10-Q 1 banf-10q_20150930.htm 10-Q banf-10q_20150930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

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

For the quarterly period ended September 30, 2015

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to

Commission File Number 0-14384

 

BancFirst Corporation

(Exact name of registrant as specified in charter)

 

 

Oklahoma

 

73-1221379

(State or other Jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

101 N. Broadway, Oklahoma City, Oklahoma

 

73102-8405

(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  o.

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  o.

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

o

Accelerated filer

x

 

 

 

 

Non-accelerated filer

o  (Do not check if a smaller reporting company)

Smaller reporting company

o

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

As of October 31, 2015 there were 15,597,280 shares of the registrant’s Common Stock outstanding.

 

 

 

 


PART I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

 

2015

 

 

 

2014

 

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

163,188

 

 

$

203,545

 

Interest-bearing deposits with banks

 

 

1,491,873

 

 

 

1,710,350

 

Securities (fair value: $507,923 and $524,861, respectively)

 

 

507,858

 

 

 

524,783

 

Loans held for sale

 

 

12,406

 

 

 

9,433

 

Loans (net of unearned interest)

 

 

3,959,669

 

 

 

3,851,398

 

Allowance for loan losses

 

 

(40,970

)

 

 

(40,889

)

Loans, net of allowance for loan losses

 

 

3,918,699

 

 

 

3,810,509

 

Premises and equipment, net

 

 

120,659

 

 

 

121,341

 

Other real estate owned

 

 

7,650

 

 

 

7,859

 

Intangible assets, net

 

 

9,203

 

 

 

10,635

 

Goodwill

 

 

44,594

 

 

 

44,962

 

Accrued interest receivable and other assets

 

 

129,966

 

 

 

131,555

 

Total assets

 

$

6,406,096

 

 

$

6,574,972

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

2,244,711

 

 

$

2,411,066

 

Interest-bearing

 

 

3,453,880

 

 

 

3,493,638

 

Total deposits

 

 

5,698,591

 

 

 

5,904,704

 

Short-term borrowings

 

 

3,777

 

 

 

3,982

 

Accrued interest payable and other liabilities

 

 

30,863

 

 

 

30,168

 

Junior subordinated debentures

 

 

26,804

 

 

 

26,804

 

Total liabilities

 

 

5,760,035

 

 

 

5,965,658

 

 

 

 

 

 

 

 

 

 

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: 15,591,530 and 15,504,513, respectively

 

 

15,591

 

 

 

15,504

 

Capital surplus

 

 

100,835

 

 

 

96,841

 

Retained earnings

 

 

527,038

 

 

 

492,776

 

Accumulated other comprehensive income, net of income tax of $1,638

and $2,644, respectively

 

 

2,597

 

 

 

4,193

 

Total stockholders' equity

 

 

646,061

 

 

 

609,314

 

Total liabilities and stockholders' equity

 

$

6,406,096

 

 

$

6,574,972

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

47,342

 

 

$

46,759

 

 

$

139,781

 

 

$

135,263

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,291

 

 

 

1,536

 

 

 

4,148

 

 

 

4,343

 

Tax-exempt

 

 

249

 

 

 

262

 

 

 

730

 

 

 

815

 

Federal funds sold

 

 

 

 

 

 

 

 

 

 

 

1

 

Interest-bearing deposits with banks

 

 

1,009

 

 

 

1,112

 

 

 

3,137

 

 

 

3,302

 

Total interest income

 

 

49,891

 

 

 

49,669

 

 

 

147,796

 

 

 

143,724

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,522

 

 

 

2,658

 

 

 

7,602

 

 

 

8,180

 

Short-term borrowings

 

 

1

 

 

 

6

 

 

 

3

 

 

 

13

 

Long-term borrowings

 

 

 

 

 

 

 

 

 

 

 

25

 

Junior subordinated debentures

 

 

492

 

 

 

491

 

 

 

1,474

 

 

 

1,474

 

Total interest expense

 

 

3,015

 

 

 

3,155

 

 

 

9,079

 

 

 

9,692

 

Net interest income

 

 

46,876

 

 

 

46,514

 

 

 

138,717

 

 

 

134,032

 

Provision for loan losses

 

 

1,424

 

 

 

(3,115

)

 

 

4,029

 

 

 

1,232

 

Net interest income after provision for loan losses

 

 

45,452

 

 

 

49,629

 

 

 

134,688

 

 

 

132,800

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust revenue

 

 

2,295

 

 

 

2,380

 

 

 

6,837

 

 

 

6,846

 

Service charges on deposits

 

 

14,910

 

 

 

14,226

 

 

 

42,574

 

 

 

42,044

 

Securities transactions (includes accumulated other comprehensive income reclassifications of $0, $0, $3,912 and $88, respectively)

 

 

 

 

 

284

 

 

 

7,121

 

 

 

819

 

Income from sales of loans

 

 

545

 

 

 

569

 

 

 

1,534

 

 

 

1,387

 

Insurance commissions

 

 

4,427

 

 

 

4,152

 

 

 

11,615

 

 

 

11,380

 

Cash management

 

 

1,906

 

 

 

1,770

 

 

 

5,611

 

 

 

5,058

 

Gain on sale of other assets

 

 

27

 

 

 

242

 

 

 

108

 

 

 

250

 

Other

 

 

1,214

 

 

 

1,315

 

 

 

3,935

 

 

 

4,327

 

Total noninterest income

 

 

25,324

 

 

 

24,938

 

 

 

79,335

 

 

 

72,111

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

28,746

 

 

 

28,153

 

 

 

84,145

 

 

 

81,569

 

Occupancy, net

 

 

3,051

 

 

 

2,920

 

 

 

8,586

 

 

 

8,493

 

Depreciation

 

 

2,488

 

 

 

2,432

 

 

 

7,401

 

 

 

7,156

 

Amortization of intangible assets

 

 

444

 

 

 

444

 

 

 

1,333

 

 

 

1,310

 

Data processing services

 

 

1,132

 

 

 

1,183

 

 

 

3,428

 

 

 

3,538

 

Net expense from other real estate owned

 

 

51

 

 

 

173

 

 

 

181

 

 

 

317

 

Marketing and business promotion

 

 

1,640

 

 

 

1,429

 

 

 

4,720

 

 

 

4,806

 

Deposit insurance

 

 

820

 

 

 

810

 

 

 

2,482

 

 

 

2,456

 

Other

 

 

7,980

 

 

 

9,398

 

 

 

24,428

 

 

 

26,990

 

Total noninterest expense

 

 

46,352

 

 

 

46,942

 

 

 

136,704

 

 

 

136,635

 

Income before taxes

 

 

24,424

 

 

 

27,625

 

 

 

77,319

 

 

 

68,276

 

Income tax expense

 

 

8,794

 

 

 

8,832

 

 

 

26,877

 

 

 

20,138

 

Net income

 

$

15,630

 

 

$

18,793

 

 

$

50,442

 

 

$

48,138

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.01

 

 

$

1.22

 

 

$

3.25

 

 

$

3.12

 

Diluted

 

$

0.98

 

 

$

1.19

 

 

$

3.18

 

 

$

3.05

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities, net of tax of $(91), $210, $(507) and $(811), respectively

 

 

145

 

 

 

(332

)

 

 

803

 

 

 

713

 

Reclassification adjustment for gains included in net income, net of tax of $0, $0, $1,513 and $34, respectively

 

 

 

 

 

 

 

 

(2,399

)

 

 

(54

)

Other comprehensive gain (loss), net of tax of $(91), $210, $1,006 and $(777), respectively

 

 

145

 

 

 

(332

)

 

 

(1,596

)

 

 

659

 

Comprehensive income

 

$

15,775

 

 

$

18,461

 

 

$

48,846

 

 

$

48,797

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued at beginning of period

 

$

15,562

 

 

$

15,399

 

 

$

15,504

 

 

$

15,334

 

Shares issued

 

 

29

 

 

 

50

 

 

 

87

 

 

 

115

 

Issued at end of period

 

$

15,591

 

 

$

15,449

 

 

$

15,591

 

 

$

15,449

 

CAPITAL SURPLUS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

99,202

 

 

$

91,447

 

 

$

96,841

 

 

$

88,803

 

Common stock issued

 

 

749

 

 

 

1,554

 

 

 

2,065

 

 

 

3,174

 

Tax effect of stock options

 

 

395

 

 

 

417

 

 

 

686

 

 

 

665

 

Stock-based compensation arrangements

 

 

489

 

 

 

448

 

 

 

1,243

 

 

 

1,224

 

Balance at end of period

 

$

100,835

 

 

$

93,866

 

 

$

100,835

 

 

$

93,866

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

517,028

 

 

$

468,761

 

 

$

492,776

 

 

$

448,953

 

Net income

 

 

15,630

 

 

 

18,793

 

 

 

50,442

 

 

 

48,138

 

Dividends on common stock ($0.36, $0.34, $1.04 and $0.96 per share, respectively)

 

 

(5,620

)

 

 

(5,252

)

 

 

(16,180

)

 

 

(14,789

)

Balance at end of period

 

$

527,038

 

 

$

482,302

 

 

$

527,038

 

 

$

482,302

 

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2,452

 

 

$

4,898

 

 

$

4,193

 

 

$

3,907

 

Net change

 

 

145

 

 

 

(332

)

 

 

(1,596

)

 

 

659

 

Balance at end of period

 

$

2,597

 

 

$

4,566

 

 

$

2,597

 

 

$

4,566

 

Total stockholders’ equity

 

$

646,061

 

 

$

596,183

 

 

$

646,061

 

 

$

596,183

 

 

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

 

4


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

50,442

 

 

$

48,138

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

4,029

 

 

 

1,232

 

Depreciation and amortization

 

 

8,734

 

 

 

8,466

 

Net amortization of securities premiums and discounts

 

 

747

 

 

 

712

 

Realized securities gains

 

 

(7,121

)

 

 

(819

)

Gain on sales of loans

 

 

(1,534

)

 

 

(1,387

)

Cash receipts from the sale of loans originated for sale

 

 

132,957

 

 

 

114,388

 

Cash disbursements for loans originated for sale

 

 

(134,396

)

 

 

(115,294

)

