UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2003

OR

¨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 incorporation or organization)	(I.R.S. Employer Identification No.)

101 N. Broadway, Oklahoma City, Oklahoma

73102-8401

(Address of principal executive offices)

(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal

year, if changed since last report)

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 X No .

Indicate by checkmark whether the registrant is an accelerate filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x     No ¨.

As of July 31, 2003 there were 7,804,489 shares of the registrant’s Common Stock outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEET

(Unaudited)

(Dollars in thousands)

	June 30,						December 31, 2002
	2003			2002
ASSETS
Cash and due from banks	$	143,292		$	143,488		$	152,239
Interest-bearing deposits with banks		19,623			5,271			8,866
Federal funds sold		231,000			112,000			134,000
Securities (market value: $533,305, $569,679, and $567,717, respectively)		530,644			567,466			565,225
Loans:
Total loans (net of unearned interest)		1,797,364			1,761,158			1,814,862
Allowance for loan losses		(25,004	)		(24,730	)		(24,367	)
Loans, net		1,772,360			1,736,428			1,790,495
Premises and equipment, net		60,746			61,832			60,281
Other real estate owned		2,638			3,322			2,345
Intangible assets, net		1,187			1,662			1,425
Goodwill		20,235			20,235			20,235
Accrued interest receivable		19,171			23,212			21,526
Other assets		47,436			38,515			40,225
Total assets	$	2,848,332		$	2,713,431		$	2,796,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	655,838		$	565,617		$	610,511
Interest-bearing		1,846,466			1,801,916			1,818,137
Total deposits		2,502,304			2,367,533			2,428,648
Short-term borrowings		28,788			28,941			24,443
Long-term borrowings		13,356			32,705			34,087
9.65% Capital Securities		25,000			25,000			25,000
Accrued interest payable		4,227			6,420			5,611
Other liabilities		23,044			19,306			25,317
Minority interest		2,299			2,187			2,248
Total liabilities		2,599,018			2,482,092			2,545,354
Commitments and contingent liabilities
Stockholders’ equity:
Common stock, $1.00 par (shares issued: 7,803,239, 8,101,504 and 8,136,852, respectively)		7,803			8,100			8,137
Capital surplus		59,996			57,752			59,232
Retained earnings		165,651			154,873			168,240
Accumulated other comprehensive income, net of income tax of $7,830, $5,086 and $8,384, respectively		15,864			10,614			15,899
Total stockholders’ equity		249,314			231,339			251,508
Total liabilities and stockholders’ equity	$	2,848,332		$	2,713,431		$	2,796,862

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

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BANCFIRST CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30
	2003			2002			2003			2002
INTEREST INCOME
Loans, including fees	$	28,906		$	31,298		$	58,087		$	63,204
Securities:
Taxable		5,573			6,925			11,719			13,983
Tax-exempt		397			488			828			993
Federal funds sold		782			645			1,228			1,252
Interest-bearing deposits with banks		22			47			39			110
Total interest income		35,680			39,403			71,901			79,542
INTEREST EXPENSE
Deposits		7,525			11,014			15,857			23,188
Short-term borrowings		89			181			157			342
Long-term borrowings		418			495			887			949
9.65% Capital Securities		611			611			1,223			1,223
Total interest expense		8,643			12,301			18,124			25,682
Net interest income		27,037			27,102			53,777			53,860
Provision for loan losses		1,062			1,396			1,845			2,359
Net interest income after provision for loan losses		25,975			25,706			51,932			51,501
NONINTEREST INCOME
Trust revenue		1,126			1,040			2,175			2,099
Service charges on deposits		6,545			6,541			12,609			11,886
Securities transactions		2,462			—			3,079			—
Income from sales of loans		653			294			1,055			515
Other		3,190			3,544			6,838			6,948
Total noninterest income		13,976			11,419			25,756			21,448
NONINTEREST EXPENSE
Salaries and employee benefits		14,366			14,151			28,381			28,056
Occupancy and fixed assets expense, net		1,363			1,332			2,777			2,682
Depreciation		1,306			1,323			2,541			2,578
Amortization of intangible assets		137			146			284			307
Data processing services		550			527			1,101			1,040
Net expense from other real estate owned		30			177			7			242
Loss on early extinguishment of debt		2,429			—			2,429			—
Other		7,182			7,123			14,432			13,504
Total noninterest expense		27,363			24,779			51,952			48,409
Income before taxes		12,588			12,346			25,736			24,540
Income tax expense		(4,516	)		(3,960	)		(9,066	)		(8,232	)
Net income		8,072			8,386			16,670			16,308
Other comprehensive income, net of tax:
Unrealized (gains) losses on securities		2,529			4,948			1,966			1,424
Reclassification adjustment for gains included in net income		(1,601	)		—			(2,001	)		—
Comprehensive income	$	9,000		$	13,334		$	16,635		$	17,732
NET INCOME PER COMMON SHARE
Basic	$	1.04		$	1.03		$	2.12		$	2.00
Diluted	$	1.02		$	1.02		$	2.09		$	1.97

