Annual Statements Open main menu

BANCFIRST CORP /OK/ - Quarter Report: 2023 June (Form 10-Q)

10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

 

For the quarterly period ended June 30, 2023

OR

 

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

 

For the transition period from to

Commission File Number 0-14384

 

BancFirst Corporation

(Exact name of registrant as specified in charter)

 

 

Oklahoma

 

73-1221379

(State or other Jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

100 N. Broadway Ave., Oklahoma City, Oklahoma

 

73102-8405

(Address of principal executive offices)

 

(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1.00 Par Value Per Share

 

BANF

 

NASDAQ Global Select Market System

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

As of July 31, 2023 there were 32,941,756 shares of the registrant’s Common Stock outstanding.

 

 


 

BancFirst Corporation

Quarterly Report on Form 10-Q

June 30, 2023

 

Table of Contents

 

Item

PART I – Financial Information

Page

1.

Financial Statements (Unaudited)

2

 

Consolidated Balance Sheets

2

 

Consolidated Statements of Comprehensive Income

3

 

Consolidated Statements of Shareholders’ Equity

4

 

 

Consolidated Statements of Cash Flow

 

5

 

 

 

 

 

Notes to Consolidated Financial Statements

 

6

 

2.

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

30

3.

Quantitative and Qualitative Disclosure About Market Risk

40

4.

Controls and Procedures

40

 

 

 

 

PART II – Other Information

 

1.

Legal Proceedings

41

1A.

Risk Factors

41

2.

Unregistered Sales of Equity Securities

41

3.

Defaults Upon Senior Securities

41

4.

Mine Safety Disclosures

41

5.

Other Information

41

6.

Exhibits

42

Signatures

43

 

 


 

PART I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

221,138

 

 

$

259,049

 

Interest-bearing deposits with banks

 

 

2,188,004

 

 

 

2,909,861

 

Federal funds sold

 

 

4,481

 

 

 

2,850

 

Debt securities held for investment (fair value: $1,193 and $2,383, respectively)

 

 

1,193

 

 

 

2,383

 

Debt securities available for sale at fair value

 

 

1,569,427

 

 

 

1,538,221

 

Loans held for sale

 

 

8,783

 

 

 

6,232

 

  Loans held for investment (net of unearned interest)

 

 

7,298,692

 

 

 

6,943,563

 

  Allowance for credit losses

 

 

(96,920

)

 

 

(92,728

)

Loans, net of allowance for credit losses

 

 

7,201,772

 

 

 

6,850,835

 

Premises and equipment, net

 

 

279,758

 

 

 

278,088

 

Other real estate owned

 

 

41,270

 

 

 

36,756

 

Intangible assets, net

 

 

18,223

 

 

 

19,983

 

Goodwill

 

 

182,055

 

 

 

182,055

 

Accrued interest receivable and other assets

 

 

304,161

 

 

 

301,550

 

Total assets

 

$

12,020,265

 

 

$

12,387,863

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

4,285,620

 

 

$

4,944,730

 

Interest-bearing

 

 

6,189,560

 

 

 

6,029,498

 

Total deposits

 

 

10,475,180

 

 

 

10,974,228

 

Short-term borrowings

 

 

3,893

 

 

 

300

 

Accrued interest payable and other liabilities

 

 

114,329

 

 

 

76,455

 

Subordinated debt

 

 

86,072

 

 

 

86,044

 

Total liabilities

 

 

10,679,474

 

 

 

11,137,027

 

 

 

 

 

 

 

 

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, 40,000,000 shares authorized; shares issued and
      outstanding:
32,939,256 and 32,875,560, respectively

 

 

32,939

 

 

 

32,876

 

  Capital surplus

 

 

172,358

 

 

 

169,231

 

  Retained earnings

 

 

1,206,499

 

 

 

1,120,292

 

  Accumulated other comprehensive loss, net of tax benefit of $21,953
      and $
22,107, respectively

 

 

(71,005

)

 

 

(71,563

)

Total stockholders' equity

 

 

1,340,791

 

 

 

1,250,836

 

Total liabilities and stockholders' equity

 

$

12,020,265

 

 

$

12,387,863

 

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

2


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

114,612

 

 

$

78,726

 

 

$

219,008

 

 

$

151,680

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

9,408

 

 

 

5,142

 

 

 

18,399

 

 

 

8,923

 

Tax-exempt

 

 

23

 

 

 

23

 

 

 

30

 

 

 

49

 

Federal funds sold

 

 

81

 

 

 

5

 

 

 

113

 

 

 

6

 

Interest-bearing deposits with banks

 

 

26,694

 

 

 

7,600

 

 

 

58,714

 

 

 

9,357

 

Total interest income

 

 

150,818

 

 

 

91,496

 

 

 

296,264

 

 

 

170,015

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

43,732

 

 

 

3,586

 

 

 

78,909

 

 

 

5,567

 

Short-term borrowings

 

 

129

 

 

 

12

 

 

 

212

 

 

 

13

 

Subordinated debt

 

 

1,031

 

 

 

1,031

 

 

 

2,061

 

 

 

2,061

 

Total interest expense

 

 

44,892

 

 

 

4,629

 

 

 

81,182

 

 

 

7,641

 

Net interest income

 

 

105,926

 

 

 

86,867

 

 

 

215,082

 

 

 

162,374

 

Provision for credit losses

 

 

2,824

 

 

 

501

 

 

 

5,146

 

 

 

3,437

 

Net interest income after provision for credit losses

 

 

103,102

 

 

 

86,366

 

 

 

209,936

 

 

 

158,937

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Trust revenue

 

 

4,590

 

 

 

3,949

 

 

 

8,812

 

 

 

7,455

 

Service charges on deposits

 

 

22,268

 

 

 

21,618

 

 

 

43,499

 

 

 

42,993

 

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

 

 

110

 

 

 

 

 

 

(103

)

 

 

(3,915

)

Income from sales of loans

 

 

757

 

 

 

1,256

 

 

 

1,361

 

 

 

2,922

 

Insurance commissions

 

 

6,225

 

 

 

5,302

 

 

 

14,966

 

 

 

12,729

 

Cash management

 

 

7,927

 

 

 

4,447

 

 

 

14,661

 

 

 

7,578

 

Gain on sale of other assets

 

 

315

 

 

 

118

 

 

 

794

 

 

 

163

 

Other

 

 

5,782

 

 

 

5,908

 

 

 

11,812

 

 

 

16,323

 

Total noninterest income

 

 

47,974

 

 

 

42,598

 

 

 

95,802

 

 

 

86,248

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

49,803

 

 

 

45,284

 

 

 

99,055

 

 

 

89,216

 

Occupancy, net

 

 

5,118

 

 

 

4,734

 

 

 

10,101

 

 

 

9,137

 

Depreciation

 

 

4,769

 

 

 

4,647

 

 

 

9,412

 

 

 

9,422

 

Amortization of intangible assets

 

 

880

 

 

 

857

 

 

 

1,760

 

 

 

1,688

 

Data processing services

 

 

2,217

 

 

 

1,975

 

 

 

4,324

 

 

 

3,780

 

Net expense from other real estate owned

 

 

2,889

 

 

 

(510

)

 

 

5,348

 

 

 

1,284

 

Marketing and business promotion

 

 

1,900

 

 

 

1,591

 

 

 

4,427

 

 

 

3,664

 

Deposit insurance

 

 

1,463

 

 

 

1,196

 

 

 

3,076

 

 

 

2,324

 

Other

 

 

12,071

 

 

 

13,943

 

 

 

23,924

 

 

 

25,714

 

Total noninterest expense

 

 

81,110

 

 

 

73,717

 

 

 

161,427

 

 

 

146,229

 

Income before taxes

 

 

69,966

 

 

 

55,247

 

 

 

144,311

 

 

 

98,956

 

Income tax expense

 

 

14,956

 

 

 

10,540

 

 

 

31,768

 

 

 

18,334

 

Net income

 

$

55,010

 

 

$

44,707

 

 

$

112,543

 

 

$

80,622

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.67

 

 

$

1.36

 

 

$

3.42

 

 

$

2.46

 

Diluted

 

$

1.64

 

 

$

1.34

 

 

$

3.36

 

 

$

2.42

 

OTHER COMPREHENSIVE (LOSS)/GAIN

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss)/income on debt securities, net of tax benefit/(expense) of $4,350, $5,240, $(154) and $15,459, respectively

 

 

(14,091

)

 

 

(16,972

)

 

 

558

 

 

 

(49,805

)

Reclassification adjustment for loss included in net income, net of tax expense of $0, $0, $0 and $369, respectively

 

 

 

 

 

 

 

 

 

 

 

1,167

 

Other comprehensive (loss)/income, net of tax benefit/(expense) of $4,350, $5,240, $(154) and $15,090, respectively

 

 

(14,091

)

 

 

(16,972

)

 

 

558

 

 

 

(48,638

)

Comprehensive income

 

$

40,919

 

 

$

27,735

 

 

$

113,101

 

 

$

31,984

 

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

3


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

Issued at beginning of period

 

$

32,900

 

 

$

32,726

 

 

$

32,876

 

 

$

32,603

 

Shares issued for stock options

 

 

39

 

 

 

55

 

 

 

63

 

 

 

178

 

Issued at end of period

 

$

32,939

 

 

$

32,781

 

 

$

32,939

 

 

$

32,781

 

CAPITAL SURPLUS

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

170,231

 

 

$

163,392

 

 

$

169,231

 

 

$

159,914

 

Common stock issued for stock options

 

 

1,296

 

 

 

1,443

 

 

 

1,914

 

 

 

4,463

 

Stock-based compensation arrangements

 

 

831

 

 

 

460

 

 

 

1,213

 

 

 

918

 

Balance at end of period

 

$

172,358

 

 

$

165,295

 

 

$

172,358

 

 

$

165,295

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

1,164,665

 

 

$

1,001,200

 

 

$

1,120,292

 

 

$

977,067

 

Net income

 

 

55,010

 

 

 

44,707

 

 

 

112,543

 

 

 

80,622

 

Dividends on common stock ($0.40, $0.36, $0.80 and $0.72  per share, respectively)

 

 

(13,176

)

 

 

(11,800

)

 

 

(26,336

)

 

 

(23,582

)

Balance at end of period

 

$

1,206,499

 

 

$

1,034,107

 

 

$

1,206,499

 

 

$

1,034,107

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses)/gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(56,914

)

 

$

(29,516

)

 

$

(71,563

)

 

$

2,150

 

Net change

 

 

(14,091

)

 

 

(16,972

)

 

 

558

 

 

 

(48,638

)

Balance at end of period

 

$

(71,005

)

 

$

(46,488

)

 

$

(71,005

)

 

$

(46,488

)

Total stockholders’ equity

 

$

1,340,791

 

 

$

1,185,695

 

 

$

1,340,791

 

 

$

1,185,695

 

 

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

4


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

112,543

 

 

$

80,622

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

Provision for credit losses

 

 

5,146

 

 

 

3,437

 

Depreciation and amortization

 

 

11,172

 

 

 

11,110

 

Net amortization of securities premiums and discounts

 

 

(577

)

 

 

2,773

 

Realized securities losses

 

 

103

 

 

 

3,915

 

Gain on sales of loans

 

 

(1,361

)

 

 

(2,922

)

Cash receipts from the sale of loans originated for sale

 

 

77,758

 

 

 

155,075

 

Cash disbursements for loans originated for sale

 

 

(78,948

)

 

 

(134,737

)

Deferred income tax benefit

 

 

(1,489

)

 

 

(1,806

)

Gain on sale of other assets

 

 

(1,061

)

 

 

(3,996

)

Increase in interest receivable

 

 

(3,387

)

 

 

(5,065

)

Increase in interest payable

 

 

3,005

 

 

 

160

 

Amortization of stock-based compensation arrangements

 

 

1,213

 

 

 

918

 

Excess tax benefit from stock-based compensation arrangements

 

 

(734

)

 

 

(1,771

)

Other, net

 

 

5,797

 

 

 

12,127

 

Net cash provided by operating activities

 

 

129,180

 

 

 

119,840

 

INVESTING ACTIVITIES

 

 

 

 

 

 

Net cash received from acquisitions, net of cash paid

 

 

 

 

 

121,099

 

Net (increase)/decrease in federal funds sold

 

 

(1,631

)

 

 

1,888

 

