BANCFIRST CORP /OK/ - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE 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.)

101 N. Broadway, Oklahoma City, Oklahoma		73102-8405
(Address of principal executive offices)		(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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	☐ (Do not check if a smaller reporting company)	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 28, 2017 there were 15,906,276 shares of the registrant’s Common Stock outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	March 31,			December 31,
		2017			2016
	(unaudited)			(see Note 1)
ASSETS
Cash and due from banks	$	180,051		$	183,921
Interest-bearing deposits with banks		1,857,961			1,666,540
Federal funds sold		200			700
Securities (fair value: $463,285 and $469,871, respectively)		463,250			469,833
Loans held for sale		7,754			9,318
Loans (net of unearned interest)		4,390,775			4,400,232
Allowance for loan losses		(47,921	)		(48,693	)
Loans, net of allowance for loan losses		4,342,854			4,351,539
Premises and equipment, net		127,124			126,771
Other real estate owned		4,018			3,526
Intangible assets, net		12,768			13,330
Goodwill		54,042			54,042
Accrued interest receivable and other assets		139,615			139,432
Total assets	$	7,189,637		$	7,018,952

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	2,652,691		$	2,526,842
Interest-bearing		3,741,936			3,721,215
Total deposits		6,394,627			6,248,057
Short-term borrowings		800			500
Accrued interest payable and other liabilities		32,378			27,342
Junior subordinated debentures		31,959			31,959
Total liabilities		6,459,764			6,307,858

Stockholders' equity:
Senior preferred stock, $1.00 par; 10,000,000 shares authorized; none issued		—			—
Cumulative preferred stock, $5.00 par; 900,000 shares authorized; none issued		—			—
Common stock, $1.00 par, 20,000,000 shares authorized; shares issued and outstanding: 15,891,276 and 15,810,935, respectively		15,891			15,811
Capital surplus		120,435			117,541
Retained earnings		593,631			577,648
Accumulated other comprehensive (loss) income, net of income tax of $54 and $(59), respectively		(84	)		94
Total stockholders' equity		729,873			711,094
Total liabilities and stockholders' equity	$	7,189,637		$	7,018,952

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
		2017			2016
INTEREST INCOME
Loans, including fees	$	53,635		$	50,195
Securities:
Taxable		1,761			1,327
Tax-exempt		187			255
Interest-bearing deposits with banks		3,440			1,802
Total interest income		59,023			53,579
INTEREST EXPENSE
Deposits		3,725			3,080
Short-term borrowings		3			1
Junior subordinated debentures		527			522
Total interest expense		4,255			3,603
Net interest income		54,768			49,976
Provision for loan losses		72			4,103
Net interest income after provision for loan losses		54,696			45,873
NONINTEREST INCOME
Trust revenue		2,952			2,465
Service charges on deposits		15,778			14,710
Securities transactions (includes accumulated other comprehensive income reclassifications of $0 and $100, respectively)		—			100
Income from sales of loans		632			562
Insurance commissions		4,563			4,135
Cash management		2,754			2,318
(Loss) gain on sale of other assets		(24	)		4
Other		1,430			1,323
Total noninterest income		28,085			25,617
NONINTEREST EXPENSE
Salaries and employee benefits		30,654			29,357
Occupancy, net		2,974			2,827
Depreciation		2,420			2,530
Amortization of intangible assets		547			581
Data processing services		1,195			1,215
Net expense (income) from other real estate owned		50			(1,141	)
Marketing and business promotion		2,215			1,855
Deposit insurance		588			839
Other		8,945			8,228
Total noninterest expense		49,588			46,291
Income before taxes		33,193			25,199
Income tax expense		11,143			8,620
Net income	$	22,050		$	16,579
NET INCOME PER COMMON SHARE
Basic	$	1.39		$	1.07
Diluted	$	1.36		$	1.05
OTHER COMPREHENSIVE INCOME
Unrealized (losses)/gains on securities, net of tax of $113 and $(374), respectively		(178	)		591
Reclassification adjustment for gains included in net income, net of tax of $0 and $39, respectively		—			(61	)
Other comprehensive (losses)/gains, net of tax of $113 and $(335), respectively		(178	)		530
Comprehensive income	$	21,872		$	17,109

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	March 31,
	2017			2016
COMMON STOCK
Issued at beginning of period	$	15,811		$	15,597
Shares issued		80			31
Shares acquired and canceled		—			(100	)
Issued at end of period	$	15,891		$	15,528
CAPITAL SURPLUS
Balance at beginning of period	$	117,541		$	102,865
Common stock issued		2,672			871
Tax effect of stock options		—			(209	)
Stock-based compensation arrangements		222			451
Balance at end of period	$	120,435		$	103,978
RETAINED EARNINGS
Balance at beginning of period	$	577,648		$	535,521
Net income		22,050			16,579
Dividends on common stock ($0.38 and $0.36 per share, respectively)		(6,067	)		(5,579	)
Common stock acquired and canceled		—			(5,423	)
Balance at end of period	$	593,631		$	541,098
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains on securities:
Balance at beginning of period	$	94		$	1,527
Net change		(178	)		530
Balance at end of period	$	(84	)	$	2,057
Total stockholders’ equity	$	729,873		$	662,661

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

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	March 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	22,050		$	16,579
Adjustments to reconcile to net cash provided by operating activities:
Provision for loan losses		72			4,103
Depreciation and amortization		2,967			3,111
Net amortization of securities premiums and discounts		(47	)		148
Realized securities gains	—				(100	)
Gain on sales of loans		(632	)		(562	)
Cash receipts from the sale of loans originated for sale		43,005			40,271
Cash disbursements for loans originated for sale		(40,826	)		(33,610	)
Deferred income tax benefit		(485	)		(829	)
Loss/(gain) on other assets		35			(1,222	)
Decrease/(increase) in interest receivable		598			(176	)
Increase in interest payable		22			13
Amortization of stock-based compensation arrangements		222			451
Excess tax benefit from stock-based compensation arrangements		(376	)	—
Other, net		5,310			300
Net cash provided by operating activities	$	31,915		$	28,477
INVESTING ACTIVITIES
Net decrease in federal funds sold		500		—
Purchases of available for sale securities		(20,511	)	—
Proceeds from maturities, calls and paydowns of held for investment securities		361			410
Proceeds from maturities, calls and paydowns of available for sale securities		26,489			55,071
Proceeds from sales of available for sale securities	—				299
Net change in loans		7,366			(45,010	)
Purchases of premises, equipment and computer software		(3,369	)		(2,939	)
Proceeds from the sale of other real estate owned and other assets		1,186			5,971
Net cash provided by investing activities		12,022			13,802
FINANCING ACTIVITIES
Net change in deposits		146,570			37,514
Net increase in short-term borrowings		300			800
Issuance of common stock, net		2,752			693
Common stock acquired	—				(5,523	)
Cash dividends paid		(6,008	)		(5,615	)
Net cash provided by financing activities		143,614			27,869
Net increase in cash, due from banks and interest-bearing deposits		187,551			70,148
Cash, due from banks and interest-bearing deposits at the beginning of the period		1,850,461			1,598,177
Cash, due from banks and interest-bearing deposits at the end of the period	$	2,038,012		$	1,668,325
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	4,235		$	3,591
Cash paid during the period for income taxes	$	1,100		$	1,050
Noncash investing and financing activities:
Unpaid common stock dividends declared	$	6,028		$	5,579

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

BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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 State 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, 2016.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc. and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc. 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 the instructions for Form 10-Q. 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, 2016, 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. There have been no significant changes in the accounting policies of the Company since December 31, 2016, the date of the most recent annual report.