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

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BANCFIRST CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES	$	9,454		$	17,297
INVESTING ACTIVITIES
Purchases of securities:
Held for investment		(1,041	)		(2,768	)
Available for sale		(116,096	)		(77,863	)
Maturities of securities:
Held for investment		11,591			12,820
Available for sale		57,355			46,196
Proceeds from sales and calls of securities:
Held for investment		649			280
Available for sale		84,404			219
Net (increase) decrease in federal funds sold		(97,000	)		96,000
Purchases of loans		(13,063	)		(10,217	)
Proceeds from sales of loans		100,866			55,942
Net other increase in loans		(72,838	)		(94,374	)
Purchases of premises and equipment		(3,587	)		(5,463	)
Proceeds from the sale of other real estate owned and repossessed assets		581			1,973
Other, net		2,094			1,504
Net cash (used) provided by investing activities		(46,085	)		24,249
FINANCING ACTIVITIES
Net increase in demand, transaction and savings deposits		145,216			33,110
Net decrease in certificates of deposits		(71,560	)		(66,905	)
Net increase (decrease) in short-term borrowings		4,345			(23,150	)
Net increase (decrease) in long-term borrowings		(20,731	)		8,615
Issuance of common stock		789			356
Acquisition of common stock		(16,185	)		(6,824	)
Cash dividends paid		(3,433	)		(3,094	)
Net cash provided (used) by financing activities		38,441			(57,892	)
Net increase (decrease) in cash and due from banks		1,810			(16,346	)
Cash and due from banks at the beginning of the period		161,105			165,105
Cash and due from banks at the end of the period	$	162,915		$	148,759
SUPPLEMENTAL DISCLOSURE
Cash paid during the period for interest	$	19,508		$	28,653
Cash paid during the period for income taxes	$	8,750		$	8,102

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

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BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except per share data)

(1) GENERAL

The accompanying consolidated financial statements include the accounts of BancFirst Corporation, BFC Capital Trust I, Century Life Assurance Company, Council Oak Capital, Inc., Council Oak Partners, LLC, and BancFirst and its subsidiaries. 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 consolidated financial statements.

The unaudited interim 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. There have been no significant changes in the accounting policies of the Company since December 31, 2002, the date of the most recent annual report. Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentation.

The preparation of financial statements in conformity with generally accepted accounting principles 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 loan losses, income taxes and the fair values of financial instruments. Such estimates and assumptions may change over time and actual amounts realized may differ from those reported.

(2) RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, “Accounting for Stock-Based Compensation” to provide two additional transition methods for entities that adopt the fair value method of accounting for stock-based compensation. This Statement also prohibits the use of the prospective method of transition for changes to the fair value method made in fiscal years beginning after December 15, 2003. In addition, this Statement requires new disclosures about the effect of stock-based compensation on reported results and requires more prominent disclosures about stock-based compensation by prescribing specific tabular format and by requiring disclosure in the “Summary of Significant Accounting Policies.” The adoption of this new standard did not have a material effect on the Company’s consolidated financial statements, as the Company uses the intrinsic value method of accounting for stock-based compensation. Pro forma disclosures as if the Company adopted the cost recognition provisions of SFAS No. 123 in 1995 are presented below.

	Three Months Ended June 30,								Six Months Ended June 30,
	2003				2002				2003				2002
	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
APB 25 charge	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
FAS 123 charge		—		174		—		179		—		341		—		325
Net income		8,072		7,898		8,386		8,207		16,670		16,329		16,308		15,983
Net income per share:
Basic	$	1.04	$	1.01	$	1.03	$	1.01	$	2.12	$	2.08	$	2.00	$	1.96
Diluted		1.02		0.99		1.02		0.99		2.09		2.05		1.97		1.93

The effects of applying SFAS No. 123 to the pro forma disclosure are not indicative of future results. SFAS No. 123 does not apply to grants of options prior to 1995 and the Company anticipates making additional grants in the future.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) which provides guidance for determining when an entity should consolidate another entity that meets the definition of a variable interest entity. Special purpose entities and other types of entities would be assessed for consolidation under this

5

new guidance. FIN 46 requires a variable interest entity to be consolidated if the company will absorb a majority of the expected losses, will receive a majority of the expected residual returns, or both. FIN 46 is effective immediately for interests in variable interest entities acquired after January 31, 2003. It applies in the first interim period after June 15, 2003 to interests in variable interest entities acquired before February 1, 2003. At June 30, 2003, the Company had an interest in BFC Capital Trust I (the “Trust”) which it acquired in January 1997. The Company consolidates the Trust and reports the $25,000 of 9.65% Capital Securities issued by the Trust as debt. A possible interpretation of FIN 46 would require that the Company deconsolidate the Trust and report the $25,000 of subordinated debentures issued by BancFirst Corporation to the Trust as debt instead of the 9.65% Capital Securities. The potential impact of this change on total assets and total liabilities would be immaterial. However, another potential result of the deconsolidation of the Trust could be that the 9.65% Capital Securities would no longer be included in the Company’s Tier 1 capital. The Federal Reserve Board has issued interim guidance that allows such securities to continue to qualify as Tier 1 capital while the issue of deconsolidation continues under review.

(3) RECENT DEVELOPMENTS; MERGERS, ACQUISITIONS AND DISPOSALS

In January 2003, BancFirst Corporation repurchased 320,000 shares of its common stock for $14,400. The shares were repurchased through a market-maker in the Company’s stock and was not a part of the Company’s ongoing Stock Repurchase Program.

