banf-10q_20200331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

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

For the transition period from to

Commission File Number 0-14384

BancFirst Corporation

(Exact name of registrant as specified in charter)

Oklahoma		73-1221379
(State or other Jurisdiction of		(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 Par Value Per Share

BANF

NASDAQ Global Select Market System

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 ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐.

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 30, 2020 there were 32,646,691 shares of the registrant’s Common Stock outstanding.

BancFirst Corporation

Quarterly Report on Form 10-Q

March 31, 2020

Table of Contents

Item		Page
	PART I – Financial Information
1.	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Shareholders’ Equity	4
	Consolidated Statements of Cash Flow	5

	Notes to Consolidated Financial Statements	6
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
3.	Quantitative and Qualitative Disclosure About Market Risk	38
4.	Controls and Procedures	38

	PART II – Other Information
1.	Legal Proceedings	39
1A.	Risk Factors	39
2.	Unregistered Sales of Equity Securities	40
3.	Defaults Upon Senior Securities	40
4.	Mine Safety Disclosures	40
5.	Other Information	40
6.	Exhibits	41
Signatures		43

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	March 31,			December 31,
		2020			2019
	(unaudited)			(see Note 1)
ASSETS
Cash and due from banks	$	192,034		$	222,043
Interest-bearing deposits with banks		1,356,826			1,646,238
Federal funds sold		—			1,000
Securities held for investment (fair value: $2,220 and $1,903, respectively)		2,189			1,903
Securities available for sale at fair value		589,798			489,723
Loans held for sale		16,161			11,001
Loans (net of unearned interest)		5,989,904			5,662,143
Allowance for credit losses		(70,080	)		(54,238	)
Loans, net of allowance for credit losses		5,919,824			5,607,905
Premises and equipment, net		215,927			206,275
Other real estate owned		5,720			5,607
Intangible assets, net		21,850			22,608
Goodwill		149,923			148,604
Accrued interest receivable and other assets		198,844			202,851
Total assets	$	8,669,096		$	8,565,758

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	2,980,792		$	2,956,370
Interest-bearing		4,592,408			4,527,265
Total deposits		7,573,200			7,483,635
Short-term borrowings		1,400			1,100
Accrued interest payable and other liabilities		44,312			49,230
Junior subordinated debentures		26,804			26,804
Total liabilities		7,645,716			7,560,769

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, 40,000,000 shares authorized; shares issued and outstanding: 32,646,691 and 32,694,268, respectively		32,647			32,694
Capital surplus		153,999			153,353
Retained earnings		826,855			815,488
Accumulated other comprehensive income, net of income tax of $3,363 and $1,187, respectively		9,879			3,454
Total stockholders' equity		1,023,380			1,004,989
Total liabilities and stockholders' equity	$	8,669,096		$	8,565,758

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
		2020			2019
INTEREST INCOME
Loans, including fees	$	76,518		$	68,730
Securities:
Taxable		2,586			4,335
Tax-exempt		98			126
Federal funds sold		—			2
Interest-bearing deposits with banks		4,769			7,748
Total interest income		83,971			80,941
INTEREST EXPENSE
Deposits		9,400			13,537
Short-term borrowings		7			10
Junior subordinated debentures		491			491
Total interest expense		9,898			14,038
Net interest income		74,073			66,903
Provision for credit losses		19,583			1,684
Net interest income after provision for credit losses		54,490			65,219
NONINTEREST INCOME
Trust revenue		3,655			3,177
Service charges on deposits		18,804			17,663
Securities transactions (includes no accumulated other comprehensive income reclassifications)		50			—
Income from sales of loans		781			698
Insurance commissions		5,676			5,265
Cash management		4,320			3,776
Gain/(loss) on sale of other assets		86			(4	)
Other		1,773			1,426
Total noninterest income		35,145			32,001
NONINTEREST EXPENSE
Salaries and employee benefits		39,756			36,171
Occupancy, net		3,546			2,627
Depreciation		3,491			2,985
Amortization of intangible assets		964			759
Data processing services		1,692			1,480
Net income from other real estate owned		(2,135	)		(484	)
Marketing and business promotion		2,355			2,261
Deposit insurance		136			533
Other		11,580			9,874
Total noninterest expense		61,385			56,206
Income before taxes		28,250			41,014
Income tax expense		5,642			9,177
Net income	$	22,608		$	31,837
NET INCOME PER COMMON SHARE
Basic	$	0.69		$	0.98
Diluted	$	0.68		$	0.96
OTHER COMPREHENSIVE GAIN
Unrealized gain on securities, net of tax of $(2,176) and $(868), respectively		6,425			2,540
Comprehensive income	$	29,033		$	34,377

