
17
    
  
  
  
  
  
Total
   
$
4,572
   
$
3,028
   
$
4,572
   
$
2,522
   
$
4,572
   
$
2,658
    
  
  
  
  
  
 
Amortization of intangible assets and estimated amortization of intangible assets are as follows:
 
Amortization:
     
Three months ended September 30, 2002
   
$146
Three months ended September 30, 2001
   
219
Nine months ended September 30, 2002
   
454
Nine months ended September 30, 2001
   
485
Year ended December 31, 2001
   
649

8

 
Estimated Amortization:
     
Year ended December 31,
     
2002
   
$600
2003
   
511
2004
   
310
2005
   
292
2006
   
255
 
The following is a summary of goodwill by business segment:
 
    
Metropolitan Banks
   
Community Banks
   
Other Financial Services
   
Executive, Operations & Support
   
Eliminations
   
Consolidated
Three Months Ended:
                                          
September 30, 2002
                                          
Balance at beginning and end of period
   
$
7,144
   
$
12,561
   
$
—  
   
$
1,713
   
$
(1,183
   
$
20,235
    
  
  
  
         
September 30, 2001
                                          
Balance at beginning of period
   
$
7,498
   
$
13,255
   
$
—  
   
$
1,810
   
$
(1,183
   
$
21,380
Amortization
   
 
(187
   
 
(405
   
 
 —  
   
 
27
   
 
13
   
 
(552
Reclassification
   
 
—  
   
 
—  
   
 
—  
   
 
—  
   
 
(13
   
 
(13
    
  
  
  
         
Balance at end of period
   
$
7,311
   
$
12,850
   
$
—  
   
$
1,837
   
 
(1,183
   
$
20,815
    
  
  
  
         
Nine Months Ended:
                                          
September 30, 2002
                                          
Balance at beginning and
                                          
end of period
   
$
7,144
   
$
12,561
   
$
—  
   
$
1,713
   
$
(1,183
   
$
20,235
    
  
  
  
         
September 30, 2001
                                          
Balance at beginning of period
   
$
7,871
   
$
13,782
   
$
—  
   
$
2,234
   
$
(1,183
   
$
22,704
Amortization
   
 
(560
   
 
(858
   
 
—  
   
 
(397
   
 
35
   
 
(1,780
Branch closing
   
 
—  
   
 
(74
   
 
—  
   
 
—  
   
 
—  
   
 
(74
Reclassification
   
 
—  
   
 
—  
   
 
—  
   
 
—  
   
 
(35
   
 
(35
    
  
  
  
         
Balance at end of period
   
$
7,311
   
$
12,850
   
$
—  
   
$
1,837
   
 
(1,183
   
$
20,815
    
  
  
  
         

9

 
A reconciliation of reported net income to adjusted net income, and the related per share amounts, is as follows:
 
    
Three Months Ended September 30,
   
Nine Months Ended September 30,
    
   2002   
   
   2001   
   
2002
   
2001
Net Income:
                            
Reported net income
   
$
8,860
   
$
6,880
   
$
25,168
   
$
21,066
Goodwill amortization
   
 
—  
   
 
536
   
 
—  
   
 
1,570
Equity method goodwill amortization
   
 
—  
   
 
4
   
 
—  
   
 
11
    
  
  
  
Adjusted net income
   
$
8,860
   
$
7,420
   
$
25,168
   
$
22,647
    
  
  
  
Net Income Per Common Share:
                            
Basic
                            
Reported net income
   
$
1.09
   
$
0.83
   
$
3.09
   
$
2.54
Goodwill amortization
   
 
—  
   
 
0.06
   
 
—  
   
 
0.19
Equity method goodwill amortization
   
 
—  
   
 
—  
   
 
—  
   
 
—  
    
  
  
  
Adjusted net income
   
$
1.09
   
$
0.89
   
$
3.09
   
$
2.73
    
  
  
  
Diluted
                            
Reported net income
   
$
1.07
   
$
0.82
   
$
3.05
   
$
2.51
Goodwill amortization
   
 
—  
   
 
0.06
   
 
—  
   
 
0.19
Equity method goodwill amortization
   
 
—  
   
 
—  
   
 
—  
   
 
—  
    
  
  
  
Adjusted net income
   
$
1.07
   
$
0.88
   
$
3.05
   
$
2.70
    
  
  
  
 
(8)    CAPITAL
 
The Company is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System. These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s assets, liabilities, and certain off-balance-sheet items calculated under regulatory practices. Failure to meet the minimum capital requirements can initiate certain mandatory or discretionary actions by the regulatory agencies that could have a direct material effect on the Company’s financial statements. The required minimums and the Company’s respective ratios are shown below.
 