In July 2003, BancFirst Corporation entered into an agreement to acquire Lincoln National Bancorporation (“Lincoln”) of Oklahoma City, Oklahoma for cash of approximately $18,500. Lincoln has consolidated total assets of approximately $117,100. As a result of the acquisition, Lincoln will be merged into BancFirst Corporation, and Lincoln’s wholly-owned bank subsidiary, Lincoln National Bank, will become a subsidiary of BancFirst Corporation. The acquisition will be accounted for as a purchase. Accordingly, the effects of the acquisition will be included in the Company’ consolidated financial statements from the date of the acquisition forward. The acquisition is expected to be completed in the fourth quarter of 2003 and will not have a material effect on the results of operations of the Company.

(4) SECURITIES

The table below summarizes securities held for investment and securities available for sale.

	June 30,				December 31, 2002
	2003		2002
Held for investment at cost (market value; $46,537, $63,673 and $57,585, respectively)	$	43,876	$	61,460	$	55,093
Available for sale, at market value		486,768		506,006		510,132
Total	$	530,644	$	567,466	$	565,225

In June 2003, the Company sold $71,176 of available for sale securities and recognized a gain of $2,487. The sale was a part of a plan to adjust the Company’s interest rate sensitivity. The proceeds from this sale was reinvested in securities with shorter maturity dates. The table below summarizes the maturity of securities.

	June 30,				December 31, 2002
	2003		2002
Contractual maturity:
Within one year	$	162,397	$	117,639	$	103,267
After one year but within five years		334,499		403,016		433,017
After five years		20,878		35,139		17,502
Total debt securities		517,774		555,794		553,786
Equity securities		12,870		11,672		11,439
Total	$	530,644	$	567,466	$	565,225

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(5) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

	June 30,								December 31
	2003				2002				2002
	Amount		Percent		Amount		Percent		Amount		Percent
Commercial and industrial	$	365,335	20.33	%	$	360,181	20.45	%	$	371,627	20.48	%
Agriculture		76,647	4.26			85,285	4.84			99,706	5.49
State and political subdivisions:
Taxable		131	0.01			148	0.01			137	0.01
Tax-exempt		19,645	1.09			18,479	1.05			19,467	1.07
Real Estate:
Construction		148,000	8.23			114,929	6.53			136,539	7.52
Farmland		68,326	3.80			62,010	3.52			67,447	3.72
One to four family residences		423,157	23.55			394,768	22.42			423,551	23.34
Multifamily residential properties		15,129	0.84			16,418	0.93			16,034	0.88
Commercial		400,630	22.29			393,452	22.34			384,880	21.21
Consumer		254,148	14.14			266,692	15.14			260,819	14.37
Other		26,216	1.46			48,796	2.77			34,655	1.91
Total loans	$	1,797,364	100.00	%	$	1,761,158	100.00	%	$	1,814,862	100.00	%
Loans held for sale (included above)	$	17,069			$	7,283			$	16,025

The Company’s loans are mostly to customers within Oklahoma and over half of the loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral. The amount of estimated loss due to credit risk in the Company’s loan portfolio is provided for in the allowance for loan losses. The amount of the allowance required to provide for all existing losses in the loan portfolio is an estimate based upon evaluations of loans, appraisals of collateral and other estimates which are subject to rapid change due to changing economic conditions and the economic prospects of borrowers. It is reasonably possible that a material change could occur in the estimated allowance for loan losses in the near term.

Changes in the allowance for loan losses are summarized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Balance at beginning of period	$	24,694		$	24,058		$	24,367		$	24,531
Charge-offs		(1,014	)		(1,031	)		(1,770	)		(2,741	)
Recoveries		262			307			562			581
Net charge-offs		(752	)		(724	)		(1,208	)		(2,160	)
Provisions charged to operations		1,062			1,396			1,845			2,359
Balance at end of period	$	25,004		$	24,730		$	25,004		$	24,730

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The net charge-offs by category are summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
Commercial, financial and other	$	316	$	314	$	364	$	981
Real estate – construction		6		—		15		15
Real estate – mortgage		135		26		367		289
Consumer		295		384		462		875
Total	$	752	$	724	$	1,208	$	2,160

(6) NONPERFORMING AND RESTRUCTURED ASSETS

Below is a summary of nonperforming and restructured assets:

	June 30,						December 31, 2002
	2003			2002
Past due over 90 days and still accruing	$	1,521		$	796		$	2,515
Nonaccrual		13,756			13,806			10,899
Restructured		503			1,011			497
Total nonperforming and restructured loans		15,780			15,613			13,911
Other real estate owned and repossessed assets		2,934			3,718			2,819
Total nonperforming and restructured assets	$	18,714		$	19,331		$	16,730
Nonperforming and restructured loans to total loans		0.88	%		0.89	%		0.77	%
Nonperforming and restructured assets to total assets		0.66	%		0.71	%		0.60	%

(7) INTANGIBLE ASSETS AND GOODWILL

The following is a summary of intangible assets:

	June 30,								December 31, 2002
	2003				2002
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangibles	$	4,552	$	3,366	$	4,552	$	2,891	$	4,552	$	3,128
Trademarks		20		19		20		18		20		19
Total	$	4,572	$	3,385	$	4,572	$	2,909	$	4,572	$	3,147

Amortization of intangible assets and estimated amortization of intangible assets are as follows:

Amortization:
Three months ended June 30, 2003	$	137
Three months ended June 30, 2002		146
Six months ended June 30, 2003		284
Six months ended June 30, 2002		307
Year ended December 31, 2002		600
Estimated Amortization:
Year ended December 31,
2003	$	511
2004		310
2005		292
2006		255
2007		102

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The following is a summary of goodwill by business segment:

	Metropolitan Banks		Community Banks		Other Financial Services		Executive, Operations & Support		Eliminations			Consolidated
Three Months Ended June 30, 2003 and 2002
Balance at beginning and end of period	$	7,144	$	12,561	$	—	$	1,713	$	(1,183	)	$	20,235
Six Months Ended June 30, 2003 and 2002
Balance at beginning and end of period	$	7,144	$	12,561	$	—	$	1,713	$	(1,183	)	$	20,235

(8) LONG-TERM BORROWINGS

In June 2003, the Company retired $25,100 of Federal Home Loan Bank advances under its line of credit, and recognized a loss on early extinguishment of debt of $2,429. This early retirement of the advances was a part of a plan to adjust the Company’s interest rate sensitivity. These advances retired had fixed rates of from 3.47% to 7.87% and maturities of from 2008 to 2017.

(9) CAPITAL

The Company is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System. These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s assets, liabilities, and certain off-balance-sheet items calculated under regulatory practices. Failure to meet the minimum capital requirements can initiate certain mandatory or discretionary actions by the regulatory agencies that could have a direct material effect on the Company’s financial statements. The required minimums and the Company’s respective ratios are shown below.

	Minimum Required	June 30,						December 31, 2002
		2003			2002
Tier 1 capital		$	239,316		$	223,339		$	241,185
Total capital		$	264,406		$	249,127		$	265,766
Risk-adjusted assets		$	2,025,754		$	1,983,979		$	2,005,465
Leverage ratio	3.00%		8.47	%		8.32	%		8.69	%
Tier 1 capital ratio	4.00%		11.81	%		11.28	%		12.03	%
Total capital ratio	8.00%		13.05	%		12.56	%		13.25	%

To be “well capitalized” under federal bank regulatory agency definitions, a depository institution must have a leverage ratio of at least 5%, a Tier 1 ratio of at least 6%, and a combined total capital ratio of at least 10%. As of June 30, 2003 and 2002, and December 31, 2002, BancFirst was considered to be “well capitalized”. There are no conditions or events since the most recent notification of BancFirst’s capital category that management believes would change its category.

(10) STOCK REPURCHASE PLAN

In November 1999, the Company adopted a new Stock Repurchase Program (the “SRP”) authorizing management to repurchase up to 300,000 shares of the Company’s common stock. The SRP was amended in May 2001 to increase the shares authorized to be purchased by 277,916 shares and was amended again in August 2002 to increase the number of shares authorized to be purchased by 182,265 shares. The SRP may be used as a means to increase earnings per share and return on equity, to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and

9

to provide liquidity for shareholders wishing to sell their stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and must be approved by the Company’s Executive Committee. At June 30, 2003 there were 250,701 shares remaining that could be repurchased under the SRP. Below is a summary of the shares repurchased under the program.

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
Number of shares repurchased		29,000		71,600		39,200		176,500
Average price of shares repurchased	$	45.68	$	42.62	$	45.54	$	38.66

(11) COMPREHENSIVE INCOME

The only component of comprehensive income reported by the Company is the unrealized gain or loss on securities available for sale. The amount of this unrealized gain or loss, net of tax, has been presented in the statement of income for each period as a component of other comprehensive income. Below is a summary of the tax effects of this unrealized gain or loss.

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Unrealized gain (loss) during the period:
Before-tax amount	$	3,849			7,448		$	3,033		$	2,245
Tax (expense) benefit		(1,320	)		(2,500	)		(1,067	)		(821	)
Net-of-tax amount	$	2,529		$	4,948		$	1,966		$	1,424

The amount of unrealized gain or loss included in accumulated other comprehensive income is summarized below.

	Three Months Ended June 30,					Six Months Ended June 30,
	2003			2002		2003			2002
Unrealized gain (loss) on securities:
Beginning balance	$	14,936		$	5,666	$	15,899		$	9,190
Current period change		2,529			4,948		1,966			1,424
Reclassification adjustment for gains included in net income		(1,601	)		—		(2,001	)		—
Ending balance	$	15,864		$	10,614	$	15,864		$	10,614

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(12) NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are calculated as follows:

	Income (Numerator)		Shares (Denominator)	Per Share Amount
Three Months Ended June 30, 2003
Basic
Income available to common stockholders	$	8,072	7,796,999	$	1.04
Effect of stock options		—	138,550
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	8,072	7,935,549	$	1.02
Three Months Ended June 30, 2002
Basic
Income available to common stockholders	$	8,386	8,112,475	$	1.03
Effect of stock options		—	121,819
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	8,386	8,234,294	$	1.02
Six Months Ended June 30, 2003
Basic
Income available to common stockholders	$	16,670	7,856,613	$	2.12
Effect of stock options		—	125,620
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	16,670	7,982,233	$	2.09
Six Months Ended June 30, 2002
Basic
Income available to common stockholders	$	16,308	8,157,000	$	2.00
Effect of stock options		—	102,943
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	16,308	8,259,943	$	1.97

Below is the number and average exercise prices of options that were excluded from the computation of diluted net income per share for each period because the options’ exercise prices were greater than the average market price of the common shares.

