-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TFa/3X4PPfXJ7vVSI6zrTKjiUnhT01ZUEwpp95mrIphJKYsP+JtwZlTYI23rE9PL jHx0PpB6BYQagN5DUDgr4g== 0000912057-96-011572.txt : 19960606 0000912057-96-011572.hdr.sgml : 19960606 ACCESSION NUMBER: 0000912057-96-011572 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960322 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960605 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCFIRST CORP /OK/ CENTRAL INDEX KEY: 0000760498 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 731221379 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14384 FILM NUMBER: 96576918 BUSINESS ADDRESS: STREET 1: 101 N BROADWAY STE 200 STREET 2: D CITY: OKLAHOMA CITY STATE: OK ZIP: 73102-8401 BUSINESS PHONE: 4052701000 MAIL ADDRESS: STREET 1: 101 NORTH BROADWAY STREET 2: STE 200 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102-8401 FORMER COMPANY: FORMER CONFORMED NAME: UNITED COMMUNITY CORP DATE OF NAME CHANGE: 19890401 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) MARCH 22, 1996 BANCFIRST CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) OKLAHOMA 0-14384 73-1221379 -------- ------- ---------- (State or other Commission File Number (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 101 NORTH BROADWAY, SUITE 200, OKLAHOMA CITY, OKLAHOMA 73102 ------------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (405)270-1086 ------------- Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The audited financial statements of City Bankshares, Inc. required by this item are provided as follows: PAGE ---- Independent Auditors' Report 5 Consolidated Balance Sheet as of December 31, 1995 and 1994 6 Consolidated Statement of Income for the Years Ended December 31, 1995 and 1994 7 Statement of Cash Flows for the Years Ended December 31, 1995 and 1994 8 Statement of Stockholders' Equity for the Years Ended December 31, 1995 and 1994 10 Notes to Financial Statements 11 (b) PRO FORMA FINANCIAL INFORMATION. The pro forma financial information required by this item is provided as follows: PAGE ---- Unaudited Pro Forma Consolidated Condensed Balance Sheet as of December 31, 1995 25 Unaudited Pro Forma Consolidated Condensed Statement of Income for the Year Ended December 31, 1995 26 Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements 27 The unaudited pro forma consolidated condensed financial statements and related notes present the pro forma effects of the merger described in Item 2 of this report. The pro forma consolidated condensed balance sheet is presented as if the merger occurred at December 31, 1995. The pro forma consolidated condensed statement of income for the year ended December 31, 1995 is presented as if the merger occurred at January 1, 1995. The merger was accounted for using the purchase method. Pro forma data are based on assumptions and include adjustments as explained in the notes to the unaudited pro forma consolidated condensed financial statements. The pro forma data are not necessarily indicative of the financial results that would have occurred had the merger been effective on the date assumed and should not be viewed as indicative of operations in future periods. The unaudited pro forma consolidated condensed financial statements and related notes should be read in conjunction with the 1995 BancFirst Corporation Form 10-K and the audited financial statements of City Bankshares, Inc. presented elsewhere herein. 2 (c) EXHIBITS. EXHIBIT NUMBER EXHIBIT. - ------ ------- 2.1 Agreement and Plan of Reorganization dated September 16, 1995 between BancFirst and City Bankshares,Inc., (filed as Exhibit 2.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 2.2 Agreement dated September 16, 1995 between BancFirst and William O. Johnstone (filed as Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 3 CITY BANKSHARES, INC. REPORT AND FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 4 REPORT OF INDEPENDENT ACCOUNTANTS January 26, 1996 To the Board of Directors and Stockholders of City Bankshares, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of City Bankshares, Inc. and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the City Bankshares, Inc.'s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Oklahoma City, Oklahoma 5 CITY BANKSHARES, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) - ------------------------------------------------------------------- DECEMBER 31, 1995 1994 ---- ---- ASSETS Cash and due from banks $ 11,182 $ 10,191 Interest bearing deposits with banks 18 24 Federal funds sold 9,750 12,000 Investment securities 39,348 46,303 Loans, net 78,280 66,196 Premises and equipment, net 5,436 6,042 Intangible assets, net 1,250 1,595 Other assets, net 4,445 4,879 Deferred tax asset, net -- 106 --------- --------- $ 149,709 $147,336 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 45,747 $ 45,751 Interest bearing 87,245 85,996 --------- --------- Total deposits 132,992 131,747 Long-term borrowings 1,400 1,800 Other liabilities 614 507 Current taxes payable 21 49 Deferred tax liability, net 21 --------- --------- Total liabilities 135,048 134,103 --------- --------- Minority interest 336 289 --------- --------- Commitments and Contingencies (Note 14) Stockholders' equity: Common stock; $1.00 par value, 2,000,000 shares authorized; 902,150 and 889,650 shares issued and outstanding in 1995 and 1994, respectively 902 890 Capital surplus 8,114 8,002 Retained earnings 5,312 4,172 Unrealized holding gain (loss) on investment securities 2 (115) Treasury stock, at cost (5) (5) --------- --------- 14,325 12,944 --------- --------- $ 149,709 $ 147,336 --------- --------- --------- --------- The accompanying notes are an integral part of these financial statements. 