    
Minimum Required
     
September 30,
     
December 31, 2001
  
       
2002
     
2001
     
Tier 1 capital
          
$
227,841
 
   
$
210,471
 
   
$
216,832
 
Total capital
          
$
251,762
 
   
$
235,307
 
   
$
241,862
 
Risk-adjusted assets
          
$
1,984,372
 
   
$
1,939,585
 
   
$
1,955,789
 
Leverage ratio
   
3.00
%
   
 
8.18
%
   
 
7.83
%
   
 
7.93
%
Tier 1 capital ratio
   
4.00
%
   
 
11.48
%
   
 
10.85
%
   
 
1.09
%
Total capital ratio
   
8.00
%
   
 
12.69
%
   
 
12.13
%
   
 
12.37
%
 
To be “well capitalized” under federal bank regulatory agency definitions, a depository institution must have a leverage ratio of at least 5%, a Tier 1 ratio of at least 6%, and a combined total capital ratio of at least 10%. As of September 30, 2002 and 2001, and December 31, 2001, BancFirst was considered to be “well capitalized”. There are no conditions or events since the most recent notification of BancFirst’s capital category that management believes would change its category.
 
(9)    STOCK REPURCHASE PLAN
 
In November 1999, the Company adopted a new Stock Repurchase Program (the “SRP”) authorizing management to repurchase up to 300,000 shares of the Company’s common stock. The SRP has been amended in May 2001 and August 2002 to increase the number of shares authorized to be repurchased to the original 300,000 shares. 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

10

or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and to provide liquidity for shareholders wishing to sell their stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and must be approved by the Company’s Executive Committee. At September 30, 2002 there were 300,000 shares remaining that could be repurchased under the SRP. Below is a summary of the shares repurchased under the program.
 
    
Three Months Ended September 30,
   
Nine Months Ended September 30,
    
  2002  
   
  2001  
   
2002
   
2001
Number of shares repurchased
   
 
 —  
   
 
 —  
   
 
176,500
   
 
119,519
Average price of shares repurchased
   
$
—  
   
$
—  
   
$
38.66
   
$
39.34
 
(10)    COMPREHENSIVE INCOME
 
The only component of comprehensive income reported by the Company is the unrealized gain or loss on securities available for sale. The amount of this unrealized gain or loss, net of tax, has been presented in the statement of income for each period as a component of other comprehensive income. Below is a summary of the tax effects of this unrealized gain or loss.
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Unrealized gain (loss) during the period:
                                    
Before-tax amount
   
$
8,154
 
   
$
6,796
 
   
$
10,399
 
   
$
13,620
 
Tax (expense) benefit
   
 
(2,753
)
   
 
(1,950
)
   
 
(3,574
)
   
 
(3,937
)
    
  
  
  
Net-of-tax amount
   
$
5,401
 
   
$
4,846
 
   
$
6,825
 
   
$
9,683
 
    
  
  
  
 
The amount of unrealized gain or loss included in accumulated other comprehensive income is summarized below.
 
    
Three Months Ended September 30,
   
Nine Months Ended September 30,
    
2002
   
2001
   
2002
   
2001
Unrealized gain (loss) on securities:
                            
Beginning balance
   
$
10,614
   
$
6,367
   
$
9,190
   
$
1,530
Current period change
   
 
5,401
   
 
4,846
   
 
6,825
   
 
9,683
    
  
  
  
Ending balance
   
$
16,015
   
$
11,213
   
$
16,015
   
$
11,213
    
  
  
  

11

 
(11)    NET INCOME PER COMMON SHARE
 
Basic and diluted net income per common share are calculated as follows:
 
    
Income
(Numerator)
   
Shares
(Denominator)
   
Per Share
Amount
Three Months Ended September 30,
               
Basic
                   
Income available to common stockholders
   
$
8,860
   
8,106,765
   
$
1.09
                
Effect of stock options
   
 
—  
   
137,989
       
    
  