	Shares	Average Exercise Price
Three Months Ended June 30, 2003	77	$	51.86
Three Months Ended June 30, 2002	3,956	$	43.52
Six Months Ended June 30, 2003	16,026	$	50.00
Six Months Ended June 30, 2002	38,425	$	40.17

(13) SEGMENT INFORMATION

The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The four principal business units are metropolitan banks, community

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banks, other financial services, and executive, operations and support. Metropolitan and community banks offer traditional banking products such as commercial and retail lending, and a full line of deposit accounts. Metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Other financial services are specialty product business units including guaranteed small business lending, guaranteed student lending, residential mortgage lending, electronic banking, trust services, insurance services, merchant banking and brokerage services. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units. The results of operations and selected financial information for the four business units are as follows:

	Metropolitan Banks		Community Banks		Other Financial Services		Executive, Operations & Support			Eliminations			Consolidated
Three Months Ended:
June 30, 2003
Net interest income (expense)	$	7,982	$	20,781	$	1,784	$	(3,510	)	$	—		$	27,037
Noninterest income		2,113		5,804		3,249		16,932			(14,122	)		13,976
Income before taxes		4,729		12,633		1,577		7,762			(14,113	)		12,588
June 30, 2002
Net interest income (expense)	$	7,287	$	18,841	$	1,641	$	(667	)	$	—		$	27,102
Noninterest income		1,972		5,757		3,165		15,482			(14,957	)		11,419
Income before taxes		3,255		11,503		953		11,603			(14,968	)		12,346
Six Months Ended:
June 30, 2003
Net interest income (expense)	$	15,287	$	39,168	$	3,417	$	(4,095	)	$	—		$	53,777
Noninterest income		4,171		11,320		6,439		32,865			(29,039	)		25,756
Income before taxes		8,332		24,332		3,173		18,990			(29,091	)		25,736
June 30, 2002
Net interest income (expense)	$	14,630	$	37,171	$	3,451	$	(1,392	)	$	—		$	53,860
Noninterest income		3,761		10,748		6,065		30,426			(29,552	)		21,448
Income before taxes		6,526		22,110		2,324		23,200			(29,620	)		24,540
Total Assets:
June 30, 2003	$	969,277	$	1,809,400	$	161,814	$	567,703		$	(659,862	)	$	2,848,332
June 30, 2002	$	867,336	$	1,797,820	$	158,006	$	508,744		$	(618,475	)	$	2,713,431

The financial information for each business unit is presented on the basis used internally by management to evaluate performance and allocate resources. The Company utilizes a transfer pricing system to allocate the benefit or cost of funds provided or used by the various business units. Certain revenues related to other financial services are allocated to the banks whose customers receive the services and, therefor, are not reflected in the income for other financial services. Certain services provided by the support group to other business units, such as item processing, are allocated at rates approximating the cost of providing the services. Eliminations are adjustments to consolidate the business units and companies.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

BANCFIRST CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SUMMARY

Net income for the second quarter ended June 30, 2003 was $8.07 million, compared to $8.37 million for the second quarter of 2002. Diluted net income per share was $1.02 both the second quarter of 2003 and the second quarter of 2002. For the first six months of 2003, net income was $16.7 million, compared to $16.3 million for the first six months of 2002. Diluted net income per share for the first six months was $2.09, up from $1.97 for the first six months of 2002. Net income per share for 2003 was positively impacted by the repurchase of 320,000 shares of the Company’s stock for $14.4 million in January 2003.

Total assets at June 30, 2003 was $2.85 billion, up $51.5 million from December 31, 2002 and up $135 million from June 30, 2002. Stockholders’ equity was $249 million at June 30, 2003, down $2.19 million from December 31, 2002 due to the stock repurchase in the first quarter, and up $18 million compared to June 30, 2002.

In July 2003, BancFirst Corporation entered into an agreement to acquire Lincoln National Bancorporation (“Lincoln”) of Oklahoma City, Oklahoma for cash of approximately $18.5 million. Lincoln has consolidated total assets of approximately $117 million. As a result of the acquisition, Lincoln will be merged into BancFirst Corporation, and Lincoln’s wholly-owned bank subsidiary, Lincoln National Bank, will become a subsidiary of BancFirst Corporation. The acquisition will be accounted for as a purchase. Accordingly, the effects of the acquisition will be included in the Company’ consolidated financial statements from the date of the acquisition forward. The acquisition is expected to be completed in the fourth quarter of 2003 and will not have a material effect on the results of operations of the Company.