6 CITY BANKSHARES, INC. CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) - ------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Interest income: Loans, including fees $ 6,999 $ 5,716 Investment securities 2,464 2,549 Federal funds sold 221 99 Interest-bearing deposits 1 1 ------- -------- Total interest income 9,685 8,365 ------- -------- Interest expense: Deposits 3,201 2,470 Short-term borrowings 39 99 Long-term borrowings 145 126 ------- -------- Total interest expense 3,385 2,695 ------- -------- Net interest income 6,300 5,670 Provision for possible loan losses 75 22 ------- -------- Net interest income after provision for possible loan losses 6,225 5,648 ------- -------- Non-interest income: Data processing income 9,219 7,896 Service charges on deposits 1,059 1,080 Other 244 250 ------- -------- Total non-interest income 10,522 9,226 ------- -------- Non-interest expense: Salaries and employee benefits 7,213 6,388 Occupancy, net 851 945 Depreciation and amortization 1,439 1,392 Net expense from other real estate owned 45 155 Other 4,689 4,010 ------- -------- Total non-interest expense 14,237 12,890 ------- -------- Income before taxes 2,510 1,984 Income tax expense 1,016 724 ------- -------- Net income $ 1,494 $ 1,260 ------- -------- ------- -------- The accompanying notes are an integral part of these financial statements. 7 CITY BANKSHARES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS) - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 Operating activities: Net income $ 1,494 $ 1,260 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 75 22 Provision for other real estate losses 24 113 Depreciation and amortization 1,439 1,392 Net accretion of investment security premiums and discounts (54) 311 Accretion of loan discounts, net 39 (28) Decrease (increase) in interest receivable 62 (193) Increase in interest payable 80 15 Change in current taxes (28) 87 Change in deferred taxes 52 53 Other, net 422 (162) --------- -------- Net cash provided by operating activities 3,605 2,870 --------- -------- Investing activities: Proceeds from sales and maturities of investment securities 12,493 13,845 Purchases of investment securities (5,293) (19,635) Net increase in loans (12,198) (773) Purchases of premises and equipment (488) (1,219) Decrease in loan to ESOP 117 --------- -------- Net cash used in investing activities (5,486) (7,665) --------- --------
The accompanying notes are an integral part of these financial statements. 8 CITY BANKSHARES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS) - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 Financing activities: Net increase in savings accounts and demand deposits 2,090 6,275 Net (decrease) increase in certificates of deposit (845) 1,973 Net decrease in long-term borrowings (400) (161) Issuance of common stock 125 - Dividends paid (354) - --------- --------- Net cash (used in) provided by financing activities 616 8,087 --------- --------- Net (decrease) increase in cash and cash equivalents (1,265) 3,292 Cash and cash equivalents at the beginning of the period 22,215 18,923 --------- --------- Cash and cash equivalents at the end of the period $ 20,950 $ 22,215 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 3,305 $ 2,680 --------- --------- --------- --------- Cash paid during the period for taxes $ 993 $ 604 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES Unrealized holding gain (loss) on investment securities, net of $1 and $74 tax effect, respectively $ 2 $ (115) --------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements. 9 CITY BANKSHARES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS) - -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 Common stock: Balance at beginning of period (889,650 shares) $ 890 $ 890 Issuance of common stock (12,500 shares) 12 - --------- --------- Balance at end of period (902,150 and 889,650 shares, respectively) 902 890 --------- --------- Capital surplus: Balance at beginning of period 8,002 8,002 Issuance of common stock 112 - --------- --------- Balance at end of period 8,114 8,002 --------- --------- Retained earnings: Balance at beginning of period 4,172 2,912 Net income 1,494 1,260 Dividend paid ($.40 per common share) (354) - --------- --------- Balance at end of period 5,312 4,172 --------- --------- Unrealized holding gain (loss) on investment securities, net 2 (115) --------- --------- Loan to ESOP: Balance at beginning of period (0 and 13,000 shares, respectively) - (117) Net payments on ESOP loan (0 and 13,000 shares, respectively) - 117 --------- --------- Balance at end of period (0 shares) - - --------- --------- Treasury stock: Balance at beginning and end of period (5,000 shares) (5) (5) --------- --------- Total stockholders' equity $ 14,325 $ 12,944 --------- --------- --------- ---------
