UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 20212022

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

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

101100 N. Broadway Ave., Oklahoma City, Oklahoma

73102-8405

(Address of principal executive offices)

(Zip Code)

(405) (405) 270-1086

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 Par Value Per Share

BANF

NASDAQ Global Select Market System

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 No ☐..

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (sec. 232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐..

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes No

As of April 30, 202129, 2022 there were 32,775,01332,731,685 shares of the registrant’s Common Stock outstanding.


BancFirst Corporation

Quarterly Report on Form 10-Q

March 31, 20212022

Table of Contents

Item

  

 

  

Page

 

PART I – Financial Information

 

Page

  

PART I – Financial Information

  

 

1.

  

 

Financial Statements (Unaudited)

  

2

 

 

Financial Statements (Unaudited)

 

2

  

 

Consolidated Balance Sheets

  

2

 

 

Consolidated Balance Sheets

 

2

  

 

Consolidated Statements of Comprehensive Income

  

3

 

 

Consolidated Statements of Comprehensive Income

 

3

  

 

Consolidated Statements of Shareholders’ Equity

  

4

 

 

Consolidated Statements of Shareholders’ Equity

 

4

 

 

Consolidated Statements of Cash Flow

 

5

 

 

Consolidated Statements of Cash Flow

 

5

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

6

 

Notes to Consolidated Financial Statements

 

6

2.

  

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

28

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

3.

  

 

Quantitative and Qualitative Disclosure About Market Risk

  

36

 

 

Quantitative and Qualitative Disclosure About Market Risk

 

37

4.

  

 

Controls and Procedures

  

36

 

 

Controls and Procedures

 

37

 

 

 

 

 

 

 

 

  

 

PART II – Other Information

  

 

 

 

PART II – Other Information

 

 

1.

  

 

Legal Proceedings

  

37

 

 

Legal Proceedings

 

38

1A.

  

 

Risk Factors

  

37

 

 

Risk Factors

 

38

2.

  

 

Unregistered Sales of Equity Securities

  

37

 

 

Unregistered Sales of Equity Securities

 

38

3.

  

 

Defaults Upon Senior Securities

  

37

 

 

Defaults Upon Senior Securities

 

38

4.

  

 

Mine Safety Disclosures

  

37

 

 

Mine Safety Disclosures

 

38

5.

  

 

Other Information

  

37

 

 

Other Information

 

38

6.

  

Exhibits

  

38

 

Exhibits

 

39

Signatures

Signatures

  

40

Signatures

 

41


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

 

2020

 

 

2022

 

 

2021

 

 

(unaudited)

 

 

(see Note 1)

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

274,092

 

 

$

280,518

 

 

$

274,872

 

 

$

228,819

 

Interest-bearing deposits with banks

 

 

2,788,316

 

 

 

1,336,394

 

 

 

3,816,532

 

 

 

1,821,203

 

Debt securities held for investment (fair value: $2,953 and $2,984, respectively)

 

 

2,956

 

 

 

2,964

 

Federal funds sold

 

 

3,489

 

 

 

800

 

Debt securities held for investment (fair value: $2,917 and $2,978, respectively)

 

 

2,917

 

 

 

2,977

 

Debt securities available for sale at fair value

 

 

517,587

 

 

 

552,232

 

 

 

1,208,751

 

 

 

531,523

 

Loans held for sale

 

 

21,718

 

 

 

53,719

 

 

 

10,137

 

 

 

24,776

 

Loans held for investment (net of unearned interest)

 

 

6,358,390

 

 

 

6,394,506

 

 

 

6,494,340

 

 

 

6,169,442

 

Allowance for credit losses

 

 

(90,860

)

 

 

(91,366

)

 

 

(87,239

)

 

 

(83,936

)

Loans, net of allowance for credit losses

 

 

6,267,530

 

 

 

6,303,140

 

 

 

6,407,101

 

 

 

6,085,506

 

Premises and equipment, net

 

 

263,452

 

 

 

261,677

 

 

 

283,843

 

 

 

269,047

 

Other real estate owned

 

 

30,167

 

 

 

32,179

 

 

 

39,617

 

 

 

39,475

 

Intangible assets, net

 

 

18,206

 

 

 

18,999

 

 

 

25,456

 

 

 

17,566

 

Goodwill

 

 

149,922

 

 

 

149,922

 

 

 

176,563

 

 

 

149,922

 

Accrued interest receivable and other assets

 

 

215,359

 

 

 

220,613

 

 

 

375,153

 

 

 

233,998

 

Total assets

 

$

10,549,305

 

 

$

9,212,357

 

 

$

12,624,431

 

 

$

9,405,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

4,276,145

 

 

$

3,790,900

 

 

$

5,216,266

 

 

$

3,775,387

 

Interest-bearing

 

 

5,095,795

 

 

 

4,273,804

 

 

 

6,034,705

 

 

 

4,316,527

 

Total deposits

 

 

9,371,940

 

 

 

8,064,704

 

 

 

11,250,971

 

 

 

8,091,914

 

Short-term borrowings

 

 

3,750

 

 

 

1,100

 

 

 

3,300

 

 

 

0

 

Accrued interest payable and other liabilities

 

 

52,140

 

 

 

51,864

 

 

 

116,357

 

 

 

55,977

 

Junior subordinated debentures

 

 

26,804

 

 

 

26,804

 

Subordinated debt

 

 

86,001

 

 

 

85,987

 

Total liabilities

 

 

9,454,634

 

 

 

8,144,472

 

 

 

11,456,629

 

 

 

8,233,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior preferred stock, $1.00 par; 10,000,000 shares authorized; NaN issued

 

 

 

 

 

 

Cumulative preferred stock, $5.00 par; 900,000 shares authorized; NaN issued

 

 

 

 

 

 

Common stock, $1.00 par, 40,000,000 shares authorized; shares issued and

outstanding: 32,771,013 and 32,719,852, respectively

 

 

32,771

 

 

 

32,720

 

Senior preferred stock, $1.00 par; 10,000,000 shares authorized; NaN issued

 

 

 

 

 

 

Cumulative preferred stock, $5.00 par; 900,000 shares authorized; NaN issued

 

 

 

 

 

 

Common stock, $1.00 par, 40,000,000 shares authorized; shares issued and
outstanding:
32,725,587 and 32,603,118, respectively

 

 

32,726

 

 

 

32,603

 

Capital surplus

 

 

157,450

 

 

 

156,574

 

 

 

163,392

 

 

 

159,914

 

Retained earnings

 

 

898,026

 

 

 

871,161

 

 

 

1,001,200

 

 

 

977,067

 

Accumulated other comprehensive income, net of income tax of $2,177

and $2,513, respectively

 

 

6,424

 

 

 

7,430

 

Accumulated other comprehensive (loss) income, net of tax of $9,166
and $(
684), respectively

 

 

(29,516

)

 

 

2,150

 

Total stockholders' equity

 

 

1,094,671

 

 

 

1,067,885

 

 

 

1,167,802

 

 

 

1,171,734

 

Total liabilities and stockholders' equity

 

$

10,549,305

 

 

$

9,212,357

 

 

$

12,624,431

 

 

$

9,405,612

 

 

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

2



BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

 

2020

 

 

2022

 

 

2021

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

77,662

 

 

$

76,518

 

 

$

72,954

 

 

$

77,662

 

Securities:

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

Taxable

 

 

1,693

 

 

 

2,586

 

 

 

3,781

 

 

 

1,693

 

Tax-exempt

 

 

70

 

 

 

98

 

 

 

26

 

 

 

70

 

Federal funds sold

 

 

1

 

 

 

0

 

Interest-bearing deposits with banks

 

 

595

 

 

 

4,769

 

 

 

1,757

 

 

 

595

 

Total interest income

 

 

80,020

 

 

 

83,971

 

 

 

78,519

 

 

 

80,020

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,322

 

 

 

9,400

 

 

 

1,981

 

 

 

2,322

 

Short-term borrowings

 

 

1

 

 

 

7

 

 

 

1

 

 

 

1

 

Junior subordinated debentures

 

 

491

 

 

 

491

 

Subordinated debt

 

 

1,030

 

 

 

491

 

Total interest expense

 

 

2,814

 

 

 

9,898

 

 

 

3,012

 

 

 

2,814

 

Net interest income

 

 

77,206

 

 

 

74,073

 

 

 

75,507

 

 

 

77,206

 

Provision for credit losses

 

 

 

 

 

19,583

 

 

 

2,936

 

 

 

 

Net interest income after provision for credit losses

 

 

77,206

 

 

 

54,490

 

 

 

72,571

 

 

 

77,206

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust revenue

 

 

3,102

 

 

 

3,655

 

 

 

3,506

 

 

 

3,102

 

Service charges on deposits

 

 

19,100

 

 

 

18,804

 

 

 

21,375

 

 

 

19,100

 

Securities transactions (includes 0 accumulated other comprehensive income reclassifications)

 

 

95

 

 

 

50

 

Securities transactions (includes accumulated other comprehensive loss reclassifications of $1,536 and $0, respectively)

 

 

(3,915

)

 

 

95

 

Income from sales of loans

 

 

2,010

 

 

 

781

 

 

 

1,666

 

 

 

2,010

 

Insurance commissions

 

 

5,989

 

 

 

5,676

 

 

 

7,427

 

 

 

5,989

 

Cash management

 

 

3,003

 

 

 

4,320

 

 

 

3,131

 

 

 

3,003

 

Gain on sale of other assets

 

 

2,639

 

 

 

86

 

 

 

45

 

 

 

2,639

 

Other

 

 

3,997

 

 

 

1,773

 

 

 

10,415

 

 

 

3,997

 

Total noninterest income

 

 

39,935

 

 

 

35,145

 

 

 

43,650

 

 

 

39,935

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

39,577

 

 

 

39,756

 

 

 

43,932

 

 

 

39,577

 

Occupancy, net

 

 

4,348

 

 

 

3,546

 

 

 

4,403

 

 

 

4,348

 

Depreciation

 

 

3,877

 

 

 

3,491

 

 

 

4,775

 

 

 

3,877

 

Amortization of intangible assets

 

 

793

 

 

 

964

 

 

 

831

 

 

 

793

 

Data processing services

 

 

1,678

 

 

 

1,692

 

 

 

1,805

 

 

 

1,678

 

Net loss/(income) from other real estate owned

 

 

1,510

 

 

 

(2,135

)

Net expense from other real estate owned

 

 

1,794

 

 

 

1,510

 

Marketing and business promotion

 

 

1,879

 

 

 

2,355

 

 

 

2,073

 

 

 

1,879

 

Deposit insurance

 

 

876

 

 

 

136

 

 

 

1,128

 

 

 

876

 

Other

 

 

10,425

 

 

 

11,580

 

 

 

11,771

 

 

 

10,425

 

Total noninterest expense

 

 

64,963

 

 

 

61,385

 

 

 

72,512

 

 

 

64,963

 

Income before taxes

 

 

52,178

 

 

 

28,250

 

 

 

43,709

 

 

 

52,178

 

Income tax expense

 

 

9,658

 

 

 

5,642

 

 

 

7,794

 

 

 

9,658

 

Net income

 

$

42,520

 

 

$

22,608

 

 

$

35,915

 

 

$

42,520

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.30

 

 

$

0.69

 

 

$

1.10

 

 

$

1.30

 

Diluted

 

$

1.27

 

 

$

0.68

 

 

$

1.08

 

 

$

1.27

 

OTHER COMPREHENSIVE (LOSS) GAIN

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses)/gains on securities, net of tax of $336 and $(2,176) respectively

 

 

(1,006

)

 

 

6,425

 

Unrealized losses on debt securities, net of tax of $10,219 and $336, respectively

 

 

(32,833

)

 

 

(1,006

)

Reclassification adjustment for losses included in net income, net of tax of $(369) and $0, respectively

 

 

1,167

 

 

 

0

 

Other comprehensive loss, net of tax of $9,850 and $336, respectively

 

 

(31,666

)

 

 

(1,006

)

Comprehensive income

 

$

41,514

 

 

$

29,033

 

 

$

4,249

 

 

$

41,514

 

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

3


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued at beginning of period

 

$

32,720

 

 

$

32,694

 

 

$

32,603

 

 

$

32,720

 

Shares issued for stock options

 

 

51

 

 

 

12

 

 

 

123

 

 

 

51

 

Shares acquired and canceled

 

 

 

 

 

(59

)

Issued at end of period

 

$

32,771

 

 

$

32,647

 

 

$

32,726

 

 

$

32,771

 

CAPITAL SURPLUS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

156,574

 

 

$

153,353

 

 

$

159,914

 

 

$

156,574

 

Common stock issued for stock options

 

 

1,258

 

 

 

220

 

 

 

3,020

 

 

 

1,258

 

Net cash settlement of options

 

 

(958

)

 

 

 

 

 

 

 

 

(958

)

Stock-based compensation arrangements

 

 

576

 

 

 

426

 

 

 

458

 

 

 

576

 

Balance at end of period

 

$

157,450

 

 

$

153,999

 

 

$

163,392

 

 

$

157,450

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

871,161

 

 

$

815,488

 

 

$

977,067

 

 

$

871,161

 

Net income

 

 

42,520

 

 

 

22,608

 

 

 

35,915

 

 

 

42,520

 

Cumulative effect of change in accounting principle, net of tax of $925 (Note 2)

 

 

 

 

 

2,270

 

Dividends on common stock ($0.34 and $0.32 per share, respectively)

 

 

(11,134

)

 

 

(10,472

)

Dividends on common stock ($0.36 and $0.34 per share, respectively)

 

 

(11,782

)

 

 

(11,134

)

Net cash settlement of options

 

 

(4,521

)

 

 

 

 

 

 

 

 

(4,521

)

Common stock acquired and canceled

 

 

 

 

 

(3,039

)

Balance at end of period

 

$

898,026

 

 

$

826,855

 

 

$

1,001,200

 

 

$

898,026

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses)/gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

7,430

 

 

$

3,454

 

 

$

2,150

 

 

$

7,430

 

Net change

 

 

(1,006

)

 

 

6,425

 

 

 

(31,666

)

 

 

(1,006

)

Balance at end of period

 

$

6,424

 

 

$

9,879

 

 

$

(29,516

)

 

$

6,424

 

Total stockholders’ equity

 

$

1,094,671

 

 

$

1,023,380

 

 

$

1,167,802

 

 

$

1,094,671

 

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

4



BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

42,520

 

 

$

22,608

 

 

$

35,915

 

 

$

42,520

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

19,583

 

 

 

2,936

 

 

 

0

 

Depreciation and amortization

 

 

4,670

 

 

 

4,455

 

 

 

5,606

 

 

 

4,670

 

Net amortization of securities premiums and discounts

 

 

369

 

 

 

(461

)

 

 

1,921

 

 

 

369

 

Realized securities gains

 

 

(95

)

 

 

(50

)

Realized securities losses/(gains)

 

 

3,915

 

 

 

(95

)

Gain on sales of loans

 

 

(2,010

)

 

 

(781

)

 

 

(1,666

)

 

 

(2,010

)

Cash receipts from the sale of loans originated for sale

 

 

114,517

 

 

 

56,879

 

 

 

83,749

 

 

 

114,517

 

Cash disbursements for loans originated for sale

 

 

(98,043

)

 

 

(61,258

)

 

 

(67,444

)

 

 

(98,043

)

Deferred income tax benefit

 

 

(738

)

 

 

(1,211

)

 

 

(968

)

 

 

(738

)

Gain on sale of other assets

 

 

(2,584

)

 

 

(2,183

)

 

 

(771

)

 

 

(2,584

)

Decrease in interest receivable

 

 

235

 

 

 

196

 

Decrease in interest payable

 

 

(329

)

 

 

(543

)

Increase/(decrease) in interest receivable

 

 

(4,714

)

 

 

235

 

Increase/(decrease) in interest payable

 

 

485

 

 

 

(329

)

Amortization of stock-based compensation arrangements

 

 

576

 

 

 

426

 

 

 

458

 

 

 

576

 

Excess tax benefit from stock-based compensation arrangements

 

 

(1,551

)

 

 

(95

)

 

 

(1,024

)

 

 

(1,551

)

Other, net

 

 

10,833

 

 

 

(2,302

)

 

 

5,209

 

 

 

11,504

 

Net cash provided by operating activities

 

 

68,370

 

 

 

35,263

 

 

 

63,607

 

 

 

69,041

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash received from acquisitions, net of cash paid

 

 

 

 

 

18,397

 

 

 

121,099

 

 

 

 

Net cash paid from sale of assets and liabilities, net of cash received

 

 

(13,733

)

 

 

 

 

 

 

 

 

(13,733

)

Net increase in federal funds sold

 

 

 

 

 

1,000

 

 

 

(76

)

 

 

 

Purchases of held for investment debt securities

 

 

 

 

 

(295

)

Purchases of available for sale debt securities

 

 

(210,662

)

 

 

(234,059

)

 

 

(966,818

)

 

 

(210,662

)

Proceeds from maturities, calls and paydowns of held for investment debt securities

 

 

7

 

 

 

237

 

 

 

61

 

 

 

7

 

Proceeds from maturities, calls and paydowns of available for sale debt securities

 

 

243,597

 

 

 

142,818

 

 

 

19,689

 

 

 

243,597

 

Proceeds from sales of available for sale securities

 

 

222,473

 

 

 

 

Purchase of equity securities

 

 

(171

)

 

 

(39

)

 

 

(144

)

 

 

(171

)

Proceeds from paydowns and sales of equity securities

 

 

194

 

 

 

408

 

 

 

697

 

 

 

194

 

Net change in loans

 

 

32,053

 

 

 

(308,102

)

 

 

(67,669

)

 

 

32,053

 

Net payments on derivative asset contracts

 

 

(70,694

)

 

 

(671

)

Purchases of premises, equipment and computer software

 

 

(7,718

)

 

 

(11,349

)

 

 

(6,896

)

 

 

(7,718

)

Purchase of tax credits

 

 

(1,262

)

 

 

(219

)

 

 

(770

)

 

 

(1,262

)

Other, net

 

 

2,858

 

 

 

4,988

 

 

 

3,078

 

 

 

2,858

 

Net cash provided by (used in) investing activities

 

 

45,163

 

 

 

(386,215

)

Net cash (used in) provided by investing activities

 

 

(745,970

)

 

 

44,492

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in deposits

 

 

1,344,608

 

 

 

44,559

 

 

 

2,729,040

 

 

 

1,344,608

 

Net change in short-term borrowings

 

 

2,650

 

 

 

300

 

 

 

3,300

 

 

 

2,650

 

Issuance of common stock in connection with stock options, net

 

 

1,309

 

 

 

232

 

 

 

3,143

 

 

 

1,309

 

Common stock acquired

 

 

 

 

 

(3,098

)

Net cash settlement of options

 

 

(5,479

)

 

 

 

 

 

 

 

 

(5,479

)

Cash dividends paid

 

 

(11,125

)

 

 

(10,462

)

 

 

(11,738

)

 

 

(11,125

)

Net cash provided by financing activities

 

 

1,331,963

 

 

 

31,531

 

 

 

2,723,745

 

 

 

1,331,963

 

Net increase/(decrease) in cash, due from banks and interest-bearing deposits

 

 

1,445,496

 

 

 

(319,421

)

Net increase in cash, due from banks and interest-bearing deposits

 

 

2,041,382

 

 

 

1,445,496

 

Cash, due from banks and interest-bearing deposits at the beginning of the period

 

 

1,616,912

 

 

 

1,868,281

 

 

 

2,050,022

 

 

 

1,616,912

 

Cash, due from banks and interest-bearing deposits at the end of the period

 

$

3,062,408

 

 

$

1,548,860

 

 

$

4,091,404

 

 

$

3,062,408

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

3,155

 

 

$

10,410

 

 

$

2,503

 

 

$

3,155

 

Cash paid during the period for income taxes

 

$

1,300

 

 

$

1,175

 

 

$

 

 

$

1,300

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash consideration for acquisitions

 

$

77,685

 

 

$

 

Fair value of assets acquired in acquisitions

 

$

 

 

$

47,838

 

 

$

510,888

 

 

$

 

Liabilities assumed in acquisitions

 

$

 

 

$

45,040

 

 

$

433,203

 

 

$

 

Unpaid common stock dividends declared

 

$

11,134

 

 

$

10,463

 

 

$

11,781

 

 

$

11,134

 

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

5


BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1)

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., Pegasus Bank ("Pegasus"), Worthington National Bank ("Worthington") and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC, BFC-PNC LLC, and BancFirst Agency, Inc. 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 unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with U.S. GAAP for interim financial information and the instructions for Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). The information contained in the financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, should be referred to in connection with these unaudited interim consolidated financial statements. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

The unaudited interim consolidated 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.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, stockholders’ equity or comprehensive income.

Use of Estimates in the Preparation of Financial Statements

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

Recent Accounting Pronouncements

Standards Not Yet Adopted:

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments – Credit Losses (Topic 326).” ASU 2022-02 eliminates the TDR recognition and measurement guidance and, instead, requires that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan. The Company has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings when adopted. In addition, the update requires that the Company disclose current-period write-offs by year of origination for financing receivables. The current-period write-off amendment should be applied prospectively. The amendments are effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption is permitted; however the Company expects to adopt ASU 2022-02 on January 1, 2023. ASU No. 2022-02 is not expected to have a significant impact on the Company’s financial statements.