Deferred income tax benefit

 

 

(1,029

)

 

 

(3,107

)

Gain on other assets

 

 

(76

)

 

 

(714

)

Decrease in interest receivable

 

 

8

 

 

 

381

 

Decrease in interest payable

 

 

(64

)

 

 

(366

)

Amortization of stock-based compensation arrangements

 

 

1,243

 

 

 

1,224

 

Other, net

 

 

4,797

 

 

 

6,957

 

Net cash provided by operating activities

 

$

58,737

 

 

$

59,811

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Net decrease in federal funds sold

 

 

 

 

4,319

 

Net cash and due from banks received from acquisitions

 

 

 

 

174,283

 

Purchases of held for investment securities

 

 

(1,085

)

 

 

Purchases of available for sale securities

 

 

(41,424

)

 

 

(204,979

)

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

 

 

1,344

 

 

 

3,882

 

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

 

 

53,285

 

 

 

197,469

 

Proceeds from sales of available for sale securities

 

 

8,576

 

 

 

2,235

 

Net change in loans

 

 

(113,740

)

 

 

(266,076

)

Purchases of premises, equipment and computer software

 

 

(9,535

)

 

 

(8,541

)

Proceeds from the sale of other assets

 

 

4,324

 

 

 

4,741

 

Net cash used in investing activities

 

 

(98,255

)

 

 

(92,667

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net change in deposits

 

 

(206,113

)

 

 

19,116

 

Net (decrease)/increase in short-term borrowings

 

 

(205

)

 

 

6,883

 

Paydown of long-term borrowings

 

 

 

 

(6,938

)

Issuance of common stock, net

 

 

2,838

 

 

 

3,954

 

Cash dividends paid

 

 

(15,836

)

 

 

(14,289

)

Net cash (used in) provided by financing activities

 

 

(219,316

)

 

 

8,726

 

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

 

 

(258,834

)

 

 

(24,130

)

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

 

 

1,913,895

 

 

 

1,857,535

 

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

 

$

1,655,061

 

 

$

1,833,405

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

9,142

 

 

$

10,058

 

Cash paid during the period for income taxes

 

$

26,531

 

 

$

21,128

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid common stock dividends declared

 

$

5,609

 

 

$

5,244

 

 

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

 

5


BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(1)

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United State of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc. and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc. and BancFirst Agency, Inc.  All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, should be referred to in connection with these unaudited interim consolidated financial statements. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

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, 2014, the date of the most recent annual report.

Reclassifications

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

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.

Recent Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis.” ASU 2015-02 implements changes to both the variable interest consolidation model and the voting interest consolidation model. ASU 2015-02 (i) eliminates certain criteria that must be met when determining when fees paid to a decision maker or service provider do not represent a variable interest, (ii) amends the criteria for determining whether a limited partnership is a variable interest entity and (iii)  eliminates the presumption that a general partner controls a limited partnership in the voting model. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2015. Adoption of ASU 2015-02 is not expected to have a significant effect on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40).”  ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about the Company’s ability to continue as a going concern and related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date the financial statements are issued.  The amendments are effective for annual periods, and

6


interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. Adoption of ASU 2014-15 is not expected to have a significant effect on the Company’s financial statements.

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

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

 

 

(2)

RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

 

In January 2015, Council Oak Investment Corporation, a wholly-owned subsidiary of BancFirst, recognized a pretax gain of approximately $1.7 million on one of its investments.

 

In June 2015, Council Oak Partners, LLC, a wholly-owned subsidiary of the Company, recognized a pretax gain of approximately $5.3 million on one of its investments.

 

See Note 12 for developments subsequent to September 30, 2015.

 

 

(3)

SECURITIES

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

 

 

 

September 30,

 2015

 

 

December 31, 2014

 

 

 

(Dollars in thousands)

 

Held for investment, at cost (fair value: $8,398 and $8,671, respectively)

 

$

8,333

 

 

$

8,593

 

Available for sale, at fair value

 

 

499,525

 

 

 

516,190

 

Total

 

$

507,858

 

 

$

524,783

 

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

 

 

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

September 30, 2015

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

382

 

 

$

30

 

 

$

 

 

$

412

 

States and political subdivisions

 

 

7,951

 

 

 

35

 

 

 

 

 

 

7,986

 

Total

 

$

8,333

 

 

$

65

 

 

$

 

 

$

8,398

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

471

 

 

$

34

 

 

$

 

 

$

505

 

States and political subdivisions

 

 

8,122

 

 

 

44

 

 

 

 

 

 

8,166

 

Total

 

$

8,593

 

 

$

78

 

 

$

 

 

$

8,671

 

7


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

 

 

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

September 30, 2015

 

(Dollars in thousands)

 

U.S. treasuries

 

$

279,331

 

 

$

1,966

 

 

$

 

 

$

281,297

 

U.S. federal agencies

 

 

133,670

 

 

 

870

 

 

 

(54

)

 

 

134,486

 

Mortgage backed securities (1)

 

 

22,587

 

 

 

500

 

 

 

(557

)

 

 

22,530

 

States and political subdivisions

 

 

49,815

 

 

 

1,552

 

 

 

(41

)

 

 

51,326

 

Other securities (2)

 

 

9,887

 

 

 

197

 

 

 

(198

)

 

 

9,886

 

Total

 

$

495,290

 

 

$

5,085

 

 

$

(850

)

 

$

499,525

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

248,767

 

 

$

404

 

 

$

(178

)

 

$

248,993

 

U.S. federal agencies

 

 

171,641

 

 

 

983

 

 

 

(175

)

 

 

172,449

 

Mortgage backed securities (1)

 

 

26,441

 

 

 

602

 

 

 

(586

)

 

 

26,457

 

States and political subdivisions

 

 

51,706

 

 

 

1,716

 

 

 

(49

)

 

 

53,373

 

Other securities (2)

 

 

10,798

 

 

 

4,252

 

 

 

(132

)

 

 

14,918

 

Total

 

$

509,353

 

 

$

7,957

 

 

$

(1,120

)

 

$

516,190

 

 

 

(1)

Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.

 

(2)

Primarily consists of equity securities.

 

The unrealized gains decreased in 2015 primarily due to the reclassification of an unrealized gain on one investment of $3.3 million from other comprehensive income to a realized gain by Council Oak Partners, LLC, a wholly-owned subsidiary of the Company. The realized gain is reported as securities transactions within the noninterest income section of the consolidated statement of comprehensive income.

 

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.

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

4,978

 

 

$

4,985

 

 

$

1,451

 

 

$

1,456

 

After one year but within five years

 

 

3,003

 

 

 

3,031

 

 

 

6,603

 

 

 

6,642

 

After five years but within ten years

 

 

316

 

 

 

343

 

 

 

380

 

 

 

396

 

After ten years

 

 

36

 

 

 

39

 

 

 

159

 

 

 

177

 

Total

 

$

8,333

 

 

$

8,398

 

 

$

8,593

 

 

$

8,671

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

132,557

 

 

$

132,794

 

 

$

41,772

 

 

$

41,870

 

After one year but within five years

 

 

266,217

 

 

 

269,077

 

 

 

350,975

 

 

 

352,044

 

After five years but within ten years

 

 

12,493

 

 

 

13,068

 

 

 

21,990

 

 

 

22,717

 

After ten years

 

 

77,590

 

 

 

78,155

 

 

 

87,252

 

 

 

88,132

 

Total debt securities

 

 

488,857

 

 

 

493,094

 

 

 

501,989

 

 

 

504,763

 

Equity securities

 

 

6,433

 

 

 

6,431

 

 

 

7,364

 

 

 

11,427

 

Total

 

$

495,290

 

 

$

499,525

 

 

$

509,353

 

 

$

516,190

 

8


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:

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

450,473

 

 

$

522,190

 

 

 

(4)

LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

 

(Dollars in thousands)

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

759,935

 

 

 

19.19

%

 

$

745,106

 

 

 

19.35

%

Oil & gas production and equipment

 

 

68,943

 

 

 

1.74

 

 

 

104,940

 

 

 

2.72

 

Agriculture

 

 

112,675

 

 

 

2.84

 

 

 

132,830

 

 

 

3.45

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

17,674

 

 

 

0.45

 

 

 

20,431

 

 

 

0.53

 

Tax-exempt

 

 

28,855

 

 

 

0.73

 

 

 

20,952

 

 

 

0.54

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

382,883

 

 

 

9.67

 

 

 

356,621

 

 

 

9.26

 

Farmland

 

 

163,989

 

 

 

4.14

 

 

 

149,507

 

 

 

3.88

 

One to four family residences

 

 

797,974

 

 

 

20.15

 

 

 

766,362

 

 

 

19.90

 

Multifamily residential properties

 

 

63,016

 

 

 

1.59

 

 

 

66,766

 

 

 

1.73

 

Commercial

 

 

1,250,673

 

 

 

31.59

 

 

 

1,191,477

 

 

 

30.94

 

Consumer

 

 

281,800

 

 

 

7.12

 

 

 

267,179

 

 

 

6.94

 

Other (not classified above)

 

 

31,252

 

 

 

0.79

 

 

 

29,227

 

 

 

0.76

 

Total loans

 

$

3,959,669

 

 

 

100.00

%

 

$

3,851,398

 

 

 

100.00

%

The Company’s loans are mostly to customers within Oklahoma and over 65% 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 Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

Past due 90 days or more and still accruing

 

$

2,061

 

 

$

1,135

 

Nonaccrual

 

 

30,321

 

 

 

16,410

 

Restructured

 

 

15,386

 

 

 

16,515

 

Total nonperforming and restructured loans

 

 

47,768

 

 

 

34,060

 

Other real estate owned and repossessed assets

 

 

7,863

 

 

 

8,079

 

Total nonperforming and restructured assets

 

$

55,631

 

 

$

42,139

 

Nonaccrual loans, accruing loans past due 90 days or more, and restructured loans are shown in the table above. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.5 million for the nine months ended September 30, 2015 and approximately $839,000 for the nine months ended September 30, 2014.