Purchases of available for sale debt securities

 

 

(94,112

)

 

 

(1,009,340

)

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

 

 

1,349

 

 

 

66

 

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

 

 

64,036

 

 

 

44,915

 

Proceeds from sales of available for sale securities

 

 

 

 

 

222,473

 

Purchase of equity securities

 

 

(294

)

 

 

(208

)

Proceeds from paydowns and sales of equity securities

 

 

531

 

 

 

699

 

Net change in loans

 

 

(357,140

)

 

 

(190,135

)

Net receipts/(payments) on derivative asset contracts

 

 

11,628

 

 

 

(84,932

)

Purchases of premises, equipment and computer software

 

 

(13,016

)

 

 

(11,869

)

Purchase of tax credits

 

 

(3,813

)

 

 

(3,676

)

Other, net

 

 

23,302

 

 

 

10,519

 

Net cash used in investing activities

 

 

(369,160

)

 

 

(898,501

)

FINANCING ACTIVITIES

 

 

 

 

 

 

Net change in deposits

 

 

(499,048

)

 

 

2,620,757

 

Net change in short-term borrowings

 

 

3,593

 

 

 

6,100

 

Issuance of common stock in connection with stock options, net

 

 

1,977

 

 

 

4,641

 

Cash dividends paid

 

 

(26,310

)

 

 

(23,518

)

Net cash (used in) provided by financing activities

 

 

(519,788

)

 

 

2,607,980

 

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

 

 

(759,768

)

 

 

1,829,319

 

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

 

 

3,168,910

 

 

 

2,050,022

 

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

 

$

2,409,142

 

 

$

3,879,341

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during the period for interest

 

$

78,176

 

 

$

7,456

 

Cash paid during the period for income taxes

 

$

31,180

 

 

$

14,080

 

Noncash investing and financing activities:

 

 

 

 

 

 

Cash consideration for acquisitions

 

$

 

 

$

77,685

 

Fair value of assets acquired in acquisitions

 

$

 

 

$

511,466

 

Liabilities assumed in acquisitions

 

$

 

 

$

433,782

 

Unpaid common stock dividends declared

 

$

13,176

 

 

$

11,801

 

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

5


 

BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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

 

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., Pegasus Bank ("Pegasus"), Worthington Bank ("Worthington") and BancFirst and its subsidiaries ("BancFirst"). The principal operating subsidiaries of BancFirst are BFTower, LLC, BFC-PNC LLC, and BancFirst Agency, Inc. All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with U.S. GAAP for interim financial information and the instructions for Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). The information contained in the consolidated financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, should be referred to in connection with these unaudited interim consolidated financial statements. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

The unaudited interim consolidated financial statements contained herein reflect all adjustments, which are, in the opinion of management, necessary to provide a fair statement of the financial position and results of operations of the Company for the interim periods presented. All such adjustments are of a normal and recurring nature.

Reclassifications

Certain loan segments from 2022 have been reclassified to conform to the 2023 presentation. Such reclassifications had no effect on previously reported balance sheets, cash flows, stockholders’ equity or comprehensive income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States inherently involves the use of estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures. These estimates relate principally to the determination of the allowance for credit losses, income taxes, the fair value of financial instruments and the valuation of assets and liabilities acquired in a business combination, including identifiable intangible assets. Such estimates and assumptions may change over time and actual amounts realized may differ from those reported.

 

Recent Accounting Pronouncements

 

Standards Adopted During the Current Period:

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminated the Troubled Debt Restructurings (“TDR”) recognition and measurement guidance and, instead, required that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan when a borrower is experiencing financial difficulty. In addition, the update required that the Company disclose current-period charge-offs by year of origination for financing receivables. The current-period charge-off amendment was applied prospectively. The amendments were effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. The Company adopted ASU 2022-02 on January 1, 2023. ASU No. 2022-02 did not have a significant impact on the Company’s consolidated financial statements.

In March 2023, the FASB issued ASU No. 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323)." ASU 2023-02 permits the election of accounting for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, if certain conditions are met. Using the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income

6


 

tax expense (benefit). The amendments are effective for annual periods beginning after December 15, 2023, including interim periods within those annual periods. Early adoption is permitted for all entities in any interim period. The Company adopted the amendment as of January 1, 2023 using the modified retrospective transition. The Company has investments in New Markets Tax Credits ("NMTC") and Low-Income Housing Tax Credits ("LIHTC") that will be affected by ASU 2023-02. Upon adoption of ASU No. 2023-02, the Company recorded $21.8 million in other assets and other liabilities on the consolidated balance sheet for unfunded LIHTC commitments and amortized $977,000 of NMTC investments to income tax expense during the period that would have previously been recorded to other expense. ASU No. 2023-02 did not have a significant impact on the Company’s consolidated financial statements.

 

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

 

On July 28, 2023, the Company's wholly-owned subsidiary BancFirst applied to become a Federal Reserve System member bank, which would change its primary regulator from the Federal Deposit Insurance Corporation (“FDIC”) to the Federal Reserve System. The Company expects its other wholly-owned subsidiaries Pegasus and Worthington will also apply for Federal Reserve System membership. The BancFirst application is pending approval from the Federal Reserve System.

On February 8, 2022, the Company acquired Worthington for an aggregate cash purchase price of $77.7 million. Worthington is chartered and regulated by the Texas State Banking Department with one banking location in Arlington, Texas, one in Colleyville, Texas and two in Fort Worth, Texas. At acquisition, Worthington had approximately $478 million in total assets, $257 million in loans and $430 million in deposits. Worthington will continue to operate under a separate charter and remain a separate subsidiary of the Company governed by its existing board of directors. The Company intends to provide an appropriate amount of capital or other support to increase Worthington’s ability to approve larger loans and allow Worthington to continue to grow earning assets. As a result of the acquisition, the Company recorded a core deposit intangible of $5.9 million and goodwill of $32.1 million. The Company did not incur a material amount of acquisition-related expenses. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. Pro forma information has not been presented because the acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of Worthington complements the Company by expanding its Texas presence in the Dallas-Fort Worth market.

(3) SECURITIES

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

 

 

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

June 30, 2023

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

8

 

 

$

 

 

$

 

 

$

8

 

States and political subdivisions

 

 

685

 

 

 

 

 

 

 

 

 

685

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

1,193

 

 

$

 

 

$

 

 

$

1,193

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

13

 

 

$

 

 

$

 

 

$

13

 

States and political subdivisions

 

 

1,870

 

 

 

 

 

 

 

 

 

1,870

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,383

 

 

$

 

 

$

 

 

$

2,383

 

 

7


 

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

 

 

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

June 30, 2023

 

(Dollars in thousands)

 

U.S. treasuries

 

$

1,599,593

 

 

$

 

 

$

(89,527

)

 

$

1,510,066

 

U.S. federal agencies

 

 

13,368

 

 

 

170

 

 

 

(2

)

 

 

13,536

 

Mortgage backed securities (1)

 

 

17,479

 

 

 

10

 

 

 

(1,869

)

 

 

15,620

 

States and political subdivisions

 

 

10,998

 

 

 

21

 

 

 

(133

)

 

 

10,886

 

Asset backed securities

 

 

12,784

 

 

 

 

 

 

(349

)

 

 

12,435

 

Other securities

 

 

8,163

 

 

 

 

 

 

(1,279

)

 

 

6,884

 

Total

 

$

1,662,385

 

 

$

201

 

 

$

(93,159

)

 

$

1,569,427

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

1,568,563

 

 

$

 

 

$

(90,699

)

 

$

1,477,864

 

U.S. federal agencies

 

 

15,025

 

 

 

198

 

 

 

(1

)

 

 

15,222

 

Mortgage backed securities (1)

 

 

18,449

 

 

 

21

 

 

 

(1,884

)

 

 

16,586

 

States and political subdivisions

 

 

8,320

 

 

 

35

 

 

 

(221

)

 

 

8,134

 

Asset backed securities

 

 

13,371

 

 

 

 

 

 

(361

)

 

 

13,010

 

Other securities

 

 

8,163

 

 

 

 

 

 

(758

)

 

 

7,405

 

Total

 

$

1,631,891

 

 

$

254

 

 

$

(93,924

)

 

$

1,538,221

 

 

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

 

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

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

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

350

 

 

$

350

 

 

$

1,186

 

 

$

1,186

 

After one year but within five years

 

 

842

 

 

 

842

 

 

 

1,195

 

 

 

1,195

 

After five years but within ten years

 

 

1

 

 

 

1

 

 

 

2

 

 

 

2

 

After ten years

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,193

 

 

$

1,193

 

 

$

2,383

 

 

$

2,383

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

150,837

 

 

$

147,496

 

 

$

101,607

 

 

$

100,655

 

After one year but within five years

 

 

1,269,157

 

 

 

1,187,686

 

 

 

1,316,874

 

 

 

1,233,725

 

After five years but within ten years

 

 

202,889

 

 

 

196,755

 

 

 

170,513

 

 

 

163,101

 

After ten years

 

 

39,502

 

 

 

37,490

 

 

 

42,897

 

 

 

40,740

 

Total debt securities

 

$

1,662,385

 

 

$

1,569,427

 

 

$

1,631,891

 

 

$

1,538,221

 

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:

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

593,260

 

 

$

573,952

 

 

 

8


 

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

 

 

 

For the Six Months
Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Proceeds

 

$

 

 

$

222,473

 

Gross losses realized

 

 

 

 

 

3,990

 

There were no sales of debt securities and therefore no proceeds from sales or realized securities gains or losses on available for sale debt securities for the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company sold $226 million of debt securities with an average yield of 0.16%, the proceeds of which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. The Company used specific identification to reclassify the unrealized loss in other comprehensive income to a realized loss, as shown in the consolidated statements of comprehensive income.

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

 

The following table summarizes debt securities with unrealized losses, segregated by the duration of the unrealized loss, at June 30, 2023 and December 31, 2022 respectively:

 

 

 

 

 

Less than 12 Months

 

 

More than 12 Months

 

 

Total

 

 

Number of investments

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

 

 

 

(Dollars in thousands)

 

June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

73

 

 

$

414,002

 

 

$

13,360

 

 

$

1,096,064

 

 

$

76,167

 

 

$

1,510,066

 

 

$

89,527

 

U.S. federal agencies

 

3

 

 

 

1,305

 

 

 

2

 

 

 

 

 

 

 

 

 

1,305

 

 

 

2

 

Mortgage backed securities

 

91

 

 

 

1,452

 

 

 

5

 

 

 

13,899

 

 

 

1,864

 

 

 

15,351

 

 

 

1,869

 

States and political subdivisions

 

10

 

 

 

2,029

 

 

 

22

 

 

 

1,251

 

 

 

111

 

 

 

3,280

 

 

 

133

 

Asset backed securities

 

1

 

 

 

 

 

 

 

 

 

12,435

 

 

 

349

 

 

 

12,435

 

 

 

349

 

Other securities

 

3

 

 

 

4,476

 

 

 

687

 

 

 

2,408

 

 

 

592

 

 

 

6,884

 

 

 

1,279

 

Total

 

181

 

 

$

423,264

 

 

$

14,076

 

 

$

1,126,057

 

 

$

79,083

 

 

$

1,549,321

 

 

$

93,159

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

74

 

 

$

787,925

 

 

$

27,078

 

 

$

689,939

 

 

$

63,621

 

 

$

1,477,864

 

 

$

90,699

 

U.S. federal agencies

 

1

 

 

 

 

 

 

 

 

 

349

 

 

 

1

 

 

 

349

 

 

 

1

 

Mortgage backed securities

 

92

 

 

 

10,001

 

 

 

1,239

 

 

 

5,055

 

 

 

645

 

 

 

15,056

 

 

 

1,884

 

States and political subdivisions

 

8

 

 

 

2,308

 

 

 

184

 

 

 

464

 

 

 

37

 

 

 

2,772

 

 

 

221

 

Asset backed securities

 

1

 

 

 

13,010

 

 

 

361

 

 

 

 

 

 

 

 

 

13,010

 

 

 

361

 

Other securities

 

3

 

 

 

4,871

 

 

 

291

 

 

 

2,534

 

 

 

467

 

 

 

7,405

 

 

 

758

 

Total

 

179

 

 

$

818,115

 

 

$

29,153

 

 

$

698,341

 

 

$

64,771

 

 

$

1,516,456

 

 

$

93,924

 

 

The Company has the ability and intent to hold the debt securities classified as held for investment until they mature, at which time the Company will receive full value for the debt securities. Furthermore, as of June 30, 2023 and December 31, 2022, the Company also had the ability and intent to hold the debt securities classified as available for sale for a period of time sufficient for a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were purchased. The fair value of those debt securities having unrealized losses is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline. The Company has no intent or requirement to sell before the recovery of the unrealized loss; therefore, no impairment loss was realized in the Company’s consolidated statement of comprehensive income.