 

6


(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

On February 19,8, 2022, BancFirst Corporation acquired Worthington for an aggregate cash purchase price of $77.7 million. Worthington is chartered and regulated by the Office of the Comptroller of the Currency (OCC) with 1 banking location in Arlington, Texas, 1 in Colleyville, Texas and 2 in Fort Worth, Texas. At acquisition, Worthington had approximately $484 million in total assets, $257 million in loans and $430 million in deposits. Worthington will continue to operate as “Worthington National Bank” under a separate OCC charter and remain a separate subsidiary of BancFirst Corporation governed by its existing board of directors. BancFirst Corporation intends to provide an appropriate amount of capital or other support to increase Worthington’s ability to approve larger loans and allow Worthington to continue to grow earning assets. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $8.7 million and goodwill of approximately $26.6 million. These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements.

On June 17, 2021, the Company entered intocompleted a purchaseprivate placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 (the “Subordinated Notes”) to various institutional accredited investors. See Note (7) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

On May 20, 2021, the Company purchased approximately $284 million in total assets, which included approximately $195 million in loans, and assumption agreement withassumed approximately $256 million in deposits and certain other obligations, from The First National Bank and Trust Company of Vinita, Oklahoma for a purchase price of approximately $21 million. The Company recorded a bargain purchase gain related to this purchase certain of its assetsapproximately $4.8 million, which was included in other noninterest income on the statement of comprehensive income and assume its deposits and certainin other obligations.operating activities on the statement of cash flow during the second quarter of 2021. The bargain purchase gain is a noncash item on the statement of cash flow. In addition, the Company recorded expenses related to this purchase of approximately $4.8 million, which were included in noninterest expense during the second quarter of 2021. As a result of the purchase, the Company recorded a core deposit intangible of approximately $1.7 million. The effect of this purchase was included in the consolidated financial statement of the Company from the date of purchase forward. The purchase did not have a material effect on the Company’s consolidated financial statements. The First National Bank and Trust Company of Vinita iswas a nationally chartered bank with2 banking locations in Vinita and Grove, Oklahoma. These banking locations would become branches of BancFirst. As of December 31, 2020, the First National Bank and Trust Company of Vinita had approximately $285 million in total assets, $209 million in loans, and $258 million in deposits. The purchase and assumption is expected to be completed during the second quarter of 2021 and is subject to regulatory approval.

On January 22, 2021, the Company sold approximately $21$21 million in loans and approximately $38$38 million in deposits from its Hugo, Oklahoma branch to AmeriState Bank in Atoka, Oklahoma. AThe Company recorded a gain on the transaction of $2.5$2.5 million, which is reflectedincluded in noninterest income in the first quarter of 2021.

 


(3) SECURITIES

(3)

SECURITIES

The following table summarizes the amortized cost and estimated fair values of debt securities held for investment:

 

 

 

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

March 31, 2022

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

27

 

 

$

 

 

$

 

 

$

27

 

States and political subdivisions

 

 

2,390

 

 

 

 

 

 

 

 

 

2,390

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,917

 

 

$

 

 

$

 

 

$

2,917

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

32

 

 

$

1

 

 

$

 

 

$

33

 

States and political subdivisions

 

 

2,445

 

 

 

 

 

 

 

 

 

2,445

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,977

 

 

$

1

 

 

$

 

 

$

2,978

 

7


 

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

March 31, 2021

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

51

 

 

$

3

 

 

$

 

 

$

54

 

States and political subdivisions

 

 

2,405

 

 

 

3

 

 

 

(9

)

 

 

2,399

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,956

 

 

$

6

 

 

$

(9

)

 

$

2,953

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

59

 

 

$

3

 

 

$

 

 

$

62

 

States and political subdivisions

 

 

2,405

 

 

 

18

 

 

 

(1

)

 

 

2,422

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,964

 

 

$

21

 

 

$

(1

)

 

$

2,984

 

The following table summarizes the amortized cost and estimated fair values of debt securities available for sale:

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

 

 

 

March 31, 2021

 

(Dollars in thousands)

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

March 31, 2022

 

(Dollars in thousands)

 

U.S. treasuries

 

$

445,813

 

 

$

8,155

 

 

$

(182

)

 

$

453,786

 

 

$

1,184,289

 

$

1,005

 

$

(38,996

)

 

$

1,146,298

 

U.S. federal agencies

 

 

19,166

 

 

 

1

 

 

 

(58

)

 

 

19,109

 

 

20,216

 

320

 

(2

)

 

20,534

 

Mortgage backed securities (1)

 

 

14,877

 

 

 

372

 

 

 

 

 

 

15,249

 

 

21,708

 

51

 

(798

)

 

20,961

 

States and political subdivisions

 

 

15,789

 

 

 

269

 

 

 

(18

)

 

 

16,040

 

 

4,861

 

76

 

(85

)

 

4,852

 

Asset backed securities

 

 

13,341

 

 

 

62

 

 

 

 

 

 

13,403

 

 

13,359

 

 

(79

)

 

13,280

 

Other securities

 

 

3,000

 

 

 

 

 

 

(174

)

 

 

2,826

 

Total

 

$

508,986

 

 

$

8,859

 

 

$

(258

)

 

$

517,587

 

 

$

1,247,433

 

 

$

1,452

 

 

$

(40,134

)

 

$

1,208,751

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

465,416

 

 

$

9,820

 

 

$

 

 

$

475,236

 

 

$

455,701

 

$

3,693

 

$

(1,766

)

 

$

457,628

 

U.S. federal agencies

 

 

19,697

 

 

 

1

 

 

 

(60

)

 

 

19,638

 

 

21,609

 

335

 

(2

)

 

21,942

 

Mortgage backed securities (1)

 

 

15,268

 

 

 

428

 

 

 

 

 

 

15,696

 

 

28,897

 

400

 

(14

)

 

29,283

 

States and political subdivisions

 

 

28,571

 

 

 

377

 

 

 

 

 

 

28,948

 

 

6,128

 

194

 

(3

)

 

6,319

 

Asset backed securities

 

 

13,337

 

 

 

 

 

 

(623

)

 

 

12,714

 

 

13,354

 

3

 

 

13,357

 

Other securities

 

 

3,000

 

 

 

 

 

 

(6

)

 

 

2,994

 

Total

 

$

542,289

 

 

$

10,626

 

 

$

(683

)

 

$

552,232

 

 

$

528,689

 

 

$

4,625

 

 

$

(1,791

)

 

$

531,523

 

(1) Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.

On January 10, 2022, the Company purchased United States Treasury Notes of $600 million par value with an average yield of 1.42% and an average maturity of 53 months.

(1)

Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.


The maturities of debt securities held for investment and available for sale are summarized in the following table using contractual maturities. Actual maturities may differ from contractual maturities due to obligations that are called or prepaid. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been presented at their contractual maturity.

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

581

 

 

$

581

 

 

$

577

 

 

$

577

 

After one year but within five years

 

 

2,332

 

 

 

2,332

 

 

 

2,396

 

 

 

2,397

 

After five years but within ten years

 

 

4

 

 

 

4

 

 

 

4

 

 

 

4

 

After ten years

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

2,917

 

 

$

2,917

 

 

$

2,977

 

 

$

2,978

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

52,902

 

 

$

53,213

 

 

$

58,478

 

 

$

58,688

 

After one year but within five years

 

 

956,577

 

 

 

917,966

 

 

 

408,253

 

 

 

410,049

 

After five years but within ten years

 

 

189,828

 

 

 

190,010

 

 

 

10,851

 

 

 

11,011

 

After ten years

 

 

48,126

 

 

 

47,562

 

 

 

51,107

 

 

 

51,775

 

Total debt securities

 

$

1,247,433

 

 

$

1,208,751

 

 

$

528,689

 

 

$

531,523

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

862

 

 

$

862

 

 

$

807

 

 

$

809

 

After one year but within five years

 

 

2,089

 

 

 

2,085

 

 

 

2,091

 

 

 

2,110

 

After five years but within ten years

 

 

4

 

 

 

5

 

 

 

65

 

 

 

64

 

After ten years

 

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

Total

 

$

2,956

 

 

$

2,953

 

 

$

2,964

 

 

$

2,984

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

110,317

 

 

$

111,484

 

 

$

339,752

 

 

$

341,102

 

After one year but within five years

 

 

359,388

 

 

 

366,433

 

 

 

162,401

 

 

 

171,135

 

After five years but within ten years

 

 

5,914

 

 

 

6,049

 

 

 

3,753

 

 

 

3,910

 

After ten years

 

 

33,367

 

 

 

33,621

 

 

 

36,383

 

 

 

36,085

 

Total debt securities

 

$

508,986

 

 

$

517,587

 

 

$

542,289

 

 

$

552,232

 

The following table is a summary of the Company’s book value of securities that were pledged as collateral for public funds on deposit, repurchase agreements and for other purposes as required or permitted by law:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

459,251

 

 

$

490,833

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

483,135

 

 

$

473,026

 

8



The following is a detail of proceeds from sales and the realized losses on available for sale debt securities:

 

 

 

 

 

 

 

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

(Dollars in thousands)

 

Proceeds

 

$

222,473

 

 

$

 

Gross losses realized

 

 

3,990

 

 

 

 

During the three months ended March 31, 2022, the Company sold $226 million of debt securities with an average yield of 0.16%, which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. The Company used specific identification to reclassify the unrealized loss in other comprehensive income to a realized loss, as shown in the consolidated statements of comprehensive income. There were no sales of debt securities and therefore 0 proceeds from sales or realized securities gains or losses on available for sale debt securities for the three months ended March 31, 2021.

Realized gains/losses on debt and equity securities are reported as securities transactions within the noninterest income section of the consolidated statement of comprehensive income.

The following table summarizes debt securities with unrealized losses, segregated by the duration of the unrealized loss, at March 31, 2022 and December 31, 2021 respectively:

 

 

 

 

Less than 12 Months

 

 

More than 12 Months

 

 

Total

 

 

Number of investments

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

50

 

 

$

1,030,589

 

 

$

38,875

 

 

$

4,876

 

 

$

121

 

 

$

1,035,465

 

 

$

38,996

 

U.S. federal agencies

 

2

 

 

 

403

 

 

 

2

 

 

 

 

 

 

 

 

 

403

 

 

 

2

 

Mortgage backed securities

 

63

 

 

 

20,084

 

 

 

798

 

 

 

 

 

 

 

 

 

20,084

 

 

 

798

 

States and political subdivisions

 

6

 

 

 

2,177

 

 

 

85

 

 

 

 

 

 

 

 

 

2,177

 

 

 

85

 

Asset backed securities

 

1

 

 

 

13,280

 

 

 

79

 

 

 

 

 

 

 

 

 

13,280

 

 

 

79

 

Other securities

 

1

 

 

 

2,826

 

 

 

174

 

 

 

 

 

 

 

 

 

2,826

 

 

 

174

 

Total

 

123

 

 

$

1,069,359

 

 

$

40,013

 

 

$

4,876

 

 

$

121

 

 

$

1,074,235

 

 

$

40,134

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

10

 

 

$

298,080

 

 

$

1,766

 

 

$

 

 

$

 

 

$

298,080

 

 

$

1,766

 

U.S. federal agencies

 

1

 

 

 

376

 

 

 

2

 

 

 

 

 

 

 

 

 

376

 

 

 

2

 

Mortgage backed securities

 

7

 

 

 

2,824

 

 

 

14

 

 

 

 

 

 

 

 

 

2,824

 

 

 

14

 

States and political subdivisions

 

2

 

 

 

505

 

 

 

3

 

 

 

 

 

 

 

 

 

505

 

 

 

3

 

Other securities

 

1

 

 

 

2,994

 

 

 

6

 

 

 

 

 

 

 

 

 

2,994

 

 

 

6

 

Total

 

21

 

 

$

304,779

 

 

$

1,791

 

 

$

 

 

$

 

 

$

304,779

 

 

$

1,791

 

The Company has the ability and intent to hold the debt securities classified as held for investment until they mature, at which time the Company will receive full value for the debt securities. Furthermore, as of March 31, 2022 and December 31, 2021, the Company also had the ability and intent to hold the debt securities classified as available for sale for a period of time sufficient for a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were purchased. The fair value of those debt securities having unrealized losses is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline. The Company has no intent or requirement to sell before the recovery of the unrealized loss; therefore, no impairment loss was realized in the Company’s consolidated statement of comprehensive income.

9


(4) LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

(4)

LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

Loans held for investment are summarized by portfolio segment as follows:

 

March 31, 2021

 

 

December 31, 2020

 

Amount

 

 

Amount

 

March 31, 2022

 

 

December 31, 2021

 

(Dollars in thousands)

 

(Dollars in thousands)

 

BancFirst

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

$

636,652

 

 

$

641,987

 

$

784,619

 

$

684,739

 

Commercial real estate non-owner occupied

 

959,988

 

 

 

971,158

 

 

1,160,506

 

1,095,324

 

Construction and development < 60 months

 

258,585

 

 

 

229,615

 

 

458,859

 

415,466

 

Construction residential real estate < 60 months

 

196,096

 

 

 

206,195

 

 

282,027

 

254,524

 

Residential real estate first lien

 

844,149

 

 

 

853,316

 

 

1,032,732

 

937,006

 

Residential real estate all other

 

165,513

 

 

 

168,081

 

 

160,843

 

161,018

 

Farmland

 

251,875

 

 

 

252,958

 

 

276,465

 

272,179

 

Commercial and agricultural non-real estate

 

1,101,518

 

 

 

1,159,810

 

 

1,291,627

 

1,256,487

 

Consumer non-real estate

 

348,988

 

 

 

355,405

 

 

419,490

 

413,370

 

Oil and gas

 

172,300

 

 

 

179,355

 

 

427,792

 

428,908

 

Other loans (2)

 

878,233

 

 

 

822,078

 

 

199,380

 

 

 

250,421

 

Pegasus Bank

 

544,493

 

 

 

554,548

 

Total (1)

$

6,358,390

 

 

$

6,394,506

 

$

6,494,340

 

 

$

6,169,442

 

(1) Excludes accrued interest receivable of $24.7 million at March 31, 2021 and $26.0 million at December 31, 2020, that is recorded in accrued interest receivable and other assets.

 

(2) Includes PPP loans held for investment of $713.7 million, net of unamortized processing fees of $23.3 million at March 31, 2021 and $652.7 million, net of unamortized processing fees of $14.5 million at December 31, 2020.

 

(1) Excludes accrued interest receivable of $22.1 million at March 31, 2022 and $21.0 million at December 31, 2021, that is recorded in accrued interest receivable and other assets.

(1) Excludes accrued interest receivable of $22.1 million at March 31, 2022 and $21.0 million at December 31, 2021, that is recorded in accrued interest receivable and other assets.

 

(2) Includes PPP loans held for investment of $30.6 million, net of unamortized processing fees of $394,000, at March 31, 2022 and $80.4 million, net of unamortized processing fees of $2.0 million, at December 31, 2021.

(2) Includes PPP loans held for investment of $30.6 million, net of unamortized processing fees of $394,000, at March 31, 2022 and $80.4 million, net of unamortized processing fees of $2.0 million, at December 31, 2021.

 

Other loans. Other loans consist of loans approved by the Small Business Administration (“SBA”), which include loans funded through the Paycheck Protection Program (“PPP”). Since PPP loans are fully guaranteed by the SBA, there is no expected credit loss related to these loans. In April 2020, the Company began originating loans to qualified small businesses under the PPP administered by the SBA. During the three months ended March 31, 2021, $9.8 million ofThe Company had processing fees, which were recognized as interest income related to the PPP loans.loans totaling $1.7 million and $9.8 million during the three months ended March 31, 2022 and 2021, respectively.

BancFirst’sThe Company's loans are mostly to customers within Oklahomacurrently 84% held by BancFirst and 16% held by Pegasus and Worthington. In addition, approximately 52%64% of the Company's loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual and related borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, 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.

BancFirst’s commercial and agricultural non-real estate and oil and gas loan categories include upstream and midstream energy loans, and loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers. The balance of upstream energy loans was approximately $183 million at March 31, 2021 and approximately $191 million at December 31, 2020. The balance of midstream energy loans was approximately $33 million at March 31, 2021 and approximately $50 million at December 31, 2020. The balance of the ancillary services energy loans was approximately $67 million at March 31, 2021 and approximately $59 million at December 31, 2020.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $294 million or 54% of the loans are secured by real estate at March 31, 2021. Pegasus Bank’s commercial and agricultural non-real estate loans were approximately $228 million at March 31, 2021 and approximately $262 million at December 31, 2020. Pegasus Bank’s commercial and agricultural non-real estate loan category includes upstream energy loans, and loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers. The balance of upstream energy loans was approximately $109 million at March 31, 2021 and approximately $107 million at December 31, 2020. The balance of midstream energy loans was approximately $11 million at both March 31, 2021 and December 31, 2020. The balance of the ancillary services energy loans was approximately $15 million at March 31, 2021 and approximately $13 million at December 31, 2020.

Accounting policies related to appraisals, and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

9


The Company's portfolio segment descriptions and the weighted average remaining life of portfolio segments are disclosed in Note (5) to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Troubled Debt Restructurings, Other Real Estate Owned and Repossessed Assets and Held for Sale Assets

The following is a summary of troubled debt restructurings and other real estate owned and repossessed assets:

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

March 31, 2022

 

 

December 31, 2021

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Troubled debt restructurings

 

$

7,801

 

 

$

7,784

 

 

$

2,345

 

$

3,665

 

Other real estate owned and repossessed assets

 

$

30,320

 

 

$

32,480

 

 

$

39,729

 

$

39,553

 

The Company charges interest on principal balances outstanding on troubled debt restructurings during deferral periods. The current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings were not considered to be material.

Other real estate owned includes approximately $2.4 million related to the Company's previous headquarters. As of both March 31, 2022 and December 31, 2021, other real estate owned included a single commercial real estate property recorded at approximately $29.5 million.

10


During the first quarter of 2021,three months ended March 31, 2022, the Company sold property held in other real estate owned for a total lossgain of $55,000,$726,000, compared to a total gainloss of $2.2 million$55,000 in the first quarter of 2020.three months ended March 31, 2021.

Nonaccrual loans

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $521,000$376,000 for the three months ended March 31, 20212022 and approximately $332,000$521,000 for the three months ended March 31, 2020.2021.

Nonaccrual loans guaranteed by government agencies totaled approximately $6.6$3.4 million at March 31, 20212022 and approximately $7.8$3.3 million at December 31, 2020.2021.

The following table is a summary of amounts included in nonaccrual loans, segregated by portfolio segment.