9


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

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

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

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

(Dollars in thousands)

 

Real estate:

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

183

 

 

$

296

 

Non-residential real estate other

 

 

4,878

 

 

 

5,126

 

Residential real estate permanent mortgage

 

 

517

 

 

 

681

 

Residential real estate all other

 

 

1,222

 

 

 

1,796

 

Commercial and financial:

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

13,458

 

 

 

1,556

 

Consumer non-real estate

 

 

198

 

 

 

250

 

Other loans

 

 

5,761

 

 

 

1,659

 

Acquired loans

 

 

4,104

 

 

 

5,046

 

Total

 

$

30,321

 

 

$

16,410

 

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

 

 

 

Age Analysis of Past Due Loans

 

 

 

30-59

Days

Past Due

 

 

60-89

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 September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

223

 

 

$

391

 

 

$

99

 

 

$

713

 

 

$

492,565

 

 

$

493,278

 

 

$

99

 

Non-residential real estate other

 

 

2,035

 

 

 

61

 

 

 

1,162

 

 

 

3,258

 

 

 

1,033,981

 

 

 

1,037,239

 

 

 

317

 

Residential real estate permanent mortgage

 

 

1,108

 

 

 

328

 

 

 

1,028

 

 

 

2,464

 

 

 

322,673

 

 

 

325,137

 

 

 

788

 

Residential real estate all other

 

 

1,279

 

 

 

89

 

 

 

967

 

 

 

2,335

 

 

 

660,700

 

 

 

663,035

 

 

 

420

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

2,690

 

 

 

949

 

 

 

209

 

 

 

3,848

 

 

 

930,554

 

 

 

934,402

 

 

 

22

 

Consumer non-real estate

 

 

1,700

 

 

 

616

 

 

 

297

 

 

 

2,613

 

 

 

265,755

 

 

 

268,368

 

 

 

264

 

Other loans

 

 

562

 

 

 

174

 

 

 

5,211

 

 

 

5,947

 

 

 

155,379

 

 

 

161,326

 

 

 

65

 

Acquired loans

 

 

743

 

 

 

548

 

 

 

1,313

 

 

 

2,604

 

 

 

74,280

 

 

 

76,884

 

 

 

86

 

Total

 

$

10,340

 

 

$

3,156

 

 

$

10,286

 

 

$

23,782

 

 

$

3,935,887

 

 

$

3,959,669

 

 

$

2,061

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

635

 

 

$

 

 

$

269

 

 

$

904

 

 

$

482,731

 

 

$

483,635

 

 

$

70

 

Non-residential real estate other

 

 

377

 

 

 

317

 

 

 

825

 

 

 

1,519

 

 

 

952,484

 

 

 

954,003

 

 

 

 

Residential real estate permanent mortgage

 

 

2,010

 

 

 

758

 

 

 

544

 

 

 

3,312

 

 

 

304,267

 

 

 

307,579

 

 

 

172

 

Residential real estate all other

 

 

1,820

 

 

 

194

 

 

 

1,488

 

 

 

3,502

 

 

 

633,586

 

 

 

637,088

 

 

 

387

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

841

 

 

 

71

 

 

 

793

 

 

 

1,705

 

 

 

965,002

 

 

 

966,707

 

 

 

24

 

Consumer non-real estate

 

 

1,914

 

 

 

711

 

 

 

330

 

 

 

2,955

 

 

 

244,810

 

 

 

247,765

 

 

 

215

 

Other loans

 

 

1,858

 

 

 

916

 

 

 

741

 

 

 

3,515

 

 

 

149,469

 

 

 

152,984

 

 

 

 

Acquired loans

 

 

1,815

 

 

 

997

 

 

 

1,304

 

 

 

4,116

 

 

 

97,521

 

 

 

101,637

 

 

 

267

 

Total

 

$

11,270

 

 

$

3,964

 

 

$

6,294

 

 

$

21,528

 

 

$

3,829,870

 

 

$

3,851,398

 

 

$

1,135

 

10


Impaired Loans

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

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

 

 

 

Impaired Loans

 

 

 

Unpaid

Principal

Balance

 

 

Recorded

Investment

with Allowance

 

 

Related

Allowance

 

 

Average

Recorded

Investment

 

 

 

(Dollars in thousands)

 

As of September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

495

 

 

$

410

 

 

$

15

 

 

$

374

 

Non-residential real estate other

 

 

22,982

 

 

 

19,906

 

 

 

758

 

 

 

19,969

 

Residential real estate permanent mortgage

 

 

1,676

 

 

 

1,456

 

 

 

68

 

 

 

1,126

 

Residential real estate all other

 

 

2,047

 

 

 

1,806

 

 

 

177

 

 

 

1,892

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

15,940

 

 

 

13,481

 

 

 

2,555

 

 

 

16,393

 

Consumer non-real estate

 

 

657

 

 

 

636

 

 

 

122

 

 

 

596

 

Other loans

 

 

5,902

 

 

 

5,826

 

 

 

157

 

 

 

5,882

 

Acquired loans

 

 

7,373

 

 

 

4,890

 

 

 

 

 

 

5,085

 

Total

 

$

57,072

 

 

$

48,411

 

 

$

3,852

 

 

$

51,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

521

 

 

$

448

 

 

$

15

 

 

$

453

 

Non-residential real estate other

 

 

23,154

 

 

 

21,164

 

 

 

1,364

 

 

 

21,522

 

Residential real estate permanent mortgage

 

 

1,095

 

 

 

880

 

 

 

85

 

 

 

1,042

 

Residential real estate all other

 

 

2,480

 

 

 

2,270

 

 

 

299

 

 

 

2,273

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

1,895

 

 

 

1,580

 

 

 

431

 

 

 

1,646

 

Consumer non-real estate

 

 

664

 

 

 

648

 

 

 

138

 

 

 

602

 

Other loans

 

 

2,101

 

 

 

1,659

 

 

 

228

 

 

 

1,512

 

Acquired loans

 

 

10,933

 

 

 

7,708

 

 

 

 

 

 

8,082

 

Total

 

$

42,843

 

 

$

36,357

 

 

$

2,560

 

 

$

37,132

 

Credit Risk Monitoring and Loan Grading

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

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

The general characteristics of the risk grades are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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 September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

408,259

 

 

$

78,173

 

 

$

6,663

 

 

$

183

 

 

$

 

 

$

493,278

 

Non-residential real estate other

 

 

872,939

 

 

 

129,399

 

 

 

30,023

 

 

 

4,878

 

 

 

 

 

 

1,037,239

 

Residential real estate permanent mortgage

 

 

288,436

 

 

 

29,520

 

 

 

6,393

 

 

 

788

 

 

 

 

 

 

325,137

 

Residential real estate all other

 

 

544,388

 

 

 

106,840

 

 

 

10,200

 

 

 

1,607

 

 

 

 

 

 

663,035

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

775,900

 

 

 

133,200

 

 

 

11,804

 

 

 

13,498

 

 

 

 

 

 

934,402

 

Consumer non-real estate

 

 

252,581

 

 

 

13,583

 

 

 

1,690

 

 

 

512

 

 

 

2

 

 

 

268,368

 

Other loans

 

 

153,197

 

 

 

4,696

 

 

 

1,027

 

 

 

2,406

 

 

 

 

 

 

161,326

 

Acquired loans

 

 

53,350

 

 

 

10,347

 

 

 

8,727

 

 

 

4,311

 

 

 

149

 

 

 

76,884

 

Total

 

$

3,349,050

 

 

$

505,758

 

 

$

76,527

 

 

$

28,183

 

 

$

151

 

 

$

3,959,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

402,706

 

 

$

75,555

 

 

$

5,008

 

 

$

366

 

 

$

 

 

$

483,635

 

Non-residential real estate other

 

 

795,209

 

 

 

133,542

 

 

 

20,126

 

 

 

5,126

 

 

 

 

 

 

954,003

 

Residential real estate permanent mortgage

 

 

272,411

 

 

 

27,855

 

 

 

6,369

 

 

 

944

 

 

 

 

 

 

307,579

 

Residential real estate all other

 

 

529,555

 

 

 

99,214

 

 

 

6,146

 

 

 

2,173

 

 

 

 

 

 

637,088

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

821,094

 

 

 

117,457

 

 

 

26,550

 

 

 

1,606

 

 

 

 

 

 

966,707

 

Consumer non-real estate

 

 

233,424

 

 

 

12,229

 

 

 

1,548

 

 

 

564

 

 

 

 

 

 

247,765

 

Other loans

 

 

147,758

 

 

 

4,261

 

 

 

601

 

 

 

173

 

 

 

191

 

 

 

152,984

 

Acquired loans

 

 

46,465

 

 

 

36,951

 

 

 

12,651

 

 

 

5,206

 

 

 

364

 

 

 

101,637

 

Total

 

$

3,248,622

 

 

$

507,064

 

 

$

78,999

 

 

$

16,158

 

 

$

555

 

 

$

3,851,398

 

Allowance for Loan Losses Methodology

The allowance for loan losses (“ALL”) methodology is disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

12


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

 

 

 

ALL

 

 

 

Balance at

beginning of

period

 

 

Charge-

offs

 

 

Recoveries

 

 

Net

charge-offs

 

 

Provisions

charged to

operations

 

 

Balance at

end of

period

 

 

 

(Dollars in thousands)

 

Three Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

4,503

 

 

$

 

 

$

 

 

$

 

 

$

36

 

 

$

4,539

 

Non-residential real estate other

 

 

9,880

 

 

 

(708

)

 

 

1

 

 

 

(707

)

 

 

814

 

 

 

9,987

 

Residential real estate permanent mortgage

 

 

3,110

 

 

 

(28

)

 

 

15

 

 

 

(13

)

 

 

(26

)

 

 

3,071

 

Residential real estate all other

 

 

6,485

 

 

 

(48

)

 

 

4

 

 

 

(44

)

 

 

168

 

 

 

6,609

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

13,713

 

 

 

(2,180

)

 

 

38

 

 

 

(2,142

)

 

 

86

 

 

 

11,657

 

Consumer non-real estate

 

 

2,499

 

 

 

(152

)

 

 

35

 

 

 

(117

)

 

 

160

 

 

 

2,542

 

Other loans

 

 

2,431

 

 

 

(20

)

 

 

6

 

 

 

(14

)

 

 

134

 

 