 

 

9


 

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

Certain loan segments from 2022 have been reclassified to conform to the 2023 presentation. Each loan segment is made up of loan categories possessing similar risk characteristics. The Company’s re-alignment of the segments primarily consisted of reclassifying farmland and agriculture related loans that were previously included in consumer-related and commercial-related loans to the agriculture category. Management believes this accurately represents the risk profile of each loan segment. These reclassifications did not have a significant impact on the allowance for credit losses.

 

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

 

June 30, 2023

 

 

December 31, 2022

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

    Commercial real estate owner occupied

 

969,914

 

 

 

908,494

 

    Commercial real estate non-owner occupied

 

1,412,476

 

 

 

1,383,150

 

    Construction and development < 60 months

 

549,068

 

 

 

475,236

 

    Construction residential real estate < 60 months

 

276,726

 

 

 

303,305

 

    Residential real estate first lien

 

1,189,944

 

 

 

1,117,899

 

    Residential real estate all other

 

219,752

 

 

 

196,198

 

    Agriculture

 

422,327

 

 

 

408,037

 

  Commercial non-real estate

 

1,349,789

 

 

 

1,241,454

 

  Consumer non-real estate

 

457,897

 

 

 

446,756

 

  Oil and gas

 

450,799

 

 

 

463,034

 

           Total (1)

$

7,298,692

 

 

$

6,943,563

 

(1) Excludes accrued interest receivable of $34.3 million at June 30, 2023 and $30.6 million at December 31, 2022, that is recorded in accrued interest receivable and other assets.

 

 

 

The Company's loans are currently 85% held by BancFirst and 15% held by Pegasus and Worthington. In addition, approximately 69% of the Company's loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual and related borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

 

The Company's portfolio segment descriptions and the weighted average remaining life of portfolio segments are disclosed in Note (5) to the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Loan Modifications, Other Real Estate Owned and Repossessed Assets and Held for Sale Assets

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

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

Other real estate owned and repossessed assets

 

$

41,612

 

 

$

36,936

 

As of both June 30, 2023 and December 31, 2022, other real estate owned included a commercial real estate property recorded at approximately $32.9 million and $29.4 million, respectively. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from other real estate owned in other noninterest expense on the consolidated statements of comprehensive income.

This property had the following rental income and operating expenses for the periods presented.

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Rental income

 

$

2,778

 

 

$

2,643

 

 

$

5,468

 

 

$

5,313

 

Operating expense

 

 

2,967

 

 

 

2,299

 

 

 

5,348

 

 

 

4,738

 

 

10


 

 

During the six months ended June 30, 2023, the Company sold property held in other real estate owned for a total gain of $266,000, compared to a total gain of $3.8 million in the six months ended June 30, 2022.

The Company charges interest on principal balances outstanding on modified loans during deferral periods. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of modified loans was approximately $9.7 million during the period ended June 30, 2023.

Nonaccrual loans

The Company did not recognize any interest income on nonaccrual loans for either of the six months ended June 30, 2023 or 2022. In addition, there were no nonaccrual loans for which there is no related allowance for credit losses at both June 30, 2023 and December 31, 2022. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $718,000 for the six months ended June 30, 2023 and approximately $653,000 for the six months ended June 30, 2022.

Nonaccrual loans guaranteed by government agencies totaled approximately $6.6 million at June 30, 2023 and approximately $4.7 million at December 31, 2022.

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

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

4,360

 

 

$

1,795

 

Commercial real estate non-owner occupied

 

 

706

 

 

 

667

 

Construction and development < 60 months

 

 

81

 

 

 

93

 

Construction residential real estate < 60 months

 

 

376

 

 

 

430

 

Residential real estate first lien

 

 

2,717

 

 

 

1,947

 

Residential real estate all other

 

 

845

 

 

 

55

 

Agriculture

 

 

2,141

 

 

 

2,734

 

  Commercial non-real estate

 

 

6,497

 

 

 

7,066

 

  Consumer non-real estate

 

 

241

 

 

 

192

 

  Oil and gas

 

 

83

 

 

 

320

 

Total

 

$

18,047

 

 

$

15,299

 

 

11


 

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

 

 

Age Analysis of Past Due Loans

 

(Dollars in thousands)

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,439

 

 

$

1,684

 

 

$

6,844

 

 

$

10,967

 

 

$

958,947

 

 

$

969,914

 

 

$

4,152

 

Commercial real estate non-owner occupied

 

 

236

 

 

 

8,752

 

 

 

875

 

 

 

9,863

 

 

 

1,402,613

 

 

 

1,412,476

 

 

 

213

 

Construction and development < 60 months

 

 

52

 

 

 

 

 

 

984

 

 

 

1,036

 

 

 

548,032

 

 

 

549,068

 

 

 

903

 

Construction residential real estate < 60 months

 

 

1,342

 

 

 

103

 

 

 

543

 

 

 

1,988

 

 

 

274,738

 

 

 

276,726

 

 

 

543

 

Residential real estate first lien

 

 

2,597

 

 

 

1,328

 

 

 

2,534

 

 

 

6,459

 

 

 

1,183,485

 

 

 

1,189,944

 

 

 

879

 

Residential real estate all other

 

 

1,092

 

 

 

280

 

 

 

840

 

 

 

2,212

 

 

 

217,540

 

 

 

219,752

 

 

 

61

 

Agriculture

 

 

833

 

 

 

268

 

 

 

838

 

 

 

1,939

 

 

 

420,388

 

 

 

422,327

 

 

 

50

 

  Commercial non-real estate

 

 

3,795

 

 

 

928

 

 

 

6,055

 

 

 

10,778

 

 

 

1,339,011

 

 

 

1,349,789

 

 

 

1,567

 

  Consumer non-real estate

 

 

2,405

 

 

 

807

 

 

 

569

 

 

 

3,781

 

 

 

454,116

 

 

 

457,897

 

 

 

431

 

  Oil and gas

 

 

236

 

 

 

654

 

 

 

83

 

 

 

973

 

 

 

449,826

 

 

 

450,799

 

 

 

 

Total

 

$

15,027

 

 

$

14,804

 

 

$

20,165

 

 

$

49,996

 

 

$

7,248,696

 

 

$

7,298,692

 

 

$

8,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

1,314

 

 

$

1,524

 

 

$

4,580

 

 

$

7,418

 

 

$

901,076

 

 

$

908,494

 

 

$

4,580

 

Commercial real estate non-owner occupied

 

 

6,237

 

 

 

 

 

 

42

 

 

 

6,279

 

 

 

1,376,871

 

 

 

1,383,150

 

 

 

43

 

Construction and development < 60 months

 

 

535

 

 

 

40

 

 

 

114

 

 

 

689

 

 

 

474,547

 

 

 

475,236

 

 

 

81

 

Construction residential real estate < 60 months

 

 

1,320

 

 

 

282

 

 

 

148

 

 

 

1,750

 

 

 

301,555

 

 

 

303,305

 

 

 

 

Residential real estate first lien

 

 

3,415

 

 

 

1,076

 

 

 

844

 

 

 

5,335

 

 

 

1,112,564

 

 

 

1,117,899

 

 

 

349

 

Residential real estate all other

 

 

265

 

 

 

37

 

 

 

185

 

 

 

487

 

 

 

195,711

 

 

 

196,198

 

 

 

166

 

Agriculture

 

 

2,357

 

 

 

34

 

 

 

2,265

 

 

 

4,656

 

 

 

403,381

 

 

 

408,037

 

 

 

1,054

 

  Commercial non-real estate

 

 

2,490

 

 

 

2,142

 

 

 

2,772

 

 

 

7,404

 

 

 

1,234,050

 

 

 

1,241,454

 

 

 

345

 

  Consumer non-real estate

 

 

2,591

 

 

 

648

 

 

 

585

 

 

 

3,824

 

 

 

442,932

 

 

 

446,756

 

 

 

467

 

  Oil and gas

 

 

654

 

 

 

 

 

 

 

 

 

654

 

 

 

462,380

 

 

 

463,034

 

 

 

 

Total

 

$

21,178

 

 

$

5,783

 

 

$

11,535

 

 

$

38,496

 

 

$

6,905,067

 

 

$

6,943,563

 

 

$

7,085

 

 

Credit Quality Indicators

The Company considers credit quality indicators to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical credit loss experience and economic conditions. These indicators are reviewed and updated regularly throughout the year. An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions. The general characteristics of the risk grades and the table summarizing the Company’s gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2022, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

 

12


 

The following table summarizes the Company’s gross loans held for investment by year of origination and internally assigned credit grades:

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

75,514

 

 

$

174,029

 

 

$

131,583

 

 

$

96,065

 

 

$

91,649

 

 

$

150,940

 

 

$

51,100

 

 

$

770,880

 

Grade 2

 

 

22,851

 

 

 

42,130

 

 

 

30,830

 

 

 

24,524

 

 

 

19,136

 

 

 

30,000

 

 

 

18,248

 

 

 

187,719

 

Grade 3

 

 

19

 

 

 

 

 

 

4,450

 

 

 

1,193

 

 

 

883

 

 

 

1,459

 

 

 

212

 

 

 

8,216

 

Grade 4

 

 

 

 

 

314

 

 

 

345

 

 

 

311

 

 

 

1,166

 

 

 

624

 

 

 

 

 

 

2,760

 

Grade 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

339

 

 

 

 

 

 

 

 

 

339

 

Total commercial real estate owner occupied

 

 

98,384

 

 

 

216,473

 

 

 

167,208

 

 

 

122,093

 

 

 

113,173

 

 

 

183,023

 

 

 

69,560

 

 

 

969,914

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

116,433

 

 

$

324,990

 

 

$

221,196

 

 

$

159,511

 

 

$

92,137

 

 

$

79,849

 

 

$

45,799

 

 

$

1,039,915

 

Grade 2

 

 

44,955

 

 

 

107,929

 

 

 

43,476

 

 

 

33,416

 

 

 

32,628

 

 

 

71,739

 

 

 

23,609

 

 

 

357,752

 

Grade 3

 

 

 

 

 

6,733

 

 

 

5

 

 

 

150

 

 

 

6,207

 

 

 

795

 

 

 

 

 

 

13,890

 

Grade 4

 

 

44

 

 

 

820

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

919

 

Total commercial real estate non-owner occupied

 

 

161,432

 

 

 

440,472

 

 

 

264,677

 

 

 

193,077

 

 

 

130,972

 

 

 

152,438

 

 

 

69,408

 

 

 

1,412,476

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

88,593

 

 

$

139,210

 

 

$

77,235

 

 

$

14,074

 

 

$

4,622

 

 

$

6,522

 

 

$

70,118

 

 

$

400,374

 

Grade 2

 

 

42,927

 

 

 

36,862

 

 

 

15,894

 

 

 

1,584

 

 

 

13,984

 

 

 

2,418

 

 

 

33,679

 

 

 

147,348

 

Grade 3

 

 

 

 

 

903

 

 

 

103

 

 

 

98

 

 

 

 

 

 

7

 

 

 

154

 

 

 

1,265

 

Grade 4

 

 

 

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81

 

Total construction and development < 60 months

 

 

131,520

 

 

 

177,056

 

 

 

93,232

 

 

 

15,756

 

 

 

18,606

 

 

 

8,947

 

 

 

103,951

 

 

 

549,068

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

106,520

 

 

$

80,355

 

 

$

1,897

 

 

$

257

 

 

$

6

 

 

$

39

 

 

$

33,846

 

 

$

222,920

 

Grade 2

 

 

25,787

 

 

 

26,221

 

 

 

38

 

 

 

22

 

 

 

 

 

 

388

 

 

 

90

 

 

 

52,546

 

Grade 3

 

 

99

 

 

 

785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

884

 

Grade 4

 

 

376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

376

 

Total construction residential real estate < 60 months

 

 