RESULTS OF OPERATIONS

Second Quarter

Net interest income for the second quarter of 2003 remained stable compared to the prior year at $27.0 million. The net interest margin decreased to 4.21% from 4.50% for the second quarter of 2002. Earning asset growth, primarily in loans, produced volume and mix variances that helped to offset a negative rate variance, keeping net interest income at about the same level as the prior year. In the current low interest rate environment, the value of the Company’s noninterest-bearing deposits is reduced, causing a decrease in the Company’s net interest margin. Assuming no change in this rate environment, or in the volume or mix of the Company’s loans and deposits, the Company’s net interest income would reasonably be expected to decline over the next several quarters. Also, in the second quarter of 2003, the Company adjusted its interest rate sensitivity by selling $71.2 million of securities and reinvesting the proceeds in shorter-term securities, and by retiring $25.1 million of long-term fixed-rate debt. As a result of this and other changes, the Company’s one-year negative interest sensitivity gap decreased to $(589,424) at June 30, 2003 from $(689,008) at December 31, 2003 and $(718,374) at June 30, 2002. This adjustment in interest rate sensitivity may be expected to reduce net interest income in the near term, but the lower one-year negative gap better positions the Company for the possibility of rising interest rates, while the reduction in long-term borrowings better positions the Company for a continued low interest rate environment.

The Company provided $1.06 million for loan losses in the second quarter of 2003, compared to $1.4 million for the same period of 2002. Net loan charge-offs were $752,000 for the second quarter of 2003, compared to $724,000 for the second quarter of 2002. The net charge-offs represent an annualized rate of 0.17% of average total loans for the second quarter of both 2003 and 2002.

Noninterest income increased $2.56 million compared to the second quarter of 2002, due primarily to gains from the sales of securities pursuant to the adjustment of the Company’s interest sensitivity. Noninterest income excluding securities gains increased $95,000. Trust revenue and gains on sales of loans increased, while other noninterest income decreased. Noninterest expense increased $2.58 million compared to the second quarter of 2002, due primarily to the

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loss on early extinguishment of debt pursuant to the adjustment of the Company’s interest sensitivity. Noninterest expense excluding this loss increased $155,000, mainly in salaries and employee benefits. Income tax expense increased $556,000 compared to the second quarter of 2002. The effective tax rate on income before taxes was 35.88%, compared to 32.08% in the second quarter of 2002. The Company’s effective tax rate in 2003 has increased due to lower levels of tax exempt income and tax credits.

Year-To-Date

Net interest income for the first six months of 2003 remained stable compared to the prior year at $53.8 million. The net interest margin decreased to 4.27% from 4.47% for the first six months of 2002. Earning asset growth, primarily in loans, produced volume and mix variances that helped to offset a negative rate variance, keeping net interest income at about the same level as the prior year. As discussed for the second quarter above, the Company’s net interest income would reasonably be expected to decline over the next several quarters. Also, the adjustment to the Company’s interest sensitivity in the second quarter may be expected to reduce net interest income in the near term, but better positions the Company for the possibility of rising interest rates.

The Company provided $1.85 million for loan losses in the first six months of 2003, compared to $2.36 million for the same period of 2002. Net loan charge-offs were $1.21 million for the first six months of 2003, compared to $2.16 million for the first six months of 2002. The net charge-offs represent annualized rates of 0.13% and 0.25% of average total loans for the first half of 2003 and 2002, respectively.

Noninterest income increased $4.31 million compared to the first six months of 2002, due primarily to gains from the sales of securities pursuant to the adjustment of the Company’s interest sensitivity. Noninterest income excluding securities gains increased $1.23 million. Trust revenue, service charges on deposits and gains on sales of loans increased, while other noninterest income decreased. Noninterest expense increased $3.54 million compared to the first six months of 2002, due primarily to the loss on early extinguishment of debt pursuant to the adjustment of the Company’s interest sensitivity in the second quarter of 2003 and an operational loss of $1.18 million recognized in the first quarter of 2003. Noninterest expense excluding these losses decreased $66,000. Income tax expense increased $834,000 compared to the first six months of 2002. The effective tax rate on income before taxes was 35.23%, up from 33.55% in the first half of 2002. The Company’s effective tax rate in 2003 has increased due to lower levels of tax exempt income and tax credits.

FINANCIAL POSITION

Cash and due from banks, interest-bearing deposits with banks, and federal funds sold increased a combined total of $98.8 million from December 31, 2002, and $133 million from June 30, 2002. These increases were mainly from growth in deposits.

Total securities decreased $34.6 million compared to December 31, 2002 and $36.8 million compared to June 30, 2002. The size of the Company’s securities portfolio is a function of liquidity management and excess funds available for investment. The Company has maintained a very liquid securities portfolio to provide funds for loan growth. The net unrealized gain on securities available for sale, before taxes, was $23.7 million at the end of the second quarter of 2003, compared to a gain of $24.3 million at December 31, 2002 and a gain of $15.7 million at June 30, 2002. The average taxable equivalent yield on the securities portfolio for the second quarter decreased to 4.61% from 5.54% for the same quarter of 2002.

Total loans decreased $17.5 million from December 31, 2002, and increased $36.2 million from June 30, 2002. The allowance for loan losses increased $637,000 from year-end 2002 and $274,000 from the second quarter of 2002. The allowance as a percentage of total loans was 1.39%, 1.34% and 1.40% at June 30, 2003, December 31, 2002 and June 30, 2002, respectively. The allowance to nonperforming and restructured loans at the same dates was 158.45%, 175.16% and 158.39%, respectively.