10 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES City Bankshares, Inc. ("Bankshares") was incorporated in Oklahoma in June 1985 for the purpose of becoming a bank holding company. The accounting and reporting policies of Bankshares and its wholly-owned subsidiary City Bank and Trust (the "Company") conform to generally accepted accounting principles and general practice within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In September 1995, Bankshares entered into an agreement in which all the outstanding stock of Bankshares would be acquired. Under the terms of the agreement, C-Teq, Inc. would be spun-off to the shareholders of Bankshares prior to the acquisition. The acquisition is subject to regulatory approval and is expected to be completed in early 1996. The following represent the more significant policies and practices. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of Bankshares and the following subsidiaries: City Bank and Trust, C-Teq, Inc. and C-Teq, Inc.'s subsidiary, Versateq, Inc. All significant intercompany accounts and transactions have been eliminated. INVESTMENT SECURITIES Effective January 1, 1994, Bankshares prospectively adopted the Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"). Under FAS 115, the Bankshares' marketable securities are classified as either available-for-sale or as held-to-maturity. Investments which are classified as available-for-sale are recorded at current market value, with an offsetting adjustment to stockholders' equity. Investments which are classified as held to maturity are carried at cost, adjusted for amortization of premium and accretion of discount on a basis that approximates the interest method. Gains or losses on the disposition of investment securities are recognized based upon the adjusted cost of the specific securities sold. Bankshares' policy is to hold its investment securities to maturity and does not engage in trading activities. The effect of adoption of this statement did not have a material effect on the Bankshares' consolidated financial position. LOANS Loans are stated at the principal amount outstanding, net of unearned discount. Interest income on installment loans is recognized using the interest method. Interest on other loans is recognized based on the principal amount of loans outstanding. A loan is placed on non-accrual status when, in the opinion of management, the future collectibility of interest and principal is in doubt. Interest income on these loans is only recognized to the extent payments are received. ALLOWANCE FOR POSSIBLE LOAN LOSSES The allowance for possible loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for possible loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible loan losses on existing loans that may become uncollectible, based on evaluations of the collectibility of loans. The evaluations take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives range from three to thirty-five years. Maintenance and repairs are charged to expense as incurred, while improvements are capitalized. When assets are retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed from the respective accounts and any resulting gain or loss is reflected in operations. 11 INTANGIBLE ASSETS Intangible assets consist of core deposits intangible, data processing contracts, a non-compete agreement and excess cost over net assets of acquired subsidiaries. Core deposit intangible and excess cost over net assets of acquired subsidiaries are amortized on a straight-line basis over 15 years. Data processing contracts are amortized under the straight-line method over the estimated life of the related contracts, which ranges from 3 to 10 years. The non-compete agreement is amortized using the straight-line method over 5 years. OTHER REAL ESTATE AND REPOSSESSED ASSETS Other real estate and repossessed assets are included in other assets and are comprised of real property and other miscellaneous assets acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. These assets are carried at the lower of the recorded investment in the loan or fair value based on appraised value. Losses arising from acquisition of such assets are charged against the allowance for possible loan losses. Other real estate and repossessed assets approximated $1,069 at December 31, 1995 and $1,694 at December 31, 1994. DATA PROCESSING INCOME Check and data processing income is recognized as the services are performed. INCOME TAXES Bankshares and its subsidiaries file a consolidated tax return. Beginning January 1, 1993, the Company adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109") and applied the provisions prospectively in 1993. The adoption of FAS 109 changes the Company's method of accounting for income taxes from the deferred method (APB 11) to an asset and liability method. Previously, the Company has provided deferred income taxes to reflect the effect of certain items of income and expense which are recognized for financial reporting purposes in a time period which differs from the period in which they are recognized for federal income taxes purposes. The asset and liability method requires the recognition of deferred taxes for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of assets and liabilities. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers cash and due from banks, interest bearing deposits with banks and federal funds sold as cash equivalents. RECLASSIFICATIONS Certain 1994 amounts have been reclassified to conform with 1995 presentation. 12 2. RESTRICTIONS ON DUE FROM FEDERAL RESERVE The Company is required, as a matter of law, to maintain an average reserve balance with the Federal Reserve Bank. The average amount of reserve balances for the years ended December 31, 1995 and 1994 was approximately $1,366 and $1,270, respectively. 