132,782

 

 

 

107,361

 

 

 

1,935

 

 

 

279

 

 

 

6

 

 

 

427

 

 

 

33,936

 

 

 

276,726

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

160,801

 

 

$

256,377

 

 

$

189,258

 

 

$

130,017

 

 

$

78,783

 

 

$

168,639

 

 

$

3,721

 

 

$

987,596

 

Grade 2

 

 

21,024

 

 

 

46,624

 

 

 

35,716

 

 

 

24,654

 

 

 

12,691

 

 

 

44,160

 

 

 

 

 

 

184,869

 

Grade 3

 

 

1,236

 

 

 

1,867

 

 

 

2,959

 

 

 

1,035

 

 

 

1,664

 

 

 

3,926

 

 

 

 

 

 

12,687

 

Grade 4

 

 

361

 

 

 

177

 

 

 

1,181

 

 

 

292

 

 

 

646

 

 

 

2,135

 

 

 

 

 

 

4,792

 

Total residential real estate first lien

 

 

183,422

 

 

 

305,045

 

 

 

229,114

 

 

 

155,998

 

 

 

93,784

 

 

 

218,860

 

 

 

3,721

 

 

 

1,189,944

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

25,642

 

 

$

28,209

 

 

$

8,615

 

 

$

9,218

 

 

$

4,625

 

 

$

14,003

 

 

$

39,561

 

 

$

129,873

 

Grade 2

 

 

2,380

 

 

 

4,982

 

 

 

2,202

 

 

 

1,983

 

 

 

1,509

 

 

 

3,476

 

 

 

69,231

 

 

 

85,763

 

Grade 3

 

 

171

 

 

 

422

 

 

 

77

 

 

 

45

 

 

 

146

 

 

 

471

 

 

 

1,877

 

 

 

3,209

 

Grade 4

 

 

 

 

 

24

 

 

 

10

 

 

 

26

 

 

 

 

 

 

50

 

 

 

797

 

 

 

907

 

Total residential real estate all other

 

 

28,193

 

 

 

33,637

 

 

 

10,904

 

 

 

11,272

 

 

 

6,280

 

 

 

18,000

 

 

 

111,466

 

 

 

219,752

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

32,122

 

 

$

61,718

 

 

$

39,267

 

 

$

32,007

 

 

$

18,986

 

 

$

36,796

 

 

$

39,208

 

 

$

260,104

 

Grade 2

 

 

18,303

 

 

 

23,027

 

 

 

19,601

 

 

 

8,718

 

 

 

9,835

 

 

 

17,869

 

 

 

43,466

 

 

 

140,819

 

Grade 3

 

 

6,781

 

 

 

1,204

 

 

 

1,527

 

 

 

3,396

 

 

 

144

 

 

 

3,815

 

 

 

3,255

 

 

 

20,122

 

Grade 4

 

 

59

 

 

 

668

 

 

 

57

 

 

 

169

 

 

 

44

 

 

 

254

 

 

 

31

 

 

 

1,282

 

Total Agriculture

 

 

57,265

 

 

 

86,617

 

 

 

60,452

 

 

 

44,290

 

 

 

29,009

 

 

 

58,734

 

 

 

85,960

 

 

 

422,327

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

148,198

 

 

$

288,490

 

 

$

176,959

 

 

$

48,809

 

 

$

42,278

 

 

$

43,672

 

 

$

293,889

 

 

$

1,042,295

 

Grade 2

 

 

55,938

 

 

 

65,449

 

 

 

28,746

 

 

 

16,090

 

 

 

10,820

 

 

 

21,080

 

 

 

96,657

 

 

 

294,780

 

Grade 3

 

 

1,208

 

 

 

2,284

 

 

 

575

 

 

 

172

 

 

 

619

 

 

 

1,381

 

 

 

2,491

 

 

 

8,730

 

Grade 4

 

 

11

 

 

 

983

 

 

 

348

 

 

 

693

 

 

 

372

 

 

 

279

 

 

 

1,034

 

 

 

3,720

 

Grade 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

264

 

 

 

 

 

 

 

 

 

264

 

Total commercial non-real estate

 

 

205,355

 

 

 

357,206

 

 

 

206,628

 

 

 

65,764

 

 

 

54,353

 

 

 

66,412

 

 

 

394,071

 

 

 

1,349,789

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

118,847

 

 

$

146,280

 

 

$

76,246

 

 

$

27,782

 

 

$

13,664

 

 

$

4,737

 

 

$

26,330

 

 

$

413,886

 

Grade 2

 

 

7,960

 

 

 

16,721

 

 

 

8,236

 

 

 

2,766

 

 

 

971

 

 

 

1,804

 

 

 

1,642

 

 

 

40,100

 

Grade 3

 

 

155

 

 

 

984

 

 

 

1,013

 

 

 

401

 

 

 

245

 

 

 

115

 

 

 

16

 

 

 

2,929

 

Grade 4

 

 

39

 

 

 

392

 

 

 

352

 

 

 

44

 

 

 

85

 

 

 

25

 

 

 

4

 

 

 

941

 

Grade 5

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41

 

Total consumer non-real estate

 

 

127,001

 

 

 

164,418

 

 

 

85,847

 

 

 

30,993

 

 

 

14,965

 

 

 

6,681

 

 

 

27,992

 

 

 

457,897

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

62,557

 

 

$

13,971

 

 

$

96,748

 

 

$

12,909

 

 

$

2,273

 

 

$

17,373

 

 

$

159,813

 

 

$

365,644

 

Grade 2

 

 

6,779

 

 

 

5,334

 

 

 

2,251

 

 

 

432

 

 

 

18,470

 

 

 

255

 

 

 

47,498

 

 

 

81,019

 

Grade 3

 

 

 

 

 

2,091

 

 

 

240

 

 

 

3

 

 

 

 

 

 

 

 

 

1,719

 

 

 

4,053

 

Grade 4

 

 

 

 

 

83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83

 

Total oil and gas

 

 

69,336

 

 

 

21,479

 

 

 

99,239

 

 

 

13,344

 

 

 

20,743

 

 

 

17,628

 

 

 

209,030

 

 

 

450,799

 

Total loans held for investment

 

$

1,194,690

 

 

$

1,909,764

 

 

$

1,219,236

 

 

$

652,866

 

 

$

481,891

 

 

$

731,150

 

 

$

1,109,095

 

 

$

7,298,692

 

 

 

13


 

The following tables summarize the Company’s gross charge-offs by year of origination for the periods indicated:

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

Three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

19

 

 

 

21

 

 

 

 

 

 

2

 

 

 

 

 

 

42

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

301

 

 

 

1

 

 

 

 

 

 

 

 

 

302

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

42

 

 

 

34

 

 

 

1

 

 

 

20

 

 

 

 

 

 

5

 

 

 

 

 

 

102

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

29

 

 

 

186

 

 

 

115

 

 

 

14

 

 

 

28

 

 

 

11

 

 

 

15

 

 

 

398

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Total current-period gross charge-offs

 

$

71

 

 

$

224

 

 

$

135

 

 

$

358

 

 

$

29

 

 

$

18

 

 

$

15

 

 

$

850

 

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

$

 

 

$

7

 

 

$

1

 

 

$

22

 

 

$

18

 

 

$

 

 

$

 

 

$

48

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

2

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

 

 

 

19

 

 

 

21

 

 

 

 

 

 

4

 

 

 

 

 

 

44

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

4

 

 

 

19

 

 

 

 

 

 

1

 

 

 

4

 

 

 

 

 

 

28

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

4

 

 

 

 

 

 

317

 

 

 

14

 

 

 

2

 

 

 

 

 

 

337

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

42

 

 

 

101

 

 

 

63

 

 

 

20

 

 

 

 

 

 

52

 

 

 

 

 

 

278

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

29

 

 

 

262

 

 

 

147

 

 

 

29

 

 

 

37

 

 

 

17

 

 

 

17

 

 

 

538

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Total current-period gross charge-offs

 

$

71

 

 

$

382

 

 

$

249

 

 

$

411

 

 

$

70

 

 

$

82

 

 

$

17

 

 

$

1,282

 

Allowance for Credit Losses Methodology

 

The Company determines its provision for credit losses and allowance for credit losses using the current expected credit loss methodology that is referred to as the CECL model. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.

14


 

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

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,547

 

 

$

 

 

$

3

 

 

$

3

 

 

$

258

 

 

$

6,808

 

Commercial real estate non-owner occupied

 

 

32,120

 

 

 

 

 

 

 

 

 

 

 

 

1,312

 

 

 

33,432

 

Construction and development < 60 months

 

 

3,608

 

 

 

(2

)

 

 

3

 

 

 

1

 

 

 

(169

)

 

 

3,440

 

Construction residential real estate < 60 months

 

 

3,226

 

 

 

 

 

 

 

 

 

 

 

 

327

 

 

 

3,553

 

Residential real estate first lien

 

 

4,454

 

 

 

(42

)

 

 

10

 

 

 

(32

)

 

 

333

 

 

 

4,755

 

Residential real estate all other

 

 

1,444

 

 

 

(2

)

 

 

1

 

 

 

(1

)

 

 

218

 

 

 

1,661

 

Agriculture

 

 

6,268

 

 

 

(302

)

 

 

7

 

 

 

(295

)

 

 

453

 

 

 

6,426

 

  Commercial non-real estate

 

 

25,079

 

 

 

(102

)

 

 

127

 

 

 

25

 

 

 

23

 

 

 

25,127

 

  Consumer non-real estate

 

 

4,232

 

 

 

(398

)

 

 

35

 

 

 

(363

)

 

 

475

 

 

 

4,344

 

  Oil and gas

 

 

7,782

 

 

 

(2

)

 

 

 

 

 

(2

)

 

 

(406

)

 

 

7,374

 

Total

 

$

94,760

 

 

$

(850

)

 

$

186

 

 

$

(664

)

 

$

2,824

 

 

$

96,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,416

 

 

$

(48

)

 

$

52

 

 

$

4

 

 

$

388

 

 

$

6,808

 

Commercial real estate non-owner occupied

 

 

30,190

 

 

 

(3

)

 

 

 

 

 

(3

)

 

 

3,245

 

 

 

33,432

 

Construction and development < 60 months

 

 

3,778

 

 

 

(4

)

 

 

6

 

 

 

2

 

 

 

(340

)

 

 

3,440

 

Construction residential real estate < 60 months

 

 

3,275

 

 

 

 

 

 

 

 

 

 

 

 

278

 

 

 

3,553

 

Residential real estate first lien

 

 

4,092

 

 

 

(44

)

 

 

13

 

 

 

(31

)

 

 

694

 

 

 

4,755

 

Residential real estate all other

 

 

1,418

 

 

 

(28

)

 

 

3

 

 

 

(25

)

 

 

268

 

 

 

1,661

 

Agriculture

 

 

6,217

 

 

 

(337

)

 

 

13

 

 

 

(324

)

 

 

533

 

 

 

6,426

 

  Commercial non-real estate

 

 

25,106

 

 

 

(278

)

 

 

149

 

 

 

(129

)

 

 

150

 

 

 

25,127

 

  Consumer non-real estate

 

 

4,132

 

 

 

(538

)

 

 

92

 

 

 

(446

)

 

 

658

 

 

 

4,344

 

  Oil and gas

 

 

8,104

 

 

 

(2

)

 

 

 

 

 

(2

)

 

 

(728

)

 

 

7,374

 

Total

 

$

92,728

 

 

$

(1,282

)

 

$

328

 

 

$

(954

)

 

$

5,146

 

 

$

96,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15


 

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

8,262

 

 

$

(4

)

 

$

30

 

 

$

26

 

 

$

(1,360

)

 

$

6,928

 

Commercial real estate non-owner occupied

 

 

16,348

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

16,315

 

Construction and development < 60 months

 

 

3,272

 

 

 

 

 

 

2

 

 

 

2

 

 

 

406

 

 

 

3,680

 

Construction residential real estate < 60 months

 

 

1,103

 

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

1,183

 

Residential real estate first lien

 

 

3,394

 

 

 

(5

)

 

 

6

 

 

 

1

 

 

 

(40

)

 

 

3,355

 

Residential real estate all other

 

 

1,560

 

 

 

(36

)

 

 

 

 

 

(36

)

 

 

(44

)

 

 

1,480

 

Agriculture

 

 

8,018

 

 

 