      
Diluted
                   
Income available to common stockholders plus assumed exercises of stock options
   
$
8,860
   
8,244,754
   
$
1.07
    
  
  
Three Months Ended September 30, 2001
               
Basic
                   
Income available to common stockholders
   
$
6,880
   
8,248,061
   
$
0.83
                
Effect of stock options
   
 
—  
   
111,542
       
    
  
      
Diluted
                   
Income available to common stockholders plus assumed exercises of stock options
   
$
6,880
   
8,359,603
   
$
0.82
    
  
  
Nine Months Ended September 30, 2002
               
Basic
                   
Income available to common stockholders
   
$
25,168
   
8,140,071
   
$
3.09
                
Effect of stock options
   
 
—  
   
113,207
       
    
  
      
Diluted
                   
Income available to common stockholders plus assumed exercises of stock options
   
$
25,168
   
8,253,278
   
$
3.05
    
  
  
Nine Months Ended September 30, 2001
               
Basic
                   
Income available to common stockholders
   
$
21,066
   
8,281,273
   
$
2.54
                
Effect of stock options
   
 
—  
   
106,556
       
    
  
      
Diluted
                   
Income available to common stockholders plus assumed exercises of stock options
   
$
21,066
   
8,387,829
   
$
2.51
    
  
  
 
Below is the number and average exercise prices of options that were excluded from the computation of diluted net income per share for each period because the options’ exercise prices were greater than the average market price of the common shares.
 
    
Shares
   
Average
Exercise
Price
Three Months Ended September 30, 2002
   
—  
   
$
—  
Three Months Ended September 30, 2001
   
—  
   
$
—  
Nine Months Ended September 30, 2002
   
6,401
   
$
43.45
Nine Months Ended September 30, 2001
   
16,886
   
$
40.10

12

 
(12)    SEGMENT INFORMATION
 
The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The four principal business units are metropolitan banks, community banks, other financial services, and executive, operations and support. Metropolitan and community banks offer traditional banking products such as commercial and retail lending, and a full line of deposit accounts. Metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Other financial services are specialty product business units including guaranteed small business lending, guaranteed student lending, residential mortgage lending, electronic banking, trust services, insurance services, merchant banking and brokerage services. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units. The results of operations and selected financial information for the four business units are as follows:
 
    
Metropolitan Banks
   
Community Banks
   
Other Financial Services
   
Executive, Operations & Support
     
Eliminations
     
Consolidated
Three Months Ended:
                                              
September 30, 2002
                                              
Net interest income (expense)
   
$
7,718
   
$
19,310
   
$
1,672
   
$
(643
)
   
$
—  
 
   
$
28,057
Noninterest income
   
 
2,108
   
 
5,698
   
 
3,717
   
 
16,278
 
   
 
(15,853
)
   
 
11,948
Income before taxes
   
 
3,814
   
 
11,657
   
 
1,079
   
 
12,691
 
   
 
(15,874
)
   
 
13,367
September 30, 2001
                                              
Net interest income (expense)
   
$
7,936
   
$
17,942
   
$
1,308
   
$
(867
)
   
$
—  
 
   
$
26,319
Noninterest income
   
 
1,575
   
 
4,554
   
 
2,841
   
 
14,805
 
   
 
(14,054
)
   
 
9,721
Income before taxes
   
 
3,298
   
 
9,805
   
 
809
   
 
10,882
 
   
 
(14,121
)
   
 
10,673
Nine Months Ended:
                                              
September 30, 2002
                                              
Net interest income (expense)
   
$
22,348
   
$
56,481
   
$
5,123
   
$
(2,035
)
   
$
—  
 
   
$
81,917
Noninterest income
   
 
5,869
   
 
16,446
   
 
9,782
   
 
46,704
 
   
 
(45,405
)
   
 
33,396
Income before taxes
   
 
10,340
   
 
33,767
   
 
3,403
   
 
35,891
 
   
 
(45,494
)
   
 
37,907
September 30, 2001
                                              
Net interest income (expense)
   
$
23,507
   
$
53,423
   
$
4,008
   
$
(2,089
)
   
$
—  
 
   
$
78,849
Noninterest income
   
 
4,562
   
 
13,515
   
 
7,297
   
 
44,320
 
   
 
(42,387
)
   
 
27,307
Income before taxes
   
 
10,588
   
 
29,607
   
 
2,641
   
 
32,358
 
   
 
(42,576
)
   