Nonperforming and restructured loans totaled $15.8 million at June 30, 2003, compared to $13.9 million at December 31, 2002 and $15.6 million at June 30, 2002. The ratio of nonperforming and restructured loans to total loans for the same periods was 0.88%, 0.77% and 0.89%, respectively. The level of nonperforming loans and loan losses may rise over time as a result of economic and credit cycles.

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Total deposits increased $73.7 million compared to December 31, 2002, and $135 million compared to June 30, 2002 due to internal growth. The Company’s deposit base continues to be comprised substantially of core deposits, with large denomination certificates of deposit being only 9% of total deposits at June 30, 2003, compared to 10.4% at December 31, 2002 and 11.9% at June 30, 2002.

Short-term borrowings increased $4.35 million from December 31, 2002, and decreased $153,000 from June 30, 2002. Fluctuations in short-term borrowings are a function of federal funds purchased from correspondent banks, customer demand for repurchase agreements and liquidity needs of the bank.

Long-term borrowings decreased $20.7 million from year-end 2002 and $19.4 million from the second quarter of 2002, due to the early retirement of $25.1 million Federal Home Loan Bank advances as a part of the Company’s adjustment to its interest sensitivity in the second quarter of 2003. The Company uses these borrowings primarily to match-fund long-term fixed-rate loans.

Stockholders’ equity decreased $2.19 million from year-end 2002 due to the stock repurchase in the first quarter of 2003. Compared to June 30, 2002, stockholders’ equity increased $18 million due to accumulated earnings and unrealized gains on securities. Average stockholders’ equity to average assets for the first six months of 2003 was 8.8%, compared to 8.27% for the first six months of 2002. The Company’s leverage ratio and total risk-based capital ratio were 8.47% and 13.05%, respectively, at June 30, 2003, well in excess of the regulatory minimums.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See note (2) of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

SEGMENT INFORMATION

See note (13) of the Notes to Consolidated Financial Statements for disclosures regarding business segments.

FORWARD LOOKING STATEMENTS

The Company may make forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. 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.

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BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30
	2003			2002			2003			2002
Per Common Share Data
Net income – basic	$	1.04		$	1.03		$	2.12		$	2.00
Net income – diluted		1.02			1.02			2.09			1.97
Cash dividends		0.22			0.20			0.44			0.38
Performance Data
Return on average assets		1.13	%		1.23	%		1.19	%		1.21	%
Return on average stockholders’ equity		13.12			14.87			13.52			14.57
Cash dividend payout ratio		21.15			19.42			20.75			19.00
Net interest spread		3.78			3.92			3.81			3.86
Net interest margin		4.21			4.50			4.27			4.47
Efficiency ratio		66.72			64.33			65.32			64.28

	June 30,						December 31, 2002
	2003			2002
Balance Sheet Data
Book value per share	$	31.95		$	28.55		$	30.91
Tangible book value per share		29.21			25.85			28.25
Average loans to deposits (year-to-date)		73.68	%		73.68	%		73.89	%
Average earning assets to total assets (year-to-date)		91.28			90.49			90.82
Average stockholders’ equity to average assets (year-to-date)		8.80			8.27			8.53
Asset Quality Ratios
Nonperforming and restructured loans to total loans		0.88	%		0.89	%		0.77	%
Nonperforming and restructured assets to total assets		0.66			0.71			0.60
Allowance for loan losses to total loans		1.39			1.40			1.34
Allowance for loan losses to nonperforming and restructured loans		158.45			158.39			175.16

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BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

	Three Months Ended June 30,
	2003							2002
	Average Balance			Interest Income/ Expense		Average Yield/ Rate		Average Balance			Interest Income/ Expense		Average Yield/ Rate
ASSETS
Earning assets:
Loans (1)	$	1,801,221		$	29,068	6.47	%	$	1,757,441		$	31,657	7.23	%
Securities – taxable		500,731			5,573	4.46			510,764			6,925	5.44
Securities—tax exempt		37,494			611	6.53			44,542			751	6.76
Federal funds sold		270,035			804	1.19			155,693			692	1.78
Total earning assets		2,609,481			36,056	5.54			2,468,440			40,025	6.50
Nonearning assets:
Cash and due from banks		118,995							132,038
Interest receivable and other assets		150,245							148,461
Allowance for loan losses		(24,574	)						(24,076	)
Total nonearning assets		244,666							256,423
Total assets	$	2,854,147						$	2,724,863
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction deposits	$	380,701			424	0.45	%	$	358,741			834	0.93	%
Savings deposits		731,991			2,660	1.46			537,448			2,693	2.01
Time deposits		773,494			4,442	2.30			912,349			7,487	3.29
Short-term borrowings		29,974			89	1.19			39,605			181	1.83
Long-term borrowings		30,301			418	5.53			33,067			495	6.00
9.65% Capital Securities		25,000			611	9.80			25,000			611	9.80
Total interest-bearing liabilities		1,971,461			8,644	1.76			1,906,210			12,301	2.59
Interest-free funds:
Noninterest-bearing deposits		605,356							564,283
Interest payable and other liabilities		30,476							28,240
Stockholders’ equity		246,854							226,130
Total interest free funds		882,686							818,653
Total liabilities and stockholders’ equity	$	2,854,147						$	2,724,863
Net interest income				$	27,412						$	27,724
Net interest spread						3.78	%						3.92	%
Net interest margin						4.21	%						4.50	%

(1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis.