3.INVESTMENT SECURITIES The amortized cost and estimated market values of investments in debt securities are as follows: HELD-TO-MATURITY DECEMBER 31, 1995 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE U.S. Treasury securities and obligations of U.S. government corporations and agencies $36,838 $79 $(1,327) $35,590 Mortgage-backed securities 73 73 Other debt securities 861 (10) 851 ------- --- ------- ------- Totals $37,772 $79 $(1,337) $36,514 ------- --- ------- ------- ------- --- ------- ------- AVAILABLE FOR SALE DECEMBER 31, 1995 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE U.S. Treasury securities and obligations of U.S. government corporations and agencies $1,573 $10 $ (7) $ 1,576 ------- --- ------- ------ ------- --- ------- ------ An unrealized holding gain on investment securities of $2, net of $1 tax effect and $(115), net of $74 tax effect at December 31, 1995 and 1994, respectively, is reflected in a separate component of stockholders' equity. 13 HELD-TO-MATURITY DECEMBER 31, 1994 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE U.S. Treasury securities and obligations of U.S. government corporations and agencies $37,667 $ 6 $(2,990) $34,683 Mortgage-backed securities 820 (33) 787 Other debt securities 1,194 (26) 1,168 ------- ---- ------- ------- Totals $39,681 $ 6 $(3,049) $36,638 ------- ---- ------- ------- ------- ---- ------- ------- AVAILABLE FOR SALE DECEMBER 31, 1994 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 6,811 $ -- $ (189) $ 6,622 ------- ---- ------- ------- ------- ---- ------- ------- 14 The amortized cost and estimated market value of debt securities at December 31, 1995, by contractual maturities, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. ESTIMATED AMORTIZED MARKET Held-To-Maturity COST VALUE --------- -------- Due in one year or less $ 3,963 $ 3,964 Due after one year, through five years 12,456 11,311 Due after five years, through ten years 3,410 3,359 Due after ten years 17,870 17,807 ------- ------- 37,699 36,441 Mortgage-backed securities 73 73 ------- ------- $37,772 $36,514 ------- ------- ------- ------- ESTIMATED AMORTIZED MARKET Available-For-Sale COST VALUE ------- ------- Due in one year or less $ -- $ -- Due after one year, through five years -- -- Due after five years, through ten years 43 45 Due after ten years 1,530 1,531 ------- ------- $1,573 $ 1,576 ------- ------- ------- ------- Although the stated final maturities are within the time frames stated, the estimated actual life may be shorter. Investment securities having a book value of $35,853 and $27,708 at December 31, 1995 and 1994, respectively, were pledged to secure public funds on deposit and for other purposes as required or permitted by law. 4. LOANS The following is a schedule of loans outstanding, by category: DECEMBER 31, 1995 1994 ---- ---- Commercial, financial and other $ 64,571 $ 51,715 Real estate mortgage - personal 8,628 9,930 Installment 5,925 5,303 -------- -------- Total loans 79,124 66,948 Unearned discount (51) (12) -------- -------- Loans, net of unearned discount 79,073 66,936 Allowance for possible loan losses (793) (740) -------- -------- Loans, net $ 78,280 $ 66,196 -------- -------- -------- -------- Loans on which the accrual of interest has been discontinued or reduced amounted to $26 at December 31, 1995 and $157 at December 31, 1994. 15 Certain of Bankshares' officers, directors and stockholders had transactions with the Company in the ordinary course of business. In the opinion of management, such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties and did not involve more than a normal amount of risk. Loan transactions with officers, directors, principal stockholders and their affiliated interests are as follows: YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Balance at beginning of year $ 4,953 $ 3,817 Additions 17,566 9,921 Amounts collected (17,843) (8,785) --------- -------- Balance at end of year $ 4,676 $ 4,953 --------- -------- --------- -------- Interest income attributable to related party loans amounted to $383 and $337 during 1995 and 1994, respectively. Changes in the allowance for possible loan losses are summarized below: YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Balance at beginning of year $ 740 $ 824 Provisions 75 22 Recoveries 25 12 Loans charged off (47) (118) ------- -------- Balance at end of year $ 793 $ 740 ------- -------- ------- -------- Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114"), was issued in May 1993. This new accounting standard requires that impaired loans be measured based upon the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when, based on current information and events, it is probable that all amounts due according the contractual terms of the loan agreement will not be collected. Bankshares adopted FAS 114 in January 1995. The adoption of FAS 114 did not have a material effect on the financial position or results of operation of the Company. 5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of their customers. The financial instruments include commitments to advance funds on existing credit facilities and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to advance funds on existing credit facilities and standby letters of credit is represented by the contractual amounts of the instruments. Management uses the same credit policies in making these commitments as they do for on-balance sheet instruments. Commitments to advance funds on existing credit facilities are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 1995, the Company's total unfunded commitments to extend credit on existing facilities amounted to $18,227. Management evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by management, upon extension of credit is based on management's evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, marketable securities, fixed assets and real estate. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party and total $998 at December 31, 1995. The credit risk involved in issuing letters of credit is essentially the 16 same as that involved in extending loan facilities to customers. Collateral held varies but may include accounts receivable, inventory, marketable securities, fixed assets and real estate. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements. 6. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK The Company's principal area of business is the Oklahoma City metro area and, as a result, at December 31, 1995, the loan portfolio contained concentrations of credit risk with borrowers located in this area. 7. PREMISES AND EQUIPMENT The following is a summary of premises and equipment, by category: DECEMBER 31, 1995 1994 ---- ---- Land $ 1,067 $ 1,067 Buildings 1,998 1,998 Furniture, fixtures and equipment 9,670 9,177 ------- ------- 12,735 12,242 Accumulated depreciation (7,299) (6,200) ------- ------- $ 5,436 $ 6,042 ------- ------- ------- ------- Depreciation expense was $1,099 and $1,016 for years ended December 31, 1995 and 1994, respectively. 8. INTANGIBLE ASSETS Intangible assets are summarized as follows: DECEMBER 31, 1995 1994 ---- ---- Core deposit $ 2,399 $ 2,399 Data processing contracts 1,089 1,089 Non-compete agreement 250 250 Excess cost over net assets of acquired subsidiaries 704 704 ------- ------- 4,442 4,442 Accumulated amortization (3,192) (2,847) ------- ------- $ 1,250 $ 1,595 ------- ------- ------- ------- Amortization expense amounted to $345 and $377 in 1995 and 1994, respectively. 9. TIME DEPOSITS Certificates of deposit in denominations of $100 or more amounted to $13,471 and $14,624 at December 31, 1995 and 1994, respectively. 10. LONG-TERM BORROWINGS Information related to long-term borrowings is summarized as follows: DECEMBER 31, 1995 1994 ---- ---- Term loan agreement $ 1,400 $ 1,800 ------- ------- ------- ------- Bankshares has a $2,000 term loan with Boatmen's First National Bank of Oklahoma (Boatmen's). The terms of the loan provide for interest equal to Boatmen's corporate base rate plus 1/4% fixed annually at the note's anniversary date (8.75% 17 at December 31, 1995). The term loan is due December 31, 2003, with semi-annual principal payments of $100, plus accrued interest quarterly. The indebtedness is secured by all of the outstanding capital stock of City Bank and Trust and Bankshares' interest in the outstanding stock of C-Teq. The terms of the agreement contain certain provisions regarding maintenance of minimum capital ratios at the Company level. Amounts due on long-term borrowings in each of the next five years are as follows: 1996 $ 200 1997 200 1998 200 1999 200 2000 & Thereafter 600 ------- $ 1,400 ------- ------- 11. INCOME TAXES The provision for income taxes consist of the following: YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Current tax expense: Federal $ 871 $ 615 State 95 56 ------ ----- Total current 966 671 ------ ----- Deferred tax expense: Federal 43 46 State 7 7 ------ ----- Total deferred 50 53 ------ ----- Total income tax expense $1,016 $ 724 ------ ----- ------ ----- 18 The income tax provision for 1995 differs from the expected corporate income tax rate primarily as a result of permanent differences in the determination of pre-tax and taxable income. The majority of the permanent differences are attributable to amortization of intangibles. The deferred tax asset under FAS 109 is comprised of the following: DECEMBER 31, 1995 1994 ---- ---- Loan loss reserve $ 90 $ 57 Other real estate owned 240 405 Unrealized holding loss on investment securities 74 ---- ---- Gross deferred tax asset 330 536 ---- ---- Premises and equipment 303 365 Intangible assets 47 65 Unrealized holding gain on investment securities 1 ---- ---- Gross deferred tax liability 351 430 ---- ---- Deferred tax asset (liability), net $(21) $106 ---- ---- ---- ---- A reconciliation of tax expense at the federal statutory tax rate applied to income before taxes follows: YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Tax expense at the federal statutory tax rate $ 869 $675 (Increase) decrease in tax expense from: Excess cost amortization 39 56 State tax expense, net of federal tax benefit 95 38 Other, net 13 (45) ------ ---- Total tax expense $1,016 $724 ------ ---- ------ ---- 19 12. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS The following condensed financial statements are for City Bankshares, Inc. only: BALANCE SHEET DECEMBER 31, 1995 1994 ---- ---- ASSETS Cash and temporary investments $ 121 $ 277 Investment in subsidiaries; at equity 15,143 13,941 Excess cost over net assets of acquired subsidiaries 369 392 Current tax asset, net 58 101 Other assets 37 37 ------- ------- $15,728 $14,748 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Long-term borrowings $ 1,400 $ 1,800 Other liabilities 3 4 Stockholders' equity 14,325 12,944 ------- ------- $15,728 $14,748 ------- ------- ------- ------- STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Operating income: Dividends from subsidiaries $ 550 $ -- Interest 7 18 ------- ------- Total operating income 557 18 ------- ------- Operating expense: Interest 145 126 Other 75 38 ------- ------- Total operating expense 220 164 ------- ------- Income (loss) before income tax benefit and equity in undistributed earnings of subsidiaries 337 (146) Allocated income tax benefit 71 48 ------- ------- Income (loss) before equity in undistributed earnings of subsidiaries 408 (98) Undistributed earnings of subsidiaries 1,086 1,358 ------- ------- Net income $1,494 $1,260 ------- ------- ------- ------- 20 12. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 1994 ---- ---- Operating activities: Net income $ 1,494 $ 1,260 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 23 23 Change in current taxes 43 (33) Equity in earnings of subsidiaries (1,636) (1,358) Other, net (1) (13) ------- ------- Net cash used in operating activities (77) (121) Investing activities: Issuance of common stock 125 -- Dividends received 550 -- ------- ------- Net cash provided by investing activities 675 -- ------- ------- Financing activities: Dividends paid (354) -- Principal payments on long-term debt (400) (44) ------- ------- Net cash used in financing activities (754) (44) ------- ------- Net decrease in cash and cash equivalents (156) (165) Cash and cash equivalents at the beginning of the year 277 442 ------- ------- Cash and cash equivalents at the end of the year $ 121 $ 277 ------- ------- ------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 145 $ 139 ------- ------- ------- ------- Cash paid during the year for income taxes $ 993 $ 604 ------- ------- ------- ------- 21 13. EMPLOYEE AND OTHER BENEFITS In September, 1985, Bankshares adopted the City Bankshares, Inc. Employee Stock Ownership Plan ("Plan") effective October 1, 1985. The Plan covers all eligible employees, as defined in the Plan, of Bankshares and its subsidiaries. The participants are not permitted to contribute to the Plan, and the annual contribution to the Plan by the Bankshares is at the discretion of the Board of Directors. The aggregate amount of cash contributions to the Plan for the years ending December 31, 1995 and 1994 were approximately $0 and $168, respectively. Bankshares also adopted the City Bankshares, Inc. Stock Option Plan ("Option Plan") in December, 1985. The Option Plan authorizes the Board of Directors to grant incentive stock options ("the Options") for up to a maximum of 200,000 shares of Bankshares' common stock. The Options are exercisable six months after the date of the grant and expire 10 years after the date of the grant if unexercised. The exercise price of the Options approximated the fair market value of the stock at the date of the grant. During 1990, Bankshares adopted the City Bankshares, Inc. Directors Stock Option Plan ("Directors Option Plan"). The Directors Option Plan is intended to further the interests of Bankshares by providing recognition to its outside directors for their time, effort and participation. Each outside director shall be granted 5,000 shares, and shall become vested with respect to the options at 20% for each year of service. The Directors Option Plan provides that a maximum of 50,000 may be exercised pursuant to the Directors Option Plan at any time after issuance for up to 10 years. A summary of stock option transactions follows: SHARES UNDER OPTION ------------------- OPTION PRICE STOCK OPTION PLANS DIRECTORS INCENTIVE RANGE - ------------------ --------- --------- ------ Outstanding at December 31, 1993 32,000 141,350 $10.00 to $10.62 Granted 3,000 $10.39 Canceled 500 $10.62 -------- --------- ----------- Outstanding at December 31, 1994 35,000 140,850 $10.00 to $10.62 Granted 2,000 $10.39 -------- --------- ----------- Exercised 12,500 $10.00 Outstanding at December 31, 1995 37,000 128,350 $10.00 to $10.62 -------- --------- ----------- -------- --------- ----------- C-Teq, Inc. has outstanding incentive stock options to certain officers and directors. Holders of these incentive options are entitled to purchase 109 of the outstanding shares of C-Teq, Inc. (representing approximately 15% of the company). Such options are exercisable at $1,200 per share on or before December 18, 1999. In October 1991, Bankshares adopted the Savings Incentive Plan for City Bankshares, Inc. ("401k Plan"). As defined in the 401(k) Plan, all eligible employees may participate. Bankshares contributed a total of $97 and $52 in 1995 and 1994, respectively, in contributions. 22 14. COMMITMENTS AND CONTINGENCIES The Company leases equipment and office space under cancelable and non-cancelable operating leases. Future minimum lease commitments relating to operating leases which have remaining terms in excess of one year at December 31, 1995, are as follows: 1996 $ 587 1997 563 1998 547 1999 493 2000 467 Thereafter 715 Total rental expense, including rental on cancelable and non-cancelable leases, amounted to approximately $708 and $718 for the periods ending December 31, 1995 and 1994 respectively. 15. FAIR VALUES OF FINANCIAL INSTRUMENTS The fair values reported below for financial instruments are based on a variety of factors. In some cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flow and assumed discount rates reflecting varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of year end or that will be realized in the future. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND DUE FROM BANKS; FEDERAL FUNDS SOLD The carrying amount of these short-term instruments is a reasonable estimate of fair value. SECURITIES For securities, 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. LOANS For certain homogenous categories of loans, such as some residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. For residential mortgage loans held for sale, guaranteed student loans and participations in pools of credit card receivables, the carrying amount is a reasonable estimate of fair value. The fair value of other types of loans is 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. DEPOSIT LIABILITIES The fair value of transaction and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. 23 LONG-TERM BORROWINGS The amount payable on the note payable is a reasonable estimate of its fair value. LOAN COMMITMENTS AND LETTER OF CREDIT The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the terms of the agreements. The fair value of letters of credit is based on fees currently charged for similar agreements. The estimated fair values of Bankshares' financial instruments are as follows: DECEMBER 31, 1995 CARRYING FAIR AMOUNT VALUE ---------- --------- FINANCIAL ASSETS Cash and due from banks $ 11,182 $ 11,182 Federal funds sold 9,750 9,750 Securities 39,348 38,090 Loans: Loans (net of unearned interest) 79,073 Allowance for possible loan losses (793) ---------- --------- Loans, net 78,280 78,279 FINANCIAL LIABILITIES Deposits 132,992 132,802 Long-term borrowings 1,400 1,400 OFF-BALANCE SHEET FINANCIAL INSTRUMENTS Loan commitments 86 Letters of credit 5 24 BANCFIRST CORPORATION UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET For the Year Ended December 31, 1995 (Dollars in thousands)
CITY BANCFIRST BANCFIRST PRO FORMA BANCFIRST HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- ----------- ---------- ASSETS Cash and due from banks. . . . . . . . . . . . . . $ 85,353 $ 11,200 $ (63) (a) $ 100,336 3,846 (h) Securities . . . . . . . . . . . . . . . . . . . . 263,113 9,348 (1,258) (i) 301,203 Federal funds sold . . . . . . . . . . . . . . . . 30,085 9,750 1,711 (b) 15,925 (1,400) (d) (19,125) (e) (1,250) (g) (3,846) (h) Loans: Total loans (net of unearned interest) . . . . . 625,162 79,073 1,613 (j) 705,848 Allowance for possible loan losses . . . . . . . (10,646) (793) 1,613 (11,439) ----------- ---------- ---------- ----------- Loans, net . . . . . . . . . . . . . . . . . . 614,516 78,280 694,409 Premises and equipment, net. . . . . . . . . . . . 28,308 5,436 (564) (a) 32,931 1,364 (k) (1,613) (j) Other real estate owned. . . . . . . . . . . . . . 781 1,070 1,851 Intangible assets, net . . . . . . . . . . . . . . 8,106 1,250 (286) (a) 15,339 6,269 (l) Accrued interest receivable. . . . . . . . . . . . 10,403 730 11,133 Other assets . . . . . . . . . . . . . . . . . . . 7,673 2,645 (2,105) (a) 9,463 1,250 (g) ----------- ---------- ---------- ----------- Total assets . . . . . . . . . . . . . . . . . $ 1,048,338 $ 149,709 $ (15,457) $ 1,182,590 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing. . . . . . . . . . . . . . . $ 196,597 $ 45,747 $ 541 (a) $ 242,885 Interest-bearing . . . . . . . . . . . . . . . . 726,572 87,245 813,817 ----------- ---------- ---------- ----------- Total deposits . . . . . . . . . . . . . . . . 923,169 132,992 541 1,056,702 Short-term borrowings. . . . . . . . . . . . . . . 18,705 -- 18,705 Long-term borrowings . . . . . . . . . . . . . . . 918 1,400 (1,400) (d) 918 Accrued interest payable . . . . . . . . . . . . . 3,237 289 3,526 Other liabilities. . . . . . . . . . . . . . . . . 3,966 703 (273) (a) 4,396 ----------- ---------- ---------- ----------- Total liabilities. . . . . . . . . . . . . . . . 949,995 135,384 (1,132) 1,084,247 ----------- ---------- ---------- ----------- Stockholders' equity: Common stock . . . . . . . . . . . . . . . . . . 6,225 902 165 (b) 6,225 (1,067) (f) Capital surplus. . . . . . . . . . . . . . . . . 34,769 8,114 1,546 (b) 34,769 (9,660) (f) Retained earnings. . . . . . . . . . . . . . . . 55,792 5,312 (3,286) (a) 55,792 250 (c) (2,276) (f) Unrealized securities gains, . . . . . . . . . . 1,557 2 (2) (f) 1,557 Treasury stock . . . . . . . . . . . . . . . . . -- (5) 5 (f) -- ----------- ---------- ---------- ----------- Total stockholders' equity . . . . . . . . . . 98,343 14,325 (14,325) 98,343 ----------- ---------- ---------- ----------- Total liabilities and stockholders' equity . . $ 1,048,338 $ 149,709 $ (15,457) $ 1,182,590 ----------- ---------- ---------- ----------- ----------- ---------- ---------- -----------
See accompanying notes to unaudited pro forma consolidated condensed financial statements. 25 BANCFIRST CORPORATION UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CITY BANCFIRST BANCFIRST BANKSHARES PRO FORMA PRO HISTORICAL HISTORICAL ADJUSTMENTS FORMA ---------- ---------- ----------- --------- INTEREST INCOME Loans, including fees . . . . . . . $ 57,914 $ 6,999 $ 161 (p) $ 65,074 Investment securities . . . . . . . 14,538 2,464 229 (r) 17,231 Federal funds sold and other . . . 1,687 222 (1,404)(o) 505 ---------- --------- -------- --------- Total interest income . . . . . 74,139 9,685 (1,014) 82,810 ---------- --------- -------- --------- INTEREST EXPENSE Deposits . . . . . . . . . . . . . 30,167 3,201 33,368 Short-term borrowings . . . . . . . 253 39 292 Line of credit . . . . . . . . . . 16 -- 16 Long-term borrowings . . . . . . . 