 
32,618
Total Assets:
                                              
September 30, 2002
   
$
902,036
   
$
1,792,207
   
$
170,631
   
$
583,397
 
   
$
(639,768
)
   
$
2,808,503
September 30, 2001
   
$
823,245
   
$
1,796,064
   
$
151,510
   
$
545,957
 
   
$
(605,378
)
   
$
2,711,398
 
The financial information for each business unit is presented on the basis used internally by management to evaluate performance and allocate resources. The Company utilizes a transfer pricing system to allocate the benefit or cost of funds provided or used by the various business units. Certain revenues related to other financial services are allocated to the banks whose customers receive the services and, therefor, are not reflected in the income for other financial services. Certain services provided by the support group to other business units, such as item processing, are allocated at rates approximating the cost of providing the services. Eliminations are adjustments to consolidate the business units and companies.
 

13

 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
BANCFIRST CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
SUMMARY
 
Net income for the third quarter ended September 30, 2002 was $8.86 million, compared to $6.88 million for the third quarter of 2001. Diluted net income per share was $1.07, compared to $0.82 for the third quarter of 2001. For the first nine months of 2002, net income was $25.2 million, up from $21.1 million for the first nine months of 2001. Diluted net income per share for the first nine months was $3.05, up from $2.51 for the first nine months of 2001. The 2002 net income reflects the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, which eliminated the amortization of goodwill. Comparable net income for the third quarter of 2001, excluding the amortization of goodwill, was $7.42 million, or $0.88 per diluted share. The comparable net income for the first nine months of 2001 was $22.6 million, or $2.70 per diluted share.
 
Total assets at September 30, 2002 was $2.81 billion, up $51.5 million from December 31, 2001 and $97.1 million from September 30, 2001. Stockholders’ equity was $244 million at September 30, 2002, up $21.1 million from December 31, 2001 and $24.7 million compared to September 30, 2001.
 
RESULTS OF OPERATIONS
 
Third Quarter
 
Net interest income increased $1.74 million compared to the third quarter of 2001 due to growth in loans. Average loans increased $73.3 million from the third quarter of 2001. The net interest margin for the third quarter of 2002 increased to 4.51% from 4.36% for the third quarter of 2001. The higher net interest margin in 2002 is the product of the growth in loans and noninterest-bearing liabilities, that resulted in positive volume and mix variances, despite declining interest rates over such period.
 
The Company provided $1.26 million for loan losses in the third quarter of 2002, compared to $581,000 for the same period of 2001. The higher provisions in 2002 were due to loan growth, additional classified and nonperforming loans, loan charge-offs and management’s assessment of the economic outlook. Net loan charge-offs were $2.29 million for the third quarter of 2002, compared to $585,000 for the third quarter of 2001. The net charge-offs represent annualized rates of 0.51% and 0.14% of average total loans for the third quarter of 2002 and 2001, respectively.
 
Noninterest income increased $2.23 million, or 22.9%, compared to the third quarter of 2001. This increase was the result of growth in deposits and service charges, growth in revenues from trust, cash management, and other services, and higher income from sales of loans. Gains from securities transactions decreased $399,000. Noninterest expense increased $589,000, or 2.38%, compared to the third quarter of 2001. Increases in salaries and employee benefits and other operating expenses were partially offset by the elimination of goodwill amortization. Income tax expense increased $714,000 compared to the third quarter of 2001 due to higher income in 2002. The effective tax rate on income before taxes was 33.72%, down from 35.54% in the third quarter of 2001.
 
Year-to-Date
 
Net interest income for the first nine months of 2002 increased $3.07 million compared to the first nine months of 2001 due to growth in loans. Average loans increased $78.7 million from the first nine months of 2001. The net interest margin for the first nine months of 2002 increased to 4.48% from 4.46% for the same period of 2001. Declining interest rates during the period from September 30, 2001 to September 30, 2002 produced a negative interest rate variance that offset the majority of the effect of positive volume and mix variances. The Company’s interest-bearing liabilities reprice more rapidly than its earning assets. Consequently, during the 12-month period following an interest rate reduction, the Company’s net interest spread may increase as the rates on its interest-bearing liabilities reprice more rapidly than the rates on its earning assets. However, in the current rate environment of historically low interest rates the Company’s ability to reduce its liability rates may be limited causing additional pressure on the net interest margin. Additionally, in a low rate environment, the value of the Company’s noninterest bearing funds is reduced causing a decrease in the Company’s net interest margin. In light of the above, and assuming no change in the volume or mix of the Company’s loans and deposits, the Company’s net interest income would reasonably be expected to decline over the next several quarters.
 
