BancFirst Corporation Reports Second Quarter Earnings

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Jul 15, 2021, 16:20 ET

OKLAHOMA CITY, July 15, 2021 /PRNewswire/ -- BancFirst Corporation (NASDAQ GS: BANF) reported net income of $48.2 million, or $1.45 diluted earnings per share, for the second quarter of 2021 compared to net income of $20.7 million, or $0.63 diluted earnings per share, for the second quarter of 2020. Net income for the six months ended June 30, 2021 was $90.7 million, or $2.72 per share, compared to $43.3 million, or $1.31 per share, for the first half of 2020. The Company recorded a net benefit from reversal of provisions for credit losses of $9.9 million for both the second quarter and first half of 2021 compared to a provision for credit losses of $19.3 million for the second quarter of 2020 and $38.9 million for the first half of 2020. Also included in noninterest income and noninterest expense were a purchase gain and acquisition related expenses from the purchase and assumption transaction with The First National Bank and Trust Company of Vinita, Oklahoma, which resulted in a net benefit of approximately $2.0 million.

BancFirst Corporation Executive Chairman David Rainbolt commented, "There has been a 180 degree change in the perception of our economic direction from the second quarter of last year. The massive provisions in 2020 precipitated by the unknown consequences of the pandemic have given way to a stimulus driven economic turnaround both nationally and in Oklahoma. Although some caution remains regarding the sustainability of the recovery and possible effects of virus variants, we would anticipate more modest reserve reversals in the next quarter or two."

The Company's net interest income for the second quarter of 2021 increased to $82.4 million compared to $77.2 million for the second quarter of 2020, due primarily to $11.9 million in fee income from Paycheck Protection Program (PPP) loan forgiveness. The net interest margin for the quarter was 3.32% compared to 3.54% a year ago. Noninterest income for the quarter totaled $44.6 million, compared to $32.1 million last year. The increase in noninterest income was due to the aforementioned purchase gain for The First National Bank and Trust Company of Vinita, Oklahoma, $2.2 million in rental income from other real estate property, and a $2.7 million increase in income from debate card interchange fees. Noninterest expense for the quarter increased to $74.0 million compared to $64.7 million last year, due to approximately $3.4 million related to other real estate property management costs, the aforementioned acquisition related expenses, and $1.3 million in net occupancy and depreciation from the Company's new corporate headquarters. The Company's effective tax rate was 23.4% compared to 18.1% for the second quarter of 2020.

At June 30, 2021, the Company's total assets were $11.0 billion, an increase of $1.8 billion from December 31, 2020. Loans totaled $6.2 billion, a decrease of $241.0 million from December 31, 2020 due primarily to a net decrease of approximately $284 million in PPP loans and approximately $21 million of loans that were sold with the Company's Hugo, Oklahoma branch. Deposits totaled $9.7 billion, an increase of $1.7 billion from December 31, 2020. The increase in assets and deposits was primarily related to PPP and other government stimulus payments. At June 30, 2021, the balance of PPP loans was $368.6 million. The Company's total stockholders' equity was $1.1 billion, an increase of $63.7 million over December 31, 2020. Off-balance sheet sweep accounts totaled $2.6 billion at June 30, 2021 compared to $2.8 billion at December 31, 2020.

Nonaccrual loans represent 0.48% of total loans at June 30, 2021, down from 0.58% at year-end 2020. Net charge-offs for the quarter were 0.06% of average loans, compared to none in the second quarter of 2020. The allowance for credit losses to total loans was 1.35% at June 30, 2021 compared to 1.42% at year-end 2020, and the allowance for credit losses to nonaccrual loans was 281.73% compared to 243.35% at year-end 2020. At June 30, 2021, the Company's nonaccrual loans decreased $7.7 million from year-end 2020, due to resolutions of several loans, which was slightly offset by $7.3 million of nonaccrual loans acquired from The First National Bank and Trust Company of Vinita, Oklahoma. At June 30, 2021, the Company's other real estate owned (OREO) increased $8.0 million from December 31, 2020, and included approximately $4.0 million due to the repossession of one commercial real estate property, $2.4 million from the decommissioning of the Company's previous headquarters, and $2.5 million acquired from The First National Bank and Trust Company of Vinita, Oklahoma.

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 (the "Subordinated Notes") to various institutional accredited investors. The Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. The net proceeds to the Company from the sale of the Subordinated Notes was approximately $59.15 million after deducting commissions and offering expenses. The Company expects to use the proceeds from the sale of the Subordinated Notes for general corporate purposes.

