BancFirst (BANF) - 2023 Q1 - Quarterly Report

PART I – Financial Information Item 1. Financial Statements (Unaudited) The unaudited consolidated financial statements for the period ended March 31, 2023, show a significant increase in net income to $57.5 million from $35.9 million in the prior year, driven by higher net interest income. Total assets remained stable at approximately $12.3 billion. The statements reflect growth in the loan portfolio and an increase in stockholders' equity, while total deposits saw a slight decrease Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $12,332,105 | $12,387,863 | | Cash and interest-bearing deposits | $2,836,391 | $3,168,910 | | Loans, net | $7,023,848 | $6,850,835 | | Total Liabilities | $11,021,223 | $11,137,027 | | Total Deposits | $10,610,103 | $10,974,228 | | Total Stockholders' Equity | $1,310,882 | $1,250,836 | - Total assets slightly decreased by $55.8 million from year-end 2022, primarily due to a decrease in deposits. Loans, net of allowance, grew by $173.0 million, while total deposits decreased by $364.1 million during the first quarter of 2023[8] Consolidated Statements of Comprehensive Income Q1 2023 vs Q1 2022 Performance (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $109,156 | $75,507 | | Provision for Credit Losses | $2,322 | $2,936 | | Noninterest Income | $47,828 | $43,650 | | Noninterest Expense | $80,317 | $72,512 | | Net Income | $57,533 | $35,915 | | Diluted EPS | $1.72 | $1.08 | - Net income increased by 60.2% YoY, primarily driven by a 44.6% increase in net interest income due to a rising interest rate environment. Comprehensive income was $72.2 million, a significant improvement from $4.2 million in the prior-year period, which was impacted by large unrealized losses on debt securities[10] Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $1.17 billion to $1.31 billion YoY. The growth was driven by net income of $57.5 million, partially offset by dividends of $13.2 million[13] - Accumulated Other Comprehensive Loss improved, decreasing from a loss of $71.6 million at the beginning of the period to a loss of $56.9 million at the end of Q1 2023, due to a net change of $14.6 million from unrealized gains on securities[13] - Dividends on common stock increased to $0.40 per share in Q1 2023 from $0.36 per share in Q1 2022[13] Consolidated Statements of Cash Flow Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $69,504 | $63,607 | | Net Cash used in Investing Activities | ($228,584) | ($745,970) | | Net Cash (used in) provided by Financing Activities | ($173,439) | $2,723,745 | | Net Change in Cash | ($332,519) | $2,041,382 | - The net decrease in cash for Q1 2023 was primarily driven by a net change in deposits, resulting in a $364.1 million cash outflow from financing activities, and a net change in loans, contributing to cash used in investing activities[14] Notes to Consolidated Financial Statements - The Company adopted ASU 2022-02, which eliminated Troubled Debt Restructuring (TDR) accounting, and ASU 2023-02, related to accounting for tax equity investments, with neither having a significant impact on the consolidated financial statements[21][23] - On March 30, 2023, the Company took a short-term advance of $200.0 million from the FHLB, which was subsequently paid off on April 3, 2023[24] - The company's six principal business units are BancFirst metropolitan banks, BancFirst community banks, Pegasus, Worthington, other financial services, and executive/operations/support[126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong Q1 2023 performance, with net income of $57.5 million ($1.72 diluted EPS), to increased net interest income driven by rising short-term rates and loan growth. Total assets remained stable at $12.3 billion, with loans growing to $7.1 billion. A key challenge highlighted is the upcoming reduction in debit card interchange fees by approximately $22 million annually starting July 1, 2023, due to the Durbin Amendment, as the company surpassed $10 billion in assets Summary of Performance Q1 2023 Financial Highlights | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $57.5 million | $35.9 million | | Diluted EPS | $1.72 | $1.08 | | Net Interest Income | $109.2 million | $75.5 million | | Net Interest Margin | 3.89% | 2.78% | - The increase in net income was primarily driven by rising short-term interest rates and loan growth, which boosted net interest income. Noninterest income also increased to $47.8 million from $43.7 million YoY[134][135] - Total assets were $12.3 billion, a slight decrease from year-end 2022. Loans grew by $175.0 million to $7.1 billion, while deposits decreased by $364.1 million to $10.6 billion, as some funds moved to off-balance sheet sweep products[137] Results of Operations - Net interest income increased by 44.6% YoY to $109.2 million, driven by rising interest rates and loan growth, leading to a net interest margin expansion to 3.89% from 2.78%[147] - Noninterest income rose to $47.8 million, largely due to higher sweep account fees and a $1.3 million increase in insurance commissions. This was partially offset by lower income from a prior loan settlement equity interest compared to the previous year[149] - The Company anticipates a reduction of approximately $22 million annually pretax income from debit card interchange fees starting July 1, 2023, due to the Durbin Amendment, as total assets exceeded $10 billion at year-end 2022[151] - Noninterest expense increased by $7.8 million to $80.3 million, primarily due to a $5.3 million rise in salaries and employee benefits[152] Financial Position - Total loans increased by $175.0 million (2.5%) during Q1 2023 to $7.1 billion, with growth split between the Oklahoma (62%) and Texas (38%) subsidiaries[160] - Asset quality remains strong, with the allowance for credit losses to total loans stable at 1.33%. Nonaccrual loans were low at 0.25% of total loans as of March 31, 2023[138][161] - Deposits decreased by $364.1 million to $10.6 billion, as demand deposits moved to the Company's off-balance sheet sweep product, which grew by $394.9 million to $4.1 billion[157][173] - Stockholders' equity increased by $60.0 million to $1.3 billion at March 31, 2023. The company's capital ratios remain well in excess of regulatory requirements[176] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company reports that there have been no significant changes in its disclosures regarding market risk since its most recent annual report for the year ended December 31, 2022 - There have been no significant changes in the Company's disclosures regarding market risk since December 31, 2022[178] Item 4. Controls and Procedures Based on an evaluation by the CEO, CFO, and Disclosure Committee, the company concluded that its disclosure controls and procedures were effective as of March 31, 2023. No material changes to internal controls over financial reporting occurred during the quarter - Management evaluated the Company's disclosure controls and procedures and concluded they are effective as of the end of the reporting period[179] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, such controls[179] PART II – Other Information Item 1. Legal Proceedings The company is involved in various legal actions arising from normal business activities but believes that any potential liability from these actions will not have a material adverse effect on its consolidated financial statements - The Company is a defendant in various legal actions from normal business activities, but management believes any resulting liability will not materially impact the financial statements[180] Item 1A. Risk Factors A material risk factor was added concerning recent negative developments in the banking industry, specifically the failures of other banks. This could adversely affect customer confidence, leading to uninsured deposit outflows, increased competition for deposits, and a potential reduction in the company's net interest margin - A material change in risk factors was disclosed, highlighting the potential adverse effects from recent bank failures in the industry[181] - Key risks include negative impacts on customer confidence, potential movement of uninsured deposits to larger banks, increased competition for deposits, and a resulting reduction in net interest margin[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[183] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated By-Laws, CEO and CFO certifications pursuant to Sarbanes-Oxley Act rules, and Inline XBRL data files - Key exhibits filed include Amended and Restated By-Laws (3.1), CEO and CFO certifications (31.1, 31.2, 32), and Inline XBRL documents (101 series)[185][187][188][189][190]