The Company provided $3.62 million for loan losses in the first nine months of 2002, compared to $1.39 million for the same period of 2001. The higher provisions in 2002 were due to loan growth, additional classified and nonperforming

14

loans, loan charge-offs, and management’s assessment of the economic outlook. Net loan charge-offs were $4.45 million for the first nine months of 2002, compared to $1.78 million for the first nine months of 2001. The net charge-offs represent annualized rates of 0.34% and 0.14% of average total loans for the first nine months of 2002 and 2001, respectively.
 
Noninterest income increased $6.09 million, or 22.3%, compared to the first nine months of 2001. This increase was the result of growth in deposits and service charges, and growth in revenues from trust, cash management and other services, and higher income from sales of loans. Gains from securities transactions decreased $412,000. Noninterest expense increased $1.64 million, or 2.27%, compared to the first nine months of 2001. Increases in salaries and employee benefits and other operating expenses were partially offset by decreases in occupancy and fixed assets expense, and the elimination of goodwill amortization. Income tax expense increased $1.19 million compared to the first nine months of 2001 due to higher income in 2002. The effective tax rate on income before taxes was 33.61%, down from 35.42% in the first nine months of 2001.
 
FINANCIAL POSITION
 
Cash and due from banks, interest-bearing deposits with banks, and federal funds sold decreased a combined total of $34.8 million from December 31, 2001 and $1.78 million from September 30, 2001. These decreases were mainly due to growth in securities and loans.
 
Total securities increased $20.8 million compared to December 31, 2001 and $17.6 million compared to September 30, 2001. The size of the Company’s securities portfolio is a function of liquidity management and excess funds available for investment. The Company has maintained a very liquid securities portfolio to provide funds for loan growth. The net unrealized gain on securities available for sale was $23.9 million at the end of the third quarter of 2002, compared to a gain of $13.9 million at December 31, 2001 and a gain of $16.5 million at September 30, 2001. The average taxable equivalent yield on the securities portfolio for the third quarter decreased to 5.30% from 5.85% for the same quarter of 2001.
 
Total loans increased $68.5 million from December 31, 2001 and $78.5 million from September 30, 2001, due to internal growth. The allowance for loan losses decreased $824,000 from year-end 2001 and $1.29 million from the third quarter of 2001. The allowance as a percentage of total loans was 1.33%, 1.43% and 1.46% at September 30, 2002, December 31, 2001 and September 30, 2001, respectively. The allowance to nonperforming and restructured loans at the same dates was 179.54%, 184.24% and 204.73%, respectively.
 
Nonperforming and restructured loans totaled $13.2 million at September 30, 2002, compared to $13.3 million at December 31, 2001 and $12.2 million at September 30, 2001. The ratio of nonperforming and restructured loans to total loans for the same periods was 0.74%, 0.78% and 0.71%, respectively. It is reasonable to expect nonperforming loans and loan losses to rise over time to historical norms as a result of economic and credit cycles.
 
Total deposits increased $44.3 million compared to December 31, 2001 and $72.3 million compared to September 30, 2001 due to internal growth. The Company’s deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 11.08% of total deposits at September 30, 2002.
 
Short-term borrowings decreased $19.8 million from December 31, 2001, and increased $1.04 million from September 30, 2001. Fluctuations in short-term borrowings are a function of federal funds purchased from correspondent banks, customer demand for repurchase agreements and liquidity needs of the bank.
 
Long-term borrowings increased $7.01 million from year-end 2001and $5.62 million from the third quarter of 2001. The Company uses these borrowings from the Federal Home Loan Bank primarily to match-fund long-term fixed-rate loans.
 
Stockholders’ equity increased to $244 million from $223 million at year-end 2001 due to accumulated earnings and an increase in the unrealized gain on securities. Compared to September 30, 2001, stockholders’ equity increased $24.7 million. Average stockholders’ equity to average assets for the first nine months of 2002 was 8.41%, compared to 7.72% for the first nine months of 2001. The Company’s leverage ratio and total risk-based capital ratio were 8.18% and 12.69%, respectively, at September 30, 2002, well in excess of the regulatory minimums.

