BancFirst (BANF) - 2019 Q2 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for BancFirst Corporation as of June 30, 2019, including balance sheets, income statements, equity statements, cash flow statements, and detailed notes Consolidated Balance Sheets As of June 30, 2019, total assets increased slightly to $7.64 billion from $7.57 billion at year-end 2018, driven by growth in loans and interest-bearing deposits with banks, partially offset by a decrease in securities available for sale Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $7,642,021 | $7,574,258 | | Cash and interest-bearing deposits | $1,704,438 | $1,424,255 | | Securities available for sale | $423,157 | $770,704 | | Loans, net | $5,039,295 | $4,924,587 | | Total Liabilities | $6,685,641 | $6,671,469 | | Total deposits | $6,613,613 | $6,605,495 | | Total Stockholders' Equity | $956,380 | $902,789 | Consolidated Statements of Comprehensive Income For the second quarter of 2019, net income rose to $34.2 million from $30.6 million in Q2 2018, driven by higher net interest income, with diluted EPS increasing to $1.02 Income Statement Summary (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | Six Months 2019 | Six Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $68,792 | $64,880 | $135,695 | $127,915 | | Provision for Loan Losses | $2,433 | $1,225 | $4,117 | $1,539 | | Total Noninterest Income | $34,077 | $30,437 | $66,078 | $60,547 | | Total Noninterest Expense | $56,608 | $54,256 | $112,814 | $110,146 | | Net Income | $34,167 | $30,586 | $66,004 | $60,206 | | Diluted EPS | $1.02 | $0.91 | $1.98 | $1.80 | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $956.4 million at June 30, 2019, from $862.0 million at June 30, 2018, primarily due to net income partially offset by common stock dividends - For the six months ended June 30, 2019, retained earnings increased by $46.5 million, reflecting $66.0 million in net income less $19.5 million in common stock dividends[9] - Dividends per common share for the six months ended June 30, 2019, were $0.60, a significant increase from $0.42 in the same period of 2018[9] Consolidated Statements of Cash Flow For the six months ended June 30, 2019, net cash provided by operating activities was $72.1 million, with investing activities providing $219.4 million, resulting in a net increase in cash of $280.2 million Six Months Ended June 30 - Cash Flow Summary (in thousands) | Cash Flow Category | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $72,107 | $58,562 | | Net Cash from Investing Activities | $219,419 | $14,697 | | Net Cash from Financing Activities | ($11,343) | ($63,074) | | Net Increase in Cash | $280,183 | $10,185 | Notes to Consolidated Financial Statements This section provides detailed disclosures supporting the consolidated financial statements, covering accounting policies, recent acquisitions, composition of securities and loans, allowance for loan losses, and other financial details - The Company adopted the new lease accounting standard (ASU 2016-02) on January 1, 2019, recognizing right-of-use lease assets and related liabilities of $4.3 million with no material impact on results of operations[21] - The Company is preparing to adopt the new credit loss standard (ASU 2016-13, CECL) on January 1, 2020, which will change the methodology for estimating credit losses from an "incurred loss" to an "expected loss" model, with the impact currently being evaluated[24] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q2 and H1 2019, highlighting increased net interest income, stable asset quality, and strategic activities including the pending acquisition of Pegasus Bank Summary of Results Net income for Q2 2019 was $34.2 million ($1.02 diluted EPS), up from $30.6 million ($0.91 diluted EPS) in Q2 2018, reflecting strong net interest income growth and strategic investments Q2 2019 Financial Highlights | Metric | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Net Income | $34.2 million | $30.6 million | | Diluted EPS | $1.02 | $0.91 | | Net Interest Income | $68.8 million | $64.9 million | | Net Interest Margin | 3.89% | 3.70% | - Asset quality remained strong, with nonperforming and restructured assets at 0.58% of total assets at June 30, 2019, consistent with 0.59% at year-end 2018[132] - The company entered an agreement to acquire Pegasus Bank for $123.5 million, a deal expected to close in Q3 2019, with Pegasus operating as an independent subsidiary[133][25] Results of Operations Analysis Net interest income for Q2 2019 increased by 6.0% year-over-year to $68.8 million, driven by an expanded net interest margin, while noninterest income grew due to higher fees and equity security gains - Net interest margin increased to 3.89% in Q2 2019 from 3.70% in Q2 2018, primarily due to the increase in the federal funds rate throughout 2018[139] - The provision for loan losses increased to $2.4 million in Q2 2019 from $1.2 million in Q2 2018, mainly due to downgrades of a few commercial loans[141] - Noninterest income growth was supported by a rise in debit card usage fees to $8.6 million in Q2 2019 from $7.4 million in Q2 2018, and equity security gains of $821,000[143] Financial Position Analysis As of June 30, 2019, total assets reached $7.6 billion, with loans growing by $121.2 million, while debt securities decreased, and stockholders' equity increased to $956.4 million Balance Sheet Changes (vs. Dec 31, 2018) | Account | June 30, 2019 | Change | | :--- | :--- | :--- | | Total Loans | $5.1 billion | +$121.2 million | | Debt Securities | $425.2 million | -$347.0 million | | Deposits | $6.6 billion | +$8.1 million | | Stockholders' Equity | $956.4 million | +$53.6 million | - Nonperforming and restructured assets remained low, totaling $44.2 million at June 30, 2019, compared to $44.6 million at December 31, 2018[157] - The allowance for loan losses to total loans was 1.08% at June 30, 2019, up slightly from 1.03% at year-end 2018[155] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company reports no significant changes in its market risk disclosures since the end of the most recent fiscal year, December 31, 2018 - There were no significant changes in the Registrant's market risk disclosures since December 31, 2018[176] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the reporting period, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[177] - No material changes were made to internal controls over financial reporting during the quarter[178] PART II Item 1. Legal Proceedings The company is involved in various legal actions arising from normal business activities but does not expect any material adverse effect on its consolidated financial statements - The Company is a defendant in various legal actions from normal business activities, but management does not expect any material adverse effect on its financial statements[180] Item 1A. Risk Factors A key risk factor is the Durbin Amendment, which would limit debit card interchange fees if the company's assets exceed $10 billion, potentially reducing annual income by approximately $15 million - A key risk factor is the Durbin Amendment, which would apply if the Company's assets exceed $10 billion[181] - Exceeding the $10 billion asset threshold would trigger limits on debit card interchange fees, potentially reducing annual income by approximately $15 million based on current volume[181] Items 2-5 The company reported no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and no other information requiring disclosure under these items - The company reported "None" for Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, and Other Information[182] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements, corporate governance documents, and certifications from the CEO and CFO - Key exhibits filed include the Share Exchange Agreement for the Pegasus Bank acquisition, amended bylaws, and CEO/CFO certifications[184][197]