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	March 31,
	2020			2019
COMMON STOCK
Issued at beginning of period	$	32,694		$	32,604
Shares issued for stock options		12			14
Shares acquired and canceled		(59	)		—
Issued at end of period	$	32,647		$	32,618
CAPITAL SURPLUS
Balance at beginning of period	$	153,353		$	149,709
Common stock issued for stock options		220			312
Stock-based compensation arrangements		426			174
Balance at end of period	$	153,999		$	150,195
RETAINED EARNINGS
Balance at beginning of period	$	815,488		$	722,615
Net income		22,608			31,837
Cumulative effect of change in accounting principle, net of tax of $925 (Note 1)		2,270			—
Dividends on common stock ($0.32 and $0.30 per share, respectively)		(10,472	)		(9,739	)
Common stock acquired and canceled		(3,039	)		—
Balance at end of period	$	826,855		$	744,713
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain/(losses) on securities:
Balance at beginning of period	$	3,454		$	(2,139	)
Net change		6,425			2,540
Balance at end of period	$	9,879		$	401
Total stockholders’ equity	$	1,023,380		$	927,927

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	22,608		$	31,837
Adjustments to reconcile to net cash provided by operating activities:
Provision for credit losses		19,583			1,684
Depreciation and amortization		4,455			3,744
Net amortization of securities premiums and discounts		(461	)		(1,948	)
Realized securities gains		(50	)		—
Gain on sales of loans		(781	)		(698	)
Cash receipts from the sale of loans originated for sale		56,879			43,229
Cash disbursements for loans originated for sale		(61,258	)		(42,094	)
Deferred income tax benefit		(1,211	)		(459	)
Gain on sale of other assets		(2,183	)		(499	)
Decrease/(increase) in interest receivable		196			(1,500	)
(Decrease)/increase in interest payable		(543	)		382
Amortization of stock-based compensation arrangements		426			174
Excess tax benefit from stock-based compensation arrangements		(95	)		(102	)
Other, net		(2,302	)		2,910
Net cash provided by operating activities		35,263			36,660
INVESTING ACTIVITIES
Net cash received from acquisitions, net of cash paid		18,397			—
Net decrease in federal funds sold		1,000			—
Purchases of held for investment securities		(295	)	—
Purchases of available for sale securities		(234,059	)		—
Proceeds from maturities, calls and paydowns of held for investment securities		237			210
Proceeds from maturities, calls and paydowns of available for sale securities		142,818			2,406
Purchase of equity securities		(39	)		(1,828	)
Proceeds from paydowns and sales of equity securities		408			110
Net change in loans		(308,102	)		(67,249	)
Purchases of premises, equipment and computer software		(11,349	)		(6,792	)
Purchase of tax credits		(219	)		(6,894	)
Other, net		4,988			1,875
Net cash used in investing activities		(386,215	)		(78,162	)
FINANCING ACTIVITIES
Net change in deposits		44,559			100,582
Net change in short-term borrowings		300			3,525
Issuance of common stock in connection with stock options, net		232			326
Common stock acquired		(3,098	)	—
Cash dividends paid		(10,462	)		(9,781	)
Net cash provided by financing activities		31,531			94,652
Net (decrease)/increase in cash, due from banks and interest-bearing deposits		(319,421	)		53,150
Cash, due from banks and interest-bearing deposits at the beginning of the period		1,868,281			1,424,255
Cash, due from banks and interest-bearing deposits at the end of the period	$	1,548,860		$	1,477,405
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	10,410		$	13,655
Cash paid during the period for income taxes	$	1,175		$	—
Noncash investing and financing activities:
Fair value of assets acquired in acquisitions	$	47,838		$	—
Liabilities assumed in acquisitions	$	45,040		$	—
Unpaid common stock dividends declared	$	10,463		$	9,784

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

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 States 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, 2019.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., BancFirst Risk & Insurance Company, Pegasus Bank and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC 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 U.S. GAAP for interim financial information and the instructions for Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). 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, 2019, 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.

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 credit 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

Standards Adopted During Current Period:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820).” ASU 2018-13 modifies disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 was effective for the Company on January 1, 2020. ASU No. 2018-13 was adopted on January 1, 2020 and did not have a significant impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” On January 1, 2020, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in