15

 
FUTURE APPLICATION OF ACCOUNTING STANDARDS
 
See note (2) of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.
 
SEGMENT INFORMATION
 
See note (12) of the Notes to Consolidated Financial Statements for disclosures regarding business segments.
 
FORWARD LOOKING STATEMENTS
 
The Company may make forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. The Company cautions readers that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions, the performance of financial markets and interest rates; legislative and regulatory actions and reforms; competition; as well as other factors, all of which change over time. Actual results may differ materially from forward-looking statements.

16

 
BANCFIRST CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)
 
    
Three Months Ended September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Per Common Share Data
                                    
Net income – basic
   
$
1.09
 
   
$
0.83
 
   
$
3.09
 
   
$
2.54
 
Net income – diluted
   
 
1.07
 
   
 
0.82
 
   
 
3.05
 
   
 
2.51
 
Cash dividends
   
 
0.20
 
   
 
0.18
 
   
 
0.58
 
   
 
0.54
 
Performance Data
                                    
Return on average assets
   
 
1.28
%
   
 
1.01
%
   
 
1.23
%
   
 
1.05
%
Return on average stockholders’ equity
   
 
14.76
 
   
 
12.90
 
   
 
14.63
 
   
 
13.66
 
Cash dividend payout ratio
   
 
18.35
 
   
 
21.69
 
   
 
18.77
 
   
 
21.26
 
Net interest spread
   
 
3.94
 
   
 
3.53
 
   
 
3.89
 
   
 
3.56
 
Net interest margin
   
 
4.51
 
   
 
4.36
 
   
 
4.48
 
   
 
4.46
 
Efficiency ratio
   
 
63.43
 
   
 
68.77
 
   
 
63.98
 
   
 
67.96
 
           
September 30,
     
December 31,
2001
  
           
2002
     
2001
     
Balance Sheet Data
                                    
Book value per share
            
$
30.11
 
   
$
26.60
 
   
$
27.02
 
Tangible book value per share
            
 
27.42
 
   
 
23.83
 
   
 
24.34
 
Average loans to deposits (year-to-date)
            
 
73.75
%
   
 
71.85
%        
   
 
72.12
%
Average earning assets to total assets (year-to-date)
            
 
90.72
 
   
 
90.02
 
   
 
90.11
 
Average stockholders’ equity to average assets (year-to-date)
            
 
8.41
 
   
 
7.72
 
   
 
7.86
 
Asset Quality Ratios
                                    
Nonperforming and restructured loans to total loans
            
 
0.74
%
   
 
0.71
%        
   
 
0.78
%
Nonperforming and restructured assets to total assets
            
 
0.59
 
   
 
0.56
 
   
 
0.58
 
Allowance for loan losses to total loans
            
 
1.33
 
   
 
1.46
 
   
 
1.43
 
Allowance for loan losses to nonperforming and restructured loans
            
 
179.54
 
   
 
204.73
 
   
 
184.24
 

17

 
BANCFIRST CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES
(Unaudited)
Taxable Equivalent Basis (Dollars in thousands)
 
    
Three Months Ended September 30,
  
    
2002
     
2001
  
    
Average Balance
     
Interest
Income/Expense
   
Average Yield/
Rate
     
Average
Balance
     
Interest
Income/
Expense
   
Average
Yield/
Rate
  
ASSETS
                                              
Earning assets:
                                              
Loans (1)
   
$
1,767,714
 
   
$
31,689
   
7.11
%
   
$
1,694,379
 
   
$
36,010
   
8.43
%
Investments – taxable
   
 
522,054
 
   
 
6,816
   
5.18
 
   
 
492,957
 
   
 
7,267
   
5.85
 
Investments—tax exempt
   
 
42,434
 
   
 
718
   
6.71
 
   
 
54,980
 
   
 
811
   
5.85
 
Federal funds sold
   
 
172,935
 
   
 
748
   
1.72
 
   
 
195,545
 
   
 
1,788
   
3.63
 
    
  
         
  
      
Total earning assets
   
 
2,505,137
 
   
 
39,971
   
6.33
 
   
 
2,437,861
 
   
 
45,876
   
7.47
 
    
  
         
  
      
Nonearning assets:
                                              
Cash and due from banks
   
 
122,659
 
                 
 