 

 

 

4

 

 

 

4

 

 

 

(66

)

 

 

7,956

 

  Commercial non-real estate

 

 

25,163

 

 

 

(717

)

 

 

26

 

 

 

(691

)

 

 

898

 

 

 

25,370

 

  Consumer non-real estate

 

 

3,730

 

 

 

(153

)

 

 

42

 

 

 

(111

)

 

 

431

 

 

 

4,050

 

  Oil and gas

 

 

16,389

 

 

 

 

 

 

 

 

 

 

 

 

229

 

 

 

16,618

 

Total

 

$

87,239

 

 

$

(915

)

 

$

110

 

 

$

(805

)

 

$

501

 

 

$

86,935

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Initial allowance on loans purchased with credit deterioration

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

7,550

 

 

$

 

 

$

(20

)

 

$

78

 

 

$

58

 

 

$

(680

)

 

$

6,928

 

Commercial real estate non-owner occupied

 

 

16,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(492

)

 

 

16,315

 

Construction and development < 60 months

 

 

3,454

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

 

 

221

 

 

 

3,680

 

Construction residential real estate < 60 months

 

 

1,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

132

 

 

 

1,183

 

Residential real estate first lien

 

 

3,048

 

 

 

2

 

 

 

(49

)

 

 

13

 

 

 

(36

)

 

 

341

 

 

 

3,355

 

Residential real estate all other

 

 

1,567

 

 

 

 

 

 

(36

)

 

 

402

 

 

 

366

 

 

 

(453

)

 

 

1,480

 

Agriculture

 

 

8,392

 

 

 

 

 

 

(125

)

 

 

7

 

 

 

(118

)

 

 

(318

)

 

 

7,956

 

  Commercial non-real estate

 

 

25,565

 

 

 

48

 

 

 

(774

)

 

 

136

 

 

 

(638

)

 

 

395

 

 

 

25,370

 

  Consumer non-real estate

 

 

3,694

 

 

 

28

 

 

 

(233

)

 

 

80

 

 

 

(153

)

 

 

481

 

 

 

4,050

 

  Oil and gas

 

 

12,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,810

 

 

 

16,618

 

Total

 

$

83,936

 

 

$

78

 

 

$

(1,237

)

 

$

721

 

 

$

(516

)

 

$

3,437

 

 

$

86,935

 

 

Purchased Credit Deteriorated Loans

 

The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The Company did not purchase credit-deteriorated loans during the six month period ended June 30, 2023. The credit-deteriorated loans purchased during the six months ended June 30, 2022 were as follows:

 

 

 

Loans acquired
with deteriorated
credit quality

 

 

 

(Dollars in thousands)

 

For the period ended June 30, 2022

 

 

 

Purchase price of loans at acquisition

 

$

661

 

Allowance for credit losses at acquisition

 

 

78

 

Par value of acquired loans at acquisition

 

$

739

 

 

 

16


 

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. During the six months ended June 30, 2023 and 2022, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,129

 

 

$

 

 

$

 

 

$

 

 

$

2,129

 

 

$

863

 

Commercial real estate non-owner occupied

 

 

664

 

 

 

 

 

 

 

 

 

 

 

 

664

 

 

 

270

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

376

 

 

 

 

 

 

 

 

 

 

 

 

376

 

 

 

45

 

Residential real estate first lien

 

 

371

 

 

 

 

 

 

 

 

 

 

 

 

371

 

 

 

118

 

Residential real estate all other

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

41

 

 

 

19

 

Agriculture

 

 

3,436

 

 

 

672

 

 

 

 

 

 

3,068

 

 

 

7,176

 

 

 

2,694

 

  Commercial non-real estate

 

 

 

 

 

4,879

 

 

 

 

 

 

 

 

 

4,879

 

 

 

1,747

 

  Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

93

 

 

 

56

 

  Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total collateral-dependent loans held for investment

 

$

7,017

 

 

$

5,551

 

 

$

 

 

$

3,161

 

 

$

15,729

 

 

$

5,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,213

 

 

$

 

 

$

 

 

$

 

 

$

2,213

 

 

$

870

 

Commercial real estate non-owner occupied

 

 

1,263

 

 

 

 

 

 

 

 

 

 

 

 

1,263

 

 

 

333

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

420

 

 

 

 

 

 

 

 

 

 

 

 

420

 

 

 

45

 

Residential real estate first lien

 

 

481

 

 

 

 

 

 

 

 

 

 

 

 

481

 

 

 

207

 

Residential real estate all other

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

Agriculture

 

 

3,447

 

 

 

701

 

 

 

 

 

 

3,592

 

 

 

7,740

 

 

 

3,114

 

  Commercial non-real estate

 

 

 

 

 

5,924

 

 

 

 

 

 

4

 

 

 

5,928

 

 

 

1,938

 

  Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

117

 

 

 

117

 

 

 

81

 

  Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total collateral-dependent loans held for investment

 

$

7,833

 

 

$

6,625

 

 

$

 

 

$

3,713

 

 

$

18,171

 

 

$

6,597

 

Non-Cash Transfers from Loans and Premises and Equipment

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

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

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

667

 

 

$

4,065

 

Repossessed assets

 

 

946

 

 

 

503

 

Total

 

$

1,613

 

 

$

4,568

 

 

17


 

 

(5) INTANGIBLE ASSETS AND GOODWILL

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

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

 

(Dollars in thousands)

 

June 30, 2023

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

33,298

 

 

$

(15,316

)

 

$

17,982

 

Customer relationship intangibles

 

 

3,350

 

 

 

(3,109

)

 

 

241

 

Total

 

$

36,648

 

 

$

(18,425

)

 

$

18,223

 

December 31, 2022

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

33,298

 

 

$

(13,615

)

 

$

19,683

 

Customer relationship intangibles

 

 

3,350

 

 

 

(3,050

)

 

 

300

 

Total

 

$

36,648

 

 

$

(16,665

)

 

$

19,983

 

 

The following is a summary of goodwill by business segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Metropolitan Banks

 

 

BancFirst Community Banks

 

 

Pegasus

 

 

Worthington

 

 

Other Financial Services

 

 

Executive, Operations & Support

 

 

Consolidated

 

 

 

(Dollars in thousands)

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning and end of period

 

$

13,767

 

 

$

61,212

 

 

$

68,855

 

 

$

32,133

 

 

$

5,464

 

 

$

624

 

 

$

182,055

 

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, 2022.

 

(6) SUBORDINATED DEBT

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

 

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 (the “Subordinated Notes”) to various institutional accredited investors. The sale of the Subordinated Notes was pursuant to a Subordinated Note Purchase Agreement entered into with each of the investors. The Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. The net proceeds to the Company from the sale of the Subordinated Notes were approximately $59.15 million after deducting commissions and offering expenses of $850,000. The Company used the proceeds from the sale of the Subordinated Notes for general corporate purposes. The Subordinated Notes will initially bear interest at a fixed rate of 3.50% per annum, from and including June 17, 2021 to but excluding June 30, 2031, payable semi-annually in arrears on June 30 and December 31 of each year, commencing December 31, 2021. Then, from and including June 30, 2031, to but excluding the maturity date, the Subordinated Notes will bear interest at a floating rate equal to the benchmark (initially, three-month term SOFR), reset quarterly, plus a spread of 229 basis points, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Subordinated Notes mature on June 30, 2036.

18


 

 

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

 

 

(7) STOCK-BASED COMPENSATION

The Company had a nonqualified incentive stock option plan, the BancFirst Corporation Stock Option Plan (the “Employee Plan”), which was terminated on June 1, 2023. The remaining options will continue to vest and are exercisable beginning four years from the date of grant at the rate of 25% per year for four years, and expire no later than the end of fifteen years from the date of grant.

The Company had the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”), which was terminated on June 1, 2023. The remaining options will continue to vest and are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire no later than the end of fifteen years from the date of grant.

On May 25, 2023, the shareholders of the Company adopted the BancFirst Corporation 2023 Restricted Stock Unit Plan (the "RSU Plan"). The RSU Plan was effective as of June 1, 2023 and for a period of ten years thereafter. The RSU Plan shall continue in effect after such ten-year period until all matters relating to the payment of awards and administration of the RSU Plan have been settled. At June 30, 2023 there were 497,375 shares available for future grants. The restricted stock units ("RSU") vest beginning two years from the date of grant at the rate of 20% per year for five years. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant.

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

Although not required or expected, the Company may settle some options or restricted stock units in cash on a limited basis at the discretion of the Company. The Company had no cash settlements during the six months ended June 30, 2023 or June 30, 2022.

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

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

Remaining

 

Aggregate

 

 

 

 

 

 

Exercise

 

 

Contractual

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

Value

 

 

 

(Dollars in thousands, except option data)

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2022

 

 

1,310,290

 

 

$

52.51

 

 

 

 

 

 

Exercised

 

 

(45,899

)

 

 

33.54

 

 

 

 

 

 

Canceled, forfeited, or expired

 

 

(8,500

)

 

 

87.97

 

 

 

 

 

 

Outstanding at June 30, 2023

 

 

1,255,891

 

 

 

52.96

 

 

10.18 Yrs.

 

$

49,029

 

Exercisable at June 30, 2023

 

 

477,266

 

 

 

31.74

 

 

6.41 Yrs.

 

$

28,760

 

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

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Total intrinsic value of options exercised

 

$

1,979

 

 

$

2,979

 

 

$

2,331

 

 

$

8,943

 

Cash received from options exercised

 

 

1,318

 

 

 

1,303

 

 

 

1,539

 

 

 

4,292

 

Tax benefit realized from options exercised

 

 

475

 

 

 

716

 

 

 

560

 

 

 

2,150

 

 

19


 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility and the expected term. The fair value of each option is expensed over its vesting period. The 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. The Company accounts for forfeitures as they occur. No stock options were granted during the six months ended June 30, 2023.

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:

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

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

 

$

 

 

$

29.08

 

Risk-free interest rate

 

 

 

 

1.75 to 3.25%

 

Dividend yield

 

 

 

 

2.00%

 

Stock price volatility

 

 

 

 

34.61 to 34.71%

 

Expected term

 

 

 

 

10 Yrs

 

 

The following table is a summary of the activity under the Company's RSU plan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

Restricted

 

 

Grant Date

 

 

 

 

Stock Units

 

 

Fair Value

 

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

Nonvested at December 31, 2022

 

 

 

 

 

 

 

Granted

 

 

2,625

 

 

$

93.66

 

 

Nonvested at June 30, 2023

 

 

2,625

 

 

 

 

 

 

The Company has had the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “Deferred Stock Compensation Plan”) since May 1999. As of June 30, 2023, there are 22,252 shares available for future issuance under the Deferred Stock Compensation Plan. The Deferred Stock Compensation Plan will terminate on December 31, 2024, if not extended. Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 100% 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 17,797 and 13,288 shares of common stock distributed from the Deferred Stock Compensation Plan during the six months ended June 30, 2023 and 2022, respectively.

A summary of the accumulated stock units is as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Accumulated stock units

 

 

115,848

 

 

 

129,609

 

Average price

 

$

38.26

 

 

$

34.91

 

 

Stock-based compensation expense is charged to salaries and benefits expense on the Consolidated Statements of Comprehensive Income.

20


 

The components of stock-based compensation expense for all share-based compensation plans and related tax benefits are as follows:

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Stock-based compensation expense

 

$

831

 

 

$

460

 

 

$

1,213

 

 

$

918

 

Tax benefit

 

 

200

 

 

 

111

 

 

 

292

 

 

 

221

 

Stock-based compensation expense, net of tax

 

$

631

 

 

$

349

 

 

$

921

 

 

$

697

 

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:

 

 

June 30, 2023

 

 

 

(Dollars in thousands)

 

Unearned stock-based compensation expense

 

$

11,867

 

 

(8) STOCKHOLDERS’ EQUITY

In November 1999, the Company adopted the SRP. The SRP may be used as a means to increase earnings per share and return on equity. In addition, the SRP may be used to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options and to provide liquidity for stockholders wishing to sell their stock. All shares repurchased under the SRP have been retired and not held as treasury stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee.