 

 

March 31, 2021

 

 

December 31, 2020

 

 

(Dollars in thousands)

 

 

March 31, 2022

 

 

December 31, 2021

 

BancFirst

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

969

 

 

$

1,404

 

 

$

3,112

 

 

$

2,900

 

Commercial real estate non-owner occupied

 

 

4,794

 

 

 

4,719

 

 

 

407

 

 

 

407

 

Construction and development < 60 months

 

 

91

 

 

 

95

 

 

 

104

 

 

 

80

 

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate first lien

 

 

3,163

 

 

 

3,615

 

 

 

2,391

 

 

 

2,763

 

Residential real estate all other

 

 

1,293

 

 

 

1,362

 

 

 

133

 

 

 

280

 

Farmland

 

 

5,848

 

 

 

7,901

 

 

 

4,059

 

 

 

4,224

 

Commercial and agricultural non-real estate

 

 

12,391

 

 

 

12,782

 

 

 

5,956

 

 

 

7,569

 

Consumer non-real estate

 

 

212

 

 

 

268

 

 

 

111

 

 

 

148

 

Oil and gas

 

 

 

 

 

 

 

 

 

 

 

1,070

 

Other loans

 

 

6,565

 

 

 

5,399

 

 

 

1,180

 

 

 

1,451

 

Pegasus Bank

 

 

 

 

 

 

Total

 

$

35,326

 

 

$

37,545

 

 

$

17,453

 

 

$

20,892

 

11



Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following table presents an age analysis of ourthe Company's loans held for investment:

 

 

Age Analysis of Past Due Loans

 

 

30-59

Days

Past Due

 

 

60-89

Days

Past Due

 

 

90 Days

and

Greater

 

 

Total

Past Due

Loans

 

 

Current

Loans

 

 

Total Loans

 

 

Accruing

Loans 90

Days or

More

Past Due

 

 

Age Analysis of Past Due Loans

 

 

(Dollars in thousands)

 

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

As of March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

601

 

 

$

80

 

 

$

739

 

 

$

1,420

 

 

$

635,232

 

 

$

636,652

 

 

$

 

 

$

731

 

$

4

 

$

1,621

 

$

2,356

 

$

782,263

 

$

784,619

 

$

 

Commercial real estate non-owner occupied

 

 

4,757

 

 

 

 

 

 

108

 

 

 

4,865

 

 

 

955,123

 

 

 

959,988

 

 

 

33

 

 

 

962

 

407

 

 

1,369

 

1,159,137

 

1,160,506

 

 

Construction and development < 60 months

 

 

419

 

 

 

45

 

 

 

 

 

 

464

 

 

 

258,121

 

 

 

258,585

 

 

 

 

 

 

106

 

 

 

 

 

106

 

 

 

458,753

 

 

 

458,859

 

 

 

 

Construction residential real estate < 60 months

 

 

1,510

 

 

 

 

 

 

 

 

 

1,510

 

 

 

194,586

 

 

 

196,096

 

 

 

 

 

 

97

 

 

 

97

 

 

 

281,930

 

 

 

282,027

 

 

 

 

Residential real estate first lien

 

 

5,444

 

 

 

706

 

 

 

2,927

 

 

 

9,077

 

 

 

835,072

 

 

 

844,149

 

 

 

1,022

 

 

 

3,815

 

744

 

2,177

 

6,736

 

1,025,996

 

1,032,732

 

1,369

 

Residential real estate all other

 

 

1,588

 

 

 

30

 

 

 

1,338

 

 

 

2,956

 

 

 

162,557

 

 

 

165,513

 

 

 

173

 

 

 

350

 

102

 

579

 

1,031

 

159,812

 

160,843

 

559

 

Farmland

 

 

614

 

 

 

140

 

 

 

4,242

 

 

 

4,996

 

 

 

246,879

 

 

 

251,875

 

 

 

14

 

 

 

595

 

 

 

433

 

 

 

3,245

 

 

 

4,273

 

 

 

272,192

 

 

 

276,465

 

 

 

37

 

Commercial and agricultural non-real estate

 

 

1,164

 

 

 

374

 

 

 

5,019

 

 

 

6,557

 

 

 

1,094,961

 

 

 

1,101,518

 

 

 

1,326

 

 

 

6,486

 

2,994

 

2,891

 

12,371

 

1,279,256

 

1,291,627

 

214

 

Consumer non-real estate

 

 

1,589

 

 

 

330

 

 

 

430

 

 

 

2,349

 

 

 

346,639

 

 

 

348,988

 

 

 

365

 

 

 

2,377

 

416

 

387

 

3,180

 

416,310

 

419,490

 

353

 

Oil and gas

 

 

61

 

 

 

 

 

 

 

 

 

61

 

 

 

172,239

 

 

 

172,300

 

 

 

 

 

 

1,068

 

83

 

 

1,151

 

426,641

 

427,792

 

 

Other loans

 

 

221

 

 

 

428

 

 

 

3,897

 

 

 

4,546

 

 

 

873,687

 

 

 

878,233

 

 

 

2,349

 

 

 

1,247

 

 

 

1,207

 

 

 

3,836

 

 

 

6,290

 

 

 

193,090

 

 

 

199,380

 

 

 

3,828

 

Pegasus Bank

 

 

 

 

 

1,747

 

 

 

 

 

 

1,747

 

 

 

542,746

 

 

 

544,493

 

 

 

 

Total

 

$

17,968

 

 

$

3,880

 

 

$

18,700

 

 

$

40,548

 

 

$

6,317,842

 

 

$

6,358,390

 

 

$

5,282

 

 

$

17,834

 

 

$

6,390

 

 

$

14,736

 

 

$

38,960

 

 

$

6,455,380

 

 

$

6,494,340

 

 

$

6,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

1,096

 

 

$

108

 

 

$

1,164

 

 

$

2,368

 

 

$

639,619

 

 

$

641,987

 

 

$

 

 

$

972

 

$

223

 

$

1,363

 

$

2,558

 

$

682,181

 

$

684,739

 

$

18

 

Commercial real estate non-owner occupied

 

 

323

 

 

 

 

 

 

34

 

 

 

357

 

 

 

970,801

 

 

 

971,158

 

 

 

35

 

 

 

7,244

 

 

 

7,244

 

1,088,080

 

1,095,324

 

 

Construction and development < 60 months

 

 

511

 

 

 

86

 

 

 

 

 

 

597

 

 

 

229,018

 

 

 

229,615

 

 

 

 

 

 

136

 

 

 

 

 

 

 

 

 

136

 

 

 

415,330

 

 

 

415,466

 

 

 

 

Construction residential real estate < 60 months

 

 

1,106

 

 

 

 

 

 

282

 

 

 

1,388

 

 

 

204,807

 

 

 

206,195

 

 

 

282

 

 

 

2,264

 

 

 

 

 

2,264

 

 

 

252,260

 

 

 

254,524

 

 

 

 

Residential real estate first lien

 

 

5,428

 

 

 

1,463

 

 

 

2,978

 

 

 

9,869

 

 

 

843,447

 

 

 

853,316

 

 

 

945

 

 

 

3,351

 

567

 

2,817

 

6,735

 

930,271

 

937,006

 

1,704

 

Residential real estate all other

 

 

520

 

 

 

55

 

 

 

1,606

 

 

 

2,181

 

 

 

165,900

 

 

 

168,081

 

 

 

384

 

 

 

293

 

30

 

451

 

774

 

160,244

 

161,018

 

431

 

Farmland

 

 

1,297

 

 

 

344

 

 

 

6,223

 

 

 

7,864

 

 

 

245,094

 

 

 

252,958

 

 

 

135

 

 

 

253

 

37

 

2,077

 

2,367

 

269,812

 

272,179

 

139

 

Commercial and agricultural non-real estate

 

 

2,788

 

 

 

1,794

 

 

 

4,345

 

 

 

8,927

 

 

 

1,150,883

 

 

 

1,159,810

 

 

 

465

 

 

 

1,807

 

199

 

4,574

 

6,580

 

1,249,907

 

1,256,487

 

124

 

Consumer non-real estate

 

 

2,154

 

 

 

501

 

 

 

534

 

 

 

3,189

 

 

 

352,216

 

 

 

355,405

 

 

 

386

 

 

 

1,873

 

321

 

272

 

2,466

 

410,904

 

413,370

 

254

 

Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

179,355

 

 

 

179,355

 

 

 

 

 

 

 

 

 

 

428,908

 

428,908

 

 

Other loans

 

 

951

 

 

 

1,223

 

 

 

6,618

 

 

 

8,792

 

 

 

813,286

 

 

 

822,078

 

 

 

2,170

 

 

 

1,773

 

 

 

347

 

 

 

2,646

 

 

 

4,766

 

 

 

245,655

 

 

 

250,421

 

 

 

2,294

 

Pegasus Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

554,548

 

 

 

554,548

 

 

 

 

Total

 

$

16,174

 

 

$

5,574

 

 

$

23,784

 

 

$

45,532

 

 

$

6,348,974

 

 

$

6,394,506

 

 

$

4,802

 

 

$

19,966

 

 

$

1,724

 

 

$

14,200

 

 

$

35,890

 

 

$

6,133,552

 

 

$

6,169,442

 

 

$

4,964

 

Due to the impacts of the COVID-19 pandemic, the Company had approximately $88 million in modified loans as of March 31, 2021 and $81.7 million in modified loans as of December 31, 2020, most of which were secured by commercial real estate. These modifications were undertaken in response to Section 4013 of the CARES Act and the regulatory intent outlined in the Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus and to provide businesses financial flexibility until the economy has time to recover to a more normal level of activity. However, these modifications, which typically involve payment modifications and forbearance, also have the effect of delaying recognition of loans that may ultimately be permanently impaired. The timing and extent of such consequences are difficult to ascertain at this time and are dependent on the duration of the COVID-19 pandemic, the level and success of the government’s economic stimulus, and further regulatory guidance. These modified loans are included in Current Loans in the table above.



Credit Quality Indicators

The Company considers credit quality indicators to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical credit loss experience and economic conditions. These indicators are reviewed and updated regularly throughout the year. An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions. The general characteristics of the risk grades and the table summarizing ourthe Company’s gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2020,2021, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

The Company’s revolving loans that are converted to term loans are not material and therefore have not been presented.

The following table summarizes ourthe Company’s gross loans held for investment by year of origination and internally assigned credit grades as of March 31, 2021::

12


 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

 

Revolving Loans Amortized Cost Basis

 

Total

 

 

(Dollars in thousands)

As of March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$23,563

 

$146,668

 

$86,383

 

$63,000

 

$37,685

 

$117,044

 

$16,271

 

$490,614

Grade 2

 

4,208

 

40,127

 

30,459

 

10,616

 

9,613

 

37,459

 

4,201

 

136,683

Grade 3

 

9

 

3,825

 

30

 

466

 

483

 

3,573

 

 

8,386

Grade 4

 

 

34

 

63

 

317

 

 

248

 

307

 

969

Total commercial real estate owner occupied loans

 

27,780

 

190,654

 

116,935

 

74,399

 

47,781

 

158,324

 

20,779

 

636,652

Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

50,243

 

236,739

 

154,498

 

73,368

 

64,959

 

143,281

 

11,514

 

734,602

Grade 2

 

7,968

 

58,067

 

45,308

 

26,102

 

17,806

 

47,430

 

4,929

 

207,610

Grade 3

 

6,738

 

785

 

3,063

 

519

 

1,609

 

81

 

 

12,795

Grade 4

 

 

4,719

 

86

 

 

 

176

 

 

4,981

Total commercial real estate non-owner occupied loans

 

64,949

 

300,310

 

202,955

 

99,989

 

84,374

 

190,968

 

16,443

 

959,988

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

45,528

 

92,005

 

60,758

 

11,413

 

3,686

 

3,077

 

7,971

 

224,438

Grade 2

 

4,073

 

11,256

 

11,272

 

1,116

 

746

 

758

 

803

 

30,024

Grade 3

 

2,053

 

1,795

 

131

 

8

 

45

 

 

 

4,032

Grade 4

 

 

 

62

 

8

 

21

 

 

 

91

Total construction and development < 60 months

 

51,654

 

105,056

 

72,223

 

12,545

 

4,498

 

3,835

 

8,774

 

258,585

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

44,635

 

107,546

 

155

 

69

 

20

 

36

 

10,678

 

163,139

Grade 2

 

7,530

 

23,822

 

 

110

 

 

462

 

200

 

32,124

Grade 3

 

286

 

547

 

 

 

 

 

 

833

Total construction residential real estate < 60 months

 

52,451

 

131,915

 

155

 

179

 

20

 

498

 

10,878

 

196,096

Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

68,977

 

214,495

 

122,472

 

74,112

 

58,362

 

166,467

 

 

704,885

Grade 2

 

5,180

 

26,051

 

15,445

 

19,158

 

11,149

 

42,497

 

 

119,480

Grade 3

 

687

 

2,590

 

2,548

 

2,128

 

1,721

 

5,593

 

 

15,267

Grade 4

 

49

 

412

 

659

 

498

 

200

 

2,699

 

 

4,517

Total residential real estate first lien

 

74,893

 

243,548

 

141,124

 

95,896

 

71,432

 

217,256

 

 

844,149

Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

3,747

 

19,180

 

12,583

 

9,427

 

5,641

 

16,013

 

29,371

 

95,962

Grade 2

 

605

 

3,502

 

1,833

 

1,333

 

1,623

 

2,393

 

53,936

 

65,225

Grade 3

 

105

 

146

 

466

 

288

 

87

 

351

 

1,296

 

2,739

Grade 4

 

 

217

 

 

558

 

95

 

695

 

22

 

1,587

Total residential real estate all other

 

4,457

 

23,045

 

14,882

 

11,606

 

7,446

 

19,452

 

84,625

 

165,513

Farmland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

12,125

 

46,945

 

25,602

 

16,291

 

13,155

 

35,907

 

9,321

 

159,346

Grade 2

 

4,126

 

11,817

 

30,125

 

6,254

 

5,959

 

13,371

 

8,506

 

80,158

Grade 3

 

1,399

 

2,217

 

287

 

74

 

842

 

1,116

 

2,007

 

7,942

Grade 4

 

 

414

 

14

 

3,188

 

296

 

239

 

278

 

4,429

Total farmland

 

17,650

 

61,393

 

56,028

 

25,807

 

20,252

 

50,633

 

20,112

 

251,875

Commercial and agricultural non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

117,733

 

144,961

 

128,177

 

92,010

 

63,617

 

60,998

 

230,768

 

838,264

Grade 2

 

17,356

 

61,227

 

31,397

 

15,072

 

4,523

 

21,254

 

56,833

 

207,662

Grade 3

 

1,610

 

7,452

 

1,269

 

11,220

 

1,915

 

572

 

20,044

 

44,082

Grade 4

 

 

565

 

1,501

 

541

 

233

 

1,240

 

7,430

 

11,510

Total commercial and agricultural non-real estate

 

136,699

 

214,205

 

162,344

 

118,843

 

70,288

 

84,064

 

315,075

 

1,101,518

Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

47,697

 

139,148

 

78,071

 

33,990

 

11,288

 

4,788

 

6,700

 

321,682

Grade 2

 

4,182

 

11,293

 

4,782

 

2,869

 

775

 

608

 

288

 

24,797

Grade 3

 

125

 

476

 

781

 

335

 

193

 

64

 

4

 

1,978

Grade 4

 

2

 

133

 

182

 

76

 

41

 

96

 

1

 

531

Total consumer non-real estate

 

52,006

 

151,050

 

83,816

 

37,270

 

12,297

 

5,556

 

6,993

 

348,988

Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

71,423

 

36,838

 

62

 

74

 

 

4,071

 

14,562

 

127,030

Grade 2

 

8,431

 

8,706

 

651

 

 

 

 

9,619

 

27,407

Grade 3

 

17,737

 

126

 

 

 

 

 

 

17,863

Total oil and gas

 

97,591

 

45,670

 

713

 

74

 

 

4,071

 

24,181

 

172,300

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Revolving Loans Amortized Cost Basis

 

 

Total

 

 

 

(Dollars in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

53,454

 

 

$

130,071

 

 

$

115,334

 

 

$

94,782

 

 

$

49,997

 

 

$

120,371

 

 

$

24,862

 

 

$

588,871

 

Grade 2

 

 

39,504

 

 

 

39,029

 

 

 

33,297

 

 

 

22,802

 

 

 

9,986

 

 

 

35,244

 

 

 

10,657

 

 

 

190,519

 

Grade 3

 

 

 

 

 

42

 

 

 

459

 

 

 

601

 

 

 

258

 

 

 

541

 

 

 

212

 

 

 

2,113

 

Grade 4

 

 

 

 

 

303

 

 

 

591

 

 

 

870

 

 

 

200

 

 

 

845

 

 

 

307

 

 

 

3,116

 

Total commercial real estate owner occupied

 

 

92,958

 

 

 

169,445

 

 

 

149,681

 

 

 

119,055

 

 

 

60,441

 

 

 

157,001

 

 

 

36,038

 

 

 

784,619

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

27,931

 

 

 

258,527

 

 

 

208,346

 

 

 

116,081

 

 

 

51,072

 

 

 

118,840

 

 

 

37,306

 

 

 

818,103

 

Grade 2

 

 

18,461

 

 

 

52,282

 

 

 

46,895

 

 

 

50,872

 

 

 

42,738

 

 

 

88,046

 

 

 

29,259

 

 

 

328,553

 

Grade 3

 

 

7,063

 

 

 

 

 

 

 

 

 

3,206

 

 

 

107

 

 

 

2,828

 

 

 

 

 

 

13,204

 

Grade 4

 

 

 

 

 

407

 

 

 

 

 

 

 

 

 

207

 

 

 

32

 

 

 

 

 

 

646

 

Total commercial real estate non-owner occupied

 

 

53,455

 

 

 

311,216

 

 

 

255,241

 

 

 

170,159

 

 

 

94,124

 

 

 

209,746

 

 

 

66,565

 

 

 

1,160,506

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

53,028

 

 

 

162,575

 

 

 

39,428

 

 

 

42,116

 

 

 

3,719

 

 

 

6,572

 

 

 

35,506

 

 

 

342,944

 

Grade 2

 

 

14,386

 

 

 

32,079

 

 

 

4,323

 

 

 

13,028

 

 

 

1,825

 

 

 

1,314

 

 

 

44,553

 

 

 

111,508

 

Grade 3

 

 

1,198

 

 

 

3,000

 

 

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,303

 

Grade 4

 

 

 

 

 

 

 

 

33

 

 

 

54

 

 

 

 

 

 

17

 

 

 

 

 

 

104

 

Total construction and development < 60 months

 

 

68,612

 

 

 

197,654

 

 

 

43,889

 

 

 

55,198

 

 

 

5,544

 

 

 

7,903

 

 

 

80,059

 

 

 

458,859

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

54,418

 

 

 

159,373

 

 

 

4,522

 

 

 

33

 

 

 

 

 

 

46

 

 

 

26,274

 

 

 

244,666

 

Grade 2

 

 

8,528

 

 

 

23,471

 

 

 

473

 

 

 

 

 

 

 

 

 

419

 

 

 

3,957

 

 

 

36,848

 

Grade 3

 

 

410

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

513

 

Total construction residential real estate < 60 months

 

 

63,356

 

 

 

182,947

 

 

 

4,995

 

 

 

33

 

 

 

 

 

 

465

 

 

 

30,231

 

 

 

282,027

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

82,439

 

 

 

255,075

 

 

 

172,583

 

 

 

102,582

 

 

 

65,952

 

 

 

174,331

 

 

 

7,895

 

 

 

860,857

 

Grade 2

 

 

11,906

 

 

 

41,467

 

 

 

28,275

 

 

 

15,303

 

 

 

12,622

 

 

 

46,039

 

 

 

 

 

 

155,612

 

Grade 3

 

 

1,293

 

 

 

1,506

 

 

 

886

 

 

 

1,839

 

 

 

1,936

 

 

 

4,688

 

 

 

 

 

 

12,148

 

Grade 4

 

 

 

 

 

131

 

 

 

239

 

 

 

418

 

 

 

983

 

 

 

2,344

 

 

 

 

 

 

4,115

 

Total residential real estate first lien

 

 

95,638

 

 

 

298,179

 

 

 

201,983

 

 

 

120,142

 

 

 

81,493

 

 

 

227,402

 

 

 

7,895

 

 

 

1,032,732

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

5,357

 

 

 

15,974

 

 

 

13,307

 

 

 

7,665

 

 

 

4,976

 

 

 

14,588

 

 

 

31,325

 

 

 

93,192

 

Grade 2

 

 

933

 

 

 

2,028

 

 

 

2,342

 

 

 

1,895

 

 

 

1,470

 

 

 

3,044

 

 

 

52,937

 

 

 

64,649

 

Grade 3

 

 

40

 

 

 

304

 

 

 

95

 

 

 

88

 

 

 

254

 

 

 

946

 

 

 

559

 

 

 

2,286

 

Grade 4

 

 

 

 

 

13

 

 

 

178

 

 

 

 

 

 

38

 

 

 

101

 

 

 

386

 

 

 

716

 

Total residential real estate all other

 

 

6,330

 

 

 

18,319

 

 

 

15,922

 

 

 

9,648

 

 

 

6,738

 

 

 

18,679

 

 

 

85,207

 

 

 

160,843

 

 Farmland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

15,574

 

 

 

44,160

 

 

 

35,899

 

 

 

23,593

 

 

 

12,282

 

 

 

36,405

 

 

 

5,763

 

 

 

173,676

 

Grade 2

 

 

4,505

 

 

 

16,679

 

 

 

7,874

 

 

 

22,007

 

 

 

6,381

 

 

 

16,671

 

 

 

13,102

 

 

 

87,219

 

Grade 3

 

 

1,346

 

 

 

2,896

 

 

 

1,862

 

 

 

1,873

 

 

 

70

 

 

 

2,704

 

 

 

1,880

 

 

 

12,631

 

Grade 4

 

 

 

 

 

1,125

 

 

 

379

 

 

 

 

 

 

979

 

 

 

224

 

 

 

232

 

 

 

2,939

 

Total farmland

 

 

21,425

 

 

 

64,860

 

 

 

46,014

 

 

 

47,473

 

 

 

19,712

 

 

 

56,004

 

 

 

20,977

 

 

 

276,465

 

 Commercial and agricultural non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

77,553

 

 

 

296,814

 

 

 

93,424

 

 

 

75,665

 

 

 

20,679

 

 

 

67,573

 

 

 

315,085

 

 

 

946,793

 

Grade 2

 

 

17,955

 

 

 

75,007

 

 

 

30,905

 

 

 

20,516

 

 

 

27,531

 

 

 

12,032

 

 

 

138,823

 

 

 

322,769

 

Grade 3

 

 

1,562

 

 

 

2,516

 

 

 

1,717

 

 

 

1,136

 

 

 

2,259

 

 

 

1,105

 

 

 

7,479

 

 

 

17,774

 

Grade 4

 

 

358

 

 

 

799

 

 

 

266

 

 

 

947

 

 

 

509

 

 

 

1,171

 

 

 

241

 

 

 

4,291

 

Total commercial and agricultural non-real estate

 

 

97,428

 

 

 

375,136

 

 

 

126,312

 

 

 

98,264

 

 

 

50,978

 

 

 

81,881

 

 

 

461,628

 

 

 

1,291,627

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

55,988

 

 

 

175,287

 

 

 

67,276

 

 

 

36,818

 

 

 

13,972

 

 

 

5,867

 

 

 

21,964

 

 