 

2,551

 

Acquired loans

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

 

 

52

 

 

 

14

 

Total

 

$

42,621

 

 

$

(3,174

)

 

$

99

 

 

$

(3,075

)

 

$

1,424

 

 

$

40,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

4,406

 

 

$

(1

)

 

$

1

 

 

$

 

 

$

133

 

 

$

4,539

 

Non-residential real estate other

 

 

9,616

 

 

 

(708

)

 

 

2

 

 

 

(706

)

 

 

1,077

 

 

 

9,987

 

Residential real estate permanent mortgage

 

 

2,948

 

 

 

(124

)

 

 

29

 

 

 

(95

)

 

 

218

 

 

 

3,071

 

Residential real estate all other

 

 

6,269

 

 

 

(123

)

 

 

13

 

 

 

(110

)

 

 

450

 

 

 

6,609

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

12,771

 

 

 

(2,349

)

 

 

76

 

 

 

(2,273

)

 

 

1,159

 

 

 

11,657

 

Consumer non-real estate

 

 

2,404

 

 

 

(382

)

 

 

90

 

 

 

(292

)

 

 

430

 

 

 

2,542

 

Other loans

 

 

2,359

 

 

 

(283

)

 

 

15

 

 

 

(268

)

 

 

460

 

 

 

2,551

 

Acquired loans

 

 

116

 

 

 

(232

)

 

 

28

 

 

 

(204

)

 

 

102

 

 

 

14

 

Total

 

$

40,889

 

 

$

(4,202

)

 

$

254

 

 

$

(3,948

)

 

$

4,029

 

 

$

40,970

 

13


 

 

 

ALL

 

 

 

Balance at

beginning of

period

 

 

Charge-

offs

 

 

Recoveries

 

 

Net

charge-offs

 

 

Provisions

charged to

operations

 

 

Balance at

end of

period

 

 

 

(Dollars in thousands)

 

Three Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

5,241

 

 

$

 

 

$

20

 

 

$

20

 

 

$

(798

)

 

$

4,463

 

Non-residential real estate other

 

 

11,238

 

 

 

(29

)

 

 

45

 

 

 

16

 

 

 

(1,784

)

 

 

9,470

 

Residential real estate permanent mortgage

 

 

3,310

 

 

 

(12

)

 

 

18

 

 

 

6

 

 

 

(464

)

 

 

2,852

 

Residential real estate all other

 

 

6,815

 

 

 

(23

)

 

 

9

 

 

 

(14

)

 

 

(649

)

 

 

6,152

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

11,967

 

 

 

(391

)

 

 

21

 

 

 

(370

)

 

 

412

 

 

 

12,009

 

Consumer non-real estate

 

 

2,645

 

 

 

(177

)

 

 

58

 

 

 

(119

)

 

 

(132

)

 

 

2,394

 

Other loans

 

 

1,993

 

 

 

(93

)

 

 

8

 

 

 

(85

)

 

 

219

 

 

 

2,127

 

Acquired loans

 

 

88

 

 

 

(201

)

 

 

32

 

 

 

(169

)

 

 

81

 

 

 

 

Total

 

$

43,297

 

 

$

(926

)

 

$

211

 

 

$

(715

)

 

$

(3,115

)

 

$

39,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

4,827

 

 

$

(22

)

 

$

85

 

 

$

63

 

 

$

(427

)

 

$

4,463

 

Non-residential real estate other

 

 

11,026

 

 

 

(29

)

 

 

48

 

 

 

19

 

 

 

(1,575

)

 

 

9,470

 

Residential real estate permanent mortgage

 

 

2,825

 

 

 

(174

)

 

 

59

 

 

 

(115

)

 

 

142

 

 

 

2,852

 

Residential real estate all other

 

 

6,708

 

 

 

(116

)

 

 

23

 

 

 

(93

)

 

 

(463

)

 

 

6,152

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

8,977

 

 

 

(522

)

 

 

51

 

 

 

(471

)

 

 

3,503

 

 

 

12,009

 

Consumer non-real estate

 

 

2,556

 

 

 

(508

)

 

 

166

 

 

 

(342

)

 

 

180

 

 

 

2,394

 

Other loans

 

 

1,991

 

 

 

(344

)

 

 

135

 

 

 

(209

)

 

 

345

 

 

 

2,127

 

Acquired loans

 

 

124

 

 

 

(366

)

 

 

715

 

 

 

349

 

 

 

(473

)

 

 

 

Total

 

$

39,034

 

 

$

(2,081

)

 

$

1,282

 

 

$

(799

)

 

$

1,232

 

 

$

39,467

 

 

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

 

 

 

ALL

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually

evaluated for

impairment

 

 

Collectively

evaluated for

impairment

 

 

Individually

evaluated for

impairment

 

 

Collectively

evaluated for

impairment

 

 

 

(Dollars in thousands)

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied.

 

$

257

 

 

$

4,282

 

 

$

202

 

 

$

4,204

 

Non-residential real estate other

 

 

1,321

 

 

 

8,666

 

 

 

1,518

 

 

 

8,098

 

Residential real estate permanent mortgage

 

 

380

 

 

 

2,691

 

 

 

407

 

 

 

2,541

 

Residential real estate all other

 

 

865

 

 

 

5,744

 

 

 

743

 

 

 

5,526

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

3,712

 

 

 

7,945

 

 

 

4,671

 

 

 

8,100

 

Consumer non-real estate

 

 

352

 

 

 

2,190

 

 

 

372

 

 

 

2,032

 

Other loans

 

 

52

 

 

 

2,499

 

 

 

214

 

 

 

2,145

 

Acquired loans

 

 

 

 

 

14

 

 

 

 

 

 

116

 

Total

 

$

6,939

 

 

$

34,031

 

 

$

8,127

 

 

$

32,762

 

14


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

 

 

 

Loans

 

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

Individually

evaluated for

impairment

 

 

Collectively

evaluated for

impairment

 

 

Loans acquired

with deteriorated

credit quality

 

 

Individually

evaluated for

impairment

 

 

Collectively

evaluated for

impairment

 

 

Loans acquired

with deteriorated

credit quality

 

 

 

(Dollars in thousands)

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-residential real estate owner occupied

 

$

6,846

 

 

$

486,432

 

 

$

 

 

$

5,374

 

 

$

478,261

 

 

$

 

Non-residential real estate other

 

 

34,900

 

 

 

1,002,339

 

 

 

 

 

 

25,251

 

 

 

928,752

 

 

 

 

Residential real estate permanent mortgage

 

 

7,181

 

 

 

317,956

 

 

 

 

 

 

7,313

 

 

 

300,266

 

 

 

 

Residential real estate all other

 

 

11,807

 

 

 

651,228

 

 

 

 

 

 

8,319

 

 

 

628,769

 

 

 

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-consumer non-real estate

 

 

25,302

 

 

 

909,100

 

 

 

 

 

 

28,156

 

 

 

938,551

 

 

 

 

Consumer non-real estate

 

 

2,199

 

 

 

266,169

 

 

 

 

 

 

2,112

 

 

 

245,653

 

 

 

 

Other loans

 

 

166

 

 

 

161,160

 

 

 

 

 

 

233

 

 

 

152,751

 

 

 

 

Acquired loans

 

 

 

 

 

63,697

 

 

 

13,187

 

 

 

 

 

 

83,416

 

 

 

18,221

 

Total

 

$

88,401

 

 

$

3,858,081

 

 

$

13,187

 

 

$

76,758

 

 

$

3,756,419

 

 

$

18,221

 

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:

 

 

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

3,155

 

 

$

2,073

 

Repossessed assets

 

 

794

 

 

 

955

 

Total

 

$

3,949

 

 

$

3,028

 

 

 

(5)

INTANGIBLE ASSETS

The following is a summary of intangible assets:

 

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

 

(Dollars in thousands)

 

As of September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

13,198

 

 

$

(7,074

)

 

$

6,124

 

Customer relationship intangibles

 

 

5,699

 

 

 

(2,970

)

 

 

2,729

 

Mortgage servicing intangibles

 

 

570

 

 

 

(220

)

 

 

350

 

Total

 

$

19,467

 

 

$

(10,264

)

 

$

9,203

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

13,198

 

 

$

(6,013

)

 

$

7,185

 

Customer relationship intangibles

 

 

5,699

 

 

 

(2,699

)

 

 

3,000

 

Mortgage servicing intangibles

 

 

643

 

 

 

(193

)

 

 

450

 

Total

 

$

19,540

 

 

$

(8,905

)

 

$

10,635

 

15


The following is a summary of goodwill by business segment:

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Executive,

 

 

 

 

 

 

 

Metropolitan

 

 

Community

 

 

Financial

 

 

Operations

 

 

 

 

 

 

 

Banks

 

 

Banks

 

 

Services

 

 

& Support

 

 

Consolidated

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 

$

8,078

 

 

$

30,970

 

 

$

5,464

 

 

$

450

 

 

$

44,962

 

Impairment

 

 

 

 

 

(368

)

 

 

 

 

 

 

 

 

(368

)

Balance at September 30, 2015

 

$

8,078

 

 

$

30,602

 

 

$

5,464

 

 

$

450

 

 

$

44,594

 

In June 2015, the Company recorded an impairment loss of $368,000 after adopting a plan in the second quarter to close a small branch and leave a full-service ATM to serve the community.   

Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

 

(6)

STOCK-BASED COMPENSATION

The Company adopted a nonqualified incentive stock option plan (the “BancFirst ISOP”) in May 1986. The Company amended the BancFirst ISOP to increase the number of shares to be issued under the plan to 3,000,000 shares in May 2013. At September 30, 2015, 29,485 shares were available for future grants. The BancFirst ISOP will terminate on December 31, 2019. The options are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of September 30, 2015 will become exercisable through the year 2022. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

In June 1999, the Company adopted the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”). Each non-employee director is granted an option for 10,000 shares. The Company amended the BancFirst Directors’ Stock Option Plan to increase the number of shares to be issued under the plan to 230,000 shares in May 2014. At September 30, 2015, 20,000 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 September 30, 2015 will become exercisable through the year 2018. 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:

 

 

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

Remaining

 

 

Aggregate

 

 

 

 

 

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

 

Value

 

 

 

(Dollars in thousands, except per share data)

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2014

 

 

1,029,657

 

 

$

36.55

 

 

 

 

 

 

 

 

 

Options granted

 

 

108,000

 

 

 

59.84

 

 

 

 

 

 

 

 

 

Options exercised

 

 

(86,482

)

 

 

24.65

 

 

 

 

 

 

 

 

 

Options canceled, forfeited, or expired

 

 

(22,500

)

 

 

37.14

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2015

 

 

1,028,675

 

 

 

39.98

 

 

 

8.82

 

 

$

23,782

 

Exercisable at September 30, 2015

 

 

474,500

 

 

 

32.17

 

 

5.28 Yr

 

 

$

14,677

 

16


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

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

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

 

$

11.89

 

 

$

12.75

 

 

$

11.55

 

 

$

12.57

 

Total intrinsic value of options exercised

 

 

1,129

 

 

 

1,560

 

 

 

3,258

 

 

 

3,606

 

Cash received from options exercised

 

 

779

 

 

 

1,605

 

 

 

2,132

 

 

 

3,247

 

Tax benefit realized from options exercised

 

 

437

 

 

 

604

 

 

 

1,260

 

 

 

1,395

 

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

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

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

Stock-based compensation expense

 

$

489

 

 

$

448

 

 

$

1,243

 

 

$

1,224

 

Tax benefit

 

 

189

 

 

 

173

 

 

 

481

 

 

 

473

 

Stock-based compensation expense, net of tax

 

$

300

 

 

$

275

 

 

$

762

 

 

$

751

 

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:

 

 

 

September 30, 2015

 

 

 

(Dollars in thousands)

 

Fair value of stock options

 

$

4,186

 

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

 

 

 

Nine Months Ended

September 30,

 

 

2015

 

2014

Risk-free interest rate

 

1.83 to 2.26%

 

2.50 to 2.54%

Dividend yield

 

2.00%

 

2.00%

Stock price volatility

 

18.23 to 19.65%

 

18.62 to 18.98%

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.

17


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

 

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

Number of shares repurchased

 

 

 

 

 

 

Average price of shares repurchased

 

 

 

 

 

 

Shares remaining to be repurchased

 

 

194,723

 

 

 

194,723

 

The Company and BancFirst are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“FDIC”). These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s and BancFirst’s assets, liabilities and certain off-balance-sheet items calculated under regulatory practices. Failure to meet the minimum capital requirements can initiate certain mandatory or discretionary actions by the regulatory agencies that could have a direct material effect on the Company’s financial statements. Management believes that as of September 30, 2015, the Company and BancFirst met all capital adequacy requirements to which they are subject.  The actual and required capital amounts and ratios are shown in the following table:

 

 

 

 

 

 

 

 

 

 

 

Required

 

 

To Be Well

 

 

 

 

 

 

 

 

 

 

 

For Capital

 

 

Capitalized Under

 

 

 

 

 

 

 

 

 

 

 

Adequacy

 

 

Prompt Corrective

 

 

 

Actual

 

 

Purposes

 

 

Action Provisions

 

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

 

(Dollars in thousands)

 

As of September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

662,299

 

 

 

15.27

%

 

$

346,902

 

 

 

8.00

%

 

N/A

 

 

N/A

 

BancFirst

 

 

606,989

 

 

 

14.08

%

 

 

344,890

 

 

 

8.00

%

 

$

431,113

 

 

 

10.00

%

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

595,329

 

 

 

13.73

%

 

$

195,133

 

 

 

4.50

%

 

N/A

 

 

N/A

 

BancFirst

 

 

546,019

 

 

 

12.67

%

 

 

194,001

 

 

 

4.50

%

 

$

280,223

 

 

 

6.50

%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

621,329

 

 

 

14.33

%

 

$

260,177

 

 

 

6.00

%

 

N/A

 

 

N/A

 

BancFirst

 

 

566,019

 

 

 

13.13

%

 

 

258,668

 

 

 

6.00

%

 

$

344,890

 

 

 

8.00

%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Total Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

621,329

 

 

 

9.77

%

 

$

256,245

 

 

 

4.00

%

 

N/A

 

 

N/A

 

BancFirst

 

 

566,019

 

 

 

8.91

%

 

 

255,669

 

 

 

4.00

%

 

$

319,586

 

 

 

5.00

%

As of September 30, 2015, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst as “well capitalized” under the regulatory framework from prompt corrective action. The Company’s trust preferred securities have continued to be included in Tier 1 capital as the Company’s total assets do not exceed $15 billion. There are no conditions or events since the most recent notifications of BancFirst’s capital category that management believes would materially change its category under capital requirements existing as of the report date.

Basel III Capital Rules

The Basel III Capital Rules were effective for the Company and BancFirst on January 1, 2015 (subject to a 4-year phase-in period).

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

 

Implementation of the deductions and other adjustments to CET1 began on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). Under the new rule, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital

18


requirements. The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

Management believes that, as of September 30, 2015, the Company and BancFirst would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis as if such requirements were currently in effect.

 

 

(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 September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

15,630

 

 

 

15,581,593

 

 

$

1.01

 

Effect of stock options

 

 

 

 

 

324,531

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

15,630

 

 

 

15,906,124

 

 

$

0.98

 

Three Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

18,793

 

 

 

15,425,920

 

 

$

1.22

 

Effect of stock options

 

 

 

 

 

369,923

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

18,793

 

 

 

15,795,843

 

 

$

1.19

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

50,442

 

 

 

15,542,027

 

 

$

3.25

 

Effect of stock options

 

 

 

 

 

329,964

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

50,442

 

 

 

15,871,991

 

 

$

3.18

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

48,138

 

 

 

15,412,611

 

 

$

3.12

 

Effect of stock options

 

 

 

 

 

361,686

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

48,138

 

 

 

15,774,297

 

 

$

3.05

 

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

 

 

 

Shares

 

 

Average

Exercise Price

 

Three Months Ended September 30, 2015

 

 

145,261

 

 

$

60.51

 

Three Months Ended September 30, 2014

 

 

76,413

 

 

 

56.23

 

Nine Months Ended September 30, 2015

 

 

165,927

 

 

$

58.33

 

Nine Months Ended September 30, 2014

 

 

63,645

 

 

 

55.35

 

 

 

19


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

 

·

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

 

·

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

 

·

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

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

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

Securities Available for Sale

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

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

Derivatives

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

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.

20


Mortgage Servicing Intangibles

The Company acquired mortgage servicing intangibles with the acquisition of 1st Bank Oklahoma on July 12, 2011. Mortgage Servicing Intangibles are amortized based on current prepayment assumptions and are adjusted to fair value semi-annually, 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 the periods presented, 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)

 

September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

281,297

 

 

$

 

 

$

 

 

$

281,297

 

U.S. federal agencies

 

 

 

 

 

134,486

 

 

 

 

 

 

134,486

 

Mortgage-backed securities

 

 

 

 

 

7,073

 

 

 

15,457

 

 

 

22,530

 

States and political subdivisions

 

 

 

 

 

51,326

 

 

 

 

 

 

51,326

 

Other securities

 

 

 

 

 

3,455

 

 

 

6,431

 

 

 

9,886

 

Derivative assets

 

 

 

 

 

2,357

 

 

 

 

 

 

2,357

 

Derivative liabilities

 

 

 

 

 

1,335

 

 

 

 

 

 

1,335

 

Loans held for sale

 

 

 

 

 

12,406

 

 

 

 

 

 

12,406

 

Mortgage servicing intangibles

 

 

 

 

 

 

 

 

350

 

 

 

350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

248,993

 

 

$

 

 

$

 

 

$

248,993

 

U.S. federal agencies

 

 

 

 

 

172,449

 

 

 

 

 

 

172,449

 

Mortgage-backed securities

 

 

 

 

 

9,425

 

 

 

17,032

 

 

 

26,457

 

States and political subdivisions

 

 

 

 

 

53,373

 

 

 

 

 

 

53,373

 

Other securities

 

 

 

 

 

3,491

 

 

 

11,427

 

 

 

14,918

 

Derivative assets

 

 

 

 

 

6,124

 

 

 

 

 

 

6,124

 

Derivative liabilities

 

 

 

 

 

4,756

 

 

 

 

 

 

4,756

 

Loans held for sale

 

 

 

 

 

9,433

 

 

 

 

 

 

9,433

 

Mortgage servicing intangibles

 

 

 

 

 

 

 

 

450

 

 

 

450

 

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the periods presented were as follows:

 

 

 

Nine Months Ended

September 30

 

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

Balance at the beginning of the year

 

$

28,909

 

 

$

32,002

 

Purchases, issuances and settlements

 

 

(1,070

)

 

 

(1,518

)

Sales

 

 

(8,593

)

 

 

(813

)

Gains included in earnings

 

 

7,021

 

 

 

673

 

Total unrealized (losses) gains

 

 

(4,029

)

 

 

156

 

Balance at the end of the period

 

$

22,238

 

 

$

30,500

 

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 nine months ended September 30, 2015 and 2014, the Company did not transfer any securities between levels in the fair value hierarchy.

21


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

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

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

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

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

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

 

 

 

Total Fair Value            Level 3

 

 

Losses

 

 

 

(Dollars in thousands)

 

As of and for the Year-to-date Period Ended September 30, 2015

 

 

 

 

 

 

 

 

Impaired loans (less specific allowance)

 

$

44,559

 

 

$

 

Foreclosed assets

 

 

213

 

 

 

 

Other real estate owned

 

 

7,650

 

 

 

30

 

 

 

 

 

 

 

 

 

 

As of and for the Year-to-date Period Ended December 31, 2014

 

 

 

 

 

 

 

 

Impaired loans (less specific allowance)

 

$

33,797

 

 

$

 

Foreclosed assets

 

 

220

 

 

 

 

Other real estate owned

 

 

7,859

 

 

 

730

 

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 and Interest-Bearing Deposits

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

Securities Held for Investment

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

Loans

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

Deposits

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

22


Short-term Borrowings

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

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

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,655,061

 

 

$

1,655,061

 

 

$

1,913,895

 

 

$

1,913,895

 

Securities held for investment

 

 

8,333

 

 

 

8,398

 

 

 

8,593

 

 

 

8,671

 

Level 3 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, net of allowance for loan losses

 

 

3,918,699

 

 

 

3,965,439

 

 

 

3,810,509

 

 

 

3,847,791

 

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

5,698,591

 

 

 

5,750,163

 

 

 

5,904,704

 

 

 

5,945,502

 

Short-term borrowings

 

 

3,777

 

 

 

3,777

 

 

 

3,982

 

 

 

3,982

 

Junior subordinated debentures

 

 

26,804

 

 

 

28,123

 

 

 

26,804

 

 

 

31,200

 

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments

 

 

 

 

 

 

1,708

 

 

 

 

 

 

 

1,640

 

Letters of credit

 

 

 

 

 

 

475

 

 

 

 

 

 

 

478

 

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 semi-annually) and other non-financial long-lived assets measured at fair value and adjusted for impairment. These items are evaluated at least annually for impairment. The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were not considered to be significant to the Company at September 30, 2015 or December 31, 2014.