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

 

 

 

 

 

 

June 30, 2023

 

Shares remaining to be repurchased

 

 

500,486

 

 

21


 

BancFirst Corporation, BancFirst, Pegasus and Worthington 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 BancFirst Corporation’s, BancFirst’s, Pegasus’s and Worthington'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 consolidated financial statements. The Company believes that as of June 30, 2023, BancFirst Corporation, BancFirst, Pegasus and Worthington 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 June 30, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,393,706

 

 

16.81%

 

$

663,195

 

 

8.00%

 

$

870,444

 

 

10.50%

 

N/A

 

 

N/A

BancFirst

 

 

1,160,255

 

 

16.23%

 

 

571,919

 

 

8.00%

 

 

750,644

 

 

10.50%

 

$

714,899

 

 

10.00%

Pegasus

 

 

138,455

 

 

17.62%

 

 

62,861

 

 

8.00%

 

 

82,505

 

 

10.50%

 

 

78,576

 

 

10.00%

Worthington

 

 

49,963

 

 

13.30%

 

 

30,055

 

 

8.00%

 

 

39,447

 

 

10.50%

 

 

37,568

 

 

10.00%

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,211,518

 

 

14.61%

 

$

373,047

 

 

4.50%

 

$

580,296

 

 

7.00%

 

N/A

 

 

N/A

BancFirst

 

 

1,054,783

 

 

14.75%

 

 

321,705

 

 

4.50%

 

 

500,429

 

 

7.00%

 

$

464,684

 

 

6.50%

Pegasus

 

 

130,150

 

 

16.56%

 

 

35,359

 

 

4.50%

 

 

55,003

 

 

7.00%

 

 

51,074

 

 

6.50%

Worthington

 

 

46,200

 

 

12.30%

 

 

16,906

 

 

4.50%

 

 

26,698

 

 

7.00%

 

 

24,419

 

 

6.50%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,237,518

 

 

14.93%

 

$

497,396

 

 

6.00%

 

$

704,645

 

 

8.50%

 

N/A

 

 

N/A

BancFirst

 

 

1,074,783

 

 

15.03%

 

 

428,940

 

 

6.00%

 

 

607,664

 

 

8.50%

 

$

571,919

 

 

8.00%

Pegasus

 

 

130,150

 

 

16.56%

 

 

47,145

 

 

6.00%

 

 

66,789

 

 

8.50%

 

 

62,861

 

 

8.00%

Worthington

 

 

46,200

 

 

12.30%

 

 

22,541

 

 

6.00%

 

 

31,933

 

 

8.50%

 

 

30,055

 

 

8.00%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Quarterly Average Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,237,518

 

 

10.50%

 

$

471,255

 

 

4.00%

 

N/A

 

 

N/A

 

N/A

 

 

N/A

BancFirst

 

 

1,074,783

 

 

10.63%

 

 

401,047

 

 

4.00%

 

N/A

 

 

N/A

 

$

501,309

 

 

5.00%

Pegasus

 

 

130,150

 

 

10.41%

 

 

50,026

 

 

4.00%

 

N/A

 

 

N/A

 

 

62,532

 

 

5.00%

Worthington

 

 

46,200

 

 

9.18%

 

 

20,136

 

 

4.00%

 

N/A

 

 

N/A

 

 

25,171

 

 

5.00%

As of June 30, 2023, the most recent notifications from the Federal Reserve Bank of Kansas City, the FDIC and the Comptroller of the Currency, categorized BancFirst, Pegasus and Worthington as “well capitalized” under the prompt corrective action provisions. The Common Equity Tier 1 Capital of BancFirst Corporation, BancFirst, Pegasus and Worthington includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, the election was made to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 Capital. Common Equity Tier 1 Capital for BancFirst Corporation, BancFirst, Pegasus and Worthington is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. The Company’s trust preferred securities have continued to be included in Tier 1 capital, as the Company’s total assets do not exceed $15 billion. The Company's Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. There are no conditions or events since the most recent notifications to BancFirst Corporation, BancFirst, Pegasus and Worthington of their capital category that management believes would materially change their category under capital requirements existing as of the report date.

 

22


 

(9) NET INCOME PER COMMON SHARE

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

 

 

Income
(Numerator)

 

 

Shares
(Denominator)

 

 

Per Share
Amount

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

55,010

 

 

 

32,920,497

 

 

$

1.67

 

Dilutive effect of stock options

 

 

 

 

 

546,757

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

55,010

 

 

 

33,467,254

 

 

$

1.64

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

44,707

 

 

 

32,749,752

 

 

$

1.36

 

Dilutive effect of stock options

 

 

 

 

 

668,730

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

44,707

 

 

 

33,418,482

 

 

$

1.34

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

112,543

 

 

 

32,906,753

 

 

$

3.42

 

Dilutive effect of stock options

 

 

 

 

 

559,178

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus
   assumed exercises of stock options

 

$

112,543

 

 

 

33,465,931

 

 

$

3.36

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

80,622

 

 

 

32,708,563

 

 

$

2.46

 

Dilutive effect of stock options

 

 

 

 

 

658,236

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus
   assumed exercises of stock options

 

$

80,622

 

 

 

33,366,799

 

 

$

2.42

 

 

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

 

 

Shares

 

Three Months Ended June 30, 2023

 

 

305,407

 

Three Months Ended June 30, 2022

 

 

122,489

 

Six Months Ended June 30, 2023

 

 

307,608

 

Six Months Ended June 30, 2022

 

 

131,779

 

 

 

(10) FAIR VALUE MEASUREMENTS

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

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

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

23


 

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

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.

Debt Securities Available for Sale

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

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

Derivatives

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

24


 

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)

 

June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,510,066

 

 

$

 

 

$

 

 

$

1,510,066

 

U.S. federal agencies

 

 

 

 

 

13,536

 

 

 

 

 

 

13,536

 

Mortgage-backed securities

 

 

 

 

 

15,620

 

 

 

 

 

 

15,620

 

States and political subdivisions

 

 

 

 

 

10,459

 

 

 

427

 

 

 

10,886

 

Asset backed securities

 

 

 

 

 

12,435

 

 

 

 

 

 

12,435

 

Other debt securities

 

 

 

 

 

6,884

 

 

 

 

 

 

6,884

 

Derivative assets

 

 

 

 

 

23,340

 

 

 

 

 

 

23,340

 

Derivative liabilities

 

 

 

 

 

21,813

 

 

 

 

 

 

21,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,477,864

 

 

$

 

 

$

 

 

$

1,477,864

 

U.S. federal agencies

 

 

 

 

 

15,222

 

 

 

 

 

 

15,222

 

Mortgage-backed securities

 

 

 

 

 

16,586

 

 

 

 

 

 

16,586

 

States and political subdivisions

 

 

 

 

 

7,680

 

 

 

454

 

 

 

8,134

 

Asset backed securities

 

 

 

 

 

13,010

 

 

 

 

 

 

13,010

 

Other debt securities

 

 

 

 

 

7,405

 

 

 

 

 

 

7,405

 

Derivative assets

 

 

 

 

 

20,745

 

 

 

 

 

 

20,745

 

Derivative liabilities

 

 

 

 

 

19,683

 

 

 

 

 

 

19,683

 

 

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

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Balance at the beginning of the year

 

$

454

 

 

$

320

 

Purchases

 

 

 

 

 

255

 

Settlements

 

 

(30

)

 

 

(110

)

Total unrealized gain

 

 

3

 

 

 

(11

)

Balance at the end of the period

 

$

427

 

 

$

454

 

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 six months ended June 30, 2023, the Company did not transfer any debt securities. In addition, during the year ended December 31, 2022, the Company did not transfer any debt securities.

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

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

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

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

25


 

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

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

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

The following table summarizes assets measured at fair value on a nonrecurring basis during the period presented. These nonrecurring fair values do not represent all assets, only those assets that have been adjusted during the reporting period:

 

 

 

Total Fair Value

 

 

 

Level 3

 

 

 

(Dollars in thousands)

 

As of and for the Year-to-date Period Ended June 30, 2023

 

 

 

Equity securities

 

$

15,172

 

Collateral dependent loans

 

 

122

 

Repossessed assets

 

 

320

 

Other real estate owned

 

 

5,100

 

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

 

 

 

Equity securities

 

$

15,512

 

Collateral dependent loans

 

 

1,618

 

Repossessed assets

 

 

180

 

Other real estate owned

 

 

34,999

 

 

Estimated Fair Value of Financial Instruments

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

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

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

Federal Funds Sold

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

Debt Securities Held for Investment

For debt securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar debt securities making adjustments for credit or liquidity if applicable.

Loans Held For Sale

The Company originates mortgage loans to be sold. At the time of origination, the acquiring bank has already been determined and the terms of the loan, including interest rate, have already been set by the acquiring bank, allowing the Company to originate the loan at fair value. Mortgage loans are generally sold within 30 days of origination. Loans held for sale are valued using Level 2 inputs. Gains or losses recognized upon the sale of the loans are determined on a specific identification basis.

Loans Held For Investment

To determine the fair value of loans held for investment, the Company uses an exit price calculation, which takes into account factors such as liquidity, credit and the nonperformance risk of loans. For certain homogeneous categories of loans, such as some residential mortgages, fair values are estimated using the quoted market prices for securities backed by similar loans, adjusted for

26


 

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.

Subordinated Debt

The fair values of subordinated debt are estimated using the rates that would be charged for subordinated debt 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:

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Carrying
Amount

 

 

Fair Value

 

 

Carrying
Amount

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,409,142

 

 

$

2,409,142

 

 

$

3,168,910

 

 

$

3,168,910

 

Federal funds sold

 

 

4,481

 

 

 

4,481

 

 

 

2,850

 

 

 

2,850

 

Debt securities held for investment

 

 

8

 

 

 

8

 

 

 

13

 

 

 

13

 

Loans held for sale

 

 

8,783

 

 

 

8,783

 

 

 

6,232

 

 

 

6,232

 

Level 3 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities held for investment

 

 

1,185

 

 

 

1,185

 

 

 

2,370

 

 

 

2,370

 

Loans, net of allowance for credit losses

 

 

7,201,772

 

 

 

6,915,262

 

 

 

6,850,835

 

 

 

6,563,755

 

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

10,475,180

 

 

 

10,096,793

 

 

 

10,974,228

 

 

 

10,614,840

 

Short-term borrowings

 

 

3,893

 

 

 

3,893

 

 

 

300

 

 

 

300

 

Subordinated debt

 

 

86,072

 

 

 

79,834

 

 

 

86,044

 

 

 

82,385

 

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments

 

 

 

 

 

4,938

 

 

 

 

 

 

4,598

 

Letters of credit

 

 

 

 

 

530

 

 

 

 

 

 

542

 

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 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 June 30, 2023 or December 31, 2022.

 

 

27


 

 

(11) DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company enters into oil and gas swaps and options contracts to accommodate the business needs of its customers. Upon the origination of an oil or gas swap or option contract with a customer, to mitigate the exposure to fluctuations in oil and gas prices, the Company simultaneously enters into an offsetting contract with a counterparty. These derivatives are not designated as hedged instruments and are recorded on the Company's consolidated balance sheet at fair value and are included in other assets. The Company's derivative financial instruments require a daily margin to be posted, which fluctuates with oil and gas prices. At June 30, 2023, the Company had a margin liability included in other liabilities in the amount of $5.5 million. At December 31, 2022, the Company had a margin asset included in other assets in the amount of $6.6 million.

 

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:

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

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

 

 

2,416

 

 

$

11,057

 

 

 

2,698

 

 

$

8,868

 

Derivative liabilities

 

Barrels

 

 

(2,416

)

 

 

(10,460

)

 

 

(2,698

)

 

 

(8,259

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas/Natural Gas Liquids

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

MMBTUs/Gallons

 

 

53,649

 

 

 

12,283

 

 

 

25,059

 

 

 

11,877

 

Derivative liabilities

 

MMBTUs/Gallons

 

 

(53,649

)

 

 

(11,353

)

 

 

(25,059

)

 

 

(11,424

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Fair Value

 

Included in

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Other assets

 

 

 

 

 

23,340

 

 

 

 

 

 

20,745

 

Derivative liabilities

 

Other liabilities

 

 

 

 

 

(21,813

)

 

 

 

 

 

(19,683

)

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Derivative income

 

$

260

 

 

$

189

 

 

$

349

 

 

$

348

 

 

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

 

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

 

The following table is a summary of the Company's net credit exposure relating to oil and gas swaps and options with bank counterparties:

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

Credit exposure

 

$

21,093

 

 

$

6,560

 

 

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

28


 

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.