 

377,172

 

Grade 2

 

 

6,002

 

 

 

16,755

 

 

 

6,569

 

 

 

4,973

 

 

 

1,806

 

 

 

2,179

 

 

 

1,749

 

 

 

40,033

 

Grade 3

 

 

136

 

 

 

636

 

 

 

299

 

 

 

364

 

 

 

129

 

 

 

103

 

 

 

3

 

 

 

1,670

 

Grade 4

 

 

51

 

 

 

143

 

 

 

84

 

 

 

224

 

 

 

110

 

 

 

3

 

 

 

 

 

 

615

 

Total consumer non-real estate

 

 

62,177

 

 

 

192,821

 

 

 

74,228

 

 

 

42,379

 

 

 

16,017

 

 

 

8,152

 

 

 

23,716

 

 

 

419,490

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

91,575

 

 

 

122,401

 

 

 

32,400

 

 

 

8,174

 

 

 

1,174

 

 

 

110

 

 

 

93,578

 

 

 

349,412

 

Grade 2

 

 

7,623

 

 

 

8,352

 

 

 

8,426

 

 

 

5,558

 

 

 

9,919

 

 

 

278

 

 

 

30,820

 

 

 

70,976

 

Grade 3

 

 

 

 

 

4,914

 

 

 

9

 

 

 

 

 

 

 

 

 

227

 

 

 

1,185

 

 

 

6,335

 

Grade 4

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69

 

 

 

1,069

 

Total oil and gas

 

 

99,198

 

 

 

136,667

 

 

 

40,835

 

 

 

13,732

 

 

 

11,093

 

 

 

615

 

 

 

125,652

 

 

 

427,792

 

 Other loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

5,658

 

 

 

60,549

 

 

 

38,097

 

 

 

26,158

 

 

 

18,786

 

 

 

14,429

 

 

 

30,235

 

 

 

193,912

 

Grade 2

 

 

 

 

 

296

 

 

 

 

 

 

 

 

 

65

 

 

 

2,933

 

 

 

471

 

 

 

3,765

 

Grade 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140

 

 

 

82

 

 

 

1,052

 

 

 

1,274

 

Grade 4

 

 

 

 

 

 

 

 

17

 

 

 

109

 

 

 

169

 

 

 

52

 

 

 

82

 

 

 

429

 

Total other loans

 

 

5,658

 

 

 

60,845

 

 

 

38,114

 

 

 

26,267

 

 

 

19,160

 

 

 

17,496

 

 

 

31,840

 

 

 

199,380

 

Total loans held for investment

 

$

666,235

 

 

$

2,008,089

 

 

$

997,214

 

 

$

702,350

 

 

$

365,300

 

 

$

785,344

 

 

$

969,808

 

 

$

6,494,340

 

13


13


Other loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

715,454

 

34,146

 

30,287

 

25,272

 

18,653

 

24,729

 

21,773

 

870,314

Grade 2

 

 

 

265

 

17

 

2,676

 

2,589

 

933

 

6,480

Grade 3

 

 

 

 

15

 

1

 

194

 

71

 

281

Grade 4

 

 

141

 

 

 

294

 

148

 

575

 

1,158

Total other loans

 

715,454

 

34,287

 

30,552

 

25,304

 

21,624

 

27,660

 

23,352

 

878,233

Pegasus Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

30,903

 

93,796

 

57,518

 

25,501

 

17,290

 

54,093

 

117,769

 

396,870

Grade 2

 

10,555

 

24,966

 

22,483

 

3,524

 

19,199

 

8,146

 

57,185

 

146,058

Grade 3

 

121

 

117

 

 

 

 

1,327

 

 

1,565

Total Pegasus Bank

 

41,579

 

118,879

 

80,001

 

29,025

 

36,489

 

63,566

 

174,954

 

544,493

Total loans held for investment

 

$1,337,163

 

$1,620,012

 

$961,728

 

$530,937

 

$376,501

 

$825,883

 

$706,166

 

$6,358,390

Allowance for Credit Losses Methodology

On January 1, 2020, theThe Company adopted ASC 326, which replaces the incurred loss methodology for determiningdetermines its provision for credit losses and allowance for credit losses with anusing the expected loss methodology that is referred to as the CECL model. Upon adoption, the allowance for credit losses was decreased by $3.2 million, with no impact to the consolidated statement of income.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist by identifying by portfolio segments,exist.

The increase in allowance for credit loss during 2022 was primarily related to the applicable weighted average life and measuringpurchase of loans without credit deterioration during the quarter.The decrease in the allowance for credit losses usingloss during 2021 was driven by a reversal of a pandemic-related provision during 2021 based on sustained improvements in the vintageeconomy, both nationally and in the Company's markets, which reduced the amount of expected credit loss analysis adjustedwithin the loan portfolio. This reduction was partially offset by additional allowance for qualitative factors. The weighted average life of the Company’s loans segments are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.credit loss required by newly acquired loans.

The following table details activity in the allowance for credit losses on loans for the period presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

 

Allowance for Credit Losses

 

 

Balance at

beginning of

period

 

 

Charge-

offs

 

 

Recoveries

 

 

Net

charge-offs

 

 

Provision

for credit losses on loans

 

 

Balance at

end of

period

 

 

Allowance for Credit Losses

 

 

(Dollars in thousands)

 

 

Balance at
beginning of
period

 

 

Initial allowance on loans purchased with credit deterioration

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

7,035

 

 

$

 

 

$

 

 

$

 

 

$

(440

)

 

$

6,595

 

 

$

6,410

 

$

 

$

(16

)

 

$

48

 

$

32

 

$

346

 

$

6,788

 

Commercial real estate non-owner occupied

 

 

11,842

 

 

 

(38

)

 

 

 

 

 

(38

)

 

 

5,151

 

 

 

16,955

 

 

 

16,987

 

 

 

 

 

3,687

 

20,674

 

Construction and development < 60 months

 

 

2,560

 

 

 

 

 

 

3

 

 

 

3

 

 

 

180

 

 

 

2,743

 

 

 

3,490

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

(184

)

 

 

3,309

 

Construction residential real estate < 60 months

 

 

627

 

 

 

 

 

 

 

 

 

 

 

 

356

 

 

 

983

 

 

 

1,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,072

 

 

 

2,164

 

Residential real estate first lien

 

 

2,570

 

 

 

(43

)

 

 

15

 

 

 

(28

)

 

 

50

 

 

 

2,592

 

 

 

3,076

 

2

 

(44

)

 

7

 

(37

)

 

380

 

3,421

 

Residential real estate all other

 

 

2,230

 

 

 

(16

)

 

 

3

 

 

 

(13

)

 

 

(344

)

 

 

1,873

 

 

 

2,104

 

 

 

402

 

402

 

(399

)

 

2,107

 

Farmland

 

 

3,136

 

 

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

3,077

 

 

 

4,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(439

)

 

 

4,383

 

Commercial and agricultural non-real estate

 

 

32,400

 

 

 

(104

)

 

 

26

 

 

 

(78

)

 

 

363

 

 

 

32,685

 

 

 

26,073

 

48

 

(171

)

 

113

 

(58

)

 

(77

)

 

25,986

 

Consumer non-real estate

 

 

3,377

 

 

 

(413

)

 

 

112

 

 

 

(301

)

 

 

180

 

 

 

3,256

 

 

 

3,734

 

28

 

(80

)

 

38

 

(42

)

 

51

 

3,771

 

Oil and gas

 

 

17,851

 

 

 

 

 

 

 

 

 

 

 

 

(5,720

)

 

 

12,131

 

 

 

12,978

 

 

 

 

 

(1,573

)

 

11,405

 

Other loans

 

 

3,182

 

 

 

(52

)

 

 

 

 

 

(52

)

 

 

60

 

 

 

3,190

 

 

 

3,170

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

 

 

72

 

 

 

3,231

 

Pegasus Bank

 

 

4,556

 

 

 

 

 

 

1

 

 

 

1

 

 

 

223

 

 

 

4,780

 

Total

 

$

91,366

 

 

$

(666

)

 

$

160

 

 

$

(506

)

 

$

 

 

$

90,860

 

 

$

83,936

 

 

$

78

 

 

$

(322

)

 

$

611

 

 

$

289

 

 

$

2,936

 

 

$

87,239

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

��

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,911

 

 

$

 

 

$

 

 

$

 

 

$

(406

)

 

$

6,505

 

Commercial real estate non-owner occupied

 

 

12,318

 

 

 

(38

)

 

 

 

 

 

(38

)

 

 

5,219

 

 

 

17,499

 

Construction and development < 60 months

 

 

2,723

 

 

 

 

 

 

3

 

 

 

3

 

 

 

217

 

 

 

2,943

 

Construction residential real estate < 60 months

 

 

726

 

 

 

 

 

 

 

 

 

 

 

 

366

 

 

 

1,092

 

Residential real estate first lien

 

 

2,822

 

 

 

(43

)

 

 

15

 

 

 

(28

)

 

 

143

 

 

 

2,937

 

Residential real estate all other

 

 

2,236

 

 

 

(16

)

 

 

3

 

 

 

(13

)

 

 

(343

)

 

 

1,880

 

Farmland

 

 

3,153

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

3,088

 

  Commercial and agricultural non-real estate

 

 

33,020

 

 

 

(104

)

 

 

27

 

 

 

(77

)

 

 

922

 

 

 

33,865

 

  Consumer non-real estate

 

 

3,542

 

 

 

(413

)

 

 

112

 

 

 

(301

)

 

 

180

 

 

 

3,421

 

  Oil and gas

 

 

20,733

 

 

 

 

 

 

 

 

 

 

 

 

(6,293

)

 

 

14,440

 

  Other loans

 

 

3,182

 

 

 

(52

)

 

 

 

 

 

(52

)

 

 

60

 

 

 

3,190

 

Total

 

$

91,366

 

 

$

(666

)

 

$

160

 

 

$

(506

)

 

$

 

 

$

90,860

 

 

 

Allowance for Credit Losses

 

 

 

Balance at

beginning of

period

 

 

Impact of CECL adoption

 

 

Initial allowance on loans purchased with credit deterioration

 

 

Charge-

offs

 

 

Recoveries

 

 

Net

charge-offs

 

 

Provision for credit losses on loans

 

 

Balance at

end of

period

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

5,625

 

 

$

(2,806

)

 

$

432

 

 

$

 

 

$

 

 

$

 

 

$

1,293

 

 

$

4,544

 

Commercial real estate non-owner occupied

 

 

8,358

 

 

 

(5,507

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,084

 

 

 

5,935

 

Construction and development < 60 months

 

 

2,214

 

 

 

(1,056

)

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

 

 

(19

)

 

 

1,136

 

Construction residential real estate < 60 months

 

 

1,933

 

 

 

(778

)

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

 

 

464

 

 

 

1,618

 

Residential real estate first lien

 

 

8,692

 

 

 

(3,831

)

 

 

7

 

 

 

(152

)

 

 

2

 

 

 

(150

)

 

 

1,474

 

 

 

6,192

 

Residential real estate all other

 

 

2,767

 

 

 

(1,408

)

 

 

 

 

 

(25

)

 

 

27

 

 

 

2

 

 

 

931

 

 

 

2,292

 

      Farmland

 

 

2,821

 

 

 

(1,408

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

374

 

 

 

1,788

 

  Commercial and agricultural non-real estate

 

 

13,462

 

 

 

13,195

 

 

 

62

 

 

 

(87

)

 

 

17

 

 

 

(70

)

 

 

7,344

 

 

 

33,993

 

  Consumer non-real estate

 

 

3,252

 

 

 

(622

)

 

 

 

 

 

(321

)

 

 

57

 

 

 

(264

)

 

 

1,019

 

 

 

3,385

 

  Oil and gas

 

 

1,883

 

 

 

(1,346

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,746

 

 

 

3,283

 

  Other loans

 

 

2,632

 

 

 

(116

)

 

 

 

 

 

 

 

 

2

 

 

 

2

 

 

 

233

 

 

 

2,751

 

Pegasus Bank

 

 

599

 

 

 

2,488

 

 

 

 

 

 

(571

)

 

 

7

 

 

 

(564

)

 

 

640

 

 

 

3,163

 

Total

 

$

54,238

 

 

$

(3,195

)

 

$

502

 

 

$

(1,160

)

 

$

112

 

 

$

(1,048

)

 

$

19,583

 

 

$

70,080

 

14


Purchased Credit Deteriorated Loans

The Company has previously purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The Company did not purchase credit-deteriorated loans during the three-month period ended March 31, 2021. The credit-deteriorated loans purchased during the three-month periodthree months ended March 31, 20202022 were as follows:

 

Loans acquired

with deteriorated

credit quality

 

 

(Dollars in thousands)

 

 

Loans acquired
with deteriorated
credit quality

 

For the period ended March 31, 2020

 

 

 

 

 

(Dollars in thousands)

 

For the period ended March 31, 2022

 

 

 

Purchase price of loans at acquisition

 

$

1,761

 

 

$

661

 

Allowance for credit losses at acquisition

 

 

502

 

 

 

78

 

Par value of acquired loans at acquisition

 

$

2,263

 

 

$

739

 

 

 

 



15


Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. During the three months ended March 31, 20212022 and 2020,2021, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

Collateral Type

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

As of March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

423

 

 

$

 

 

$

 

 

$

 

 

$

423

 

 

$

176

 

 

$

1,894

 

 

$

 

 

$

 

 

$

 

 

$

1,894

 

 

$

569

 

Commercial real estate non-owner occupied

 

 

4,719

 

 

 

 

 

 

 

 

 

 

 

 

4,719

 

 

 

1,000

 

 

 

1,563

 

 

 

 

 

 

 

 

 

 

 

 

1,563

 

 

 

282

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate first lien

 

 

805

 

 

 

 

 

 

 

 

 

 

 

 

805

 

 

 

138

 

 

 

756

 

 

 

 

 

 

 

 

 

 

 

 

756

 

 

 

107

 

Residential real estate all other

 

 

631

 

 

 

 

 

 

 

 

 

 

 

 

631

 

 

 

550

 

 

 

55

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

35

 

Farmland

 

 

3,215

 

 

 

 

 

 

 

 

 

 

 

 

3,215

 

 

 

1,113

 

 

 

7,290

 

 

 

 

 

 

 

 

 

 

 

 

7,290

 

 

 

1,322

 

Commercial and agricultural non-real estate

 

 

 

 

 

8,310

 

 

 

 

 

 

1,317

 

 

 

9,627

 

 

 

4,129

 

 

 

 

 

 

5,072

 

 

 

 

 

 

5,777

 

 

 

10,849

 

 

 

4,451

 

Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

50

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

85

 

 

 

85

 

 

 

57

 

Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other loans

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

 

 

16

 

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

110

 

 

 

72

 

Pegasus Bank

 

 

1,255

 

 

 

 

 

 

 

 

 

 

 

 

1,255

 

 

 

222

 

Total collateral-dependent loans held for investment

 

$

11,048

 

 

$

8,327

 

 

$

 

 

$

1,367

 

 

$

20,742

 

 

$

7,355

 

 

$

11,558

 

 

$

5,182

 

 

$

 

 

$

5,862

 

 

$

22,602

 

 

$

6,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

 

Collateral Type

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

848

 

 

$

 

 

$

 

 

$

 

 

$

848

 

 

$

226

 

 

$

1,952

 

 

$

 

 

$

 

 

$

 

 

$

1,952

 

 

$

576

 

Commercial real estate non-owner occupied

 

 

4,719

 

 

 

 

 

 

 

 

 

 

 

 

4,719

 

 

 

1,000

 

 

 

1,404

 

 

 

 

 

 

 

 

 

 

 

 

1,404

 

 

 

263

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate first lien

 

 

860

 

 

 

 

 

 

 

 

 

 

 

 

860

 

 

 

151

 

 

 

871

 

 

 

 

 

 

 

 

 

 

 

 

871

 

 

 

143

 

Residential real estate all other

 

 

866

 

 

 

 

 

 

 

 

 

 

 

 

866

 

 

 

616

 

 

 

199

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

178

 

Farmland

 

 

3,258

 

 

 

 

 

 

 

 

 

 

 

 

3,258

 

 

 

1,114

 

 

 

8,703

 

 

 

 

 

 

 

 

 

 

 

 

8,703

 

 

 

1,805

 

Commercial and agricultural non-real estate

 

 

 

 

 

8,460

 

 

 

 

 

 

413

 

 

 

8,873

 

 

 

2,813

 

 

 

 

 

 

6,363

 

 

 

 

 

 

5,202

 

 

 

11,565

 

 

 

4,867

 

Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

109

 

 

 

109

 

 

 

58

 

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

54

 

 

 

20

 

Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other loans

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

 

 

12

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

 

109

 

 

 

71

 

Pegasus Bank

 

 

1,257

 

 

 

 

 

 

 

 

 

 

 

 

1,257

 

 

 

222

 

Total collateral-dependent loans held for investment

 

$

11,808

 

 

$

8,473

 

 

$

 

 

$

522

 

 

$

20,803

 

 

$

6,212

 

 

$

13,129

 

 

$

6,472

 

 

$

 

 

$

5,256

 

 

$

24,857

 

 

$

7,923

 

Non-Cash Transfers from Loans and Premises and Equipment

Transfers from loans and premises and equipment to other real estate owned and repossessed assets are non-cash transactions, and are not included in the statements of cash flow.

Transfers from loans and premises and equipment to other real estate owned and repossessed assets during the periods presented are summarized as follows:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

2,153

 

 

$

357

 

Repossessed assets

 

 

277

 

 

 

220

 

Total

 

$

2,430

 

 

$

577

 

16



 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

357

 

 

$

2,342

 

Repossessed assets

 

 

220

 

 

 

318

 

Total

 

$

577

 

 

$

2,660

 

(5) INTANGIBLE ASSETS AND GOODWILL

(5)

INTANGIBLE ASSETS AND GOODWILL

The following is a summary of intangible assets:assets as of the date listed:

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

(Dollars in thousands)

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

As of March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

Core deposit intangibles

 

$

28,963

 

 

$

(11,366

)

 

$

17,597

 

 

$

36,154

 

$

(11,087

)

 

$

25,067

 

Customer relationship intangibles

 

 

3,350

 

 

 

(2,741

)

 

 

609

 

 

 

3,350

 

 

 

(2,961

)

 

 

389

 

Total

 

$

32,313

 

 

$

(14,107

)

 

$

18,206

 

 

$

39,504

 

 

$

(14,048

)

 

$

25,456

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

Core deposit intangibles

 

$

33,411

 

 

$

(15,076

)

 

$

18,335

 

 

$

27,433

 

$

(10,311

)

 

$

17,122

 

Customer relationship intangibles

 

 

3,350

 

 

 

(2,686

)

 

 

664

 

 

 

3,350

 

 

 

(2,906

)

 

 

444

 

Total

 

$

36,761

 

 

$

(17,762

)

 

$

18,999

 

 

$

30,783

 

 

$

(13,217

)

 

$

17,566

 

The following is a summary of goodwill by business segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Executive,

 

 

 

 

 

 

Metropolitan

 

 

Community

 

 

Pegasus

 

 

Financial

 

 

Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks

 

 

Banks

 

 

Bank

 

 

Services

 

 

& Support

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

Metropolitan Banks

 

 

Community Banks

 

 

Pegasus

 

 

Worthington

 

 

Other Financial Services

 

 

Executive, Operations & Support

 

 

Consolidated

 

Three months ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

13,767

 

$

61,212

 

$

68,855

 

$

0

 

$

5,464

 

$

624

 

$

149,922

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

26,641

 

 

 

 

 

 

 

 

 

26,641

 

Balance at beginning and end of period

 

$

13,767

 

 

$

61,212

 

 

$

68,855

 

 

$

5,464

 

 

$

624

 

 

$

149,922

 

 

$

13,767

 

 

$

61,212

 

 

$

68,855

 

 

$

26,641

 

 

$

5,464

 

 

$

624

 

 

$

176,563

 

The Company acquired Worthington on February 8, 2022, which added core deposit intangibles and goodwill shown in the tables above. See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions.

Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

(6) LEASES

Lessee

The Company has operating leases, which primarily consist of office space in buildings, ATM locations, storage facilities, parking lots, equipment and land on which it owns certain buildings.

RentThe following table presents rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $503,000 and approximately $463,000 foras of the three months ended March 31, 2021 and March 31, 2020, respectively.periods indicated:

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Rental expense

 

$

425

 

 

$

503

 

As of March 31, 2021,2022, the right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $4.1$5.0 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $4.0$4.9 million. There have been no significant changes in our expected future minimum lease payments since December 31, 2020. The future minimum lease payments are disclosed in Note (20) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As of March 31, 2021, our2022, the Company's operating leases have a weighted-average remaining lease term of 3.33.5 years and a weighted-average discount rate of 3.12.5 percent.

17


The following table presents minimum future commitments by year for the Company’s operating leases. Such commitments are reflected as undiscounted values and are reconciled to the discounted present value recognized on the balance sheet.