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 loan 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 Adopted During Current Period:

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. The Company opted for early adoption of ASU 2017-08, as was permitted, on January 1, 2017. ASU 2017-08 did not have a significant impact on the Company’s financial statements and no prior periods were adjusted.

In October 2016, the FASB issued ASU No. 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control.” ASU 2016-17 updates ASU No. 2015-02 to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. ASU 2016-17 was adopted on January 1, 2017 and did not have a significant impact on the Company’s financial statements and no prior periods were adjusted.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09 all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the

treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also allows entities to make an entity-wide accounting policy election to account for forfeitures when they occur, which the Company has elected to do. ASU 2016-09 changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. ASU 2016-09 was adopted on January 1, 2017 and did not have a significant impact on the Company’s financial statements. In addition, ASU 2016-09 was applied prospectively and no prior periods were adjusted. The excess tax benefit for share-based payment awards that vested or were exercised during the three months ended March 31, 2017 was approximately $376,000.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40).” ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about the Company’s ability to continue as a going concern and related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date the financial statements are issued. ASU 2014-15 was adopted on January 1, 2017. Adoption of ASU 2014-15 did not have a significant effect on the Company’s financial statements.

Standards Not Yet Adopted:

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 removes the second step of goodwill testing. ASU 2017-04 will be effective on January 1, 2020 and is not expected to have a significant impact on the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business. ASU 2017-01 will be effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements.

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” ASU 2016-16 provides guidance stating that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 will be effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 will be effective on January 1, 2018. Early adoption is permitted with retrospective applications. The Company is currently evaluating the potential impact of ASU 2016-15 on its financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgements used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. The Company is currently evaluating the potential impact of ASU 2016-13 on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases - (Topic 842).” ASU 2016-02 requires that lessees recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Adoption of ASU 2016-02 is not expected to have a significant effect on the Company’s financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10).” ASU 2016-01 require all equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in the fair value recognized through net income. In addition, the amendment will require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is not permitted. Adoption of ASU 2016-01 is not expected to have a significant effect on the Company’s financial statements.

In January of 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customer (Topic 606).” ASU 2014-09 implements a comprehensive new revenue recognition standard that will supersede substantially all existing revenue recognition guidance. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in a manner that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, which comprises a significant portion of the Company’s revenue stream. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606).” ASU 2015-14 is an amendment to defer the effective date of ASU N. 2014-09. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Adoption of ASU 2014-09 may require the Company to amend how it recognizes certain recurring revenue streams related to trust fees, which are recorded in non-interest expense; however, the Company does not expect the adoption of ASU 2014-09 to have a significant impact on the Company’s financial statements.

(2)	SECURITIES

The following table summarizes securities held for investment and securities available for sale:

	March 31, 2017		December 31, 2016
	(Dollars in thousands)
Held for investment, at cost (fair value: $4,038 and $4,403, respectively)	$	4,003	$	4,365
Available for sale, at fair value		459,247		465,468
Total	$	463,250	$	469,833

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2017	(Dollars in thousands)
Mortgage backed securities (1)	$	233	$	15	$	—		$	248
States and political subdivisions		3,270		22		(2	)		3,290
Other securities		500		—		—			500
Total	$	4,003	$	37	$	(2	)	$	4,038
December 31, 2016
Mortgage backed securities (1)	$	252	$	17	$	—		$	269
States and political subdivisions		3,613		25		(4	)		3,634
Other securities		500		—		—			500
Total	$	4,365	$	42	$	(4	)	$	4,403

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2017	(Dollars in thousands)
U.S. treasuries	$	289,248	$	723	$	(538	)	$	289,433
U.S. federal agencies		105,166		307		(415	)		105,058
Mortgage backed securities (1)		19,369		271		(567	)		19,073
States and political subdivisions		38,856		853		(71	)		39,638
Other securities (2)		6,746		125		(826	)		6,045
Total	$	459,385	$	2,279	$	(2,417	)	$	459,247
December 31, 2016
U.S. treasuries	$	268,763	$	700	$	(920	)	$	268,543
U.S. federal agencies		129,674		373		(405	)		129,642
Mortgage backed securities (1)		19,949		290		(567	)		19,672
States and political subdivisions		40,335		836		(129	)		41,042
Other securities (2)		6,594		125		(150	)		6,569
Total	$	465,315	$	2,324	$	(2,171	)	$	465,468

(1)

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

(2)

Primarily consists of equity securities.

The maturities of 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, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in thousands)
Held for Investment
Contractual maturity of debt securities:
Within one year	$	1,563	$	1,573	$	1,561	$	1,568
After one year but within five years		1,751		1,762		1,937		1,951
After five years but within ten years		673		687		707		723
After ten years		16		16		160		161
Total	$	4,003	$	4,038	$	4,365	$	4,403
Available for Sale
Contractual maturity of debt securities:
Within one year	$	75,206	$	75,378	$	66,542	$	66,662
After one year but within five years		308,182		308,229		320,150		319,839
After five years but within ten years		6,318		6,666		5,830		6,152
After ten years		62,933		62,929		66,199		66,246
Total debt securities		452,639		453,202		458,721		458,899
Equity securities		6,746		6,045		6,594		6,569
Total	$	459,385	$	459,247	$	465,315	$	465,468

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, 2017		December 31, 2016
	(Dollars in thousands)
Book value of pledged securities	$	432,232	$	439,692

(3)	LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

	March 31, 2017					December 31, 2016
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial and financial:
Commercial and industrial	$	834,561		19.01	%	$	828,260		18.82	%
Oil & gas production and equipment		84,976		1.93			84,228		1.91
Agriculture		139,542		3.18			144,751		3.29
State and political subdivisions:
Taxable		32,597		0.74			33,793		0.77
Tax-exempt		48,313		1.10			47,283		1.07
Real estate:
Construction		417,148		9.50			420,884		9.57
Farmland		201,450		4.59			197,872		4.50
One to four family residences		843,731		19.22			846,360		19.24
Multifamily residential properties		48,302		1.10			57,806		1.31
Commercial		1,433,707		32.65			1,426,643		32.42
Consumer		272,637		6.21			279,704		6.36
Other (not classified above)		33,811		0.77			32,648		0.74
Total loans	$	4,390,775		100.00	%	$	4,400,232		100.00	%

The Company’s commercial and industrial loan category includes a small percentage of loans to companies that provide ancillary services to the oil and gas industry, such as transportation, preparation contractors and equipment manufacturers. The balance of these loans was approximately $58 million at March 31, 2017 and approximately $56 million at December 31, 2016.