 

(12) 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 six principal business units are BancFirst metropolitan banks, BancFirst community banks, Pegasus, Worthington, other financial services and executive, operations and support. BancFirst metropolitan banks, BancFirst community banks, Pegasus and Worthington offer traditional banking products such as commercial and retail lending and a full line of deposit accounts. BancFirst metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. BancFirst community banks consist of banking locations in communities in Oklahoma outside the Oklahoma City and Tulsa metropolitan areas. Pegasus consists of banking locations in the Dallas metropolitan area. Worthington consists of banking locations in the Dallas and Fort Worth metropolitan areas. 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 six business units are as follows:

 

 

BancFirst Metropolitan
Banks

 

 

BancFirst Community
Banks

 

 

Pegasus

 

 

Worthington

 

 

Other
Financial
Services

 

 

Executive,
Operations
& Support

 

 

Eliminations

 

 

Consolidated

 

 

 

(Dollars in thousands)

 

Three Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

29,269

 

 

$

57,617

 

 

$

13,509

 

 

$

4,123

 

 

$

1,058

 

 

$

350

 

 

$

 

 

$

105,926

 

Noninterest income

 

 

7,090

 

 

 

19,986

 

 

 

467

 

 

 

255

 

 

 

12,350

 

 

 

63,688

 

 

 

(55,862

)

 

 

47,974

 

Income before taxes

 

 

21,588

 

 

 

43,184

 

 

 

9,857

 

 

 

791

 

 

 

4,298

 

 

 

45,925

 

 

 

(55,677

)

 

 

69,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

21,962

 

 

$

49,615

 

 

$

9,964

 

 

$

3,743

 

 

$

2,079

 

 

$

(505

)

 

$

9

 

 

$

86,867

 

Noninterest income

 

 

5,504

 

 

 

18,152

 

 

 

293

 

 

 

286

 

 

 

10,753

 

 

 

52,756

 

 

 

(45,146

)

 

 

42,598

 

Income before taxes

 

 

15,142

 

 

 

36,462

 

 

 

4,672

 

 

 

1,436

 

 

 

4,643

 

 

 

37,901

 

 

 

(45,009

)

 

 

55,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

60,008

 

 

$

115,302

 

 

$

28,660

 

 

$

8,747

 

 

$

2,000

 

 

$

365

 

 

$

 

 

$

215,082

 

Noninterest income

 

 

13,177

 

 

 

39,518

 

 

 

681

 

 

 

534

 

 

 

26,522

 

 

 

129,831

 

 

 

(114,461

)

 

 

95,802

 

Income before taxes

 

 

44,898

 

 

 

86,783

 

 

 

19,501

 

 

 

2,421

 

 

 

10,462

 

 

 

94,342

 

 

 

(114,096

)

 

 

144,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

41,570

 

 

$

94,183

 

 

$

17,584

 

 

$

5,437

 

 

$

4,992

 

 

$

(1,412

)

 

$

20

 

 

$

162,374

 

Noninterest income

 

 

15,277

 

 

 

34,997

 

 

 

484

 

 

 

419

 

 

 

23,736

 

 

 

95,330

 

 

 

(83,995

)

 

 

86,248

 

Income before taxes

 

 

33,313

 

 

 

67,801

 

 

 

7,499

 

 

 

1,821

 

 

 

10,688

 

 

 

61,549

 

 

 

(83,715

)

 

 

98,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

$

3,436,504

 

 

$

6,810,321

 

 

$

1,276,354

 

 

$

542,292

 

 

$

241,921

 

 

$

1,217,957

 

 

$

(1,505,084

)

 

$

12,020,265

 

December 31, 2022

 

 

3,412,369

 

 

 

6,886,066

 

 

 

1,404,033

 

 

 

541,002

 

 

 

171,679

 

 

 

1,473,443

 

 

 

(1,500,729

)

 

 

12,387,863

 

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.

 

 

29


 

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

 

The following discussion and analysis of our financial condition as of June 30, 2023 and December 31, 2022 and results of operations for the three and six months ended June 30, 2023 should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2022, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2022 Form 10-K, and "Item 1A, Risk Factors" in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

FORWARD LOOKING STATEMENTS

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

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

 

The impact of the Durbin Amendment on noninterest income beginning July 1, 2023.
Potential impacts of the recent adverse developments in the banking industry driven by high-profile bank failures, including impacts on customer confidence, demand deposit outflows and the regulatory response thereto.
Recent deterioration in the market for commercial office property could have an adverse effect on the value of the Company's other real estate owned as well as commercial office collateral for the Company's commercial real estate loans.
Political pressures could further limit our ability to charge for NSF and overdraft fees.
Rising interest rates.
The increased time, effort and non-interest expense related to ongoing and increased regulations from the Federal Reserve, Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau and the Securities and Exchange Commission (requirements related to environmental, social and governance (ESG) issues and climate disclosure).
Local, regional, national and international economic conditions and the impact they may have on the Company and its customers.
Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
Inflation, including wage inflation, energy prices, securities markets and monetary fluctuations.
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, including the impact of rising interest rates.
Technological changes.
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.

30


 

 

 

SUMMARY

 

The Company’s net income for the second quarter of 2023 was $55.0 million, compared to $44.7 million for the second quarter of 2022. Diluted net income per common share was $1.64 and $1.34 for the second quarter of 2023 and 2022, respectively. The Company’s net interest income for the second quarter of 2023 increased to $105.9 million, compared to $86.9 million for the second quarter of 2022. Rising short-term interest rates and loan growth drove the increase. The net interest margin for the second quarter was 3.87%, compared to 3.05% a year ago. For the second quarter of 2023, the Company recorded a provision for credit losses of $2.8 million, compared to a provision for credit losses of $501,000 for the second quarter of 2022.

 

Noninterest income for the second quarter of 2023 totaled $48.0 million, compared to $42.6 million for the second quarter of 2022. The growth in noninterest income was mostly attributable to increased sweep account balances. Noninterest income for the second quarter of 2022 included $578,000 of income from an equity interest received from a prior loan settlement. The equity interest was sold during the second quarter of 2023 at no gain. The Company exceeded $10 billion in total assets at December 31, 2022. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this will cause a reduction of annual pretax income from debit card interchange fees of approximately $23 million beginning July 1, 2023.

 

Noninterest expense for the second quarter of 2023 increased to $81.1 million compared to $73.7 million for the second quarter of 2022. Higher noninterest expense was primarily related to an increase in salaries and employee benefits of $4.5 million. In addition, noninterest expense was lower in the second quarter of 2022 due to a gain from sale of the Company's prior headquarters that was netted against expenses.

 

The Company’s effective tax rate was 21.4% for the second quarter of 2023 compared to 19.1% for the second quarter of 2022. The Company adopted Accounting Standard Update ("ASU") 2023-02 on January 1, 2023, which increased income tax expenses. Exercises of stock options contributed to the lower effective tax rate in 2022.

At June 30, 2023, the Company’s total assets were $12.0 billion, a decrease of $367.6 million from December 31, 2022. Debt securities of $1.6 billion were up $30.0 million from December 31, 2022. Loans totaled $7.3 billion, an increase of $357.7 million from December 31, 2022. Deposits totaled $10.5 billion, a decrease of $499.0 million from December 31, 2022 as deposits generally flowed from demand deposits into the Company's off balance sheet sweep account product. Sweep accounts totaled $4.3 billion at June 30, 2023 up $567.7 million from December 31, 2022. The Company’s total stockholders’ equity at June 30, 2023 was $1.3 billion, an increase of $90.0 million over December 31, 2022.

 

At June 30, 2023, the Company’s nonaccrual loans were $18.0 million compared to $15.3 million at year-end 2022. Nonaccrual loans represented 0.25% of total loans at June 30, 2023, compared to 0.22% at December 31, 2022. The allowance for credit losses to total loans was 1.33% at both June 30, 2023 and December 31, 2022. Net charge-offs were 0.01% of average loans for the second quarter and year-to-date of both 2023 and 2022.

 

Competition for deposits has recently increased and available yields have similarly increased, causing non-interest bearing deposits to move to interest bearing deposits and off balance sheet sweep account products. Although the percent of cash and due from banks, interest-bearing deposits with banks and federal funds sold to total assets has decreased to 20.1% at June, 30. 2023, compared to 25.6% at December 31, 2022, the Company is still highly liquid. The Company expects its net interest income to decrease for the last half of 2023 due to the decrease and change in mix of its deposits.

 

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

 

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to the Consolidated Financial Statements for disclosures regarding recently issued accounting pronouncements since December 31, 2022, the date of its most recent annual report to stockholders.

SEGMENT INFORMATION

See Note (12) of the Notes to the Consolidated Financial Statements for disclosures regarding business segments.

RESULTS OF OPERATIONS

Average Balances, Income, Expenses and Rates

31


 

The following table presents, for the periods indicated, certain information related to the Company's consolidated average balance sheets, average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. For these computations: (i) average balances are derived from daily averages, (ii) information is shown on a taxable-equivalent basis assuming a 21% tax rate, and (iii) nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis. Loan fees included in interest income were $5.7 million for the three months ended June 30, 2023 compared to $6.3 million for the three months ended June 30, 2022. Loan fees included in interest income were $11.3 million for the six months ended June 30, 2023 compared to $13.7 million for the six months ended June 30, 2022.

 

BANCFIRST CORPORATION

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

 

(Unaudited)

 

Taxable Equivalent Basis

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

7,247,283

 

 

$

114,708

 

 

 

6.35

%

 

$

6,566,437

 

 

$

78,836

 

 

 

4.82

%

Debt securities – taxable

 

 

1,604,422

 

 

 

9,408

 

 

 

2.35

 

 

 

1,192,371

 

 

 

5,142

 

 

 

1.73

 

Debt securities – tax exempt

 

 

3,251

 

 

 

29

 

 

 

3.59

 

 

 

3,682

 

 

 

28

 

 

 

3.08

 

Federal funds sold and interest-bearing deposits with banks

 

 

2,131,325

 

 

 

26,775

 

 

 

5.04

 

 

 

3,686,883

 

 

 

7,605

 

 

 

0.83

 

Total earning assets

 

 

10,986,281

 

 

 

150,920

 

 

 

5.51

 

 

 

11,449,373

 

 

 

91,611

 

 

 

3.21

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

200,165

 

 

 

 

 

 

 

 

 

291,470

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

820,731

 

 

 

 

 

 

 

 

 

943,850

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(95,887

)

 

 

 

 

 

 

 

 

(87,434

)

 

 

 

 

 

 

Total nonearning assets

 

 

925,009

 

 

 

 

 

 

 

 

 

1,147,886

 

 

 

 

 

 

 

Total assets

 

$

11,911,290

 

 

 

 

 

 

 

 

$

12,597,259

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

843,219

 

 

$

1,637

 

 

 

0.78

%

 

$

977,424

 

 

$

212

 

 

 

0.09

%

Savings deposits

 

 

4,456,909

 

 

 

37,667

 

 

 

3.39

 

 

 

4,328,065

 

 

 

2,733

 

 

 

0.25

 

Time deposits

 

 

747,101

 

 

 

4,428

 

 

 

2.38

 

 

 

665,660

 

 

 

641

 

 

 

0.39

 

Short-term borrowings

 

 

10,211

 

 

 

129

 

 

 

5.04

 

 

 

6,716

 

 

 

12

 

 

 

0.72

 

Subordinated debt

 

 

86,063

 

 

 

1,031

 

 

 

4.81

 

 

 

86,006

 

 

 

1,031

 

 

 

4.81

 

Total interest-bearing liabilities

 

 

6,143,503

 

 

 

44,892

 

 

 

2.93

 

 

 

6,063,871

 

 

 

4,629

 

 

 

0.31

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,328,005

 

 

 

 

 

 

 

 

 

5,223,063

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

109,732

 

 

 

 

 

 

 

 

 

126,279

 

 

 

 

 

 

 

Stockholders’ equity

 

 

1,330,050

 

 

 

 

 

 

 

 

 

1,184,046

 

 

 

 

 

 

 

Total interest free funds

 

 

5,767,787

 

 

 

 

 

 

 

 

 

6,533,388

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

11,911,290

 

 

 

 

 

 

 

 

$

12,597,259

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

106,028

 

 

 

 

 

 

 

 

$

86,982

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

2.58

%

 

 