 

 

 

(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.

23


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:

 

 

 

 

 

September 30, 2015

 

 

December 31, 2014

 

Oil and Natural Gas Swaps and Options

 

Notional Units

 

Notional

Amount

 

 

Estimated

Fair Value

 

 

Notional

Amount

 

 

Estimated

Fair Value

 

 

 

 

 

(Notional amounts and dollars in thousands)

 

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Barrels

 

 

55

 

 

$

1,197

 

 

 

312

 

 

$

4,629

 

Derivative liabilities

 

Barrels

 

 

(55

)

 

 

(971

)

 

 

(312

)

 

 

(4,271

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

MMBTUs

 

 

3,790

 

 

 

1,160

 

 

 

2,010

 

 

 

1,495

 

Derivative liabilities

 

MMBTUs

 

 

(3,790

)

 

 

(364

)

 

 

(2,010

)

 

 

(485

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Fair Value

 

Included in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Other assets

 

 

 

 

 

 

2,357

 

 

 

 

 

 

 

6,124

 

Derivative liabilities

 

Other liabilities

 

 

 

 

 

 

(1,335

)

 

 

 

 

 

 

(4,756

)

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in thousands)

 

Derivative income

 

$

78

 

 

$

72

 

 

$

270

 

 

$

370

 

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. The Company’s share of total profit is approximately 35%.

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:

 

 

September 30, 2015

 

 

December 31, 2014

 

 

 

(Dollars in thousands)

 

Credit exposure

 

$

1,493

 

 

$

4,028

 

Balance Sheet Offsetting

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

 

(11)

SEGMENT INFORMATION

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

24


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 September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

15,221

 

 

$

30,429

 

 

$

1,638

 

 

$

(412

)

 

$

 

 

$

46,876

 

Noninterest income

 

 

3,755

 

 

 

13,427

 

 

 

7,507

 

 

 

17,250

 

 

 

(16,615

)

 

 

25,324

 

Income before taxes

 

 

9,463

 

 

 

18,693

 

 

 

3,098

 

 

 

9,616

 

 

 

(16,446

)

 

 

24,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

15,267

 

 

$

30,076

 

 

$

1,594

 

 

$

(423

)

 

$

 

 

$

46,514

 

Noninterest income

 

 

3,417

 

 

 

13,163

 

 

 

7,722

 

 

 

20,105

 

 

 

(19,469

)

 

 

24,938

 

Income before taxes

 

 

10,640

 

 

 

21,377

 

 

 

3,002

 

 

 

11,893

 

 

 

(19,287

)

 

 

27,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

45,946

 

 

$

88,928

 

 

$

5,156

 

 

$

(1,313

)

 

$

 

 

$

138,717

 

Noninterest income

 

 

10,745

 

 

 

38,743

 

 

 

27,621

 

 

 

55,868

 

 

 

(53,642

)

 

 

79,335

 

Income before taxes

 

 

29,152

 

 

 

52,500

 

 

 

15,015

 

 

 

34,024

 

 

 

(53,372

)

 

 

77,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

44,426

 

 

$

86,272

 

 

$

4,538

 

 

$

(1,204

)

 

$

 

 

$

134,032

 

Noninterest income

 

 

10,293

 

 

 

38,402

 

 

 

21,107

 

 

 

51,979

 

 

 

(49,670

)

 

 

72,111

 

Income before taxes

 

 

25,914

 

 

 

54,146

 

 

 

8,360

 

 

 

29,252

 

 

 

(49,396

)

 

 

68,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

$

2,220,378

 

 

$

4,081,832

 

 

$

124,713

 

 

$

685,359

 

 

$

(706,186

)

 

$

6,406,096

 

December 31, 2014

 

 

2,298,828

 

 

 

4,113,783

 

 

 

145,814

 

 

 

679,194

 

 

 

(662,647

)

 

 

6,574,972

 

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.

 

 

(12) SUBSEQUENT EVENT

 

On October 8, 2015, the Company completed its acquisition of CSB Bancshares Inc. and its subsidiary bank, Bank of Commerce, with locations in Yukon, Mustang, and El Reno, Oklahoma. Bank of Commerce has approximately $196 million in total assets, $148 million in loans, $170 million in deposits, and $22 million in equity capital. The acquisition was accounted for under the acquisition method and the Company acquired 100% of the voting interest. The bank will operate under its present name until it is merged into BancFirst, which is expected to be during the fourth quarter of 2015. The acquisition will not have a material effect on the Company’s consolidated financial statements. The acquisition of CSB Bancshares Inc. and its subsidiary bank, Bank of Commerce will complement our community banking strategy by adding two communities to our banking network throughout Oklahoma.

 

Subsequent to September 30, 2015, the Company recorded a gain on sale of securities of $2.1 million, related to warrants associated with a loan transaction, which will be included in fourth quarter earnings.

 

  

 

25


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, 2014 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 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. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes”, “anticipates”, “expects”, “intends”, “targeted”, “continue”, “remain”, “will”, “should”, “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

·

Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

 

·

Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.

 

·

Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

 

·

Inflation, interest rate, crude oil price, securities market and monetary fluctuations.

 

·

The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.

 

·

Impairment of the Company’s goodwill or other intangible assets.

 

·

Changes in consumer spending, borrowing and savings habits.

 

·

Changes in the financial performance and/or condition of the Company’s borrowers.

 

·

Technological changes.

 

·

Acquisitions and integration of acquired businesses.

 

·

The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

 

·

The Company’s success at managing the risks involved in the foregoing items.

Actual results may differ materially from forward-looking statements.

26


SUMMARY

BancFirst Corporation’s net income was $15.6 million, or $0.98 diluted earnings per share, for the third quarter of 2015, compared to net income of $18.8 million, or $1.19 diluted earnings per share, for the third quarter of 2014. Net income was $50.4 million, or $3.18 diluted earnings per share for the nine months ended September 30, 2015, compared to $48.1 million, or $3.05 diluted earnings per share, for the nine months ended September 30, 2014.  

The Company’s net interest income for the third quarter of 2015 increased to $46.9 million, compared to $46.5 million for the third quarter of 2014. The net interest margin for the quarter was 3.12%, compared to 3.13% a year ago. The Company’s provision for loan losses for the third quarter of 2015 was $1.4 million, compared to negative $3.1 million a year ago. The negative provision in 2014 was due to a release of $5.31 million of loan loss reserves, partially offset by a $1.36 million increase in the specific loss reserves for existing adversely classified loans. Net charge-offs for the quarter were 0.08% of average loans, compared to net charge-offs of 0.02% for the third quarter of 2014.  Noninterest income for the quarter totaled $25.3 million, compared to $24.9 million last year. Noninterest expense for the quarter totaled $46.4 million, compared to $46.9 million last year. The Company’s effective tax rate increased to 36.0% compared to 32.0% for the third quarter of 2014, due primarily to tax credits that lowered the effective tax rate in 2014.

At September 30, 2015, the Company’s total assets were $6.4 billion, down $168.9 million or 2.6% from December 31, 2014. Securities decreased $16.9 million to a total of $507.9 million. Loans totaled $4.0 billion, up $111.2 million or 2.9% from December 31, 2014.  Deposits totaled $5.7 billion, down $206.1 million or 3.5% from December 31, 2014. The Company’s total stockholders’ equity was $646.1 million, an increase of $36.7 million, or 6.0%, over December 31, 2014.

Asset quality remained strong during the third quarter of 2015. Nonperforming and restructured assets were 0.87% of total assets at September 30, 2015 compared to 0.64% at December 31, 2014. During the second quarter the Company’s nonaccrual loans increased due to the downgrade of a single commercial loan. The allowance to total loans was 1.03%, compared to 1.06% at year-end 2014.

 

Subsequent to September 30, 2015, the Company recorded a gain on sale of securities of $2.1 million, related to a previously restructured loan, which will be included in fourth quarter earnings.

 

On October 8, 2015, the Company completed the acquisition of CSB Bancshares, Inc. and its subsidiary bank, Bank of Commerce, with locations in Yukon, Mustang, and El Reno, Oklahoma.  Bank of Commerce has approximately $196 million in total assets, $148 million in loans, $170 million in deposits, and $22 million in equity capital. The bank will operate under its present name until it is merged into BancFirst, which is expected to be during the fourth quarter of 2015.

Oil prices continued to be low during the third quarter of 2015, which had an impact on loan demand. Any continued impact from low oil prices on Oklahoma’s economy will become more apparent in future periods.

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.