The Company’s loans are mostly to customers within Oklahoma and over 65% of the 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.

Accounting policies related to appraisals, nonaccruals and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

	March 31,		December 31,
	2017		2016
	(Dollars in thousands)
Past due 90 days or more and still accruing	$	2,024	$	1,962
Nonaccrual		23,694		31,798
Restructured		2,203		1,713
Total nonperforming and restructured loans		27,921		35,473
Other real estate owned and repossessed assets		4,404		3,866
Total nonperforming and restructured assets	$	32,325	$	39,339

Nonaccrual loans, accruing loans past due 90 days or more, and restructured loans are shown in the table above. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $499,000 for the three months ended March 31, 2017 and approximately $513,000 for the three months ended March 31, 2016.

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

Loans are segregated into classes based upon the nature of the collateral and the borrower. These classes are used to estimate the credit risk component in the allowance for loan losses.

The following table is a summary of amounts included in nonaccrual loans, segregated by class of loans. Residential real estate refers to one-to-four family real estate.

	March 31, 2017		December 31, 2016
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied	$	599	$	713
Non-residential real estate other		2,087		5,688
Residential real estate permanent mortgage		1,397		1,116
Residential real estate all other		4,726		5,089
Commercial and financial:
Non-consumer non-real estate		3,643		4,464
Consumer non-real estate		286		265
Other loans		5,033		8,370
Acquired loans		5,923		6,093
Total	$	23,694	$	31,798

The following table presents an age analysis of past due loans, segregated by class of loans:

	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
	(Dollars in thousands)
As of March 31, 2017
Real estate:
Non-residential real estate owner occupied	$	1,183	$	526	$	1,034	$	2,743	$	573,970	$	576,713	$	983
Non-residential real estate other		1,985		29		250		2,264		1,125,063		1,127,327		—
Residential real estate permanent mortgage		1,900		756		1,085		3,741		319,986		323,727		232
Residential real estate all other		5,036		337		982		6,355		732,679		739,034		252
Commercial and financial:
Non-consumer non-real estate		3,837		1,722		272		5,831		1,053,489		1,059,320		108
Consumer non-real estate		1,954		595		502		3,051		273,007		276,058		384
Other loans		5,143		826		4,760		10,729		131,804		142,533		51
Acquired loans		1,104		20		2,537		3,661		142,402		146,063		14
Total	$	22,142	$	4,811	$	11,422	$	38,375	$	4,352,400	$	4,390,775	$	2,024
As of December 31, 2016
Real estate:
Non-residential real estate owner occupied	$	2,255	$	96	$	150	$	2,501	$	569,130	$	571,631	$	—
Non-residential real estate other		611		16		418		1,045		1,122,351		1,123,396		—
Residential real estate permanent mortgage		2,742		649		1,273		4,664		320,749		325,413		513
Residential real estate all other		2,559		531		1,416		4,506		743,723		748,229		369
Commercial and financial:
Non-consumer non-real estate		1,269		1,628		741		3,638		1,047,547		1,051,185		608
Consumer non-real estate		2,046		760		419		3,225		280,652		283,877		274
Other loans		5,345		958		7,775		14,078		127,404		141,482		45
Acquired loans		825		310		408		1,543		153,476		155,019		153
Total	$	17,652	$	4,948	$	12,600	$	35,200	$	4,365,032	$	4,400,232	$	1,962

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect the full amount of scheduled principal and interest payments in accordance with the original contractual terms of the loan agreement. If a loan is impaired, a specific valuation allowance may be allocated if necessary so that the loan is reported, net of

allowance for loss, at the present value of future cash flows using the loan’s existing rate, or the fair value of collateral if repayment is expected solely from the collateral.

The following table presents impaired loans, segregated by class of loans. During the period ended March 31, 2017, $2.3 million of interest income was recognized on impaired loans subsequent to their classification as impaired. During previous periods no material amount of interest income was recognized on impaired loans subsequent to their classification as impaired.

	Impaired Loans
	Unpaid Principal Balance		Recorded Investment with Allowance		Related Allowance		Average Recorded Investment
	(Dollars in thousands)
As of March 31, 2017
Real estate:
Non-residential real estate owner occupied	$	1,766	$	1,672	$	73	$	1,026
Non-residential real estate other		2,175		2,087		448		4,809
Residential real estate permanent mortgage		1,884		1,682		129		1,808
Residential real estate all other		5,364		5,123		1,513		5,388
Commercial and financial:
Non-consumer non-real estate		11,474		5,461		1,486		5,882
Consumer non-real estate		814		777		141		776
Other loans		6,606		5,084		673		5,276
Acquired loans		8,196		6,186		—		6,472
Total	$	38,279	$	28,072	$	4,463	$	31,437

As of December 31, 2016
Real estate:
Non-residential real estate owner occupied	$	894	$	806	$	101	$	825
Non-residential real estate other		7,742		5,688		574		5,854
Residential real estate permanent mortgage		1,878		1,683		124		1,612
Residential real estate all other		5,871		5,614		1,538		5,445
Commercial and financial:
Non-consumer non-real estate		12,015		6,272		1,457		6,478
Consumer non-real estate		686		650		133		788
Other loans		9,799		8,415		1,870		8,062
Acquired loans		8,780		6,581		—		6,041
Total	$	47,665	$	35,709	$	5,797	$	35,105

Credit Risk Monitoring and Loan Grading

The Company considers various factors to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loan loss experience and economic conditions.

