BancFirst Corporation (BANF) Earnings Call Transcript & Summary

Welcome, everybody, to the BancFirst Corporation 2023 Annual Meeting. We've got people on the WebEx call. We've got people in person. This is going to be a very scripted event by and large to make sure we touch all the legal basis we need to touch. We will mute those of you on the WebEx while we're discussing proposals and votes, but rest assured and for each proposal, we will unmute and allow you to ask questions. So if those of you on the WebEx, have a question, wait until we unmute and then jump in there. Kevin Lawrence, our CFO, will make some general comments toward the end of the meeting, and we'll take questions that transcend any of the proposals. But first off, Randy, would you please provide a proof of notice for the meeting.

Yes. So I have with me a certified copy of the notice of the meeting that was mailed to shareholders of record on April 11, 2023, and the record date for the meeting was March 31, 2023. At that date, there were 32,889,493 shares of common stock outstanding, and I also have with me a record list of the shareholders as of that record date.

Okay. Is there anyone present or on the conference call who intends to vote in person? If so please state your name and the number of shares you're entitled to vote. Okay. None noted. Kevin, do we have a quorum present?

Yes. The number of shares represented by proxy or in person are 29,330,431 shares, which is 89.15% of the shares outstanding. There is a quorum present.

Since quorum is present, the meeting is hereby declared convened. Proposal 1 is to elect 18 directors nominated by our Board for their 1-year term. Everybody has been provided a list of those nominees. Is there any discussion of this proposal? Okay. I get none, Kevin, will you please report the results of the election?

[Technical Difficulty] of the shares voting on the election [Technical Difficulty] received affirmative vote of less than a majority of the shares voting. All the nominees have been elected.

Okay. Proposal 2, to approve the BancFirst Corporation restricted stock unit plan. Is there any discussion of this proposal? I am hearing none. Kevin, will you please report [Technical Difficulty]

[Technical Difficulty] shares or 84.57% of the shares outstanding voted for the proposal. It has been approved.

All right. Proposal 3, to ratify Forvis, LLP as the company's independent registered public accounting firm. Forvis has been selected by the Audit Committee to continue as the company's independent registered public accounting firm for the year ending 12/31/2023. They have served as our auditor now for 10 years. Greg Wedel is Chairman of the Audit Committee. Greg, would you have any comments?

No comments.

Thank you. Brian West is the engagement partner with Forvis. And he's here, and George Simon is here. Brian, would you have any comments?

[Technical Difficulty]

Is there any discussion to vote on Forvis? Hearing none. Can you please report on the results? [Technical Difficulty]

Yes, 29,281,217 shares or 89% of the shares outstanding voted for the proposal and it has been approved.

Proposal 4, the advisory vote to approve executive compensation. Is there any discussion on this proposal? Hearing none. Kevin will you please report on result? [Technical Difficulty]

Yes. [Technical Difficulty] 41,889 shares or 94.58% of the shares represented at the meeting voted for the proposal. It has been approved.

Okay. Proposal 5, the advisory vote on the frequency of the company's executive compensation vote. Is there any discussion of this proposal? Hearing none. Kevin will you please report on the results of voting.

Yes, 27,113,562 shares or 92.44% of the shares represented at the meeting voted for frequency of 1 year.

Okay. Well, that ends the formal business session discussion of the proposals to come before the shareholder meeting. I'm going to have Kevin make some final comments. He'll touch very briefly on the year-end, which was an outstanding year by any measure and touch briefly on the first quarter, which, as everybody knows, had a lot of twists and turns for the banking industry nationally, and he'll make a few comments as that relates to BancFirst to the extent we have disclosed those in the first quarter 10-Q. But first, are there any questions or comments about anything we have discussed so far? None? Kevin?

[Technical Difficulty] 2022 was a very successful year. And I just want to point out a few metrics that you all that demonstrated the success of 2022; ROA 1.56%, ROE 16.11%. Our NIM expanded from 3.15% in '21 to 3.29% in '22. Diluted EPS of $5.77 compared to $5.03 in the prior year. Our tangible book value continued to increase at $31.90. Our efficiency ratio continued to improve from the prior year to 55.6% and asset quality remains strong. We have a net charge-off ratio of just 2 basis points -- also highlighting the year is our acquisition of Worthington Bank with Greg Morris here with us this morning and also something that we are proud of is 30 years of consecutive dividend growth after the increase in 2022. And also, as David said, '22 was success and '23 is we are experiencing now and amongst the entire banking industry is experiencing a very challenging as highlighted by the events that began on March 9. The banking industry liquidity pressure, which led to the bank failures of Silicon Valley Bank, Signature and First Republic. Deposits in the entire industry are down $981 billion since the Fed began to raise interest rates. That's the biggest outflow of deposits on record. That could lead to bank lending shrinking significantly over the coming quarters as tighter credit conditions really slowed down the economy. And net interest margin has really seemed to peak for most banks in the fourth quarter of last year, our [ NIM ] margin actually expanded in the first quarter, but we feel like even with our margins, certainly, the bank industry margin, that margin has peaked and we'll start to see that margin compress in the coming quarters due to the higher deposit betas. For BancFirst, we have disclosed in the first quarter, our total deposit of $10.6 billion. We are certainly experiencing the deposit runoff. Our deposits are down $364 million, mostly in our demand deposits moving into our off-balance sheet sweep account product. As such, movement is permanent, we will certainly see an impact to our net interest income going forward. And also a significant event that's coming that we've been [Technical Difficulty] for quite some time now being over $10 billion at [ Durbin ] amendment, which we'll start experiencing July 1, which would represent a loss of pretax income of approximately $22 million on an annual basis. And so in summary, a successful 2022 led to a very challenging 2023 as we are experiencing now. David, that's my comment.

Thank you, Kevin. So broadly speaking, there's no doubt '23 is going to be a challenge earnings-wise, at least relative to the best-in-class performance we've had in the last few years. In absolute terms, it's going to be a strong year. The good news is our balance sheet is a fortress. It was then, it is now, and that's not an accident. We've been -- we managed to this type of economy. If you're a banker in our opinion, you don't maximize earnings in high-risk risk-on environment. You manage your balance sheet for times like this. And this is one of those times, and we're in great shape. Hopefully, there'll be opportunities. Usually, they are. That's the whole point. Opportunities manifest themselves in tough times, not in booms. And this is why we wait forward, and we'll see how this plays out. Are there any comments by -- or questions by those in person attendance here in the audience? Any questions? Comments? Okay. Are there any questions or comments by those on the WebEx call? Are these dogs ever going to bark? Nothing. Even the dogs are happy. All right. In that case, we'll call this meeting to a close. I thank everybody for attending in person and online, and we'll look forward to 2023.