27


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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

46,876

 

 

$

46,514

 

 

$

138,717

 

 

$

134,032

 

Provision for loan losses

 

 

1,424

 

 

 

(3,115

)

 

 

4,029

 

 

 

1,232

 

Securities transactions

 

 

 

 

 

284

 

 

 

7,121

 

 

 

819

 

Total noninterest income

 

 

25,324

 

 

 

24,938

 

 

 

79,335

 

 

 

72,111

 

Salaries and employee benefits

 

 

28,746

 

 

 

28,153

 

 

 

84,145

 

 

 

81,569

 

Total noninterest expense

 

 

46,352

 

 

 

46,942

 

 

 

136,704

 

 

 

136,635

 

Net income

 

 

15,630

 

 

 

18,793

 

 

 

50,442

 

 

 

48,138

 

Per Common Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income – basic

 

$

1.01

 

 

$

1.22

 

 

$

3.25

 

 

$

3.12

 

Net income – diluted

 

 

0.98

 

 

 

1.19

 

 

 

3.18

 

 

 

3.05

 

Cash dividends

 

 

0.36

 

 

 

0.34

 

 

 

1.04

 

 

 

0.96

 

Performance Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.97

%

 

 

1.17

%

 

 

1.04

%

 

 

1.02

%

Return on average stockholders’ equity

 

 

9.64

 

 

 

12.63

 

 

 

10.68

 

 

 

11.14

 

Cash dividend payout ratio

 

 

35.53

 

 

 

27.91

 

 

 

32.04

 

 

 

30.74

 

Net interest spread

 

 

2.98

 

 

 

2.99

 

 

 

2.95

 

 

 

2.93

 

Net interest margin

 

 

3.12

 

 

 

3.13

 

 

 

3.09

 

 

 

3.07

 

Efficiency ratio

 

 

64.20

 

 

 

65.70

 

 

 

62.69

 

 

 

66.28

 

Net charge-offs to average loans

 

 

0.08

 

 

 

0.02

 

 

 

0.10

 

 

 

0.02

 

Net Interest Income

For the three months ended September 30, 2015, net interest income, which is the Company’s principal source of operating revenue, increased to $46.9 million compared to $46.5 million for the three months ended September 30, 2014, due to higher volume of earning assets. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The Company’s net interest margin for the quarter was 3.12% compared to 3.13% a year ago. If interest rates and/or loan volume do not increase, management would expect its net interest margin to continue to compress in 2015 as higher yielding loans and securities mature and are replaced at current market rates.

Net interest income for the nine months ended September 30, 2015 was $138.7 million compared to $134.0 million for the nine months ended September 30, 2014. The net interest margin for the year-to-date increased slightly compared to the same period of the previous year, as shown in the preceding table.  

Provision for Loan Losses

The Company’s provision for loan loss for the third quarter of 2015 increased to $1.4 million compared to negative $3.1 million a year ago. The negative provision in 2014 was due to a release of $5.31 million of loan loss reserves, partially offset by a $1.36 million increase in the specific loss reserves for existing adversely classified loans. The Company establishes an allowance as an estimate of the probable inherent losses in the loan portfolio at the balance sheet date.  Management believes the allowance for loan losses is appropriate based upon management’s best estimate of probable losses that have been incurred within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the amount of future provisions for loan losses. Net loan charge-offs were $3.1 million for the third quarter of 2015, compared to net charge-offs of $715,000 for the third quarter of 2014. Net charge-offs increased in 2015 due to a $2.1 million charge off on a portion of a nonaccrual loan. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a very low level.

 

28


For the nine months ended September 30, 2015, the Company’s provision for loan losses was $4.0 million, compared to $1.2 million for the nine months ended September 30, 2014. Net loan charge-offs were $3.9 million, compared to $799,000 for the same period of the prior year.

Noninterest Income

Noninterest income totaled $25.3 million for the third quarter of 2015 compared to $24.9 million for the third quarter of 2014.  The Company had fees from debit card usage totaling $5.7 million and $5.8 million during the three month periods ended September 30, 2015 and 2014, respectively.

 

Noninterest income for the nine months ended September 30, 2015 totaled $79.3 million compared to $72.1 million for the nine months ended September 30, 2014. Noninterest income increased due to the Company recording a gain from the sale of an investment by the Company’s wholly-owned subsidiary Council Oak Partners, LLC, of approximately $5.3 million and a $1.7 million gain on the sale of an investment by Council Oak Investment Corporation, a wholly-owned subsidiary of BancFirst.  Fees from debit card usage totaled $17.0 million and $16.9 million during the nine months ended September 30, 2015 and 2014, respectively.

Noninterest Expense

For the three months ended September 30, 2015, noninterest expense totaled $46.4 million, compared to $46.9 million for the three months ended September 30, 2014.

For the nine months ended September 30, 2015, noninterest expense totaled $136.7 million compared to $136.6 million for the nine months ended September 30, 2014. Annual salary increases in 2015 were offset by a reduction of the amortization on historic tax credits realized in 2014. In addition, the Company recorded an impairment loss of $368,000, which is included in noninterest expense, after adopting a plan in the second quarter of 2015 to close a small branch and leave a full service ATM to serve the community.

Income Taxes

The Company’s effective tax rate on income before taxes increased to 36.0% for the third quarter of 2015, compared to 32.0% for the third quarter of 2014, due primarily to tax credits that lowered the effective tax rate in 2014.

 

The Company’s effective tax rate on income before taxes was 34.8% for the first nine months of 2015, compared to 29.5% for the first nine months of 2014 due primarily to tax credits that lowered the effective tax rate in 2014 and the recognition of state deferred tax benefits in 2014.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29


 

 

FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(unaudited)

 

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

 

 

Total assets

 

$

6,406,096

 

 

$

6,574,972

 

Total loans

 

 

3,959,669

 

 

 

3,851,398

 

Allowance for loan losses

 

 

40,970

 

 

 

40,889

 

Securities

 

 

507,858

 

 

 

524,783

 

Deposits

 

 

5,698,591

 

 

 

5,904,704

 

Stockholders' equity

 

 

646,061

 

 

 

609,314

 

Book value per share

 

 

41.44

 

 

 

39.30

 

Tangible book value per share

 

 

37.99

 

 

 

35.71

 

Average loans to deposits (year-to-date)

 

 

66.56

%

 

 

63.64

%

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

 

 

93.08

 

 

 

92.71

 

Average stockholders’ equity to average assets

   (year-to-date)

 

 

9.73

 

 

 

9.19

 

Asset Quality Ratios

 

 

 

 

 

 

 

 

Nonperforming and restructured loans to total loans

 

 

1.20

%

 

 

0.88

%

Nonperforming and restructured assets to total assets

 

 

0.87

 

 

 

0.64

 

Allowance for loan losses to total loans

 

 

1.03

 

 

 

1.06

 

Allowance for loan losses to nonperforming and

   restructured loans

 

 

85.77

 

 

 

120.05

 

Cash and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks and interest-bearing deposits with banks as of September 30, 2015 totaled $1.7 billion, compared to $1.9 billion at December 31, 2014.  

Securities

At September 30, 2015, total securities decreased $16.9 million compared to December 31, 2014. 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 $4.2 million at September 30, 2015, compared to an unrealized gain of $6.8 million at December 31, 2014.  These unrealized gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of $2.6 million and $4.2 million, respectively. The unrealized gains decreased in 2015 primarily due to the reclassification of an unrealized gain on one investment of $3.3 million from other comprehensive income to realized gain by Council Oak Partners, LLC, a wholly-owned subsidiary of the Company. The realized gain is reported as securities transactions within the noninterest income section of the consolidated statement of comprehensive income.

Loans (Including Acquired Loans)

At September 30, 2015, loans totaled $4.0 billion, up $111.2 million or 2.9% from December 31, 2014. The growth in loans was largely driven by commercial real estate, which was up $59.2 million or 5% from December 31, 2014.

Allowance for Loan Losses/Fair Value Adjustments on Acquired Loans

At September 30, 2015, the allowance for loan losses to total loans represented 1.03% of total loans, compared to 1.06% at December 31, 2014. The decrease in the allowance for loan losses to total loans primarily resulted from an increase in charge offs during the period and loan growth.

30


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 $3.1 million at September 30, 2015 and $4.3 million at December 31, 2014 while the acquired loans outstanding were $76.9 million and $101.7 million, respectively. The decrease in the credit component in 2015 was due to loan payoffs and accretion.   

Nonperforming and Restructured Assets

Nonperforming and restructured assets totaled $55.6 million at September 30, 2015, compared to $42.1 million at December 31, 2014. The Company’s level of nonperforming and restructured assets has continued to be relatively low.

Nonaccrual loans totaled $30.3 million at September 30, 2015, compared to $16.4 million at the end of 2014. The Company’s nonaccrual loans are primarily commercial and real estate loans. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of interest or principal or both is in serious doubt. Interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is reasonably expected. Otherwise, interest income is not recognized until the principal balance is fully collected. Total interest income which was not accrued on nonaccrual loans outstanding, was approximately $1.5 million for the nine months ended September 30, 2015 and $839,000 for the nine months ended September 30, 2014.  Only a small amount of this interest is expected to be ultimately collected. During the second quarter of 2015 the Company’s nonaccrual loans increased due to the downgrade of a single commercial loan.

Other real estate owned and repossessed assets totaled $7.9 million at September 30, 2015, compared to $8.1 million at December 31, 2014. Other real estate owned and repossessed assets decreased due to the sale of two properties during the first quarter of 2015, partially offset by an addition in the second quarter.

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 $5.4 million of these loans at September 30, 2015, compared to $27.5 million at December 31, 2014. Potential problem loans are not included in nonperforming and restructured loans.  In general, these loans are adequately collateralized and have no specific identifiable probable loss.  Loans which are considered to have identifiable probable loss potential are placed on nonaccrual status, are allocated a specific allowance for loss or are directly charged-down, and are reported as nonperforming. Potential problem loans decreased due to the downgrade of a single commercial loan that was moved to nonaccrual during the second quarter.

Liquidity and Funding

Deposits

At September 30, 2015, deposits totaled $5.7 billion, a decrease of $206.1 million or 3.5% compared to December 31, 2014.  Deposits decreased due to a temporary influx of deposits at year end 2014. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 94.2% at September 30, 2015 compared to 94.1% at December 31, 2014.  Noninterest-bearing deposits to total deposits were 39.4% at September 30, 2015, compared to 40.8% at December 31, 2014.

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 $3.8 million at September 30, 2015, compared to $4.0 million at December 31, 2014.

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 $649.3 million, are pledged as collateral for the borrowings under the line of credit. As of September 30, 2015 and December 31, 2014, the Company had no advances outstanding.

The Company has a revolving line of credit with a bank of up to $10.0 million. There were no borrowings against the line at September 30, 2015. The line is reviewed annually and is due on demand. Under terms of the line of credit, the Company is required to maintain compliance with specified financial covenants.