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 are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The following table presents internal loan grading by class of loans:

	Internal Loan Grading
	Grade
		1		2		3		4		5	Total
	(Dollars in thousands)
As of March 31, 2017
Real estate:
Non-residential real estate owner occupied	$	469,833	$	91,517	$	14,764	$	599	$	—	$	576,713
Non-residential real estate other		931,160		179,042		15,038		2,087		—		1,127,327
Residential real estate permanent mortgage		281,991		33,986		6,121		1,629		—		323,727
Residential real estate all other		601,273		121,042		11,756		4,963		—		739,034
Commercial and financial:
Non-consumer non-real estate		830,209		203,922		21,216		3,973		—		1,059,320
Consumer non-real estate		255,874		17,116		2,367		701		—		276,058
Other loans		135,396		5,678		1,365		94		—		142,533
Acquired loans		87,373		39,256		13,310		6,124		—		146,063
Total	$	3,593,109	$	691,559	$	85,937	$	20,170	$	—	$	4,390,775

As of December 31, 2016
Real estate:
Non-residential real estate owner occupied	$	464,504	$	89,978	$	16,220	$	929	$	—	$	571,631
Non-residential real estate other		933,743		169,561		14,404		5,688		—		1,123,396
Residential real estate permanent mortgage		284,893		32,889		5,987		1,644		—		325,413
Residential real estate all other		614,338		119,018		9,382		5,491		—		748,229
Commercial and financial:
Non-consumer non-real estate		856,318		170,865		19,101		4,901		—		1,051,185
Consumer non-real estate		263,442		17,154		2,640		641		—		283,877
Other loans		132,254		5,376		1,514		2,338		—		141,482
Acquired loans		92,946		42,668		12,888		6,517		—		155,019
Total	$	3,642,438	$	647,509	$	82,136	$	28,149	$	—	$	4,400,232

Allowance for Loan Losses Methodology

The allowance for loan losses (“ALL”) methodology is disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The following table details activity in the ALL by class of 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.

	ALL
	Balance at beginning of period		Charge- offs			Recoveries		Net charge-offs			Provisions charged to operations			Balance at end of period
	(Dollars in thousands)
Three Months Ended March 31, 2017
Real estate:
Non-residential real estate owner occupied	$	5,602	$	(32	)	$	1	$	(31	)	$	(9	)	$	5,562
Non-residential real estate other		10,793		(1	)		1		—			(5	)		10,788
Residential real estate permanent mortgage		3,129		(120	)		1		(119	)		120			3,130
Residential real estate all other		8,622		(57	)		11		(46	)		83			8,659
Commercial and financial:
Non-consumer non-real estate		12,421		(206	)		918		712			(323	)		12,810
Consumer non-real estate		2,804		(234	)		51		(183	)		104			2,725
Other loans		4,045		(1,218	)		4		(1,214	)		127			2,958
Acquired loans		1,277		(13	)		50		37			(25	)		1,289
Total	$	48,693	$	(1,881	)	$	1,037	$	(844	)	$	72		$	47,921

	ALL
	Balance at beginning of period		Charge- offs			Recoveries		Net charge-offs			Provisions charged to operations		Balance at end of period
	(Dollars in thousands)
Three Months Ended March 31, 2016
Real estate:
Non-residential real estate owner occupied	$	4,661	$	(1	)	$	—	$	(1	)	$	172	$	4,832
Non-residential real estate other		9,921		(1	)		1		—			290		10,211
Residential real estate permanent mortgage		3,148		(50	)		17		(33	)		49		3,164
Residential real estate all other		6,725		(67	)		4		(63	)		1,327		7,989
Commercial and financial:
Non-consumer non-real estate		11,754		(803	)		11		(792	)		1,851		12,813
Consumer non-real estate		2,642		(221	)		38		(183	)		94		2,553
Other loans		2,648		(133	)		6		(127	)		269		2,790
Acquired loans		167		(4	)		5		1			51		219
Total	$	41,666	$	(1,280	)	$	82	$	(1,198	)	$	4,103	$	44,571

The following table details the amount of ALL by class of loans for the period presented, detailed on the basis of the impairment methodology used by the Company.

	ALL
	March 31, 2017				December 31, 2016

	Individually evaluated for impairment		Collectively evaluated for impairment		Individually evaluated for impairment		Collectively evaluated for impairment
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied.	$	614	$	4,948	$	716	$	4,886
Non-residential real estate other		1,011		9,777		1,119		9,674
Residential real estate permanent mortgage		433		2,697		422		2,707
Residential real estate all other		2,275		6,384		2,160		6,462
Commercial and financial:
Non-consumer non-real estate		3,517		9,293		3,317		9,104
Consumer non-real estate		459		2,266		478		2,326
Other loans		658		2,300		1,812		2,233
Acquired loans		10		1,279		495		782
Total	$	8,977	$	38,944	$	10,519	$	38,174

The following table details the loans outstanding by class of loans for the period presented, on the basis of the impairment methodology used by the Company.

	Loans
	March 31, 2017						December 31, 2016
	Individually evaluated for impairment		Collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Individually evaluated for impairment		Collectively evaluated for impairment		Loans acquired with deteriorated credit quality
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied	$	15,363	$	561,350	$	—	$	17,149	$	554,482	$	—
Non-residential real estate other		17,125		1,110,202		—		20,092		1,103,304		—
Residential real estate permanent mortgage		7,750		315,977		—		7,631		317,782		—
Residential real estate all other		16,719		722,315		—		14,873		733,356		—
Commercial and financial:
Non-consumer non-real estate		25,189		1,034,131		—		24,002		1,027,183		—
Consumer non-real estate		3,068		272,990		—		3,203		280,674		—
Other loans		2,338		140,195		—		2,254		139,228		—
Acquired loans		13,651		126,630		5,782		13,459		135,616		5,944
Total	$	101,203	$	4,283,790	$	5,782	$	102,663	$	4,291,625	$	5,944

Transfers from Loans

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

	Three Months Ended March 31,
	2017		2016
	(Dollars in thousands)
Other real estate owned	$	901	$	344
Repossessed assets		363		404
Total	$	1,264	$	748

During the quarter ended March 31, 2016, the Company had gains on the sale of other real estate owned totaling $1.2 million that is included in net expense from other real estate owned on the consolidated statements of comprehensive income.

(4)	INTANGIBLE ASSETS

The following is a summary of intangible assets:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(Dollars in thousands)
As of March 31, 2017
Core deposit intangibles	$	17,447	$	(7,071	)	$	10,376
Customer relationship intangibles		5,699		(3,506	)		2,193
Mortgage servicing intangibles		465		(266	)		199
Total	$	23,611	$	(10,843	)	$	12,768
As of December 31, 2016
Core deposit intangibles	$	17,447	$	(6,611	)	$	10,836
Customer relationship intangibles		5,699		(3,419	)		2,280
Mortgage servicing intangibles		473		(259	)		214
Total	$	23,619	$	(10,289	)	$	13,330

The following is a summary of goodwill by business segment:

					Other		Executive,
	Metropolitan		Community		Financial		Operations
	Banks		Banks		Services		& Support		Consolidated
	(Dollars in thousands)
Three month ended March 31, 2017
Balance at beginning and end of period	$	8,078	$	40,050	$	5,464	$	450	$	54,042

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, 2016.

(5)	STOCK-BASED COMPENSATION

The Company adopted a nonqualified incentive stock option plan (the “BancFirst ISOP”) in May 1986. The Company amended the BancFirst ISOP to increase the number of shares to be issued under the plan to 3,200,000 shares in May 2016. At March 31, 2017, 215,735 shares were available for future grants. The BancFirst ISOP will terminate on December 31, 2019. The options vest and are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2017 will become exercisable through the year 2023. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

In June 1999, the Company adopted the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”). Each non-employee director is granted an option for 10,000 shares. The Company amended the BancFirst Directors’ Stock Option Plan to increase the number of shares to be issued under the plan to 260,000 shares in May 2016. At March 31, 2017, 40,000 shares were available for future grants. The options vest and are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2017 will become exercisable through the year 2020. The option price must be no less than 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.