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

2022 (nine months)

 

$

1,085

 

2023

 

 

1,106

 

2024

 

 

742

 

2025

 

 

687

 

2026

 

 

597

 

Thereafter

 

 

1,402

 

Total lease payments

 

 

5,619

 

Less imputed Interest

 

 

(731

)

Operating lease liability

 

$

4,888

 


Maturity of Operating Lease Liabilities

 

 

March 31, 2021

 

 

 

(Dollars in thousands)

 

2021 (nine months)

 

$

1,059

 

2022

 

 

1,217

 

2023

 

 

713

 

2024

 

 

352

 

2025

 

 

285

 

Thereafter

 

 

891

 

Total lease payments

 

 

4,517

 

Less imputed Interest

 

 

(525

)

Operating lease liability

 

$

3,992

 

Lessor

Lessor

The Company is a lessor of operating leases, which primarily consist of office space in buildings and parking lots. These assets are classified on the balance sheet as premises and equipment. The Company had operating lease revenue of $1.4$1.3 million and $1.4 million for both the three months ended March 31, 2022 and 2021, and March 31, 2020.respectively. Lease revenue is included in occupancy, net on the consolidated statement of comprehensive income.

Future Minimum Lease Payments to be received

The Company does not have operating leases that extend beyond 2031. The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases:

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

2022 (nine months)

 

$

2,741

 

2023

 

 

2,956

 

2024

 

 

2,886

 

2025

 

 

2,197

 

2026

 

 

1,847

 

2027-2031

 

 

3,559

 

Total future minimum lease payments

 

$

16,186

 

(7) SUBORDINATED DEBT

In January 2004, the Company established BFC Capital Trust II (“BFC II”), a trust formed under the Delaware Business Trust Act. The Company owns all of the common securities of BFC II. In February 2004, BFC II issued $25 million of aggregate liquidation amount of 7.20% Cumulative Trust Preferred Securities (the “Cumulative Trust Preferred Securities”) to other investors. In March 2004, BFC II issued an additional $1 million in Cumulative Trust Preferred Securities through the execution of an over-allotment option. The proceeds from the sale of the Cumulative Trust Preferred Securities and the common securities of BFC II were invested in $26.8 million of 7.20% Junior Subordinated Debentures of the Company. Interest payments on the $26.8 million of 7.20% Junior Subordinated Debentures are payable January 15, April 15, July 15 and October 15 of each year. Such interest payments may be deferred for up to twenty consecutive quarters. The stated maturity date of the $26.8 million of 7.20% Junior Subordinated Debentures is March 31, 2034, but they are subject to mandatory redemption pursuant to optional prepayment terms. The Cumulative Trust Preferred Securities represent an undivided interest in the $26.8 million of 7.20% Junior Subordinated Debentures and are guaranteed by the Company. During any deferral period or during any event of default, the Company may not declare or pay any dividends on any of its capital stock. The Cumulative Trust Preferred Securities were callable at par, in whole or in part, after March 31, 2009.

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 (the “Subordinated Notes”) to various institutional accredited investors. The sale of the Subordinated Notes was pursuant to a Subordinated Note Purchase Agreement entered into with each of the investors. The Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. The net proceeds to the Company from the sale of the Subordinated Notes were approximately $59.15 million after deducting commissions and offering expenses of $850,000. The Company used the proceeds from the sale of the Subordinated Notes for general corporate purposes. The Subordinated Notes will initially bear interest at a fixed rate of 3.50% per annum, from and including June 17, 2021 to but excluding June 30, 2031, payable semi-annually in arrears on June 30 and December 31 of each year, commencing December

18


 

 

March 31, 2021

 

 

 

(Dollars in thousands)

 

2021 (nine months)

 

$

2,641

 

2022

 

 

2,886

 

2023

 

 

2,665

 

2024

 

 

2,601

 

2025

 

 

1,975

 

2026-2031

 

 

6,151

 

Total future minimum lease payments

 

$

18,919

 

31, 2021. Then, from and including June 30, 2031, to but excluding the maturity date, the Subordinated Notes will bear interest at a floating rate equal to the benchmark (initially, three-month term SOFR), reset quarterly, plus a spread of 229 basis points, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Subordinated Notes mature on June 30, 2036.

The Company may, at its option, beginning with the interest payment date of June 30, 2031, and on any scheduled interest payment date thereafter, redeem the Subordinated Notes, in whole or in part. In addition, the Company may redeem all, but not less than all, of the Subordinated Notes at any time upon the occurrence of a “Tier 2 Capital Event,” a “Tax Event” or an “Investment Company Event” (each as defined in the Subordinated Notes). Any such redemption is subject to obtaining the prior approval of the Board of Governors of the Federal Reserve System (or its designee). The redemption price with respect to any such redemption will be equal to 100% of the principal amount of the Subordinated Note, or portion thereof, to be redeemed, plus accrued but unpaid interest, if any, thereon to, but excluding, the redemption date.

(8) STOCK-BASED COMPENSATION

(7)

STOCK-BASED COMPENSATION

The Company has had a nonqualified incentive stock option plan, the BancFirst Corporation Stock Option Plan (the “Employee Plan”), since May 1986. At March 31, 2021,2022, there were 167,500116,000 shares available for future grants. The Employee Plan will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning four years from the date of grant at the rate of 25%25% per year for four years.years. Options expire no later than the end of fifteen years from the date of grant.grant. The option price must be no less than 100%100% of the fair value of the stock relating to such option at the date of grant.

The Company has had the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”) since June 1999. Each non-employee director is granted an option for 10,000 shares. At March 31, 2021,2022, there were 30,00040,000 shares available for future grants. The Non-Employee Directors’ Plan will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning one year from the date of grant at the rate of 25%25% per year for four years, and expire no later than the end of fifteen years from the date of grant. The option price must be no less than 100%100% of the fair value of the stock relating to such option at the date of grant.

The Company currently uses newly issued shares for stock option exercises, but reserves the right to use shares purchased under the Company’s Stock Repurchase Program (the “SRP”) in the future.

Although not required or expected, the Company may settle some options in cash on a limited basis at the discretion of the Company. During the three months ended March 31, 2021, the Company had cash settlements for 121,330 shares for a total costnet cash settlement of $3.6options of $5.5 million that did not increase the outstanding shares of the Company.

18


The following table is a summary of the activity under both the Employee Plan and the Non-Employee Directors’ Plan:

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

Remaining

 

Aggregate

 

 

 

 

 

 

Exercise

 

 

Contractual

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

Value

 

 

 

(Dollars in thousands, except option data)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2021

 

 

1,303,250

 

 

$

40.90

 

 

 

 

 

 

Options granted

 

 

42,500

 

 

 

77.32

 

 

 

 

 

 

Options exercised

 

 

(116,292

)

 

 

25.71

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

1,229,458

 

 

 

43.59

 

 

8.39 Yrs

 

$

48,705

 

Exercisable at March 31, 2022

 

 

516,083

 

 

 

29.07

 

 

7.15 Yrs

 

$

27,941

 

 

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

Remaining

 

Aggregate

 

 

 

 

 

 

 

Exercise

 

 

Contractual

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

Value

 

 

 

(Dollars in thousands, except option data)

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2020

 

 

1,343,080

 

 

$

35.28

 

 

 

 

 

 

 

Options granted

 

 

23,000

 

 

 

70.54

 

 

 

 

 

 

 

Options exercised

 

 

(170,330

)

 

 

23.29

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

1,195,750

 

 

 

37.67

 

 

8.89 Yrs

 

$

39,485

 

Exercisable at March 31, 2021

 

 

552,500

 

 

 

25.92

 

 

7.33 Yrs

 

$

24,735

 

The following table has additional information regarding options exercised under both the Employee Plan and the Non-Employee Directors’ Plan:

 

 

Three Months Ended

March 31,

 

 

Three Months Ended
March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Total intrinsic value of options exercised

 

$

7,303

 

 

$

389

 

 

$

5,964

 

 

$

7,303

 

Cash received from options exercised

 

 

3,966

 

 

 

201

 

 

2,989

 

 

 

3,966

 

Tax benefit realized from options exercised

 

 

1,860

 

 

 

99

 

 

1,434

 

 

 

1,860

 

19


The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility and the expected term. The fair value of each option is expensed over its vesting period.

The following table is a summary of the Company’s recorded stock-based compensation expense:

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Stock-based compensation expense

 

$

458

 

 

$

576

 

Tax benefit

 

 

110

 

 

 

147

 

Stock-based compensation expense, net of tax

 

$

348

 

 

$

429

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(Dollars in thousands)

 

Stock-based compensation expense

 

$

576

 

 

$

426

 

Tax benefit

 

 

147

 

 

 

109

 

Stock-based compensation expense, net of tax

 

$

429

 

 

$

317

 

The Company will continue to amortize the unearned stock-based compensation expense over the remaining vesting period of approximately seven years.years. The following table shows the unearned stock-based compensation expense:

 

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

Unearned stock-based compensation expense

 

$

7,780

 

 

 

March 31, 2021

 

 

 

(Dollars in thousands)

 

Unearned stock-based compensation expense

 

$

5,113

 

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method on options granted during the periods presented:

 

 

Three Months Ended

March 31,

 

 

Three Months Ended
March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Weighted average grant-date fair value per share of options granted

 

$

23.80

 

 

$

10.56

 

 

$

26.21

 

 

$

23.80

 

Risk-free interest rate

 

1.34 to 1.64%

 

 

1.13%

 

 

1.75 to 2.14%

 

1.34 to1.64%

 

Dividend yield

 

2.00%

 

 

2.00%

 

 

2.00%

 

2.00%

 

Stock price volatility

 

35.55 to 35.73%

 

 

22.84%

 

 

34.61 to 34.69%

 

35.55 to 35.73%

 

Expected term

 

10 Yrs

 

 

10 Yrs

 

 

10 Yrs

 

10 Yrs

 

The risk-free interest rate is determined by reference to the spot zero-coupon rate for the U.S. Treasury security with a maturity similar to the expected term of the options. The dividend yield is the expected yield for the expected term. The stock price volatility is

19


estimated from the recent historical volatility of the Company’s stock. The expected term is estimated from the historical option exercise experience. The Company accounts for forfeitures as they occur.

The Company has had the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “Deferred Stock Compensation Plan”) since May 1999. As of March 31, 2021,2022, there are 19,71731,914 shares available for future issuance under the Deferred Stock Compensation Plan. The Deferred Stock Compensation Plan will terminate on December 31, 2024, if not extended. Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 100%100% of their board fees. They are credited for each deferral with a number of stock units based on the current market price of the Company’s stock, which accumulate in an account until such time as the director or community board member terminates serving as a board member. Shares of common stock of the Company are then distributed to the terminating director or community board member based upon the number of stock units accumulated in his or her account. There were 2,1616,177 and 1,3072,161 shares of common stock distributed from the Deferred Stock Compensation Plan during the three months ended March 31, 2022 and 2021, and March 31, 2020, respectively.

A summary of the accumulated stock units is as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accumulated stock units

 

 

148,788

 

 

 

152,754

 

Average price

 

$

31.82

 

 

$

30.86

 

20


 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accumulated stock units

 

 

148,343

 

 

 

148,278

 

Average price

 

$

29.14

 

 

$

28.57

 

(9) STOCKHOLDERS’ EQUITY

(8)

STOCKHOLDERS’ EQUITY

In November 1999, the Company adopted the SRP. The SRP may be used as a means to increase earnings per share and return on equity. In addition, the SRP may be used 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 to provide liquidity for stockholders wishing to sell their stock. All shares repurchased under the SRP have been retired and not held as treasury stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee. During September 2021, the SRP was amended to permit the repurchase of an additional 650,000 shares.

The following table is a summary of the shares under the program:

 

 

Three Months Ended

March 31,

 

 

Three Months Ended
March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Number of shares repurchased

 

 

 

 

 

59,284

 

 

 

 

 

 

Average price of shares repurchased

 

$

 

 

$

52.26

 

 

$

 

 

$

 

Shares remaining to be repurchased

 

 

62,782

 

 

 

62,782

 

 

500,486

 

 

 

62,782

 

The Company, BancFirst Corporation, BancFirst, Pegasus and Pegasus BankWorthington are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“FDIC”). These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s,BancFirst Corporation’s, BancFirst’s, Pegasus’s and Pegasus Bank’sWorthington'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. ManagementThe Company believes that as of March 31, 2021, the Company,2022, BancFirst Corporation, BancFirst, Pegasus and Pegasus BankWorthington met all capital adequacy requirements to which they are subject. The actual and required capital amounts and ratios are shown in the following table:

 

 

 

 

 

 

 

Required

 

 

 

To Be Well

 

 

 

 

 

 

 

For Capital

 

With

 

Capitalized Under

 

 

 

 

 

 

 

Adequacy

 

Capital Conservation

 

Prompt Corrective

 

 

Actual

 

Purposes

 

Buffer

 

Action Provisions

 

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

 

(Dollars in thousands)

As of March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,167,735

 

 

15.99%

 

$

584,236

 

 

8.00%

 

$

766,810

 

 

10.50%

 

N/A

 

 

N/A

BancFirst

 

 

1,010,124

 

 

16.25%

 

 

497,404

 

 

8.00%

 

 

652,843

 

 

10.50%

 

$

621,755

 

 

10.00%

Pegasus

 

 

95,969

 

 

11.83%

 

 

64,878

 

 

8.00%

 

 

85,153

 

 

10.50%

 

 

81,098

 

 

10.00%

Worthington

 

 

39,569

 

 

15.45%

 

 

20,490

 

 

8.00%

 

 

26,893

 

 

10.50%

 

 

25,613

 

 

10.00%

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

995,299

 

 

13.63%

 

$

328,633

 

 

4.50%

 

$

511,207

 

 

7.00%

 

N/A

 

 

N/A

BancFirst

 

 

912,401

 

 

14.67%

 

 

279,790

 

 

4.50%

 

 

435,229

 

 

7.00%

 

$

404,141

 

 

6.50%

Pegasus

 

 

89,376

 

 

11.02%

 

 

36,494

 

 

4.50%

 

 

56,768

 

 

7.00%

 

 

52,714

 

 

6.50%

Worthington

 

 

36,365

 

 

14.20%

 

 

11,526

 

 

4.50%

 

 

17,929

 

 

7.00%

 

 

16,648

 

 

6.50%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,021,299

 

 

13.98%

 

$

438,177

 

 

6.00%

 

$

620,751

 

 

8.50%

 

N/A

 

 

N/A

BancFirst

 

 

932,401

 

 

15.00%

 

 

373,053

 

 

6.00%

 

 

528,492

 

 

8.50%

 

$

497,404

 

 

8.00%

Pegasus

 

 

89,376

 

 

11.02%

 

 

48,659

 

 

6.00%

 

 

68,933

 

 

8.50%

 

 

64,878

 

 

8.00%

Worthington

 

 

36,365

 

 

14.20%

 

 

15,368

 

 

6.00%

 

 

21,771

 

 

8.50%

 

 

20,490

 

 

8.00%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Total Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,021,299

 

 

8.66%

 

$

471,735

 

 

4.00%

 

N/A

 

 

N/A

 

N/A

 

 

N/A

BancFirst

 

 

932,401

 

 

9.08%

 

 

410,756

 

 

4.00%

 

N/A

 

 

N/A

 

$

513,445

 

 

5.00%

Pegasus

 

 

89,376

 

 

6.81%

 

 

52,515

 

 

4.00%

 

N/A

 

 

N/A

 

 

65,644

 

 

5.00%

Worthington

 

 

36,365

 

 

7.65%

 

 

19,019

 

 

4.00%

 

N/A

 

 

N/A

 

 

23,774

 

 

5.00%

21

 

 

 

 

 

 

 

 

 

 

Required

 

 

 

 

 

To Be Well

 

 

 

 

 

 

 

 

 

 

 

For Capital

 

 

With

 

 

Capitalized Under

 

 

 

 

 

 

 

 

 

 

 

Adequacy

 

 

Capital Conservation

 

 

Prompt Corrective

 

 

 

Actual

 

 

Purposes

 

 

Buffer

 

 

Action Provisions

 

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

 

(Dollars in thousands)

 

As of March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,024,295

 

 

16.41%

 

 

$

499,314

 

 

8.00%

 

 

$

655,350

 

 

10.50%

 

 

N/A

 

 

N/A

 

BancFirst

 

 

919,705

 

 

16.27%

 

 

 

452,334

 

 

8.00%

 

 

 

593,688

 

 

10.50%

 

 

$

565,417

 

 

10.00%

 

Pegasus Bank

 

 

74,397

 

 

12.90%

 

 

 

46,124

 

 

8.00%

 

 

 

60,538

 

 

10.50%

 

 

 

57,656

 

 

10.00%

 

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

920,119

 

 

14.74%

 

 

$

280,864

 

 

4.50%

 

 

$

436,900

 

 

7.00%

 

 

N/A

 

 

N/A

 

BancFirst

 

 

828,838

 

 

14.66%

 

 

 

254,438

 

 

4.50%

 

 

 

395,792

 

 

7.00%

 

 

$

367,521

 

 

6.50%

 

Pegasus Bank

 

 

69,519

 

 

12.06%

 

 

 

25,945

 

 

4.50%

 

 

 

40,359

 

 

7.00%

 

 

 

37,476

 

 

6.50%

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

946,119

 

 

15.16%

 

 

$

374,486

 

 

6.00%

 

 

$

530,521

 

 

8.50%

 

 

N/A

 

 

N/A

 

BancFirst

 

 

848,838

 

 

15.01%

 

 

 

339,250

 

 

6.00%

 

 

 

480,604

 

 

8.50%

 

 

$

452,334

 

 

8.00%

 

Pegasus Bank

 

 

69,519

 

 

12.06%

 

 

 

34,593

 

 

6.00%

 

 

 

49,007

 

 

8.50%

 

 

 

46,124

 

 

8.00%

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Total Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

946,119

 

 

9.45%

 

 

$

400,544

 

 

4.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

BancFirst

 

 

848,838

 

 

9.36%

 

 

 

362,698

 

 

4.00%

 

 

N/A

 

 

N/A

 

 

$

453,372

 

 

5.00%

 

Pegasus Bank

 

 

69,519

 

 

7.52%

 

 

 

36,996

 

 

4.00%

 

 

N/A

 

 

N/A

 

 

 

46,245

 

 

5.00%

 


As of March 31, 2021,2022, the most recent notificationnotifications from the Federal Reserve Bank of Kansas City, the FDIC and the FDICComptroller of the Currency, categorized BancFirst, Pegasus and Pegasus BankWorthington as “well capitalized” under the prompt corrective action provisions. The Common Equity Tier 1 Capital of the Company, BancFirst Corporation, BancFirst, Pegasus and Pegasus BankWorthington includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, the election was made to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 Capital. Common Equity Tier 1 Capital for the Company, BancFirst Corporation, BancFirst, Pegasus and Pegasus BankWorthington is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. The Company’s trust preferred securities have continued to be included in Tier 1 capital, as the Company’s total assets do not exceed $15$15 billion. There are no conditions or events since the most recent notificationnotifications to BancFirst Corporation, BancFirst, Pegasus and Worthington of BancFirst and Pegasus Bank’stheir capital category that management believes would materially change itstheir category under capital requirements existing as of the report date.

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of Subordinated Notes. The Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines.

In April 2020, the Company began originating loans to qualified small businesses under the PPP administered by the SBA. Federal bank regulatory agencies have issued an interim final rule that permits banks to neutralize the regulatory capital effects of participating in the Paycheck Protection Program Lending Facility (the “PPP Facility”) and clarify that PPP loans have a 0 percent risk weight under applicable risk-based capital rules. Specifically, a bank may exclude all PPP loans pledged as collateral to the PPP Facility from its average total consolidated assets for the purposes of calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility are included. The PPP loans the Company originated in 20202021 and 20212020 are included in the calculation of the Company’s leverage ratio as of March 31, 20212022 as the Company did not utilize the PPP Facility for funding purposes.

 


(10) NET INCOME PER COMMON SHARE

(9)

NET INCOME PER COMMON SHARE

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

 

 

 

Income
(Numerator)

 

 

Shares
(Denominator)

 

 

Per Share
Amount

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

35,915

 

 

 

32,666,916

 

 

$

1.10

 

Dilutive effect of stock options

 

 

 

 

 

648,417

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

35,915

 

 

 

33,315,333

 

 

$

1.08

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

42,520

 

 

 

32,756,852

 

 

$

1.30

 

Dilutive effect of stock options

 

 

 

 

 

651,264

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

42,520

 

 

 

33,408,116

 

 

$

1.27

 

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per Share

Amount

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

42,520

 

 

 

32,756,852

 

 

$

1.30

 

Dilutive effect of stock options

 

 

 

 

 

651,264

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

42,520

 

 

 

33,408,116

 

 

$

1.27

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

22,608

 

 

 

32,679,587

 

 

$

0.69

 

Dilutive effect of stock options

 

 

 

 

 

607,772

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed

   exercises of stock options

 

$

22,608

 

 

 

33,287,359

 

 

$

0.68

 

The following table shows the number and average exercise price of options that were excluded from the computation of diluted net income per common share for each period because the options were anti-dilutive for the period:

 

Shares

Three Months Ended March 31, 2022

105,278

Three Months Ended March 31, 2021

110,144

Three Months Ended March 31, 2020

351,862

(10)

FAIR VALUE MEASUREMENTS

110,144

22


(11) FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the price that would be received to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants on the measurement date.