14 145 (145)(n) 14 ---------- --------- -------- --------- Total interest expense . . . . 30,450 3,385 (145) 33,690 ---------- --------- -------- --------- Net interest income . . . . . . . . 43,689 6,300 (869) 49,120 Provision for possible loan losses . . . . . . . . . . . . . . 855 75 930 ---------- --------- -------- --------- Net interest income after provision for possible loan losses . . . . . . . . . . . . 42,834 6,225 (869) 48,190 ---------- --------- -------- --------- NONINTEREST INCOME Service charges on deposits . . . . 7,869 1,059 8,928 Securities transactions . . . . . . 111 -- 111 Other . . . . . . . . . . . . . . . 4,520 9,463 (8,235)(m) 4,865 (883)(q) ---------- --------- -------- --------- Total noninterest income. . . . 12,500 10,522 (9,118) 13,904 ---------- --------- -------- --------- NONINTEREST EXPENSE Salaries and employee benefits. . . 19,909 7,213 (4,216)(m) 22,906 Occupancy and fixed assets expense, net . . . . . . . . . . . 2,049 851 (363)(m) 2,537 Depreciation . . . . . . . . . . . 1,871 1,094 (134)(m) 2,122 (712)(q) 3 (t) Amortization . . . . . . . . . . . 1,453 345 (128)(m) 2,240 570 (s) Other . . . . . . . . . . . . . . . 9,650 4,734 (3,820)(m) 10,877 313 (u) ---------- --------- -------- --------- Total noninterest expense . . . 34,932 14,237 (8,487) 40,682 ---------- --------- -------- --------- Income before taxes . . . . . . . . 20,402 2,510 (1,500) 21,412 Income tax expense . . . . . . . . (7,563) (1,016) 210 (m) 7,757 600 (v) 12 (w) ---------- --------- -------- --------- Net income . . . . . . . . . . $ 12,839 $ 1,494 $ (678) $ 13,655 ---------- --------- -------- --------- ---------- --------- -------- --------- PER SHARE DATA (PRIMARY AND FULLY DILUTED) Net income . . . . . . . . . . . . $ 2.01 $ 1.61 $ 2.14 ---------- --------- --------- ---------- --------- --------- Average common shares and common stock equivalents outstanding. . . 6,391,424 926,148 6,391,424 ---------- --------- --------- ---------- --------- ---------
See accompanying notes to unaudited pro forma consolidated condensed financial statements. 26 BANCFIRST CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The unaudited pro forma consolidated condensed financial statements for the year ended December 31, 1995 are based upon BancFirst Corporation's and City Bankshares, Inc.'s ("City Bankshares") audited financial statements. The pro forma consolidated condensed balance sheet is presented as if the merger occurred at December 31, 1995. The pro forma consolidated condensed statement of income is presented as if the merger occurred at January 1, 1995. Other assumptions and the pro forma adjustments are described below. (2) PRO FORMA ADJUSTMENTS The pro forma consolidated condensed balance sheet reflects the following adjustments: (a) Reflect the spin-off of C-Teq, Inc. to the shareholders of City Bankshares prior to the acquisition. (b) Reflect the exercise of stock options by City Bankshares' officers and directors prior to the acquisition. (c) Reflect the assumption that the minimum level of $13 million in total stockholders' equity, as required by the terms of the acquisition, had been attained by City Bankshares as of September 30, 1995. (d) Reflect the pay-off of City Bankshares' term loan prior to the acquisition. (e) Record the cash payment for the common stock of City Bankshares. (f) Eliminate stockholders' equity of City Bankshares. (g) Record the payment to the C.E.O. of City Bankshares for an agreement not to compete. (h) Reflect the increase in reserve requirements due to loss of City Bankshares' low reserve tranche. (i) Write-down City Bankshares' securities held for investment to market value. (j) Record loan to C-Teq, Inc. for purchase of furniture, equipment and software leased from City Bankshares. (k) Write-up City Bankshares' premises to fair value. (l) Record core deposit intangible and excess of cost over fair value of the net assets acquired. The pro forma consolidated condensed statements of income reflect the following adjustments: (m) Reflect the spin-off of C-Teq, Inc. to shareholders of City Bankshares, Inc. prior to the acquisition. (n) Eliminate the interest expense on City Bankshares' term loan. (o) Reduce interest income on short-term investments to reflect the use of such funds for the various purposes assumed for the City Bankshares acqusition in the pro forma consolidated condensed balance sheet. (p) Increase interest income for loan to C-Teq, Inc. for purchase of furiture, equipment and software. (q) Reduce depreciation expense and eliminate rental income for furniture, equipment and software purchased by C-Teq, Inc. 27 (r) Record accretion of discount from write-down of City Bankshares' securities held for investment to market value. (s) Record amortization of core deposit intangible and excess of cost over fair value of the net assets acquired. (t) Adjust depreciation expense for write up of City Bankshares' premises to fair value. (u) Record amortization of payment for agreement not to compete. (v) Reduce income tax expense for effect of pro forma adjustments. (w) Adjust City Bankshares' income tax expense to statutory rate. 28 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 hereunto duly authorized. June 5, 1996 /Randy P. Foraker/ ---------------------------------------- Randy P. Foraker Sr. Vice President, Controller and Secretary/Treasurer (Principal Accounting Officer) 29 -----END PRIVACY-ENHANCED MESSAGE-----