The following table is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option 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, 2017
Outstanding at December 31, 2016		707,450		$	44.92
Options exercised		(76,450	)		34.14
Outstanding at March 31, 2017		631,000			46.23	9.75 Yrs	$	27,558
Exercisable at March 31, 2017		265,625			38.46	6.88 Yrs	$	13,663

The following table has additional information regarding options granted and options exercised under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:

	Three Months Ended March 31,
	2017		2016
	(Dollars in thousands except per share data)
Weighted average grant-date fair value per share of options granted	$	—	$	11.47
Total intrinsic value of options exercised		4,613		779
Cash received from options exercised		2,610		875
Tax benefit realized from options exercised		1,784		301

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,
	2017		2016
	(Dollars in thousands)
Stock-based compensation expense	$	222	$	451
Tax benefit		71		174
Stock-based compensation expense, net of tax	$	151	$	277

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

	March 31, 2017
	(Dollars in thousands)
Unearned stock-based compensation expense	$	2,538

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,
	2017		2016
Risk-free interest rate		—	1.91 to 2.02%
Dividend yield		—	2.00%
Stock price volatility		—	20.41 to 20.64%
Expected term		—	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 estimated from the recent historical volatility of the Company’s stock. The expected term is estimated from the historical option exercise experience.

In May 1999, the Company adopted the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “BancFirst Deferred Stock Compensation Plan”). The Company amended the BancFirst Deferred Stock Compensation Plan to increase the number of shares to be issued under the plan to 91,110 shares in May 2014. Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 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 3,891 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the three months ended March 31, 2017.

A summary of the accumulated stock units is as follows:

	March 31,		December 31,
	2017		2016
Accumulated stock units		67,230		70,022
Average price	$	42.87	$	41.74

(6)	STOCKHOLDERS’ EQUITY

In November 1999, the Company adopted a Stock Repurchase Program (the “SRP”). The SRP may be used as a means to increase earnings per share and return on equity, to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and

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 may be determined by management within the limitations of the SRP. During the third quarter of 2016 the SRP was amended to increase the remaining shares to be repurchased to 150,000.

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

	Three Months Ended March 31,
	2017		2016
Number of shares repurchased		—		100,000
Average price of shares repurchased	$	—	$	55.23
Shares remaining to be repurchased		150,000		66,276

The Company and BancFirst 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 and BancFirst’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. Management believes that as of March 31, 2017, the Company and BancFirst 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, 2017:
Total Capital
(to Risk Weighted Assets)-
BancFirst Corporation	$	743,955		15.72%	$	378,690		8.00%	$	437,861		9.250%	N/A		N/A
BancFirst		668,329		14.14%		378,252		8.00%		437,354		9.250%	$	472,815		10.00%
Common Equity Tier 1 Capital
(to Risk Weighted Assets)-
BancFirst Corporation	$	665,034		14.05%	$	213,013		4.50%	$	272,184		5.750%	N/A		N/A
BancFirst		600,408		12.70%		212,767		4.50%		271,869		5.750%	$	307,330		6.50%
Tier 1 Capital
(to Risk Weighted Assets)-
BancFirst Corporation	$	696,034		14.70%	$	284,018		6.00%	$	343,188		7.250%	N/A		N/A
BancFirst		620,408		13.12%		283,689		6.00%		342,791		7.250%	$	378,252		8.00%
Tier 1 Capital
(to Total Assets)-
BancFirst Corporation	$	696,034		9.95%	$	279,674		4.00%	N/A		N/A		N/A		N/A
BancFirst		620,408		8.88%		279,412		4.00%	N/A		N/A		$	349,266		5.00%

As of March 31, 2017, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst as “well capitalized” under the regulatory framework from prompt corrective action. 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 billion. There are no conditions or events since the most recent notifications of BancFirst’s capital category that management believes would materially change its category under capital requirements existing as of the report date.

Basel III Capital Rules

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). Management believes that, as of March 31, 2017, the Company and BancFirst would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis as if such requirements were currently in effect.

(7)	NET INCOME PER COMMON SHARE

Basic and diluted net income per common share based on weighted-average shares outstanding are calculated as follows:

	Income (Numerator)		Shares (Denominator)		Per Share Amount
	(Dollars in thousands, except per share data)
Three Months Ended March 31, 2017
Basic
Income available to common stockholders	$	22,050		15,864,807	$	1.39
Dilutive effect of stock options		—		373,191
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	22,050		16,237,998	$	1.36
Three Months Ended March 31, 2016
Basic
Income available to common stockholders	$	16,579		15,534,416	$	1.07
Dilutive effect of stock options		—		281,955
Diluted
Income available to common stockholders plus assumed exercises of stock options	$	16,579		15,816,371	$	1.05

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’ exercise prices were greater than the average market price of the common shares:

Average

Exercise Price

Three Months Ended March 31, 2017

—

Three Months Ended March 31, 2016

236,451

58.59

(8)	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 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 management judgment or estimation. This category includes certain impaired 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.

Securities Available for Sale

Securities classified as available for sale are reported at fair value. U.S. Treasuries are valued using Level 1 inputs. Other securities available for sale including U.S. federal agencies, registered mortgage backed 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 securities and equity securities classified as available for sale for which observable information is not readily available. These securities are reported at fair value utilizing Level 3 inputs. For these securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors.

The Company reviews the prices for Level 1 and Level 2 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 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 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.

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.

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, 2017
Securities available for sale:
U.S. Treasury	$	289,433	$	—	$	—	$	289,433
U.S. federal agencies		—		105,058		—		105,058
Mortgage-backed securities		—		4,464		14,609		19,073
States and political subdivisions		—		39,638		—		39,638
Other securities		—		—		6,045		6,045
Derivative assets		—		528		—		528
Derivative liabilities		—		329		—		329
Loans held for sale		—		7,754		—		7,754

December 31, 2016
Securities available for sale:
U.S. Treasury	$	268,543	$	—	$	—	$	268,543
U.S. federal agencies		—		129,642		—		129,642
Mortgage-backed securities		—		4,856		14,816		19,672
States and political subdivisions		—		41,042		—		41,042
Other securities		—		—		6,569		6,569
Derivative assets		—		1,569		—		1,569
Derivative liabilities		—		1,306		—		1,306
Loans held for sale		—		9,318		—		9,318

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,
	2017			2016
	(Dollars in thousands)
Balance at the beginning of the year	$	21,385		$	21,124
Purchases		157			1,096
Settlements		(212	)		(191	)
Sales		—			(429	)
Losses included in earnings		—			(111	)
Total unrealized losses		(676	)		(104	)
Balance at the end of the period	$	20,654		$	21,385

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, 2017 and 2016, the Company did not transfer any securities between levels in the fair value hierarchy.