FASB Accounting Standards Codification (“ASC”) Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. This category includes certain collaterally dependent loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes certain collaterally dependent loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis

A description of the valuation methodologies and key inputs used to measure financial assets and financial liabilities at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to the following categories of the Company’s financial assets and financial liabilities.

22


Debt Securities Available for Sale

Debt securities classified as available for sale are reported at fair value. U.S. Treasuries are valued using Level 1 inputs. Other debt securities available for sale including U.S. federal agencies, registered mortgage backed debt securities and state and political subdivisions are valued using prices from an independent pricing service utilizing Level 2 data. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The Company also invests in private label mortgage backed debt securities for which observable information is not readily available. These debt securities are reported at fair value utilizing Level 3 inputs. For these debt securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors. Discount rates are primarily based on reference to interest rate spreads on comparable debt securities of similar duration and credit rating as determined by the nationally recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are developed by investment securities professionals involved in the active trading of similar debt securities.

The Company reviews the prices for Level 1 and Level 2 debt securities supplied by the independent pricing service for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio debt securities that are esoteric or that have complicated structures. The Company’s portfolio primarily consists of traditional investments including U.S. Treasury obligations, federal agency mortgage pass-through debt securities, general obligation municipal bonds and a small amount of municipal revenue bonds. Pricing for such instruments is fairly generic and is easily obtained. For in-state bond issues that have relatively low issue sizes and liquidity, the Company utilizes the same parameters for pricing mentioned in the preceding paragraph adjusted for the specific issue. Periodically, the Company will validate prices supplied by the independent pricing service by comparison to prices obtained from third party sources.

Derivatives

Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains dealer and market quotations to value its oil and gas swaps and options. The Company utilizes dealer quotes and observable market data inputs to substantiate internal valuation models.

23


The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of the periods presented, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

 

 

Level 1 Inputs

 

 

Level 2 Inputs

 

 

Level 3 Inputs

 

 

Total Fair Value

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,146,298

 

 

$

 

 

$

 

 

$

1,146,298

 

U.S. federal agencies

 

 

 

 

 

20,534

 

 

 

 

 

 

20,534

 

Mortgage-backed securities

 

 

 

 

 

20,961

 

 

 

 

 

 

20,961

 

States and political subdivisions

 

 

 

 

 

4,612

 

 

 

240

 

 

 

4,852

 

Asset backed securities

 

 

 

 

 

13,280

 

 

 

 

 

 

13,280

 

Other debt securities

 

 

 

 

 

2,826

 

 

 

 

 

 

2,826

 

Derivative assets

 

 

 

 

 

62,701

 

 

 

 

 

 

62,701

 

Derivative liabilities

 

 

 

 

 

61,651

 

 

 

 

 

 

61,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

457,628

 

 

$

 

 

$

 

 

$

457,628

 

U.S. federal agencies

 

 

 

 

 

21,942

 

 

 

 

 

 

21,942

 

Mortgage-backed securities

 

 

 

 

 

29,283

 

 

 

 

 

 

29,283

 

States and political subdivisions

 

 

 

 

 

5,999

 

 

 

320

 

 

 

6,319

 

Asset backed securities

 

 

 

 

 

13,357

 

 

 

 

 

 

13,357

 

Other debt securities

 

 

 

 

 

2,994

 

 

 

 

 

 

2,994

 

Derivative assets

 

 

 

 

 

8,946

 

 

 

 

 

 

8,946

 

Derivative liabilities

 

 

 

 

 

8,237

 

 

 

 

 

 

8,237

 

 

 

Level 1 Inputs

 

 

Level 2 Inputs

 

 

Level 3 Inputs

 

 

Total Fair Value

 

 

 

(Dollars in thousands)

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

453,786

 

 

$

 

 

$

 

 

$

453,786

 

U.S. federal agencies

 

 

 

 

 

19,109

 

 

 

 

 

 

19,109

 

Mortgage-backed securities

 

 

 

 

 

15,249

 

 

 

 

 

 

15,249

 

States and political subdivisions

 

 

 

 

 

15,885

 

 

 

155

 

 

 

16,040

 

Asset backed securities

 

 

 

 

 

13,403

 

 

 

 

 

 

13,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

475,236

 

 

$

 

 

$

 

 

$

475,236

 

U.S. federal agencies

 

 

 

 

 

19,638

 

 

 

 

 

 

19,638

 

Mortgage-backed securities

 

 

 

 

 

15,696

 

 

 

 

 

 

15,696

 

States and political subdivisions

 

 

 

 

 

28,793

 

 

 

155

 

 

 

28,948

 

Asset backed securities

 

 

 

 

 

 

 

 

12,714

 

 

 

12,714

 

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the periods presented were as follows:

 

 

Three Months Ended

March 31,

 

 

Twelve Months Ended

December 31,

 

 

Three Months Ended March 31,

 

 

Twelve Months Ended
December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Balance at the beginning of the year

 

$

12,869

 

 

$

12,714

 

 

$

320

 

$

12,869

 

Transfers to level 2

 

 

(12,714

)

 

 

1,643

 

 

 

(12,714

)

Purchases

 

 

240

 

Settlements

 

 

 

 

 

(1,473

)

 

(80

)

 

(75

)

Total unrealized gains/(losses)

 

 

 

 

 

(15

)

Balance at the end of the period

 

$

155

 

 

$

12,869

 

 

$

240

 

 

$

320

 

The Company’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting period. During the three months ended March 31, 2022, the Company did not transfer any debt securities. During the year ended December 31, 2021, the Company transferred debt securities from Level 3 to Level 2 due to a review of the

23


pricing models that determined some asset backed debt securities to be Level 2. During the year ended December 31, 2020, the Company transferred securities from Level 2 to Level 3 due to a review of the pricing models that determined some state and political subdivisions bonds to be Level 3.

Financial Assets and Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities are reported at fair value utilizing Level 3 inputs.

The Company invests in equity securities without readily determinable fair values and utilizes Level 3 inputs. These equity securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income.

Collateral dependent loans are reported at the fair value of the underlying collateral if repayment is dependent on liquidation of the collateral. When managementthe Company determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit

24


losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. In no case does the fair value of a collateral dependent loan exceed the fair value of the underlying collateral. The collateral dependent loans are adjusted to fair value through a specific allocation of the allowance for credit losses or a direct charge-down of the loan.

Repossessed assets, upon initial recognition, are measured and adjusted to fair value through a charge-off to the allowance for possible credit losses based upon the fair value of the repossessed asset.

Other real estate owned is revalued at fair value subsequent to initial recognition, with any losses recognized in net expense from other real estate owned.

The following table summarizes assets measured at fair value on a nonrecurring basis during the period presented. The fair value represents end of period values, which approximate fair value measurements that occurred on various measurement dates throughout the period:

 

Total Fair Value

 

 

Level 3

 

 

Total Fair Value

 

 

(Dollars in thousands)

 

 

Level 3

 

As of and for the Year-to-date Period Ended March 31, 2021

 

 

 

 

 

(Dollars in thousands)

 

As of and for the Year-to-date Period Ended March 31, 2022

 

 

 

Equity securities

 

$

21,275

 

 

$

10,187

 

Collateral dependent loans

 

 

3,707

 

 

642

 

Repossessed assets

 

 

91

 

 

96

 

Other real estate owned

 

 

332

 

 

279

 

As of and for the Year-to-date Period Ended December 31, 2020

 

 

 

 

As of and for the Year-to-date Period Ended December 31, 2021

 

 

 

Equity securities

 

$

21,203

 

 

$

10,590

 

Collateral dependent loans

 

 

11,347

 

 

13,195

 

Repossessed assets

 

 

291

 

 

78

 

Other real estate owned

 

 

32,066

 

 

7,496

 

Estimated Fair Value of Financial Instruments

The Company is required under current authoritative accounting guidance to disclose the estimated fair value of their financial instruments that are not recorded at fair value. For the Company, as for most financial institutions, substantially all of its assets and liabilities are considered financial instruments. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents Include: Cash and Due from Banks and Interest-Bearing Deposits with Banks

The carrying amount of these short-term instruments is based on a reasonable estimate of fair value.

24Federal Funds Sold


The carrying amount of these short-term instruments is a reasonable estimate of fair value.

Debt Securities Held for Investment

For debt securities held for investment, which are generally traded in secondary markets, 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 debt securities making adjustments for credit or liquidity if applicable.

Loans Held For Sale

The Company originates mortgage loans to be sold. At the time of origination, the acquiring bank has already been determined and the terms of the loan, including interest rate, have already been set by the acquiring bank, allowing the Company to originate the loan at fair value. Mortgage loans are generally sold within 30 days of origination. Loans held for sale are valued using Level 2 inputs. Gains or losses recognized upon the sale of the loans are determined on a specific identification basis. At December 31, 2020, the Company’s principal subsidiary bank, BancFirst, had approximately $21.6 million in loans held for sale at its Hugo, Oklahoma branch that were sold to AmeriState Bank in Atoka, Oklahoma in the first quarter of 2021.

Loans

To determine the fair value of loans, the Company uses an exit price calculation, which takes into account factors such as liquidity, credit and the nonperformance risk of loans. For certain homogeneous categories of loans, such as some residential mortgages, fair

25


values are estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair values of other types of loans are 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.

Deposits

The fair values of transaction and savings accounts are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using the rates currently offered for deposits of similar remaining maturities.

Short-Term Borrowings

The amounts payable on these short-term instruments are reasonable estimates of fair value.

Junior Subordinated DebenturesDebt

The fair values of junior subordinated debenturesdebt are estimated using the rates that would be charged for junior subordinated debenturesdebt of similar remaining maturities.

Loan Commitments and Letters of Credit

The fair values of commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the terms of the agreements. The fair values of letters of credit are based on fees currently charged for similar agreements.

25


The estimated fair values of the Company’s financial instruments that are reported at amortized cost in the Company’s consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows:

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying

Amount

 

 

Fair Value

 

 

Carrying
Amount

 

 

Fair Value

 

 

Carrying
Amount

 

 

Fair Value

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,062,408

 

 

$

3,062,408

 

 

$

1,616,912

 

 

$

1,616,912

 

 

$

4,091,404

 

$

4,091,404

 

$

2,050,022

 

$

2,050,022

 

Federal funds sold

 

3,489

 

3,489

 

800

 

800

 

Debt securities held for investment

 

 

51

 

 

 

53

 

 

 

59

 

 

 

62

 

 

27

 

27

 

32

 

33

 

Loans held for sale

 

 

21,718

 

 

 

21,718

 

 

 

53,719

 

 

 

53,719

 

 

10,137

 

10,137

 

24,776

 

24,776

 

Level 3 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities held for investment

 

 

2,905

 

 

 

2,900

 

 

 

2,905

 

 

 

2,922

 

 

2,890

 

2,890

 

2,945

 

2,945

 

Loans, net of allowance for credit losses

 

 

6,267,530

 

 

 

6,269,096

 

 

 

6,303,140

 

 

 

6,347,803

 

 

6,407,101

 

6,276,465

 

6,085,506

 

6,059,716

 

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

9,371,940

 

 

 

9,394,515

 

 

 

8,064,704

 

 

 

8,084,695

 

 

11,250,971

 

11,258,118

 

8,091,914

 

8,161,553

 

Short-term borrowings

 

 

3,750

 

 

 

3,750

 

 

 

1,100

 

 

 

1,100

 

 

3,300

 

3,300

 

 

 

Junior subordinated debentures

 

 

26,804

 

 

 

28,948

 

 

 

26,804

 

 

 

30,535

 

Subordinated debt

 

86,001

 

85,736

 

85,987

 

90,391

 

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments

 

 

 

 

 

 

3,237

 

 

 

 

 

 

 

3,115

 

 

 

 

 

3,958

 

 

 

 

3,648

 

Letters of credit

 

 

 

 

 

 

542

 

 

 

 

 

 

 

722

 

 

 

 

 

522

 

 

 

 

621

 

Non-financial Assets and Non-financial Liabilities Measured at Fair Value

The Company has 0 non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Certain non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis include intangible assets and other non-financial long-lived assets measured at fair value and adjusted for impairment. These items are evaluated at least annually for impairment. The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were 0t0t considered to be significant to the Company at March 31, 20212022 or December 31, 2020.2021.

(11)26


(12) DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into oil and gas swaps and options contracts to accommodate the business needs of its customers. Upon the origination of an oil or gas swap or option contract with a customer, to mitigate the exposure to fluctuations in oil and gas prices, the Company simultaneously enters into an offsetting contract with a counterparty. These derivatives are not designated as hedged instruments and are recorded on the Company's consolidated balance sheet at fair value and are included in other assets. The Company's derivative financial instruments require a daily margin to be posted, which fluctuates with oil and gas prices. These margins have increased during 2022 due to the current increase in oil and gas prices and customer activity. These margins are included in other assets totaling $84.6 million at March 31, 2022 and $14.3 million at December 31, 2022.

The Company utilizes dealer quotations and observable market data inputs to substantiate internal valuation models. The notional amounts and estimated fair values of oil and gas derivative positions outstanding are presented in the following table:

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Oil and Natural Gas Swaps and Options

 

Notional Units

 

Notional
Amount

 

 

Estimated
Fair Value

 

 

Notional
Amount

 

 

Estimated
Fair Value

 

 

 

 

 

(Notional amounts and dollars in thousands)

 

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Barrels

 

 

3,622

 

 

$

40,556

 

 

 

2,585

 

 

$

6,563

 

Derivative liabilities

 

Barrels

 

 

(3,622

)

 

 

(39,883

)

 

 

(2,585

)

 

 

(6,129

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

MMBTUs

 

 

24,462

 

 

 

22,145

 

 

 

19,752

 

 

 

2,383

 

Derivative liabilities

 

MMBTUs

 

 

(24,462

)

 

 

(21,768

)

 

 

(19,752

)

 

 

(2,108

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Fair Value

 

Included in

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Other assets

 

 

 

 

 

62,701

 

 

 

 

 

 

8,946

 

Derivative liabilities

 

Other liabilities

 

 

 

 

 

(61,651

)

 

 

 

 

 

(8,237

)

The following table is a summary of the Company's recognized income related to the activity, which was included in other noninterest income:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Derivative income

 

$

159

 

 

$

2

 

The Company's credit exposure on oil and gas swaps and options varies based on the current market prices of oil and natural gas. Other than credit risk, changes in the fair value of customer positions will be offset by equal and opposite changes in the counterparty positions. The net positive fair value of the contracts represents the profit derived from the activity and is unaffected by the market price movements. The Company's share of total profit is approximately 35%.

Customer credit exposure is managed by strict position limits and is primarily offset by first liens on production while the remainder is offset by cash. Counterparty credit exposure is managed by selecting highly rated counterparties (rated A- or better by Standard and Poor's) and monitoring market information.

The Company's net credit exposure relating to oil and gas swaps and options with bank counterparties was 0 as of both March 31, 2022 and December 31, 2021.

Balance Sheet Offsetting

Derivatives may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company's derivative transactions with upstream financial institution counterparties and bank customers are generally executed under International Swaps and Derivative Association ("ISDA") master agreements, which include "right of set-off" provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments for financial reporting purposes.

27


(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 56 principal business units are metropolitan banks, community banks, Pegasus, Bank,Worthington, other financial services and executive, operations and support. Metropolitan banks, community banks, Pegasus and Pegasus BankWorthington 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. Pegasus Bank consists of banking locations in the Dallas metropolitan area. Worthington consists of banking locations in the Fort Worth metropolitan area. Other financial services are specialty product business units including guaranteed small business lending, residential mortgage lending, trust services, securities brokerage, electronic banking and insurance. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units.

26


The results of operations and selected financial information for the fivesix business units are as follows:

 

Metropolitan

Banks

 

 

Community

Banks

 

 

Pegasus      Bank

 

 

Other

Financial

Services

 

 

Executive,

Operations

& Support

 

 

Eliminations

 

 

Consolidated

 

 

Metropolitan
Banks

 

 

Community
Banks

 

 

Pegasus

 

 

Worthington

 

 

Other
Financial
Services

 

 

Executive,
Operations
& Support

 

 

Eliminations

 

 

Consolidated

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2022

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

19,608

 

$

44,568

 

$

7,620

 

$

1,694

 

$

2,913

 

$

(907

)

 

$

11

 

$

75,507

 

Noninterest income

 

9,773

 

16,845

 

191

 

133

 

12,983

 

42,574

 

(38,849

)

 

43,650

 

Income before taxes

 

18,171

 

31,339

 

2,827

 

385

 

6,045

 

23,648

 

(38,706

)

 

43,709

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

19,333

 

 

$

42,770

 

 

$

5,359

 

 

$

9,882

 

 

$

(407

)

 

$

269

 

 

$

77,206

 

 

$

19,333

 

$

42,770

 

$

5,359

 

$

 

$

9,882

 

$

(407

)

 

$

269

 

$

77,206

 

Noninterest income

 

 

5,144

 

 

 

14,976

 

 

 

384

 

 

 

11,575

 

 

 

49,731

 

 

 

(41,875

)

 

 

39,935

 

 

5,144

 

14,976

 

384

 

 

11,575

 

49,731

 

(41,875

)

 

39,935

 

Income before taxes

 

 

13,924

 

 

 

29,769

 

 

 

1,645

 

 

 

5,951

 

 

 

42,340

 

 

 

(41,451

)

 

 

52,178

 

 

13,924

 

29,769

 

1,645

 

 

5,951

 

42,340

 

(41,451

)

 

52,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

22,184

 

 

$

44,498

 

 

$

5,608

 

 

$

1,583

 

 

$

200

 

 

$

 

 

$

74,073

 

Noninterest income

 

 

4,700

 

 

 

15,853

 

 

 

131

 

 

 

10,890

 

 

 

27,483

 

 

 

(23,912

)

 

 

35,145

 

Income before taxes

 

 

10,413

 

 

 

24,436

 

 

 

1,598

 

 

 

5,759

 

 

 

9,403

 

 

 

(23,359

)

 

 

28,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

$

3,141,484

 

 

$

6,229,504

 

 

$

971,620

 

 

$

125,184

 

 

$

1,299,191

 

 

$

(1,217,678

)

 

$

10,549,305

 

December 31, 2020

 

 

2,729,886

 

 

 

5,527,611

 

 

 

919,572

 

 

 

137,122

 

 

 

1,073,507

 

 

 

(1,175,341

)

 

 

9,212,357

 

March 31, 2022

 

$

3,514,435

 

$

6,868,166

 

$

1,461,916

 

$

517,238

 

$

91,699

 

$

1,591,150

 

$

(1,420,173

)

 

$

12,624,431

 

December 31, 2021

 

2,627,874

 

5,821,220

 

1,045,699

 

 

71,694

 

1,201,974

 

(1,362,849

)

 

9,405,612

 

 

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 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.

28



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

The following discussion and analysis of our financial condition as of March 31, 20212022 and December 31, 20202021 and results of operations for the three months ended March 31, 20212022 should be read in conjunction with our consolidated financial statements and notes to the financial statements for the year ended December 31, 2020,2021, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 20202021 Form 10-K, and "Item"Item 1A, Risk Factors" in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

FORWARD LOOKING STATEMENTS

The Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. Forward-looking statements include estimates and give management’s current expectations or forecasts of future events. The Company cautions readers that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions; the performance of financial markets and interest rates; legislative and regulatory actions and reforms; competition; as well as other factors, all of which change over time. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes”, “anticipates”, “expects”, “intends”, “targeted”, “continue”, “remain”, “will”, “should”, “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

The probability the Durbin Amendment will impact non-interest income.
Political pressures could further limit our ability to charge for NSF and overdraft fees.
The effect of governments’ stimulus programs.
Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.
Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
Inflation, including wage inflation, interest rates, energy prices, securities markets and monetary fluctuations.
The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.
The COVID-19 pandemic’s adverse effects on us and our customers, employees and third-party service providers, which may materially affect our business, financial position, operations and prospects.
Impairment of the Company’s goodwill or other intangible assets.
Changes in consumer spending, borrowing and savings habits.
Changes in the financial performance and/or condition of the Company’s borrowers.
Technological changes.
Acquisitions and integration of acquired businesses.
The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
The Company’s success at managing the risks involved in the foregoing items.

The COVID-19 pandemic’s adverse effects on us and our customers, employees and third-party service providers; the adverse impacts of the pandemic on our business, financial position, operations and prospects may be material. It is not possible to accurately predict the extent, severity or duration of the pandemic or when normal economic and operation conditions will return.

The likelihood the Durbin Amendment will impact non-interest income.

The effect of governments’ stimulus programs.

Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.

Inflation, interest rates, energy prices, securities markets and monetary fluctuations.

The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.

Impairment of the Company’s goodwill or other intangible assets.

Changes in consumer spending, borrowing and savings habits.

Changes in the financial performance and/or condition of the Company’s borrowers.

Technological changes.

Acquisitions and integration of acquired businesses.

The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

The Company’s success at managing the risks involved in the foregoing items.

Actual results may differ materially from forward-looking statements.