148,041
 
              
Interest receivable and other assets
   
 
143,877
 
                 
 
146,524
 
              
Allowance for loan losses
   
 
(24,026
)
                 
 
(24,967
)
              
    
                
             
Total nonearning assets
   
 
242,510
 
                 
 
269,598
 
              
    
                
             
Total assets
   
$
2,747,647
 
                 
$
2,707,459
 
              
    
                
             
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                              
Interest-bearing liabilities:
                                              
Transaction deposits
   
$
355,629
 
   
 
653
   
0.73
%
   
$
330,772
 
   
 
1,385
   
1.66
%
Savings deposits
   
 
576,914
 
   
 
2,814
   
1.94
 
   
 
467,533
 
   
 
3,280
   
2.78
 
Time deposits
   
 
889,197
 
   
 
6,803
   
3.04
 
   
 
1,018,231
 
   
 
12,884
   
5.02
 
Short-term borrowings
   
 
33,919
 
   
 
146
   
1.71
 
   
 
56,139
 
   
 
531
   
3.75
 
Long-term borrowings
   
 
31,636
 
   
 
478
   
5.99
 
   
 
25,737
 
   
 
410
   
6.32
 
9.65% Capital Securities
   
 
25,000
 
   
 
612
   
9.71
 
   
 
25,000
 
   
 
612
   
9.71
 
    
  
         
  
      
Total interest-bearing liabilities
   
 
1,912,295
 
   
 
11,506
   
2.39
 
   
 
1,923,412
 
   
 
19,102
   
3.94
 
    
  
         
  
      
Interest-free funds:
                                              
Noninterest-bearing deposits
   
 
570,297
 
                 
 
537,788
 
              
Interest payable and other liabilities
   
 
26,825
 
                 
 
34,623
 
              
Stockholders’ equity
   
 
238,230
 
                 
 
211,636
 
              
    
                
             
Total interest free funds
   
 
835,352
 
                 
 
784,047
 
              
    
                
             
Total liabilities and stockholders’ equity
   
$
2,747,647
 
                 
$
2,707,459
 
              
    
                
             
Net interest income
            
$
28,465
                   
$
26,774
       
             
                  
      
Net interest spread
                   
3.94
%
                   
3.53
%
                    
                  
Net interest margin
                   
4.51
%
                   
4.36
%
                    
                  
 
(1)
 
Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis.

18

 
BANCFIRST CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES
(Unaudited)
Taxable Equivalent Basis (Dollars in thousands)
 
    
Nine Months Ended September 30,
  
    
2002
     
2001
  
    
Average
Balance
     
Interest
Income/
Expense
   
Average
Yield/
Rate
     
Average
Balance
     
Interest
Income/
Expense
   
Average
Yield/
Rate
  
ASSETS
                                              
Earning assets:
                                              
Loans (1)
   
$
1,757,573
 
   
$
95,220
   
7.24
%
   
$
1,678,887
 
   
$
111,590
   
8.89
%
Investments – taxable
   
 
515,123
 
   
 
20,800
   
5.40
 
   
 
498,749
 
   
 
22,481
   
6.03
 
Investments—tax exempt
   
 
44,232
 
   
 
2,246
   
6.79
 
   
 
50,748
 
   
 
2,614
   
6.89
 
Federal funds sold
   
 
164,215
 
   
 
2,110
   
1.72
 
   
 
175,917
 
   
 
5,767
   
4.38
 
    
  
         
  
      
Total earning assets
   
 
2,481,143
 
   
 
120,376
   
6.49
 
   
 
2,404,301
 
   
 
142,452
   
7.92
 
    
  
         
  
      
Nonearning assets:
                                              
Cash and due from banks
   
 
131,819
 
                 
 
145,964
 
              
Interest receivable and other assets
   
 
146,114
 
                 
 
145,807
 
              
Allowance for loan losses
   
 
(24,082
)
                 
 
(25,234
)
              
    
                
             
Total nonearning assets
   
 
253,851
 
                 
 
266,537
 
              
    
                
             
Total assets
   
$
2,734,994
 
                 
$
2,670,838
 
              
    
                
             
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                              
Interest-bearing liabilities:
                                              
Transaction deposits
   
$
360,944
 
   
 
2,337
   
0.87
%
   
$
349,933
 
   
 
4,830
   
1.85
%
Savings deposits
   
 
540,240
 
   
 