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.

Impaired loans are reported at the fair value of the underlying collateral if repayment is dependent on liquidation of the collateral. In no case does the fair value of an impaired loan exceed the fair value of the underlying collateral. The impaired loans are adjusted to fair value through a specific allocation of the allowance for loan 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 loan 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. 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
	(Dollars in thousands)
As of and for the Year-to-date Period Ended March 31, 2017
Impaired loans (less specific allowance)	$	23,609
Repossessed assets		266
Other real estate owned		776

As of and for the Year-to-date Period Ended December 31, 2016
Impaired loans (less specific allowance)	$	29,912
Repossessed assets		340
Other real estate owned		1,480

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, Federal Funds Sold and Interest-Bearing Deposits

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

Securities Held for Investment

For 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 securities making adjustments for credit or liquidity if applicable.

Loans

For certain homogeneous categories of loans, such as some residential mortgages, fair 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 Debentures

The fair values of junior subordinated debentures are estimated using the rates that would be charged for junior subordinated debentures 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.

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,
	2017				2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
FINANCIAL ASSETS
Level 2 inputs:
Cash and cash equivalents	$	2,038,212	$	2,038,212	$	1,851,161	$	1,851,161
Securities held for investment		3,503		3,538		3,722		3,760
Level 3 inputs:
Securities held for investment		500		500		643		643
Loans, net of allowance for loan losses		4,342,854		4,358,648		4,351,539		4,367,363
FINANCIAL LIABILITIES
Level 2 inputs:
Deposits		6,394,627		6,462,059		6,248,057		6,313,622
Short-term borrowings		800		800		500		500
Junior subordinated debentures		31,959		36,248		31,959		34,339
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Loan commitments				1,749				1,718
Letters of credit				430				424

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

The Company has no 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 (excluding mortgage service rights, which are valued semi-annually) 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 not considered to be significant to the Company at March 31, 2017 or December 31, 2016.

(9)	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, the Company simultaneously enters into an offsetting contract with a counterparty to mitigate the exposure to fluctuations in oil and gas prices. These derivatives are not designated as hedged instruments and are recorded on the Company’s consolidated balance sheet at fair value.

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, 2017						December 31, 2016
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		63		$	161			83		$	576
Derivative liabilities	Barrels		(63	)		(101	)		(83	)		(496	)

Natural Gas
Derivative assets	MMBTUs		1,770			367			1,900			993
Derivative liabilities	MMBTUs		(1,770	)		(228	)		(1,900	)		(810	)

Total Fair Value	Included in
Derivative assets	Other assets					528						1,569
Derivative liabilities	Other liabilities					(329	)					(1,306	)

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,
	2017		2016
	(Dollars in thousands)
Derivative income	$	5	$	5

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 is the profit derived from the activity and is unaffected by 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 following table is a summary of the Company’s net credit exposure relating to oil and gas swaps and options with bank counterparties:

	March 31, 2017		December 31, 2016
	(Dollars in thousands)
Credit exposure	$	—	$	—

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.

(10)	SEGMENT INFORMATION

The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The four principal business units are metropolitan banks, community banks, other financial services and executive, operations and support. Metropolitan and community banks offer traditional banking products such as commercial and retail lending and a full line of deposit accounts. Metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Other financial services are specialty product business units including guaranteed small business lending, 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.

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

	Metropolitan Banks		Community Banks		Other Financial Services		Executive, Operations & Support			Eliminations			Consolidated
	(Dollars in thousands)
Three Months Ended March 31, 2017
Net interest income (expense)	$	18,520	$	35,123	$	1,495	$	(370	)	$	—		$	54,768
Noninterest income		3,822		13,277		8,310		24,472			(21,796	)		28,085
Income before taxes		13,074		22,719		3,645		15,511			(21,756	)		33,193

Three Months Ended March 31, 2016
Net interest income (expense)	$	15,843	$	33,122	$	1,416	$	(405	)	$	—		$	49,976
Noninterest income		3,788		13,596		7,479		17,678			(16,924	)		25,617
Income before taxes		9,348		19,094		3,114		10,500			(16,857	)		25,199

Total Assets:
March 31, 2017	$	2,569,703	$	4,481,943	$	75,587	$	854,316		$	(791,912	)	$	7,189,637
December 31, 2016		2,493,096		4,412,174		83,594		803,810			(773,722	)		7,018,952

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. Capital expenditures are generally charged to the business unit using the asset.

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

The following discussion and analysis presents factors that the Company believes are relevant to an assessment and understanding of the Company’s consolidated financial position and results of operations. This discussion and analysis should be read in conjunction with the Company’s December 31, 2016 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and the Company’s consolidated financial statements and the related Notes included in Item 1.

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:

•

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 rate, crude oil price, securities market 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.

SUMMARY

BancFirst Corporation’s net income for the first quarter of 2017 was $22.1 million, compared to $16.6 million for the first quarter of 2016. Diluted net income per common share was $1.36 and $1.05 for the first quarter of 2017 and 2016, respectively. Net income for the first quarter of 2017 included the effects of favorable resolutions of two problem loans which resulted in principal recovery of $894,000 and interest income of $2.3 million.

The Company’s net interest income for the first quarter of 2017 increased to $54.8 million, compared to $50.0 million for the first quarter of 2016. The net interest margin for the quarter was 3.39%, compared to 3.25% a year ago. The increase in margin was primarily due to the previously mentioned interest of $2.3 million, which added approximately 0.14% to the margin, and increases in the federal funds rate. The Company’s provision for loan losses for the first quarter of 2017 decreased to $72,000, compared to $4.1 million a year ago. The decrease in the provision was due in part to the resolution of the above-mentioned problem loans and an unusually high provision for a few commercial loans in the prior year. Net charge-offs for the quarter were only 0.02% of average loans, compared to 0.03% for the first quarter of 2016. Noninterest income for the quarter totaled $28.1 million, compared to $25.6 million last year. Noninterest expense for the quarter totaled $49.6 million, compared to $46.3 million last year. The increase in noninterest expenses was due to salary increases in 2017 and $1.2 million in gains on the sale of other real estate owned that reduced expenses in 2016. The Company’s effective tax rate was 33.6% compared to 34.2% for the first quarter of 2016. The decrease in the effective tax rate was primarily due to Accounting Standards Update 2016-09, which is a change in accounting standards related to stock based compensation.

At March 31, 2017, the Company’s total assets were $7.2 billion, an increase of $170.7 million from December 31, 2016. Securities of $463.3 million and loans of $4.4 billion were both down slightly from December 31, 2016. Deposits totaled $6.4 billion, an increase of $146.6 million from the December 31, 2016 total. The Company’s total stockholders’ equity was $729.9 million, an increase of $18.8 million over December 31, 2016.