THE COVID-19 PANDEMIC29


SUMMARY

The COVID-19 pandemic and actions taken in response to it have negatively impacted the global economy and all financial markets. Since March 31, 2020, these conditions and the related financial impact have continued. Although the Company is not able to estimate the impact of the COVID-19 pandemic and the resultant economic circumstances on a long-term basis at this time, the COVID-19 pandemic could materially affect the Company’s financial and operational results. The Company is closely monitoring its loan portfolio for effects related to COVID-19. See Item 1.A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for further discussion.

SUMMARY

The Company’s net income for the first quarter of 20212022 was $42.5$35.9 million, compared to $22.6$42.5 million for the first quarter of 2020.2021. Diluted net income per common share was $1.27$1.08 and $0.68$1.27 for the first quarter of 2022 and 2021, and 2020, respectively. For the first quarter of 2021, no provision for credit losses was recorded compared to a provision for credit losses of $19.6 million for the first quarter of 2020; the absence of a provision in the first quarter of 2021 was due to improvements in economic conditions and the outlook for certain economic indicators.

The Company’s net interest income for the first quarter of 2021 increased2022 decreased to $77.2$75.5 million, compared to $74.1$77.2 million for the first quarter of 2020. Net interest income increased for the first quarter of 20212021. The decrease was due to loan growth,the decline of PPP fee income of approximately $9.8$8.1 million, andpartially offset by the decreaseincrease in interest rates paidincome on deposits. debt securities of $2.0 million, an increase of $1.2 million related to interest-bearing deposits at the Federal Reserve and $1.7 million in net interest income related to the Worthington acquisition. The net interest margin for the first quarter was 3.36%2.78%, compared to 3.82%3.36% a year ago.The decrease in margin was due to lower PPP fees earned during the quarter and an increase in cash held at the Federal Reserve. For the first quarter of 2022 a provision of $2.9 million was recorded, which was substantially related to acquired loans during the quarter, compared to no provision for credit losses recorded for March 31, 2021. Noninterest income for the first quarter of 20212022 totaled $39.9$43.7 million, compared to $35.1$39.9 million for the first quarter of 2020. 2021. The increase in noninterest income was duemostly attributable to a gain$4.9 million of income resulting from the saleapplication of the Company’s Hugo, Oklahoma branch of $2.5 million, $2.4 million in rental income from a real estate property foreclosed onequity method accounting related to an equity interest received in the fourth quarterprocess of 2020, and a $1.2loan collection, along with a $2.3 million increase in income from sales of mortgage loans, which wereservice charges on deposits and $1.4 million increase in insurance commissions. The increase in non-interest income was partially offset by a $1.3loss of $4.0 million decreaseon bonds resulting from the sale of $226 million of low yielding debt securities, which were subsequently reinvested in treasury management income.higher yielding debt securities and a $2.6 million gain on sale of other assets in the first quarter last year. Noninterest expense for the first quarter of 20212022 increased to $65.0$72.5 million compared to $61.4$65.0 million for the first quarter of 20202021 because of $1.4the increase in salaries and employee benefits of approximately $4.4 million ofand other expenses related to such foreclosed property, and a $2.2 million gain on the sale of other real estate owned in the first quarter of 2020 that reduced noninterest expense.Worthington acquisition. The Company’s effective tax rate was 17.8% for the first quarter of 2022 compared to 18.5% for the first quarter of 2021 compared to 20.0% for2021. The lower effective tax rate was driven by the firstexercising of stock options during the quarter of 2020.and a lower state income tax rate.

At March 31, 2021,2022, the Company’s total assets were $10.5$12.6 billion, an increase of $1.3$3.2 billion from December 31, 2020. 2021. Debt securities of $520.5 million at March 31, 2021$1.2 billion were down $34.7up $677.2 million from December 31, 2020. 2021. Loans totaled $6.4 billion, a decrease of $68.1 million from December 31, 2020 partially due to approximately $21 million of loans that were sold with the Company’s Hugo, Oklahoma branch. Deposits totaled $9.4$6.5 billion, an increase of $1.3$310.3 million from December 31, 2021. Loans increased $257.4 million due to the acquisition of Worthington. At March 31, 2022, the balance of the PPP loans was $30.6 million, compared to $80.4 million at December 31, 2021. Deposits totaled $11.3 billion, an increase of $3.2 billion from the December 31, 20202021 total. The increase in assets and deposits werefrom December 31, 2021 was primarily related to the return of off-balance sheet sweep accounts related to the Company’s year-end sweep program.Paycheck Protection Program (PPP) and other government stimulus. At Off-balance sheet sweep accounts totaled $2.9 billion at March 31, 2021, the Company had PPP loans held for investment of $713.7 million, net of unamortized processing fees of $23.3 million.2022 compared to $5.1 billion at December 31, 2021. The Company’s total stockholders’ equity at March 31, 20212022 was $1.1$1.2 billion, an increasea decrease of $26.8$3.9 million over December 31, 2020. Off-balance sweep accounts were $2.2 billion at March 31, 2021 compared2021. The decrease in stockholders equity was due to $2.7 billion at December 31, 2020.unrealized losses included in other comprehensive income.

Nonaccrual loans represent 0.55%represented 0.27% of total loans at March 31, 2021,2022, down from 0.58%0.34% at December 31, 2020. Net charge-offs for the quarter were 0.01% of average loans for the first quarter of 2021, compared to 0.02% of average loans for the first quarter of 2020.2021. The allowance for credit losses to total loans was 1.42%1.34% at both March 31, 2021 and2022 compared to 1.36% at December 31, 2020,2021, and the allowance for credit losses to nonaccrual loans was 257.20%approximately 500% at March 31, 2022 compared to 243.35%402% at December 31, 2020.2021. At March 31, 2022, the Company’s nonaccrual loans were $17.5 million compared to $20.9 million at year-end 2021.

See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

There have been noSee Note (1) of the Notes to the Consolidated Financial Statements for disclosures regarding changes in the Registrant’sCompany’s disclosures regarding recently issued accounting pronouncements since December 31, 2020,2021, the date of its most recent annual report to stockholders.

SEGMENT INFORMATION

See Note (11)(13) of the Notes to the Consolidated Financial Statements for disclosures regarding business segments.



RESULTS OF OPERATIONS

Average Balances, Income, Expenses and Rates

The following table presents, for the periods indicated, certain information related to ourthe Company's average balance sheet, and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances are derived from daily averages.

BANCFIRST CORPORATION30


CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

BANCFIRST CORPORATION

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

 

(Unaudited)

 

Taxable Equivalent Basis

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

6,359,795

 

 

$

73,066

 

 

 

4.66

%

 

$

6,400,845

 

 

$

77,766

 

 

 

4.93

%

Debt securities – taxable

 

 

1,105,222

 

 

 

3,781

 

 

 

1.39

 

 

 

521,698

 

 

 

1,693

 

 

 

1.32

 

Debt securities – tax exempt

 

 

4,774

 

 

 

34

 

 

 

2.93

 

 

 

19,340

 

 

 

88

 

 

 

1.84

 

Federal funds sold and interest-bearing deposits with banks

 

 

3,548,875

 

 

 

1,758

 

 

 

0.20

 

 

 

2,387,000

 

 

 

595

 

 

 

0.10

 

Total earning assets

 

 

11,018,666

 

 

 

78,639

 

 

 

2.89

 

 

 

9,328,883

 

 

 

80,142

 

 

 

3.48

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

269,015

 

 

 

 

 

 

 

 

 

268,848

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

785,248

 

 

 

 

 

 

 

 

 

683,868

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(85,228

)

 

 

 

 

 

 

 

 

(90,551

)

 

 

 

 

 

 

Total nonearning assets

 

 

969,035

 

 

 

 

 

 

 

 

 

862,165

 

 

 

 

 

 

 

Total assets

 

$

11,987,701

 

 

 

 

 

 

 

 

$

10,191,048

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

942,178

 

 

$

191

 

 

 

0.08

%

 

$

766,994

 

 

$

149

 

 

 

0.08

%

Savings deposits

 

 

4,170,503

 

 

 

1,141

 

 

 

0.11

 

 

 

3,504,020

 

 

 

1,106

 

 

 

0.13

 

Time deposits

 

 

654,091

 

 

 

649

 

 

 

0.40

 

 

 

657,938

 

 

 

1,067

 

 

 

0.66

 

Short-term borrowings

 

 

2,459

 

 

 

1

 

 

 

0.12

 

 

 

2,928

 

 

 

1

 

 

 

0.19

 

Subordinated debt

 

 

85,992

 

 

 

1,030

 

 

 

4.86

 

 

 

26,804

 

 

 

491

 

 

 

7.43

 

Total interest-bearing liabilities

 

 

5,855,223

 

 

 

3,012

 

 

 

0.21

 

 

 

4,958,684

 

 

 

2,814

 

 

 

0.23

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,883,050

 

 

 

 

 

 

 

 

 

4,106,084

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

67,688

 

 

 

 

 

 

 

 

 

41,522

 

 

 

 

 

 

 

Stockholders’ equity

 

 

1,181,740

 

 

 

 

 

 

 

 

 

1,084,758

 

 

 

 

 

 

 

Total interest free funds

 

 

6,132,478

 

 

 

 

 

 

 

 

 

5,232,364

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

11,987,701

 

 

 

 

 

 

 

 

$

10,191,048

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

75,627

 

 

 

 

 

 

 

 

$

77,328

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

2.68

%

 

 

 

 

 

 

 

 

3.25

%

Effect of interest free funds

 

 

 

 

 

 

 

 

0.10

%

 

 

 

 

 

 

 

 

0.11

%

Net interest margin

 

 

 

 

 

 

 

 

2.78

%

 

 

 

 

 

 

 

 

3.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For these computations, information is shown on a taxable-equivalent basis assuming a 21% tax rate.

 

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

 

(Unaudited)31


Taxable Equivalent Basis

(Dollars in thousands)

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

6,400,845

 

 

$

77,766

 

 

 

4.93

%

 

$

5,770,502

 

 

$

76,658

 

 

 

5.33

%

Deb securities – taxable

 

 

521,698

 

 

 

1,693

 

 

 

1.32

 

 

 

506,893

 

 

 

2,586

 

 

 

2.05

 

Debt securities – tax exempt

 

 

19,340

 

 

 

88

 

 

 

1.84

 

 

 

17,474

 

 

 

123

 

 

 

2.83

 

Federal funds sold and interest-bearing deposits with banks

 

 

2,387,000

 

 

 

595

 

 

 

0.10

 

 

 

1,493,771

 

 

 

4,769

 

 

 

1.28

 

Total earning assets

 

 

9,328,883

 

 

 

80,142

 

 

 

3.48

 

 

 

7,788,640

 

 

 

84,136

 

 

 

4.33

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

268,848

 

 

 

 

 

 

 

 

 

 

 

191,682

 

 

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

683,868

 

 

 

 

 

 

 

 

 

 

 

582,200

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(90,551

)

 

 

 

 

 

 

 

 

 

 

(51,515

)

 

 

 

 

 

 

 

 

Total nonearning assets

 

 

862,165

 

 

 

 

 

 

 

 

 

 

 

722,367

 

 

 

 

 

 

 

 

 

Total assets

 

$

10,191,048

 

 

 

 

 

 

 

 

 

 

$

8,511,007

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

766,994

 

 

$

149

 

 

 

0.08

%

 

$

815,827

 

 

$

515

 

 

 

0.25

%

Savings deposits

 

 

3,504,020

 

 

 

1,106

 

 

 

0.13

 

 

 

3,020,093

 

 

 

6,249

 

 

 

0.83

 

Time deposits

 

 

657,938

 

 

 

1,067

 

 

 

0.66

 

 

 

697,821

 

 

 

2,636

 

 

 

1.51

 

Short-term borrowings

 

 

2,928

 

 

 

1

 

 

 

0.19

 

 

 

2,448

 

 

 

7

 

 

 

1.18

 

Junior subordinated debentures

 

 

26,804

 

 

 

491

 

 

 

7.43

 

 

 

26,804

 

 

 

491

 

 

 

7.35

 

Total interest-bearing liabilities

 

 

4,958,684

 

 

 

2,814

 

 

 

0.23

 

 

 

4,562,993

 

 

 

9,898

 

 

 

0.87

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,106,084

 

 

 

 

 

 

 

 

 

 

 

2,888,342

 

 

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

41,522

 

 

 

 

 

 

 

 

 

 

 

36,879

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

1,084,758

 

 

 

 

 

 

 

 

 

 

 

1,022,793

 

 

 

 

 

 

 

 

 

Total interest free funds

 

 

5,232,364

 

 

 

 

 

 

 

 

 

 

 

3,948,014

 

 

 

 

 

 

��

 

 

Total liabilities and stockholders’ equity

 

$

10,191,048

 

 

 

 

 

 

 

 

 

 

$

8,511,007

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

 

 

$

77,328

 

 

 

 

 

 

 

 

 

 

$

74,238

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

3.25

%

 

 

 

 

 

 

 

 

 

 

3.46

%

Effect of interest free funds

 

 

 

 

 

 

 

 

 

 

0.11

%

 

 

 

 

 

 

 

 

 

 

0.36

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

3.36

%

 

 

 

 

 

 

 

 

 

 

3.82

%

 

 

For these computations, information is shown on a taxable-equivalent basis assuming a 21% tax rate.

 

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

 


Selected income statement data and other selected data for the comparable periods were as follows:

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

March 31,

 

 

Three Months Ended
March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

77,206

 

 

$

74,073

 

 

$

75,507

 

$

77,206

 

Provision for credit losses

 

 

 

 

 

19,583

 

 

2,936

 

 

Securities transactions

 

 

95

 

 

 

50

 

 

(3,915

)

 

95

 

Total noninterest income

 

 

39,935

 

 

 

35,145

 

 

43,650

 

39,935

 

Salaries and employee benefits

 

 

39,577

 

 

 

39,756

 

 

43,932

 

39,577

 

Total noninterest expense

 

 

64,963

 

 

 

61,385

 

 

72,512

 

64,963

 

Net income

 

 

42,520

 

 

 

22,608

 

 

35,915

 

42,520

 

Per Common Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income – basic

 

$

1.30

 

 

$

0.69

 

 

$

1.10

 

$

1.30

 

Net income – diluted

 

 

1.27

 

 

 

0.68

 

 

1.08

 

1.27

 

Cash dividends

 

 

0.34

 

 

 

0.32

 

 

0.36

 

0.34

 

Performance Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.69

%

 

 

1.07

%

 

1.22

%

 

1.69

%

Return on average stockholders’ equity

 

 

15.90

 

 

 

8.87

 

 

12.33

 

15.90

 

Cash dividend payout ratio

 

 

26.15

 

 

 

46.38

 

 

32.73

 

26.15

 

Net interest spread

 

 

3.25

 

 

 

3.46

 

 

2.68

 

3.25

 

Net interest margin

 

 

3.36

 

 

 

3.82

 

 

2.78

 

3.36

 

Efficiency ratio

 

 

55.46

 

 

 

56.20

 

 

60.85

 

55.46

 

Net charge-offs to average loans

 

 

0.01

 

 

 

0.02

 

 

0.00

 

0.01

 

Net Interest Income

For the three months ended March 31, 2021,2022, net interest income, which is the Company’s principal source of operating revenue, increased $3.1decreased $1.7 million or 4.2%2.2% compared to the three months ended March 31, 2020. Net interest income increased for the first quarter of 20212021. The decrease was due to loan growth,the decline of PPP fee income of approximately $9.8$8.1 million, andpartially offset by the decreaseincrease in interest rates paidincome on deposits. debt securities of $2.0 million, an increase of $1.2 million related to interest-bearing deposits at the Federal Reserve and $1.7 million in net interest income related to the Worthington acquisition. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. As shown in the preceding table, the Company’s net interest margin for the first quarter of 20212022 decreased compared to the first quarter of 2020, primarily2021. The decrease in margin was due to the lower average rates on loans, federal funds and securitiesPPP fees earned during the quarter.quarter and an increase in cash held at the Federal Reserve.

The Company’s net interest income and net interest margin have been and the Company currently expects them to continue to be, impacted by the decreases in market interest rates. Therates stemming from the Federal Reserve's response to the COVID-19 pandemic. However, the Company's expectation is that interest rates will remain at these low levels for some period of time in light ofincrease during the on-going response in Federal Reserve policy driven by the economic disruption arising from the COVID-19 pandemic.year.

Provision for Credit Losses

For the first quarter of 2021, no provision for credit losses was2022, the Company recorded compared to a provision for credit losses of $19.6$2.9 million, which was substantially related to acquired loans during the quarter, compared to no provision for credit losses recorded for the first quarter of 2020. The Company’s lack of provision for the first quarter of 2021 was based on improvements in economic conditions and the Company’s outlook for certain economic indicators. The elevated provision during the first quarter of 2020 was based on the Company’s evaluation of the level of uncertainty and lack of clarity of the timing of an end to the COVID-19 pandemic, as well as the magnitude of the government’s stimulus response to it.2021. The Company establishes an allowance as an estimate of the expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change, which could affect the amount of future provisions for credit losses. Net loan charge-offs were $289,000 for the first quarter of 2022, compared to net loan charge-offs of $506,000 for the first quarter of 2021, compared to net loan charge-offs of $1.0 million for the first quarter of 2020.2021. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a low level.

3132


Noninterest Income

Noninterest income, as presented in the preceding table, increased by $4.8$3.7 million for the first quarter of 20212022 compared to the first quarter of 2020. 2021. The increase in noninterest income was duemostly attributable to a gain$4.9 million of income resulting from the saleapplication of the Company’s Hugo, Oklahoma branch of $2.5 million, $2.4 million in rental income from a real estate property foreclosed onequity method accounting related to an equity interest received in the fourth quarterprocess of 2020, and a $1.2loan collection, along with a $2.3 million increase in income from sales of mortgage loans, which wereservice charges on deposits and $1.4 million increase in insurance commissions. The increase in non-interest income was partially offset by a $1.3loss of $4.0 million decreaseon bonds resulting from the sale of $226 million of low yielding debt securities, which were subsequently reinvested in treasury management income.higher yielding debt securities, and a $2.6 million gain on sale of other assets in the first quarter last year.

Noninterest income included non-sufficient funds fees totaling $5.5$6.5 million and $8.3$5.5 million for the three month periodsmonths ended March 31, 20212022 and 2020,2021, respectively. This represents 13.8%15.0% and 23.5%13.8% of the Company’s noninterest income for the three month periods ended March 31, 2021 and 2020, respectively.respective periods. In addition, the Company had debit card interchange fees totaling $10.7$11.7 million and $8.2$10.7 million during the three month periodsmonths ended March 31, 20212022 and 2020,2021, respectively. This represents 26.7% and 23.3% of the Company’s noninterest income for the three month periods ended March 31, 2021both periods.

The Company is subject to political pressures that could limit its ability to charge for non-sufficient funds ("NSF") and 2020, respectively. For the first quarter of 2021 comparedoverdraft fees. It is expected that recent changes to the first quarter of 2020, government assistance funds that flowed into the market, including PPP loansCompany's rates charged on NSF and stimulus paymentsoverdraft fees will lower annual pretax income by $6 to households, increased customer liquidity and higher volume of transactions. This activity resulted in lower non-sufficient funds fees and higher debit card interchange fees.$7 million.

Prior to the COVID-19 pandemic, there was little or no likelihood that the Company would surpass $10 billion in total assets for several years. However, with the CARES Act, including PPP loans, stimulus payments to households, and artificially high household savings rates, our deposits and assets have grown dramatically beyond reasonably foreseeable levels. To the extent the COVID-19 pandemic continues and the government response to it continues on the same or similar basis, itIt is likelyprobable the Company will exceed $10 billion in total assets at December 31, 2021.2022. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this would trigger an approximate reduction of annual pretax income from debit card interchange fees of between $17$22 to $20$24 million beginning July 1, 2022.2023.

The Company earned $2.0 million on the sale of loans for first quarter of 2021 compared to $781,000 for first quarter of 2020. The income from sales of loans increased due to the increase in volume of loans originated due to record low mortgage rates.

Noninterest Expense

Noninterest expense, as presented in the preceding table, increased by $3.6$7.5 million for first quarter of 20212022 compared to the first quarter of 2020.2021. The increase in noninterest expenses was due to $1.4the increase in salaries and employee benefits of approximately $4.4 million ofand other expenses related to a real estate property foreclosed on in the fourth quarter of 2020 and a $2.2 million gain on the sale of other real estate owned in the first quarter of 2020 that reduced noninterest expense.Worthington acquisition.

Income Taxes

The Company’s effective tax rate was 17.8% for the first quarter of 2022, compared to 18.5% for the first quarter of 2021, compared to 20.0% for the first quarter of 2020. 2021. The lower effective tax rate was lower fordriven by the exercising of stock options during the first quarter of 2021 compared to the first quarter of 2020 primarily because of an increase in employee options exercised during the quarter. 2022 and a lower state income tax rate. The reasons for the difference between the Company’s effective tax rate and the federal statutory rate were tax-exempt income, nondeductible amortization, federal and state tax credits and state tax expense.