17

BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSES

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

	Six Months Ended June 30,
	2003							2002
	Average Balance			Interest Income/ Expense		Average Yield/ Rate		Average Balance			Interest Income/ Expense		Average Yield/ Rate
ASSETS
Earning assets:
Loans (1)	$	1,814,311		$	58,409	6.49	%	$	1,752,419		$	63,531	7.31	%
Securities – taxable		511,728			11,719	4.62			511,600			13,983	5.51
Securities—tax exempt		38,691			1,274	6.64			45,146			1,528	6.82
Federal funds sold		213,585			1,267	1.20			159,783			1,362	1.72
Total earning assets		2,578,315			72,669	5.68			2,468,948			80,404	6.57
Nonearning assets:
Cash and due from banks		121,343							136,475
Interest receivable and other assets		149,392							147,249
Allowance for loan losses		(24,521	)						(24,110	)
Total nonearning assets		246,214							259,614
Total assets	$	2,824,529						$	2,728,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction deposits	$	377,612			933	0.50	%	$	363,646			1,684	0.93	%
Savings deposits		696,889			5,395	1.56			521,598			5,293	2.05
Time deposits		790,424			9,529	2.43			929,601			16,211	3.52
Short-term borrowings		25,954			157	1.22			39,264			342	1.76
Long-term borrowings		31,660			887	5.65			30,824			929	6.08
9.65% Capital Securities		25,000			1,223	9.87			25,000			1,223	9.87
Total interest-bearing liabilities		1,947,539			18,124	1.88			1,909,933			25,682	2.71
Interest-free funds:
Noninterest-bearing deposits		597,403							563,547
Interest payable and other liabilities		30,954							29,359
Stockholders’ equity		248,633							225,723
Total interest free funds		876,990							818,629
Total liabilities and stockholders’ equity	$	2,824,529						$	2,728,562
Net interest income				$	54,545						$	54,772
Net interest spread						3.81	%						3.86	%
Net interest margin						4.27	%						4.47	%

(1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Registrants disclosures regarding market risk since December 31, 2002, the date of its annual report to stockholders.

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as of a date within 90 days of the filing date of this report. Based on their evaluation they concluded that the disclosure controls and procedures of the Company are adequate to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect disclosure controls subsequent to the date of their evaluation.

The Company has engaged a public accounting firm to conduct a review of its internal controls, disclosure controls and procedures, and its evaluation procedures, including its internal audit function. This firm will also assist management with future evaluations of the Company’s internal controls, financial reporting processes and disclosure controls and procedures as required by Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, and by the FDIC Improvement Act. The preliminary review of internal controls has not been completed as of the filing of this report. When the review is completed, the public accounting firm may make recommendations which could result in significant changes in the Company’s internal controls or disclosure controls and procedures.

PART II – OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders.

At the Company’s Annual Meeting of Stockholders held on May 22, 2003, the following matters were voted upon, with the votes indicated below:

	Number of Shares
Description of Proposal	Voted for	Withheld		Broker non-votes
Proposal No. 1-Election of Directors
Class II Directors
James R. Daniel	6,604,738	276,278		303,970
Robert A. Gregory	6,604,416	276,600		303,970
T.H. McCasland, Jr.	6,880,896	120		303,970
Paul B. Odom, Jr.	6,880,572	444		303,970
H.E. Rainbolt	6,556,983	324,033		303,970
	Number of Shares
	Voted for	Voted against	Abstained	Broker non-votes
Proposal No. 2-Ratification of Ernst & Young as Independent Accountants	6,872,581	1,115	200	303,970

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Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

Exhibit Number	Exhibit
3.1	Second Amended and Restated Certificate of Incorporation (filed as Exhibit 1 to the Company’s Form 8-A/A filed July 23, 1998 and incorporated herein by reference).
3.2	Certificate of Designations of Preferred Stock (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference).
3.3	Amended By-Laws (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference).
4.1	Amended and Restated Declaration of Trust of BFC Capital Trust I dated as of February 4, 1997 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.2	Indenture dated as of February 4, 1997 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.3	Series A Capital Securities Guarantee Agreement dated as of February 4, 1997 (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated February 4, 1997 and incorporated herein by reference.)
4.4	Rights Agreement, dated as of February 25, 1999, between BancFirst Corporation and BancFirst, as Rights Agent, including as Exhibit A the form of Certificate of Designations of the Company setting forth the terms of the Preferred Stock, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights Agreement (filed as Exhibit 1 to the Company’s Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
31.1*	CEO’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2*	CFO’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1*	CEO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	CFO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

(b) No reports on Form 8-K were filed by the Company during the quarter ended June 30, 2003.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BANCFIRST CORPORATION                 (Registrant)
Date:	August 14, 2003	/s/    Randy P. Foraker
		(Signature) Randy P. Foraker Senior Vice President and Controller; Assistant Secretary/Treasurer (Principal Accounting Officer)

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