On May 20, 2021, the Company completed the purchase and assumption transaction with The First National Bank and Trust Company of Vinita, Oklahoma to purchase certain of its assets and assume its deposits and certain other obligations. The First National Bank and Trust Company of Vinita had banking locations in Vinita and Grove, Oklahoma. These banking locations became branches of BancFirst. The Company purchased approximately $284 million in total assets, $195 million in loans, and $256 million in deposits.

BancFirst Corporation CEO David Harlow commented, "The story for the quarter and for the first six months of the year is the reversal of loan loss reserve compared to significant provisions in the first half of 2020 in addition to the continued realization of PPP loan fees as a result of ongoing PPP loan forgiveness. Our margin (absent non-recurring PPP loan fees) continues to be under pressure as government stimulus driven deposit growth has far outstripped loan growth. Our challenge for the remainder of 2021 and into 2022 will be to sustain the trajectory of non-interest income growth while generating loan growth in the emerging post-pandemic economy."

BancFirst Corporation (the Company) is an Oklahoma based financial services holding company. The Company operates two subsidiary banks, BancFirst, an Oklahoma state-chartered bank with 106 banking locations serving 58 communities across Oklahoma, and Pegasus Bank, with 3 banking locations in Dallas, TX. More information can be found at www.bancfirst.bank.

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. Actual results may differ materially from forward-looking statements.

BancFirst Corporation Summary Financial Information (Dollars in thousands, except per share and share data - Unaudited)

	2021			2021			2020			2020			2020
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
Condensed Income Statements:
Net interest income	$	82,363		$	77,206		$	79,535		$	75,852		$	77,208
(Benefit from) provision for credit losses		(9,949)			—			4,992			18,740			19,333
Non-interest income:
Trust revenue		3,264			3,102			2,976			3,131			3,368
Service charges on deposits		20,524			19,100			19,796			19,078			16,760
Securities transactions		172			95			156			—			(595)
Income from sales of loans		2,133			2,010			1,852			1,873			1,561
Insurance commissions		5,015			5,989			5,680			5,197			4,443
Cash management		3,068			3,003			3,135			3,701			4,255
Other		10,442			6,636			1,825			1,595			2,290
Total noninterest income		44,618			39,935			35,420			34,575			32,082

Non-interest expense:
Salaries and employee benefits		41,992			39,577			40,750			41,995			42,226
Occupancy expense, net		4,528			4,348			4,533			4,503			3,839
Depreciation		4,133			3,877			3,779			3,795			3,544
Amortization of intangible assets		809			793			915			968			968
Data processing services		1,660			1,678			1,763			1,669			1,629
Net expense from other real estate owned		3,357			1,510			420			196			(12)
Marketing and business promotion		1,648			1,879			1,671			1,485			1,485
Deposit insurance		766			876			857			723			365
Other		15,130			10,425			10,923			10,749			10,607
Total noninterest expense		74,023			64,963			65,611			66,083			64,651
Income before income taxes		62,907			52,178			44,352			25,604			25,306
Income tax expense		14,715			9,658			8,994			4,714			4,576
Net income	$	48,192		$	42,520		$	35,358		$	20,890		$	20,730
Per Common Share Data:
Net income-basic	$	1.47		$	1.30		$	1.08		$	0.64		$	0.64
Net income-diluted		1.45			1.27			1.06			0.63			0.63
Cash dividends declared		0.34			0.34			0.34			0.34			0.32
Common shares outstanding		32,784,513			32,771,013			32,719,852			32,679,191			32,662,691
Average common shares outstanding -
Basic		32,779,227			32,756,852			32,690,296			32,668,789			32,651,262
Diluted		33,405,923			33,408,116			33,275,550			33,168,938			33,075,493
Performance Ratios:
Return on average assets		1.79	%		1.69	%		1.45	%		0.86	%		0.88	%
Return on average stockholders' equity		17.42			15.90			13.25			7.89			7.99
Net interest margin		3.32			3.36			3.54			3.40			3.54
Efficiency ratio		58.29			55.46			57.08			59.84			59.16

BancFirst Corporation Summary Financial Information (Dollars in thousands, except per share and share data - Unaudited)

	Six months ended
	June 30,
	2021			2020
Condensed Income Statements:
Net interest income	$	159,569		$	151,281
(Benefit from) provision for credit losses		(9,949)			38,916
Non-interest income:
Trust revenue		6,366			7,023
Service charges on deposits		39,624			35,564
Securities transactions		267			(545)
Income from sales of loans		4,143			2,342
Insurance commissions		11,004			10,119
Cash management		6,071			8,575
Other		17,078			4,149
Total noninterest income		84,553			67,227