32

33


FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

10,549,305

 

 

$

9,212,357

 

 

$

12,624,431

 

 

$

9,405,612

 

Total loans (net of unearned interest)

 

 

6,380,108

 

 

 

6,448,225

 

 

 

6,504,477

 

 

 

6,194,218

 

Allowance for credit losses

 

 

90,860

 

 

 

91,366

 

 

 

87,239

 

 

 

83,936

 

Debt securities

 

 

520,543

 

 

 

555,196

 

 

 

1,211,668

 

 

 

534,500

 

Deposits

 

 

9,371,940

 

 

 

8,064,704

 

 

 

11,250,971

 

 

 

8,091,914

 

Stockholders' equity

 

 

1,094,671

 

 

 

1,067,885

 

 

 

1,167,802

 

 

 

1,171,734

 

Book value per share

 

 

33.40

 

 

 

32.64

 

 

 

35.68

 

 

 

35.94

 

Tangible book value per share (non-GAAP)(1)

 

 

28.27

 

 

 

27.47

 

 

 

29.51

 

 

 

30.80

 

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

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

 

 

 

 

 

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

 

 

 

 

Stockholders' equity

 

$

1,094,671

 

 

$

1,067,885

 

 

$

1,167,802

 

$

1,171,734

 

Less goodwill

 

 

149,922

 

 

 

149,922

 

 

 

176,563

 

149,922

 

Less intangible assets, net

 

 

18,206

 

 

 

18,999

 

 

 

25,456

 

 

 

17,566

 

Tangible stockholders' equity (non-GAAP)

 

$

926,543

 

 

$

898,964

 

 

$

965,783

 

 

$

1,004,246

 

Common shares outstanding

 

 

32,771,013

 

 

 

32,719,852

 

 

 

32,725,587

 

32,603,118

 

Tangible book value per share (non-GAAP)

 

$

28.27

 

 

$

27.47

 

 

$

29.51

 

$

30.80

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans to deposits (year-to-date)

 

 

70.84

%

 

 

78.28

%

 

 

59.72

%

 

 

64.27

%

Average earning assets to total assets (year-to-date)

 

 

91.54

 

 

 

91.90

 

 

 

91.92

 

 

 

91.96

 

Average stockholders’ equity to average assets (year-to-date)

 

 

10.64

 

 

 

11.17

 

 

 

9.86

 

 

 

10.32

 

Asset Quality Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans past due 90 days and still accruing

 

$

5,282

 

 

$

4,802

 

 

$

6,360

 

 

$

4,964

 

Nonaccrual loans (3)

 

 

35,326

 

 

 

37,545

 

 

 

17,453

 

 

 

20,892

 

Restructured loans

 

 

7,801

 

 

 

7,784

 

 

 

2,345

 

 

 

3,665

 

Total nonperforming and restructured loans

 

 

48,409

 

 

 

50,131

 

 

 

26,158

 

 

 

29,521

 

Other real estate owned and repossessed assets

 

 

30,320

 

 

 

32,480

 

 

 

39,729

 

 

 

39,553

 

Total nonperforming and restructured assets

 

 

78,729

 

 

 

82,611

 

 

 

65,887

 

 

 

69,074

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans to total loans

 

 

0.55

%

 

 

0.58

%

 

 

0.27

%

 

 

0.34

%

Nonperforming and restructured loans to total loans

 

 

0.76

 

 

 

0.78

 

 

 

0.40

 

 

 

0.48

 

Nonperforming and restructured assets to total assets

 

 

0.75

 

 

 

0.90

 

 

 

0.52

 

 

 

0.73

 

Allowance for credit losses to total loans

 

 

1.42

 

 

 

1.42

 

 

 

1.34

 

 

 

1.36

 

Allowance for credit losses to nonperforming and restructured loans

 

 

187.69

 

 

 

182.26

 

 

 

333.51

 

 

 

284.33

 

Allowance for credit losses to nonaccrual loans

 

 

257.20

 

 

 

243.35

 

 

 

499.83

 

 

 

401.76

 

(1) Refer to the “Reconciliation of Tangible Book Value per Common Share (non-GAAP)” Table.

(1) Refer to the “Reconciliation of Tangible Book Value per Common Share (non-GAAP)” Table.

 

(1) Refer to the “Reconciliation of Tangible Book Value per Common Share (non-GAAP)” Table.

 

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

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

 

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

 

(3) Government Agencies guarantee approximately $6.6 million of nonaccrual loans at March 31, 2021.

 

(3) Government agencies guarantee approximately $3.4 million of nonaccrual loans at March 31, 2022.

(3) Government agencies guarantee approximately $3.4 million of nonaccrual loans at March 31, 2022.

 

Cash and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks and interest-bearing deposits with banks increased by $1.4$2.0 billion or 89.4%99.6% to $3.1$4.1 billion, from December 31, 20202021 to March 31, 2021.2022. The increase was primarily related to the increase in deposits from PPP and other government stimulus payments.return of off-balance sheet sweep accounts related to the Company’s year-end sweep program, which was partially off-set by the purchase of higher yielding bonds described below.

Securities

At March 31, 2021,2022, total debt securities decreased $34.7increased $677.2 million, or 6.2%126.7% compared to December 31, 2020.2021. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized gainloss on debt securities available for sale, before taxes, was $8.6$38.7 million at March 31, 2021,2022, compared to a net unrealized gain of $9.9$2.8 million

33


at December 31, 2020.2021. These unrealized losses and gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of a gainloss of $6.4$29.5 million at March 31, 20212022 and a gain of $7.4$2.2 million at December 31, 2020.2021. During the quarter ended March 31, 2022, the Company had a loss of $4.0 million on bonds resulting from the sale

34


of $226 million of debt securities with an average yield of 0.16%, which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. On January 10, 2022, the Company purchased United States Treasury Notes of $600 million par value with an average yield of 1.42% and an average maturity of 53 months.

See Note (3) of the Notes to Consolidated Financial Statements for disclosures regarding the Company’s Securities.

Loans

At March 31, 2021,2022, total loans decreased $68.1increased $310.3 million or 1.1%5.0% compared to December 31, 2020. The decrease in loans was partially2021. Loans increased $257.4 million due to approximately $21 millionthe acquisition of loans that were sold with the Company’s Hugo, Oklahoma branch.Worthington. At March 31, 2021,2022, the balance of total PPP loans was $713.7$30.6 million, net of unamortized processing fees of $23.3 million.approximately $394,000 compared to $80.4 million, net of unamortized processing fees of $2.0 million at December 31, 2021.

See Note (4) of the Notes to Consolidated Financial Statements for disclosures regarding the Company’s loan portfolio segments.

Allowance for Credit Losses

On January 1, 2020, the Company adopted ASC 326, which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL. At March 31, 2021 and December 31, 2020,The increase in the allowance for credit lossesloss during 2022 was substantially related to total loans represented 1.42%the additional allowance for credit loss required by newly acquired loans. The decrease in the allowance for credit loss during 2021 was driven by a reversal of totala pandemic-related provision during 2021 based on sustained improvements in the economy, both nationally and in the Company's markets, which reduced the amount of expected credit loss within the loan portfolio. This reduction was partially offset by additional allowance for credit loss required by newly acquired loans.

NonaccrualNonperforming and Restructured Assets

At March 31, 2021,2022, nonperforming and restructured assets decreased $3.9$3.2 million to $78.7$65.9 million compared to December 31, 2020.2021. The Company’s level of nonperforming and restructured assets has continued to be relatively low, equating to 0.75%0.52% of total assets at March 31, 20212022 and 0.90%0.73% of total assets at December 31, 2020.2021.

Nonaccrual loans totaled $35.3$17.5 million at March 31, 2021,2022, compared to $37.5$20.9 million at December 31, 2020.2021. The Company’s nonaccrual loans decreased $3.4 million from December 31, 2021 due to resolutions of several loans. The Company’s nonaccrual loans are primarily commercial and agricultural non-real estate and farmland. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is not in doubt.basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $376,000 for the three months ended March 31, 2022 and $521,000 for the three months ended March 31, 2021 and $332,000 for the three months ended March 31, 2020.2021. Only a small amount of this interest is expected to be ultimately collected. Approximately $6.6$3.4 million of nonaccrual loans were guaranteed by government agencies at March 31, 2021.2022.

Restructured loans totaled $7.8$2.3 million at both March 31, 2021 and2022 compared to $3.7 million at December 31, 2020.2021. The Company charges interest on principal balances outstanding during deferral periods. As a result, the current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings whose terms were modified during the period were not considered to be material.

The classification of a loan as nonperforming does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the level of collections decline.declines. The above normal risk associated with nonperforming loans has been considered in the determination of the allowance for credit losses. At March 31, 2021,2022, the allowance for credit losses as a percentage of nonperforming and restructured loans was 187.69%333.51%, compared to 182.26%284.33%, at December 31, 2020.2021. The level of nonperforming loans and credit losses could rise over time as a result of adverse economic conditions.

Other real estate owned (OREO) and repossessed assets totaled $30.3$39.7 million at March 31, 2021,2022, compared to $32.5$39.6 million at December 31, 2020.2021. Other real estate owned consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. As of both March 31, 20212022 and December 31, 2020,2021, other real estate owned included a commercial real estate property recorded at approximately $28$29.5 million.The Company's rental income from OREO was approximately $2.8 million for the three months ended March 31, 2022 compared to approximately $2.4 million for the three months ended March 31, 2021. In addition, the Company's OREO holding expense was approximately $2.5 million for the three months ended March 31, 2022 compared to approximately $1.5 million for the three months ended March 31, 2021. Other real estate owned and repossessed assets are carried at the lower of the book values of the related loans or fair values based upon appraisals, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to other real estate owned are charged directly to the allowance for

35


credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to other real estate owned. Decreases in values of properties subsequent to their classification as other real estate owned are charged to operating expense.

34


Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $168.1$202.0 million and $168.9$167.5 million at March 31, 20212022 and December 31, 2020,2021, respectively. The increase in goodwill and intangible assets was due the acquisition of Worthington on February 8, 2022, which added approximately $8.7 million of core deposit intangibles and approximately $26.6 million of goodwill. See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions.

Other assets includes the cash surrender value of key-man life insurance policies. The balance of the cash surrender value of key-man life insurance policies was $81.3totaling $81.0 million at March 31, 20212022 and $80.7$81.4 million at December 31, 2020.  In addition,2021.

The Company's derivative financial instruments are included in other assets includes approximately $11.1and totaled $62.7 million at March 31, 2022 and $8.9 million at December 31, 2022. The derivative financial instruments have increased due to the increase in equity interest of a previous borrower in the oil and gas industry,prices and customer activity. The Company's derivative financial instruments require a daily margin to be posted, which was received through bankruptcy proceedingsfluctuates with oil and gas prices. These margins have increased during 2022 due to the current increase in oil and gas prices and customer activity. These margins are included in other assets totaling $84.6 million at March 31, 2022 and $14.3 million at December 31, 2022. See Note (12) of the fourth quarterNotes to Consolidated Financial Statements for a complete discussion of 2020. This asset is carriedthe Company’s derivative financial instruments.

Equity securities are reported in other assets on the balance sheet. The Company invests in equity securities without readily determinable fair values. These equity securities are reported at cost lessminus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $10.2 million at March 31, 2022 and $10.6 million at December 31, 2021. The Company reviews its portfolio of equity securities for impairment at least quarterly.

Low Income Housing and New Market Tax Credit Investments

During 2021,2022, there have not been any material changes in the Company’s low income housing tax credit investments and new market tax credit investments, which are included in other assets on the Company’s balance sheet. See Note (6) of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, for disclosures regarding the Company’s low income housing tax credit investments and new market tax creditthese investments.

Liquidity and Funding

The Company’s principal source of liquidity and funding is its broad deposit base generated from customer relationships. The availability of deposits is affected by economic conditions, competition with other financial institutions and alternative investments available to customers. Through interest rates paid, service charge levels and services offered, the Company can affect its level of deposits to a limited extent. The level and maturity of funding necessary to support the Company’s lending and investment functions is determined through the Company’s asset/liability management process. The Company currently does not rely heavily on long-term borrowings and does not utilize brokered CDs. The Company maintains federal funds lines of credit with other banks and could also utilize the sale of loans, securities and liquidation of other assets as sources of liquidity and funding.

DepositsThere have not been any other material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Deposits

At March 31, 2021,2022, deposits totaled $9.4$11.3 billion, an increase of $1.3$3.2 billion or 16.2%39.0% from the December 31, 20202021 total. The increase in deposits was primarily related to depositsthe return of proceeds fromoff-balance sheet sweep accounts related to the PPP and government stimulus payments. Company’s year-end sweep program. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 98.6%98.5% at March 31, 20212022 and 98.2% at December 31, 2020.2021. Noninterest-bearing deposits to total deposits were 45.6%46.4% at March 31, 2021,2022, compared to 47.0%46.7% at December 31, 2020.2021.

In addition, off-balance sheet sweep accounts totaled $2.9 billion at March 31, 2022 compared to $5.1 billion at December 31, 2021, which included a temporary sweep amount of approximately $2.3 billion. The year-end sweep program affected the balances of both assets and deposits.

36


Subordinated Debt

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 to various institutional accredited investors. See Note (7) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

Short-Term Borrowings

Short-term borrowings, consisting primarily of federal funds purchased and repurchase agreements are another source of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company’s ability to earn a favorable spread on the funds obtained. Short-term borrowings were $3.8$3.3 million at March 31, 2021, compared to $1.1 million2022. The Company did not have short-term borrowings at December 31, 2020.2021.

Long-Term BorrowingsLines of Credit

The CompanyBancFirst has a line of credit from the Federal Home Loan Bank (“FHLB”) of Topeka, Kansas to use for liquidity or to match-fund certain long-term fixed-rate loans. The Company’s assets, including residential first mortgages of $826.6In addition, BancFirst has a $25.0 million are pledged as collateral for the borrowings under the line of credit. credit with another financial institution that is an overnight federal funds facility. As of March 31, 20212022 and December 31, 2020, the Company2021, BancFirst had no advances outstanding under theeither line of credit. Pegasus has a $20.0 million line of credit with another financial institution that is an overnight federal funds facility. As of March 31, 2022 and December 31, 2021, Pegasus had no advances outstanding under its line of credit. Worthington has an $8.5 million line of credit with another financial institution that is an overnight federal funds facility, and a line of credit from FHLB.the FHLB of Dallas, Texas to use for liquidity or to match-fund certain long-term fixed rate loans. Worthington had no advances outstanding as of March 31, 2022 under either line of credit.

There have not been any other material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Capital Resources

Stockholders’ equity totaled $1.1$1.2 billion at both March 31, 20212022 and December 31, 2020.2021. In addition to net income of $42.5$35.9 million, other changes in stockholders’ equity during the three months ended March 31, 20212022 included $1.3$3.1 million related to common stock issuances for stock option exercises and $576,00$458,000 related to stock-based compensation, that were partially offset by $11.1$11.8 million in dividends $5.4 million in settlement of options in cash, and a $1.0$31.7 million decrease in accumulated other comprehensive income. The Company’s leverage ratio and total risk-based capital ratios at March 31, 2021,2022, were well in excess of the regulatory requirements.

See Note (8)(9) of the Notes to Consolidated Financial Statements for a discussion of capital ratioratios and requirements.

35


Liquidity Risk and Off-Balance Sheet Arrangements

There have not been any material changes in the Company’s liquidity and off-balance sheet arrangements included in Management’s Discussion and Analysis which was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Registrant’sCompany’s disclosures regarding market risk since December 31, 2020,2021, the date of its most recent annual report to stockholders.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s Chief Executive Officer, Chief Financial Officer and its Disclosure Committee, which includes the Company’s Executive Chairman, Chief Risk Officer, Chief Internal Auditor, Chief Asset Quality Officer, Controller, General Counsel and Vice PresidentDirector of Corporate Finance,Financial Reporting, have evaluated, as of the last day of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on their evaluation they concluded that the disclosure controls and procedures of the Company are effective 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.

Changes in Internal Control Over Financial Reporting. During the period to which this report relates, there have not been any changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, such controls.

3637


PART II – OTHER INFORMATION

The Company has been named as a defendant in various legal actions arising from the conduct of its normal business activities. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in the opinion of the Company, any such liability will not have a material adverse effect on the consolidated financial statements of the Company.

Item 1A. Risk Factors.

Except as set forth below, asAs of March 31, 2021,2022, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020:

The Durbin Amendment is a provision in the larger Dodd-Frank Act that gave the Federal Reserve the authority to establish rates on debit card transactions. The Durbin Amendment aims to control debit card interchange fees and restrict anti-competitive practices. The law applies to banks with over $10 billion in assets and limits what these banks may charge for debit card interchange fees. At December 31, 2020, the Company’s assets did not exceed $10 billion but, at March 31, 2021, the Company’s assets did exceed $10 billion. Prior to the COVID-19 pandemic, there was little or no likelihood that the Company would surpass $10 billion in total assets for several years. However, with the CARES Act, including PPP loans, stimulus payments to households, and artificially high household savings rates, our deposits and assets have grown dramatically beyond reasonably foreseeable levels. To the extent the COVID-19 pandemic continues and the government response to it continues on the same or similar basis, it is likely the Company will exceed $10 billion in total assets at December 31, 2021. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this would trigger an approximate reduction of annual pretax income from debit card interchange fees of between $17 to $20 million beginning July 1, 2022.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

 

Exhibit
Number

Exhibit

2.1

Share Exchange Agreement by and between BancFirst Corporation and Pegasus Bank dated April 23, 2019 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K/A dated April 25, 2019 and incorporated herein by reference).

3.1

Amended and Restated By-Laws of BancFirst Corporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 30, 2015July 27, 2021 and incorporated herein by reference).

3.2

Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of BancFirst Corporation dated May 31, 2017August 5, 2021. (filed as Exhibit 3.13.2 to the Company’s CurrentCompany's Quarterly Report on Form 8-K dated May 31, 2017 and incorporated herein by reference)10-Q for the Quarter Ended June 30, 2021).

4.1

Instruments defining the rights of securities holders (see Exhibits 3.1 and 3.2 above).

4.2

Description of Registrant’s Securities (filed as Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

4.3

Form of Amended and Restated Trust Agreement relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

4.4

Form of 7.20% Cumulative Trust Preferred Security Certificate for BFC Capital Trust II (filed as Exhibit D to Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

4.5

Form of Indenture relating to the 7.20% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust II (filed as Exhibit 4.1 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

4.6

Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (filed as Exhibit 4.2 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

4.7

Form of Guarantee of BancFirst Corporation relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.7 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

4.810.1

Form of Guarantee Agreement by and between CSB Bancshares, Inc. and Wilmington Trust Company (filed as Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).

4.9

Form of Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures of CSB Bancshares, Inc., issued to Wilmington Trust Company (filed as Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).

4.10

Form of First Supplemental Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures by and between Wilmington Trust Company and BancFirst Corporation (filed as Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).

10.1

BancFirst Corporation Employee Stock Ownership and Trust Agreement adopted effective January 1, 2015 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2015 and incorporated herein by reference).

10.2

Amendment Number One to the BancFirst Corporation Employee Stock Ownership Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).

10.3

BancFirst Corporation Employee Stock Ownership Plan 2019 Amendment Number One (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

10.4

Adoption Agreement for the BancFirst Corporation Thrift Plan adopted April 21, 2016 effective January 1, 2016. (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2016 and incorporated herein by reference).

10.410.5

Amendment Number One to the BancFirst Corporation Thrift Plan. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).

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Exhibit
Number

Exhibit

10.510.6

2019 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

10.7

2020 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form

8-K for dated December 17, 2020 and incorporated herein by reference).

10.8

Amended and Restated BancFirst Corporation Stock Option Plan. (filed as exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

39


10.9

Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option Plan. (filed as exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

10.10

Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan. (filed as exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

10.11

Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).

10.610.12

First Amendment to Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).

10.710.13

Seventh Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option PlanSubordinated Note Purchase Agreement. (filed as Exhibit 10.10exhibit 10.1 to the Company’s QuarterlyCompany's Current Report on Form 10-Q for the Quarter Ended8-K dated June 30, 202017, 2021 and incorporated herein by reference).

10.8

Sixth Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2019 and incorporated herein by reference).

10.9

Sixteenth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2020 and incorporated herein by reference).

10.10

Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.1 to the Company’s Current

Report on Form 8-K dated December 22, 2020 and incorporated herein by reference).

31.1*

10.11

BancFirst Corporation Employee Stock Ownership Plan 2019 Amendment Number One (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

10.12

2019 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

10.13

2020 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form

8-K for dated December 17, 2020 and incorporated herein by reference).

31.1*

Chief Executive Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31.2*

Chief Financial Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).

32*

CEO’s & CFO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document.

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*

Cover page Interactive Data File (formatted as Inline XBRL and contained within the Inline XBRL Instance Document in Exhibit 101)

*

Filed herewith.


SIGNATURES* Filed herewith.

40


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 thereunto duly authorized.

BANCFIRST CORPORATION

(Registrant)

Date: May 5, 20216, 2022

/s/ David Harlow

David Harlow

President

Chief Executive Officer

(Principal Executive Officer)

Date: May 5, 20216, 2022

/s/ Kevin Lawrence

Kevin Lawrence

Executive Vice President

Chief Financial Officer

(Principal Financial Officer)

41

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