8,107
   
2.01
 
   
 
449,286
 
   
 
11,114
   
3.31
 
Time deposits
   
 
915,985
 
   
 
23,014
   
3.36
 
   
 
1,014,683
 
   
 
41,714
   
5.50
 
Short-term borrowings
   
 
37,463
 
   
 
488
   
1.74
 
   
 
42,819
 
   
 
1,443
   
4.51
 
Long-term borrowings
   
 
31,098
 
   
 
1,407
   
6.05
 
   
 
26,011
 
   
 
1,232
   
6.33
 
9.65% Capital Securities
   
 
25,000
 
   
 
1,835
   
9.81
 
   
 
25,000
 
   
 
1,835
   
9.81
 
    
  
         
  
      
Total interest-bearing liabilities
   
 
1,910,730
 
   
 
37,188
   
2.60
 
   
 
1,907,732
 
   
 
62,168
   
4.36
 
    
  
         
  
      
Interest-free funds:
                                              
Noninterest-bearing deposits
   
 
565,822
 
                 
 
522,882
 
              
Interest payable and other liabilities
   
 
28,505
 
                 
 
34,029
 
              
Stockholders’ equity
   
 
229,937
 
                 
 
206,195
 
              
    
                
             
Total interest free funds
   
 
824,264
 
                 
 
763,106
 
              
    
                
             
Total liabilities and stockholders’ equity
   
$
2,734,994
 
                 
$
2,670,838
 
              
    
                
             
Net interest income
            
$
83,188
                   
$
80,284
       
             
                  
      
Net interest spread
                   
3.89
%
                   
3.56
%
                    
                  
Net interest margin
                   
4.48
%
                   
4.46
%
                    
                  
 
(1)
 
Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis.

19

 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
 
There have been no significant changes in the Registrants disclosures regarding market risk since December 31, 2001, the date of its annual report to stockholders.
 
Item 4.    Controls and Procedures.
 
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as of a date within 90 days of the filing date of this report. Based on their evaluation they concluded that the disclosure controls and procedures of the Company are adequate 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. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect disclosure controls subsequent to the date of their evaluation.
 
PART II – OTHER INFORMATION
 
Item 6.    Exhibits and Reports on Form 8-K.
 
(a)  Exhibits
 
Exhibit Number
   
Exhibit
3.1  
   
Second Amended and Restated Certificate of Incorporation (filed as Exhibit 1 to the Company’s Form 8-A/A filed July 23, 1998 and incorporated herein by reference).
3.2  
   
Certificate of Designations of Preferred Stock (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference).
3.3  
   
Amended By-Laws (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference).
4.1  
   
Amended and Restated Declaration of Trust of BFC Capital Trust I dated as of February 4, 1997 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.2  
   
Indenture dated as of February 4, 1997 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.3  
   
Series A Capital Securities Guarantee Agreement dated as of February 4, 1997 (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.4  
   
Rights Agreement, dated as of February 25, 1999, between BancFirst Corporation and BancFirst, as Rights Agent, including as Exhibit A the form of Certificate of Designations of the Company setting forth the terms of the Preferred Stock, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights Agreement (filed as Exhibit 1 to the Company’s Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
99.1*
   
CEO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2*
   
CFO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
*
 
Filed herewith.
 
(b)  No reports on Form 8-K were filed by the Company during the quarter ended September 30, 2002.

20

 
SIGNATURES
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
       
BANCFIRST CORPORATION
                    (Registrant)
Date  November 14, 2002
     
/s/    Randy P. Foraker        
            (Signature)
           
Randy P. Foraker
Senior Vice President and Controller;
Assistant Secretary/Treasurer
(Principal Accounting Officer)
 

21

 
CERTIFICATIONS
 
I, David E. Rainbolt, certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of BancFirst Corporation;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—14 and 15d—14) for the registrant and we have:
 
a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
 
a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date  November 14, 2002
     
/s/    David E. Rainbolt         
            (Signature)
           
David E. Rainbolt
President and Chief Executive Officer

22

 
I, Joe T. Shockley, Jr., certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of BancFirst Corporation;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—14 and 15d—14) for the registrant and we have:
 
a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
 
a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date  November 14, 2002
      
/s/    Joe T. Shockley, Jr.
            (Signature)
           
Joe T. Shockley, Jr.
Chief Financial Officer
 

23