Non-interest expense:
Salaries and employee benefits		81,569			81,982
Occupancy expense, net		8,876			7,385
Depreciation		8,010			7,035
Amortization of intangible assets		1,602			1,932
Data processing services		3,338			3,321
Net expense from other real estate owned		4,867			(2,147)
Marketing and business promotion		3,527			3,840
Deposit insurance		1,642			501
Other		25,555			22,187
Total noninterest expense		138,986			126,036
Income before income taxes		115,085			53,556
Income tax expense		24,373			10,218
Net income	$	90,712		$	43,338
Per Common Share Data:
Net income-basic	$	2.77		$	1.33
Net income-diluted		2.72			1.31
Cash dividends declared		0.68			0.64
Common shares outstanding		32,784,513			32,662,691
Average common shares outstanding -
Basic		32,768,102			32,665,425
Diluted		33,407,693			33,197,391
Performance Ratios:
Return on average assets		1.74	%		0.97	%
Return on average stockholders' equity		16.67			8.42
Net interest margin		3.34			3.68
Efficiency ratio		56.93			57.68

BancFirst Corporation
Summary Financial Information
(Dollars in thousands, except per share and share data - Unaudited)

	2021			2021			2020			2020			2020
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
Balance Sheet Data:

Total assets	$	11,015,287		$	10,549,305		$	9,212,357		$	9,618,868		$	9,612,453
Interest-bearing deposits with banks		4,475,941			2,788,316			1,336,394			1,609,462			1,583,116
Debt securities		563,771			520,543			555,196			596,941			608,031
Total loans		6,207,262			6,380,108			6,448,225			6,660,694			6,696,856
Allowance for credit losses		(83,963)			(90,860)			(91,366)			(106,126)			(89,500)
Deposits		9,728,389			9,371,940			8,064,704			8,495,891			8,486,671
Stockholders' equity		1,131,591			1,094,671			1,067,885			1,043,752			1,034,199
Book value per common share		34.52			33.40			32.64			31.94			31.66
Tangible book value per common share (non-GAAP)(1)		29.35			28.27			27.47			26.74			26.43
Balance Sheet Ratios:
Average loans to deposits		65.36	%		70.84	%		77.02	%		78.55	%		79.78	%
Average earning assets to total assets		92.01			91.54			91.82			91.99			92.23
Average stockholders' equity to average assets		10.25			10.64			10.91			10.90			10.96
Asset Quality Data:
Past due loans	$	4,386		$	5,282		$	4,802		$	6,412		$	5,382
Nonaccrual loans (5)		29,802			35,326			37,545			82,385			49,477
Restructured loans		7,485			7,801			7,784			2,837			3,213
Total nonperforming and restructured loans		41,673			48,409			50,131			91,634			58,072
Other real estate owned and repossessed assets		40,183			30,320			32,480			4,939			4,948
Total nonperforming and restructured assets		81,856			78,729			82,611			96,573			63,020
Nonaccrual loans to total loans		0.48	%		0.55	%		0.58	%		1.24	%		0.74	%
Nonaccrual loans to total Non-PPP loans (non-GAAP)(3)		0.51			0.62			0.65			1.41			0.84
Nonperforming and restructured loans to total loans		0.67			0.76			0.78			1.38			0.87
Nonperforming and restructured loans to total Non-PPP loans (non-GAAP)(3)		0.71			0.85			0.86			1.57			0.99
Nonperforming and restructured assets to total assets		0.74			0.75			0.90			1.00			0.66
Allowance for credit losses to total loans		1.35			1.42			1.42			1.59			1.34
Allowance for credit losses to total Non-PPP loans (non-GAAP)(3)		1.44			1.60			1.58			1.82			1.52
Allowance for credit losses to nonaccrual loans		281.73			257.20			243.35			128.82			180.89
Allowance for credit losses to nonperforming and restructured loans		201.48			187.69			182.26			115.81			154.12
Net charge-offs to average loans		0.06			0.01			0.30			0.03			0.00

Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(2):

Stockholders' equity	$	1,131,591		$	1,094,671		$	1,067,885		$	1,043,752		$	1,034,199
Less goodwill		149,922			149,922			149,922			149,922			149,922
Less intangible assets, net		19,283			18,206			18,999			19,914			20,882
Tangible stockholders' equity (non-GAAP)	$	962,386		$	926,543		$	898,964		$	873,916		$	863,395
Common shares outstanding		32,784,513			32,771,013			32,719,852			32,679,191			32,662,691
Tangible book value per common share (non-GAAP)	$	29.35		$	28.27		$	27.47		$	26.74		$	26.43

(1) Refer to the "Reconciliation of Tangible Book Value per Common Share (non-GAAP)" Table.
(2) Tangible book value per common share is stockholders' equity less goodwill and intangible assets, net, divided by common shares outstanding. This amount is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate the financial condition and capital strength of the Company. This measure should not be considered a substitute for operating results determined in accordance with GAAP.

