BancFirst Corporation (BANF) is a well-established community banking institution that has weathered numerous economic storms over the course of its long and storied history. Founded in 1984, the company has grown to become one of the largest banks in Oklahoma, with a footprint that extends across the state and into the Dallas-Fort Worth metropolitan area.

BancFirst's business model is rooted in a deep understanding of the local communities it serves, and the bank has consistently demonstrated a commitment to meeting the financial needs of its customers. The company's diversified loan portfolio, which includes commercial real estate, construction, agriculture, and consumer lending, has helped it navigate various economic cycles with relative stability.

Company History

BancFirst Corporation's journey began with the acquisition of its first subsidiary bank, BancFirst, which had been established in 1946. Over the next several decades, the company embarked on a series of strategic acquisitions, expanding its footprint across Oklahoma. In the early 2000s, BancFirst Corporation faced challenges due to the economic downturn, including an increase in nonperforming loans. However, the company successfully navigated these difficulties by maintaining a conservative lending approach and focusing on core deposit growth. During this period, BancFirst also diversified its revenue streams by expanding its trust, insurance, and other fee-based businesses.

The 2010s marked a period of continued geographic expansion for BancFirst Corporation. The company acquired banks in Texas to establish the Pegasus and Worthington subsidiaries, allowing it to capitalize on growth opportunities in the Dallas-Fort Worth metroplex. Today, BancFirst Corporation operates a network of over 100 banking locations across Oklahoma and Texas, offering a full range of commercial and consumer banking products and services. The company has established itself as one of the largest independent bank holding companies in the state of Oklahoma, with a strong reputation for prudent risk management and community involvement.

Resilience in the Face of Challenges

Over the years, BancFirst has faced its share of challenges, including the 2008 financial crisis and the more recent economic disruptions caused by the COVID-19 pandemic. However, the bank's prudent risk management practices, strong capital position, and adaptable business strategy have enabled it to emerge from these turbulent periods in a position of strength.

Financial Performance

In 2023, BancFirst reported net income of $212.47 million, with a return on average assets of 1.81% and a return on average equity of 16.56%. The company's net interest margin, a key measure of profitability, stood at 3.83% for the year, reflecting the bank's ability to effectively manage its funding costs and asset yields.

BancFirst's loan portfolio has continued to grow, with total loans reaching $7.66 billion as of December 31, 2023, up from $7.14 billion a year earlier. The bank's asset quality metrics have remained strong, with nonperforming assets accounting for just 0.32% of total assets at the end of 2023.

For the most recent fiscal year 2023, BancFirst reported revenue of $609.86 million, net income of $212.47 million, operating cash flow of $233.04 million, and free cash flow of $210.54 million. In the most recent quarter (Q3 2024), the company saw improvements across key financial metrics, with revenue of $160.92 million, net income of $58.90 million, operating cash flow of $229.49 million, and free cash flow of $224.25 million. The increase in revenue, net income, operating cash flow, and free cash flow compared to the prior year quarter was primarily driven by loan growth and higher interest rates, partially offset by the expense associated with the shifting mix between interest-bearing and noninterest-bearing deposits.

Liquidity and Funding

The company's liquidity position is robust, with a loan-to-deposit ratio of 68.87% at the end of 2023. BancFirst maintains a diversified funding base, with a high proportion of low-cost core deposits, which have helped the bank weather periods of market volatility.

As of December 31, 2023, BancFirst reported cash and cash equivalents of $2.40 billion. The company's debt-to-equity ratio stood at a conservative 0.0028, based on total debt of $86.10 million and total equity of $1.43 billion. This low leverage indicates a strong balance sheet and financial stability.

BancFirst has several credit facilities available to support its liquidity needs. These include an $877.10 million line of credit from the Federal Home Loan Bank of Topeka, Kansas, a Federal Reserve discount window capacity of $125.60 million for its Pegasus subsidiary, and $10.50 million in lines of credit with other financial institutions for its Worthington subsidiary. Notably, as of September 30, 2024, there were no outstanding balances on these credit facilities, further underlining the company's strong liquidity position.

The company's current ratio and quick ratio both stand at an impressive 366.80, indicating a strong ability to meet short-term obligations and highlighting BancFirst's robust liquidity management.

Business Segments

BancFirst Corporation operates through several key business segments:

Retail Banking Segment: This segment encompasses BancFirst's traditional banking products and services offered to individuals and small businesses. These include checking and savings accounts, consumer and small business loans, and debit/credit card services. The segment's performance is measured by metrics such as net interest income, non-interest income from service charges on deposits and other fees, and credit quality indicators like nonaccrual loans and the allowance for credit losses.

Commercial Banking Segment: This segment focuses on commercial lending and deposit products offered to medium-sized and larger business clients. Product offerings include commercial real estate loans, construction loans, commercial and industrial loans, as well as commercial deposit accounts. Key financial metrics for this segment include commercial loan volume, net interest income, and credit quality indicators for the commercial portfolio.

Wealth Management Segment: This segment covers BancFirst's trust and investment advisory services provided to individuals, businesses, and institutional clients. Revenue sources include trust fees, brokerage commissions, and investment management fees. Important metrics for evaluating this segment include assets under management and revenue growth.

Other Segments: BancFirst also operates in "other financial services" and "executive, operations and support" areas, though detailed information on these segments' specific product offerings and financial performance is limited.

Community Banking Focus

BancFirst's community banking focus has been a key driver of its success. The company's deep local market knowledge and strong customer relationships have enabled it to effectively serve the financial needs of individuals and businesses in its core markets. This, coupled with the bank's prudent risk management practices and adaptable business strategy, has positioned BancFirst for continued growth and success.

Industry Landscape and Challenges

The banking industry has recently experienced some high-profile bank failures, which could potentially impact customer confidence, deposit outflows, and regulatory oversight. However, BancFirst's strong liquidity and capital ratios suggest it is well-positioned to weather any potential industry turmoil.

The company has seen robust loan growth, with a 6.9% increase in loans year-to-date in 2024, driven by strong demand in its Oklahoma markets. This loan growth, combined with rising interest rates, has supported BancFirst's improved financial performance. However, a continued shift in deposit mix toward interest-bearing accounts could put pressure on the company's net interest margin going forward.

Future Outlook

Looking ahead, BancFirst remains well-positioned to navigate the challenges and opportunities that lie ahead. The bank's solid financial foundation, experienced management team, and commitment to serving its local communities will undoubtedly continue to be key strengths as it navigates the evolving banking landscape.

Despite the various obstacles it has faced, BancFirst has consistently demonstrated its ability to deliver strong financial performance and create value for its shareholders. As the bank continues to grow and adapt, it will be important for investors to closely monitor its progress and the strategies it employs to maintain its competitive edge in the dynamic banking environment.

Overall, BancFirst Corporation appears to be a well-run community bank focused on its core Oklahoma and Texas markets. Its solid balance sheet, consistent profitability, and diverse business segments make it an attractive investment option in the current banking environment. The company's ability to navigate challenges while maintaining strong financial metrics and expanding its loan portfolio positions it favorably for continued success in the competitive banking industry.