Asset quality remained strong during the first quarter of 2017. Nonperforming and restructured assets fell to 0.45% of total assets at March 31, 2017 compared to 0.56% at December 31, 2016. The decrease in nonperforming and restructured assets was largely due to the resolution of the aforementioned two problem loans during the first quarter of 2017. The allowance to total loans was 1.09%, compared to 1.10% at year-end 2016. The allowance to nonperforming and restructured loans was 171.6% compared to 137.3% at year-end 2016.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

SEGMENT INFORMATION

See Note (10) of the Notes to Consolidated Financial Statements for disclosures regarding business segments.

RESULTS OF OPERATIONS

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,
	2017			2016
Income Statement Data
Net interest income	$	54,768		$	49,976
Provision for loan losses		72			4,103
Securities transactions		—			100
Total noninterest income		28,085			25,617
Salaries and employee benefits		30,654			29,357
Total noninterest expense		49,588			46,291
Net income		22,050			16,579
Per Common Share Data
Net income – basic	$	1.39		$	1.07
Net income – diluted		1.36			1.05
Cash dividends		0.38			0.36
Performance Data
Return on average assets		1.27	%		1.00	%
Return on average stockholders’ equity		12.37			10.05
Cash dividend payout ratio		27.34			33.73
Net interest spread		3.19			3.09
Net interest margin		3.39			3.25
Efficiency ratio		59.85			61.24
Net charge-offs to average loans		0.02			0.03

Net Interest Income

For the three months ended March 31, 2017, net interest income, which is the Company’s principal source of operating revenue, increased to $54.8 million compared to $50.0 million for the three months ended March 31, 2016. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The Company’s net interest margin for the quarter was 3.39% compared to 3.25% a year ago. The increase in the margin was primarily due to interest income of $2.3 million related to the favorable resolution of two problem loans, which added approximately 0.14% to the margin, and the increase in the federal funds rate of 25 basis points during the fourth quarter of 2016.

Provision for Loan Losses

The Company’s provision for loan loss for the first quarter of 2017 decreased to $72,000 compared to $4.1 million a year ago. The decrease in the provision was due in part to the resolution of two problem loans and an unusually high provision for a few commercial loans in the prior year. The Company establishes an allowance as an estimate of the probable inherent losses in the loan portfolio at the balance sheet date. Management believes the allowance for loan losses is appropriate based upon management’s best estimate of probable losses that have been incurred within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the amount of future provisions for loan losses. Net loan charge-offs were $844,000 for the first quarter of 2017, compared to $1.2 million for the first quarter of 2016. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a very low level.

Noninterest Income

Noninterest income totaled $28.1 million for the first quarter of 2017 compared to $25.6 million for the first quarter of 2016. Noninterest income included increases in trust revenue, insurance commissions, debit card usage fees and non-sufficient funds fees. The Company had fees from debit card usage totaling $6.2 million and $5.9 million during the three month periods ended March 31, 2017 and 2016, respectively. This represents 22.2% and 23.1% of the Company’s noninterest income for the three month periods

ended March 31, 2017 and 2016, respectively. In addition, the Company has non-sufficient funds fees totaling $6.9 million and $6.1 million for the three month periods ended March 31, 2017 and 2016, respectively. This represents 24.4% and 24.0% of the Company’s noninterest income for the three month periods ended March 31, 2017 and 2016, respectively.

Noninterest Expense

For the three months ended March 31, 2017, noninterest expense totaled $49.6 million, compared to $46.3 million for the three months ended March 31, 2016. The increase in noninterest expense for the first quarter of 2017 was primarily due to salary increases and $1.2 million in gains on sale of other real estate owned that reduced expenses in 2016.

Income Taxes

The Company’s effective tax rate on income before taxes was 33.6% for the first quarter of 2017, compared to 34.2% for the first quarter of 2016. The decrease in the effective tax rate was primarily due to Accounting Standards Update 2016-09, which is a change in accounting standards related to stock based compensation.

FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

	March 31,			December 31,
	2017			2016
	(unaudited)
Balance Sheet Data
Total assets	$	7,189,637		$	7,018,952
Total loans (net of unearned interest)		4,398,529			4,409,550
Allowance for loan losses		47,921			48,693
Securities		463,250			469,833
Deposits		6,394,627			6,248,057
Stockholders' equity		729,873			711,094
Book value per share		45.93			44.97
Tangible book value per share		41.72			40.71
Average loans to deposits (year-to-date)		70.13	%		71.44	%
Average earning assets to total assets (year-to-date)		93.45			93.10
Average stockholders’ equity to average assets (year-to-date)		10.25			10.11
Asset Quality Ratios
Nonperforming and restructured loans to total loans		0.63	%		0.80	%
Nonperforming and restructured assets to total assets		0.45			0.56
Allowance for loan losses to total loans		1.09			1.10
Allowance for loan losses to nonperforming and restructured loans		171.63			137.27

Cash, Federal Funds Sold and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks, interest-bearing deposits with banks and federal funds sold increased $187.1 million, or 10.1% to $2.0 billion, from December 31, 2016 to March 31, 2017. This increase was due primarily to the increase in deposits.

Securities

At March 31, 2017, total securities decreased $6.6 million, or 1.4% compared to December 31, 2016. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized loss on securities available for sale, before taxes, was $138,000 at March 31, 2017, compared to an unrealized gain of $153,000 at December 31, 2016. These unrealized (losses)/gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of ($84,000) and $94,000, respectively.

Loans (Including Acquired Loans)

At March 31, 2017, loans totaled $4.4 billion, down slightly from December 31, 2016. The slight decrease in loans was due to several contributing factors including, modest loan demand, the payoff of a few large loans, and the timing of funding for new loans.

Allowance for Loan Losses/Fair Value Adjustments on Acquired Loans

At March 31, 2017, the allowance for loan losses to total loans represented 1.09% of total loans, compared to 1.10% at December 31, 2016.

The fair value adjustment on acquired loans consists of an interest rate component to adjust the effective rates on the loans to market rates and a credit component to adjust for estimated credit exposures in the acquired loans. The credit component of the adjustment was $1.8 million at March 31, 2017 and $2.0 million at December 31, 2016 while the acquired loans outstanding were $146.1 million and $155.0 million, respectively.

Nonperforming and Restructured Assets

Nonperforming and restructured assets totaled $32.3 million at March 31, 2017, compared to $39.3 million at December 31, 2016. The Company’s level of nonperforming and restructured assets has continued to be relatively low. The decrease in nonperforming and restructured assets in 2017 was due to the resolution of two problem loans.