Reconciliation of Non-PPP loan ratios (non-GAAP)(4):

Total loans	$	6,207,262		$	6,380,108		$	6,448,225		$	6,660,694		$	6,696,856
Less PPP loans		368,620			713,714			652,693			831,703			825,093
Total Non-PPP loans (non-GAAP)	$	5,838,642		$	5,666,394		$	5,795,532		$	5,828,991		$	5,871,763

Nonaccrual loans (5)		29,802			35,326			37,545			82,385			49,477
Nonaccrual loans to total Non-PPP loans (non-GAAP)		0.51	%		0.62	%		0.65	%		1.41	%		0.84	%
Total nonperforming and restructured loans		41,673			48,409			50,131			91,634			58,072
Nonperforming and restructured loans to total Non-PPP loans (non-GAAP)		0.71	%		0.85	%		0.86	%		1.57	%		0.99	%
Allowance for credit losses		(83,963)			(90,860)			(91,366)			(106,126)			(89,500)
Allowance for credit losses to total Non-PPP loans (non-GAAP)		1.44	%		1.60	%		1.58	%		1.82	%		1.52	%

(3) Refer to the "Reconciliation of Non-PPP loan ratios (non-GAAP)" Table.
(4) Nonaccrual loans to total Non-PPP loans is nonaccrual loans, divided by total loans less Paycheck Protection Program (PPP) loans. Nonperforming and restructured loans to total Non-PPP loans is nonperforming and restructured loans, divided by total loans less PPP loans. Allowance to total Non-PPP loans is allowance for credit losses, divided by total loans less PPP loans. These amounts are non-GAAP financial measures but have been included as they are considered critical metrics with which to analyze and evaluate the financial condition and capital strength of the Company. These measures should not be considered substitutes for operating results determined in accordance with GAAP.
(5) Government Agencies guarantee approximately $3.5 million of nonaccrual loans at June 30, 2021.

BancFirst Corporation Consolidated Average Balance Sheets And Interest Margin Analysis Taxable Equivalent Basis (Dollars in thousands - Unaudited)

	Three Months Ended							Six Months Ended
	June 30, 2021							June 30, 2021
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
ASSETS
Earning assets:
Loans	$	6,300,418	$	82,598		5.26	%	$	6,350,354	$	160,363	5.09		%
Securities – taxable		534,774		1,602		1.20			528,272		3,295	1.26
Securities – tax exempt		15,058	88		2.35				17,187	177		2.08
Interest bearing deposits with banks and FFS		3,111,009	825			0.11			2,751,005		1,420		0.10
Total earning assets		9,961,259		85,113	3.43				9,646,818		165,255	3.45

Nonearning assets:
Cash and due from banks		274,168							271,523
Interest receivable and other assets		684,089							683,978
Allowance for credit losses		(92,899)							(91,731)
Total nonearning assets		865,358							863,770
Total assets	$	10,826,617						$	10,510,588

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Transaction deposits	$	856,800	$	156	0.07		%	$	812,145	$	304	0.08		%
Savings deposits		3,692,119		939		0.10			3,598,589		2,045	0.11
Time deposits		657,473		908	0.55				657,704		1,976	0.61
Short-term borrowings		2,145		—	0.06				2,534	1			0.05
Junior subordinated debentures		27,454	578		8.44				27,131		1,069	7.94
Total interest bearing liabilities		5,235,991		2,581		0.20			5,098,103		5,395	0.21

Interest free funds:
Noninterest bearing deposits		4,432,892							4,270,391
Interest payable and other liabilities		47,868							44,713
Stockholders' equity		1,109,866							1,097,381
Total interest free funds		5,590,626							5,412,485
Total liabilities and stockholders' equity	$	10,826,617						$	10,510,588
Net interest income			$	82,532						$	159,860
Net interest spread					3.23		%					3.24		%
Effect of interest free funds						0.09	%						0.10	%
Net interest margin						3.32	%					3.34		%