31


There have not been any other 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, 2014.

Capital Resources

Stockholders’ equity totaled $646.1 million at September 30, 2015, compared to $609.3 million at December 31, 2014. In addition to net income of $50.4 million, other changes in stockholders’ equity during the nine months ended September 30, 2015 included $2.8 million related to stock option exercises and $1.2 million related to stock-based compensation that were partially offset by a $1.6 million decrease in other comprehensive income and $16.2 million in dividends. The Company’s leverage ratio and total risk-based capital ratios at September 30, 2015, were well in excess of the regulatory requirements.

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, 2014. 

32


BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

 

 

 

Three Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

3,885,579

 

 

$

47,455

 

 

 

4.85

%

 

$

3,681,534

 

 

$

46,838

 

 

 

5.05

%

Securities – taxable

 

 

485,862

 

 

 

1,291

 

 

 

1.05

 

 

 

512,325

 

 

 

1,536

 

 

 

1.19

 

Securities – tax exempt

 

 

43,118

 

 

 

382

 

 

 

3.51

 

 

 

41,334

 

 

 

404

 

 

 

3.88

 

Interest-bearing deposits w/ banks & FFS

 

 

1,570,367

 

 

 

1,009

 

 

 

0.25

 

 

 

1,694,709

 

 

 

1,112

 

 

 

0.26

 

Total earning assets

 

 

5,984,926

 

 

 

50,137

 

 

 

3.32

 

 

 

5,929,902

 

 

 

49,890

 

 

 

3.34

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

168,607

 

 

 

 

 

 

 

 

 

 

 

182,129

 

 

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

313,686

 

 

 

 

 

 

 

 

 

 

 

316,314

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(42,061

)

 

 

 

 

 

 

 

 

 

 

(43,332

)

 

 

 

 

 

 

 

 

Total nonearning assets

 

 

440,232

 

 

 

 

 

 

 

 

 

 

 

455,111

 

 

 

 

 

 

 

 

 

Total assets

 

$

6,425,158

 

 

 

 

 

 

 

 

 

 

$

6,385,013

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

701,405

 

 

$

181

 

 

 

0.10

%

 

$

729,948

 

 

$

175

 

 

 

0.09

%

Savings deposits

 

 

2,019,956

 

 

 

1,155

 

 

 

0.23

 

 

 

2,012,597

 

 

 

1,146

 

 

 

0.23

 

Time deposits

 

 

718,963

 

 

 

1,186

 

 

 

0.65

 

 

 

771,103

 

 

 

1,337

 

 

 

0.69

 

Short-term borrowings

 

 

3,014

 

 

 

1

 

 

 

0.15

 

 

 

12,636

 

 

 

6

 

 

 

0.18

 

Junior subordinated debentures

 

 

26,804

 

 

 

492

 

 

 

7.29

 

 

 

26,804

 

 

 

491

 

 

 

7.27

 

Total interest-bearing liabilities

 

 

3,470,142

 

 

 

3,015

 

 

 

0.34

 

 

 

3,553,088

 

 

 

3,155

 

 

 

0.35

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

2,284,207

 

 

 

 

 

 

 

 

 

 

 

2,214,894

 

 

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

27,243

 

 

 

 

 

 

 

 

 

 

 

26,584

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

643,566

 

 

 

 

 

 

 

 

 

 

 

590,447

 

 

 

 

 

 

 

 

 

Total interest free funds

 

 

2,955,016

 

 

 

 

 

 

 

 

 

 

 

2,831,925

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

6,425,158

 

 

 

 

 

 

 

 

 

 

$

6,385,013

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

 

 

$

47,122

 

 

 

 

 

 

 

 

 

 

$

46,735

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

2.98

%

 

 

 

 

 

 

 

 

 

 

2.99

%

Effect of interest free funds

 

 

 

 

 

 

 

 

 

 

0.14

%

 

 

 

 

 

 

 

 

 

 

0.14

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

3.12

%

 

 

 

 

 

 

 

 

 

 

3.13

%

 

(1)

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

33


 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

3,860,299

 

 

$

140,107

 

 

 

4.85

%

 

$

3,589,402

 

 

$

135,481

 

 

 

5.05

%

Securities – taxable

 

 

493,702

 

 

 

4,148

 

 

 

1.12

 

 

 

509,336

 

 

 

4,343

 

 

 

1.14

 

Securities – tax exempt

 

 

39,912

 

 

 

1,123

 

 

 

3.76

 

 

 

41,137

 

 

 

1,253

 

 

 

4.07

 

Interest-bearing deposits w/ banks & FFS

 

 

1,644,708

 

 

 

3,137

 

 

 

0.25

 

 

 

1,727,436

 

 

 

3,303

 

 

 

0.26

 

Total earning assets

 

 

6,038,621

 

 

 

148,515

 

 

 

3.29

 

 

 

5,867,311

 

 

 

144,380

 

 

 

3.29

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

175,714

 

 

 

 

 

 

 

 

 

 

 

189,030

 

 

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

315,074

 

 

 

 

 

 

 

 

 

 

 

315,901

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(41,633

)

 

 

 

 

 

 

 

 

 

 

(41,067

)

 

 

 

 

 

 

 

 

Total nonearning assets

 

 

449,155

 

 

 

 

 

 

 

 

 

 

 

463,864

 

 

 

 

 

 

 

 

 

Total assets

 

$

6,487,776

 

 

 

 

 

 

 

 

 

 

$

6,331,175

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

720,175

 

 

$

532

 

 

 

0.10

%

 

$

766,895

 

 

$

580

 

 

 

0.10

%

Savings deposits

 

 

2,047,022

 

 

 

3,463

 

 

 

0.23

 

 

 

1,981,904

 

 

 

3,363

 

 

 

0.23

 

Time deposits

 

 

730,717

 

 

 

3,607

 

 

 

0.66

 

 

 

792,202

 

 

 

4,237

 

 

 

0.72

 

Short-term borrowings

 

 

2,671

 

 

 

3

 

 

 

0.15

 

 

 

9,491

 

 

 

13

 

 

 

0.18

 

Long-term borrowings

 

 

 

 

 

 

 

 

 

 

 

2,186

 

 

 

25

 

 

 

1.53

 

Junior subordinated debentures

 

 

26,804

 

 

 

1,474

 

 

 

7.35

 

 

 

26,804

 

 

 

1,474

 

 

 

7.35

 

Total interest-bearing liabilities

 

 

3,527,389

 

 

 

9,079

 

 

 

0.34

 

 

 

3,579,482

 

 

 

9,692

 

 

 

0.36

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

2,302,164

 

 

 

 

 

 

 

 

 

 

 

2,154,395

 

 

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

26,839

 

 

 

 

 

 

 

 

 

 

 

19,325

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

631,384

 

 

 

 

 

 

 

 

 

 

 

577,973

 

 

 

 

 

 

 

 

 

Total interest free funds

 

 

2,960,387

 

 

 

 

 

 

 

 

 

 

 

2,751,693

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

6,487,776

 

 

 

 

 

 

 

 

 

 

$

6,331,175

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

 

 

$

139,436

 

 

 

 

 

 

 

 

 

 

$

134,688

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

2.95

%

 

 

 

 

 

 

 

 

 

 

2.93

%

Effect of interest free funds

 

 

 

 

 

 

 

 

 

 

0.14

%

 

 

 

 

 

 

 

 

 

 

0.14

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

3.09

%

 

 

 

 

 

 

 

 

 

 

3.07

%

(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, 2014, the date of its most recent annual report to stockholders.

 

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer, Chief Financial Officer and its Disclosure Committee, which includes the Company’s Chief Risk Officer, Chief Asset Quality Officer, Chief Internal Auditor, 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 materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

34


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 September 30, 2015, 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, 2014.

 

 

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.

35


Item 6. Exhibits.

 

Exhibit
Number

 

Exhibit

3.1

 

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

 

 

 

3.2

 

Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation dated June 15, 2004 (filed as Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2004 and incorporated herein by reference).

 

 

 

3.3

 

Amended and Restated By-Laws of BancFirst Corporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 30, 2015 and incorporated herein by reference).

 

 

 

3.4

 

Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation dated May 23, 2013 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 29, 2013 and incorporated herein by reference).

 

 

 

4.1

 

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

 

 

 

4.2

 

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).

 

 

 

4.3

 

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).

 

 

 

4.4

 

Form of Indenture relating to the 7.20% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust II (filed as Exhibit 4.1 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

 

 

 

4.5

 

Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (filed as Exhibit 4.2 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

 

 

 

4.6

 

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).

 

 

 

4.7*

 

Form of Guarantee Agreement by and between CSB Bancshares, Inc. and Wilmington Trust Company.

 

 

 

4.8*

 

Form of Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures of CSB Bancshares, Inc., issued to Wilmington Trust Company.

 

 

 

4.9*

 

Form of First Supplemental Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures by and between Wilmington Trust Company and BancFirst Corporation.

 

 

 

  10.1

 

BancFirst Corporation Employee Stock Ownership and Trust Agreement adopted effective January 1, 2015 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2015 and incorporated herein by reference).

 

 

 

10.2

 

Fourth Amended and Restated BancFirst Corporation Directors’ Stock Option Plan (filed as Exhibit 10.1 to the Company’s Form 8-K dated October 28, 2014 and incorporated herein by reference).

 

 

 

10.3

 

Fourth Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2014 and incorporated herein by reference).

 

 

 

10.4

 

Amended and Restated BancFirst Corporation Thrift Plan adopted March 25, 2010 effective January 1, 2010 (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2010 and incorporated herein by reference).

 

 

 

10.5

 

Amendment 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).

 

 

 

36


Exhibit
Number

 

Exhibit

10.6

 

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).

 

 

 

 

 

 

10.7

 

Thirteenth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.1 to the Company’s Form 8-K dated October 28, 2014 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.

 

 

37


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:  November 6, 2015

 

/s/ David E. Rainbolt

 

 

David E. Rainbolt

 

 

President

 

 

Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Date:  November 6, 2015

 

/s/ Kevin Lawrence

 

 

Kevin Lawrence

 

 

Executive Vice President

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

38