Nonaccrual loans totaled $23.7 million at March 31, 2017, compared to $31.8 million at the end of 2016. The Company’s nonaccrual loans are primarily commercial and real estate loans. 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 interest or principal or both is in serious doubt. Interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is reasonably expected. Otherwise, interest income is not recognized until the principal balance is fully collected. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $499,000 for the first quarter of 2017 and $513,000 for the first quarter of 2016. Only a small amount of this interest is expected to be ultimately collected.

Other real estate owned and repossessed assets totaled $4.4 million at March 31, 2017, compared to $3.9 million at December 31, 2016.

Potential problem loans are performing loans to borrowers with a weakened financial condition, or which are experiencing unfavorable trends in their financial condition, which causes management to have concerns as to the ability of such borrowers to comply with the existing repayment terms. The Company had approximately $7.4 million of these loans at March 31, 2017, compared to $7.5 million at December 31, 2016. Potential problem loans are not included in nonperforming and restructured loans. In general, these loans are adequately collateralized and have no specific identifiable probable loss. Loans which are considered to have identifiable probable loss potential are placed on nonaccrual status, are allocated a specific allowance for loss or are directly charged-down, and are reported as nonperforming.

Liquidity and Funding

Deposits

At March 31, 2017, deposits totaled $6.4 billion, an increase of $146.6 million from the December 31, 2016 balance. 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 94.9% at March 31, 2017 compared to 94.7% at December 31, 2016. Noninterest-bearing deposits to total deposits were 41.5% at March 31, 2017, compared to 40.4% at December 31, 2016.

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 $800,000 at March 31, 2017, compared to $500,000 at December 31, 2016.

Long-Term Borrowings

The Company 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 $670.0 million, are

pledged as collateral for the borrowings under the line of credit. As of March 31, 2017 and December 31, 2016, the Company had no advances outstanding under the line of credit from FHLB. In addition, the Company has a revolving line of credit with the ability to draw up to $10.0 million with no advances outstanding. This line of credit has a variable rate based on prime rate minus 25 basis points and matures in 2020.

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, 2016.

Capital Resources

Stockholders’ equity totaled $729.9 million at March 31, 2017, compared to $711.1 million at December 31, 2016. In addition to net income of $22.1 million, other changes in stockholders’ equity during the three months ended March 31, 2017 included $2.8 million related to stock option exercises and $222,000 related to stock-based compensation, that were partially offset by $6.1 million in dividends and a $178,000 decrease in other comprehensive income. The Company’s leverage ratio and total risk-based capital ratios at March 31, 2017, were well in excess of the regulatory requirements.

See Note (6) of the Notes to Consolidated Financial Statements for a discussion of capital ratio requirements.

On January 20, 2017, the Company filed with the Securities and Exchange Commission (“SEC”) an automatic shelf registration statement on Form S-3, which became effective upon filing with the SEC. Under the shelf registration, the Company may offer and sell, from time to time, an indeterminate amount of its common stock in one or more future offerings.

CONTRACTUAL OBLIGATIONS

There have not been any material changes in the resources required for scheduled repayments of contractual obligations from the table of Contractual Cash Obligations 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, 2016.

BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis (Dollars in thousands)

	Three Months Ended March 31,
	2017								2016
				Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Earning assets:
Loans (1)	$	4,400,707		$	53,833		4.96	%	$	4,242,883		$	50,329		4.76	%
Securities – taxable		435,196			1,761		1.64			491,505			1,327		1.08
Securities – tax exempt		33,291			287		3.50			42,539			393		3.71
Interest-bearing deposits w/ banks & FFS		1,724,747			3,440		0.81			1,419,500			1,802		0.51
Total earning assets		6,593,941			59,321		3.65			6,196,427			53,851		3.49
Nonearning assets:
Cash and due from banks		173,329								179,455
Interest receivable and other assets		337,123								336,841
Allowance for loan losses		(48,453	)							(41,591	)
Total nonearning assets		461,999								474,705
Total assets	$	7,055,940							$	6,671,132
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction deposits	$	795,743		$	211		0.11	%	$	792,120		$	201		0.10	%
Savings deposits		2,263,918			2,297		0.41			2,078,802			1,691		0.33
Time deposits		685,575			1,217		0.72			721,792			1,188		0.66
Short-term borrowings		1,870			3		0.62			1,111			1		0.35
Junior subordinated debentures		31,959			527		6.69			31,959			522		6.55
Total interest-bearing liabilities		3,779,065			4,255		0.46			3,625,784			3,603		0.40
Interest-free funds:
Noninterest-bearing deposits		2,529,883								2,359,783
Interest payable and other liabilities		23,874								23,627
Stockholders’ equity		723,118								661,938
Total interest free funds		3,276,875								3,045,348
Total liabilities and stockholders’ equity	$	7,055,940							$	6,671,132
Net interest income				$	55,066							$	50,248
Net interest spread							3.19	%							3.09	%
Effect of interest free funds							0.20	%							0.16	%
Net interest margin							3.39	%							3.25	%

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Registrant’s disclosures regarding market risk since December 31, 2016, the date of its most recent annual report to stockholders.

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer, Chief Financial Officer and its Disclosure Committee, which includes the Company’s Chief Risk Officer, Chief Internal Auditor, Chief Asset Quality Officer, Controller, and General Counsel, have evaluated, as of the last day of the period covered by this report, the Company’s disclosure controls and procedures. 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.

No changes were made to the Company’s internal control over financial reporting during the period covered by this report that materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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.

As of March 31, 2017, 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, 2016.

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.

Item 6. Exhibits.

Exhibit Number		Exhibit
3.1		Second Amended and Restated Certificate of Incorporation of BancFirst Corporation (filed as Exhibit 1 to the Company’s 8-A/A filed July 23, 1998 and incorporated herein by reference).

3.2		Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation dated June 15, 2004 (filed as Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2004 and incorporated herein by reference).

3.3		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, 2015 and incorporated herein by reference).

3.4		Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of BancFirst Corporation dated May 23, 2013 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 29, 2013 and incorporated herein by reference).

4.1		Instruments defining the rights of securities holders (see Exhibits 3.1, 3.2, 3.3 and 3.4 above).

4.2		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).

4.3		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).

4.4		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).

4.5		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).

4.6		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).

4.7		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).

4.8		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).

4.9		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		Fifth Amended and Restated BancFirst Corporation Directors’ Stock Option Plan (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2016 and incorporated herein by reference).

10.3		Fifth Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2016 and incorporated herein by reference).

10.4		Fourteenth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2016 and incorporated herein by reference).

Exhibit Number		Exhibit
10.5		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).

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).

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

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

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

*	Filed herewith.

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, 2017		/s/ David E. Rainbolt
		David E. Rainbolt
		President
		Chief Executive Officer
		(Principal Executive Officer)

Date: May 5, 2017		/s/ Kevin Lawrence
		Kevin Lawrence
		Executive Vice President
		Chief Financial Officer
		(Principal Financial Officer)