 

 

 

 

 

 

2.90

%

Effect of interest free funds

 

 

 

 

 

 

 

 

1.29

%

 

 

 

 

 

 

 

 

0.15

%

Net interest margin

 

 

 

 

 

 

 

 

3.87

%

 

 

 

 

 

 

 

 

3.05

%

 

32


 

 

BANCFIRST CORPORATION

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

 

(Unaudited)

 

Taxable Equivalent Basis

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

7,127,174

 

 

$

219,189

 

 

 

6.20

%

 

$

6,463,687

 

 

$

151,902

 

 

 

4.74

%

Debt securities – taxable

 

 

1,588,439

 

 

 

18,399

 

 

 

2.34

 

 

 

1,149,037

 

 

 

8,923

 

 

 

1.57

 

Debt securities – tax exempt

 

 

3,366

 

 

 

38

 

 

 

2.29

 

 

 

4,225

 

 

 

62

 

 

 

2.95

 

Federal funds sold and interest-bearing deposits with banks

 

 

2,463,587

 

 

 

58,827

 

 

 

4.82

 

 

 

3,618,260

 

 

 

9,363

 

 

 

0.52

 

Total earning assets

 

 

11,182,566

 

 

 

296,453

 

 

 

5.35

 

 

 

11,235,209

 

 

 

170,250

 

 

 

3.06

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

209,115

 

 

 

 

 

 

 

 

 

280,304

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

808,094

 

 

 

 

 

 

 

 

 

864,988

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(94,609

)

 

 

 

 

 

 

 

 

(86,337

)

 

 

 

 

 

 

Total nonearning assets

 

 

922,600

 

 

 

 

 

 

 

 

 

1,058,955

 

 

 

 

 

 

 

Total assets

 

$

12,105,166

 

 

 

 

 

 

 

 

$

12,294,164

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

885,010

 

 

$

3,269

 

 

 

0.74

%

 

$

959,898

 

 

$

403

 

 

 

0.08

%

Savings deposits

 

 

4,440,577

 

 

 

68,158

 

 

 

3.10

 

 

 

4,249,720

 

 

 

3,874

 

 

 

0.18

 

Time deposits

 

 

726,558

 

 

 

7,482

 

 

 

2.08

 

 

 

659,907

 

 

 

1,290

 

 

 

0.39

 

Short-term borrowings

 

 

8,537

 

 

 

212

 

 

 

5.00

 

 

 

4,599

 

 

 

13

 

 

 

0.56

 

Subordinated debt

 

 

86,056

 

 

 

2,061

 

 

 

4.83

 

 

 

85,999

 

 

 

2,061

 

 

 

4.83

 

Total interest-bearing liabilities

 

 

6,146,738

 

 

 

81,182

 

 

 

2.66

 

 

 

5,960,123

 

 

 

7,641

 

 

 

0.26

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,561,214

 

 

 

 

 

 

 

 

 

5,053,996

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

94,817

 

 

 

 

 

 

 

 

 

97,146

 

 

 

 

 

 

 

Stockholders’ equity

 

 

1,302,397

 

 

 

 

 

 

 

 

 

1,182,899

 

 

 

 

 

 

 

Total interest free funds

 

 

5,958,428

 

 

 

 

 

 

 

 

 

6,334,041

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

12,105,166

 

 

 

 

 

 

 

 

$

12,294,164

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

215,271

 

 

 

 

 

 

 

 

$

162,609

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

2.69

%

 

 

 

 

 

 

 

 

2.80

%

Effect of interest free funds

 

 

 

 

 

 

 

 

1.19

%

 

 

 

 

 

 

 

 

0.12

%

Net interest margin

 

 

 

 

 

 

 

 

3.88

%

 

 

 

 

 

 

 

 

2.92

%

 

33


 

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
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

105,926

 

 

$

86,867

 

 

$

215,082

 

 

$

162,374

 

Provision for credit losses

 

 

2,824

 

 

 

501

 

 

 

5,146

 

 

 

3,437

 

Securities transactions

 

 

110

 

 

 

 

 

 

(103

)

 

 

(3,915

)

Total noninterest income

 

 

47,974

 

 

 

42,598

 

 

 

95,802

 

 

 

86,248

 

Salaries and employee benefits

 

 

49,803

 

 

 

45,284

 

 

 

99,055

 

 

 

89,216

 

Total noninterest expense

 

 

81,110

 

 

 

73,717

 

 

 

161,427

 

 

 

146,229

 

Net income

 

 

55,010

 

 

 

44,707

 

 

 

112,543

 

 

 

80,622

 

Per Common Share Data

 

 

 

 

 

 

 

 

 

 

 

 

Net income – basic

 

$

1.67

 

 

$

1.36

 

 

$

3.42

 

 

$

2.46

 

Net income – diluted

 

 

1.64

 

 

 

1.34

 

 

 

3.36

 

 

 

2.42

 

Cash dividends

 

 

0.40

 

 

 

0.36

 

 

 

0.80

 

 

 

0.72

 

Performance Data

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.85

%

 

 

1.42

%

 

 

1.87

%

 

 

1.32

%

Return on average stockholders’ equity

 

 

16.59

 

 

 

15.14

 

 

 

17.43

 

 

 

13.74

 

Cash dividend payout ratio

 

 

23.95

 

 

 

26.47

 

 

 

23.39

 

 

 

29.27

 

Net interest spread

 

 

2.58

 

 

 

2.90

 

 

 

2.69

 

 

 

2.80

 

Net interest margin

 

 

3.87

 

 

 

3.05

 

 

 

3.88

 

 

 

2.92

 

Efficiency ratio

 

 

52.70

 

 

 

56.94

 

 

 

51.93

 

 

 

58.82

 

Net charge-offs to average loans

 

 

0.01

 

 

 

0.01

 

 

 

0.01

 

 

 

0.01

 

Net Interest Income

For the three months ended June 30, 2023, net interest income, which is the Company’s principal source of operating revenue, increased $19.1 million or 21.9% compared to the three months ended June 30, 2022. The increase was due to rising short-term interest rates and loan growth. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. As shown in the preceding table, the Company’s net interest margin for the second quarter of 2023 increased compared to the second quarter of 2022.

Net interest income for the six months ended June 30, 2023 increased $52.7 million or 32.5% compared to the six months ended June 30, 2022. Rising short term interest rates and loan growth contributed to the increase. As shown in the preceding table, the Company’s net interest margin for the six months ended June 30, 2023 increased compared to the six months ended June 30, 2022.

In March of 2022, the Federal Reserve began raising the federal funds rate in an effort to reduce inflation and slow the economy. The Company’s net interest income and net interest margin were impacted by the increases in interest rates.

Provision for Credit Losses

The provision for credit losses is presented in the preceding table. The increase in the provision for the three months ended June 30, 2023 compared to 2022 was driven by loan growth. The Company establishes an allowance as an estimate of the expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change, which could affect the amount of future provisions for credit losses. Net loan charge-offs were $664,000 for the second quarter of 2023, compared to net loan charge-offs of $805,000 for the second quarter of 2022. The rate of net charge-offs to average loans, as presented in the preceding table, continues to be at a low level.

The increased provision for credit losses for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was due to loan growth. Net loan charge-offs were $954,000 for the six months ended June 30, 2023, compared to $516,000 for the same period of the prior year.

34


 

Noninterest Income

Noninterest income, as presented in the preceding table, grew by $5.4 million for the second quarter of 2023 compared to the second quarter of 2022. The growth in noninterest income was mostly attributable to an increase in sweep account fees due to increased sweep account balances. Noninterest income for the second quarter of 2022 included $578,000 of income from an equity interest received from a prior loan settlement. The equity interest was sold during the second quarter of 2023 at no gain.

Noninterest income included non-sufficient funds ("NSF") and overdraft fees totaling $6.6 million and $6.1 million for the three months ended June 30, 2023 and 2022, respectively. This represents 13.8% and 14.3% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card interchange fees totaling $12.4 million and $12.5 million during the three months ended June 30, 2023 and 2022, respectively. This represents 25.9% and 29.3% of the Company’s noninterest income for the respective periods.

Noninterest income grew by $9.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The growth in noninterest income was mostly attributable to an increase in sweep account fees of $8.3 million due to increased sweep account balances, along with an increase in trust revenue and insurance commissions. In addition, the first six months of 2022 included a loss of $4.0 million on the sale of $226 million of low yielding debt securities, which were subsequently reinvested at higher yielding debt securities. Noninterest income for the six months ended June 30, 2022 included $5.5 million of income from an equity interest received from a prior loan settlement compared to $327,000 for six months ended June 30, 2023. The equity interest was sold during the second quarter of 2023 at no gain. The Company earned $1.4 million on the sale of loans for the six months ended June 30, 2023 compared to $2.9 million for the six months ended June 30, 2022.

Noninterest income included non-sufficient fund fees totaling $13.1 million and $12.6 million during the six months ended June 30, 2023 and 2022, respectively. This represents 13.7% and 14.7% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card interchange fees totaling $24.4 million and $24.1 million during the six months ended June 30, 2023 and 2022, respectively. This represents 25.5% and 28.0% of the Company’s noninterest income for the respective periods.

The Company is subject to political pressures that could limit our ability to charge for NSF and overdraft fees. As of April 1, 2022, the Company lowered the rates charged on NSF and overdraft fees. The Company exceeded $10 billion in total assets at December 31, 2022. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this will cause a reduction of annual pretax income from debit card interchange fees of approximately $23 million beginning July 1, 2023.

Noninterest Expense

Noninterest expense, as presented in the preceding table, increased by $7.4 million for second quarter of 2023 compared to the second quarter of 2022. Higher noninterest expenses in 2023 was primarily related to growth in salaries and employee benefits of $4.5 million. In addition, noninterest expense was lower in the second quarter of 2022 due to a gain from the sale of the Company’s prior headquarters that was carried in other real estate owned which reduced noninterest expense by $3.1 million.

For the six months ended June 30, 2023, noninterest expense increased by $15.2 million compared to the six months ended June 30, 2022. Higher noninterest expenses in 2023 was primarily related to growth in salaries and employee benefits of $9.8 million. In addition, noninterest expense was lower in the six months ended June 30, 2022 due to a gain from the sale of the Company’s prior headquarters that was carried in other real estate owned which reduced noninterest expense by $3.1 million.

 

Income Taxes

 

The Company’s effective tax rate was 21.4% for the second quarter of 2023, compared to 19.1% for the second quarter of 2022. The Company's adoption of ASU 2023-02 in the first quarter of 2023 increased income tax expense due to the amortization of $1.2 million of New Markets Tax Credits ("NMTC") to income tax expense during the period that would have previously been recorded to other expense, which increased the effective tax rate by 1.69%. The lower effective tax rate in 2022 was also driven by the exercising of stock options during the quarter.

 

The Company’s effective tax rate was 22.0% for the first six months of 2023, compared to 18.5% for the first six months of 2022. The Company's adoption of ASU 2023-02 in the first quarter of 2023 increased income tax expense due to the amortization of $2.2 million of NMTC to income tax expense during the period that would have previously been recorded to other expense, which increased the effective tax rate by 1.50%. Exercises of stock options contributed to the lower effective tax rate in 2022.

The primary reasons for the difference between the Company’s effective tax rate and the federal statutory rate were tax-exempt income, nondeductible amortization, federal and state tax credits and state tax expense.

 

35


 

FINANCIAL POSITION

 

BANCFIRST CORPORATION

 

SELECTED CONSOLIDATED FINANCIAL DATA

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

Total assets

 

$

12,020,265

 

 

$

12,387,863

 

Total loans (net of unearned interest)

 

 

7,307,475

 

 

 

6,949,795

 

Allowance for credit losses

 

 

96,920

 

 

 

92,728

 

Debt securities

 

 

1,570,620

 

 

 

1,540,604

 

Deposits

 

 

10,475,180

 

 

 

10,974,228

 

Stockholders' equity

 

 

1,340,791

 

 

 

1,250,836

 

Book value per share

 

 

40.70

 

 

 

38.05

 

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

 

 

34.62

 

 

 

31.90

 

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

 

 

 

 

Stockholders' equity

 

$

1,340,791

 

 

$

1,250,836

 

Less goodwill

 

 

182,055

 

 

 

182,055

 

Less intangible assets, net

 

 

18,223

 

 

 

19,983

 

Tangible stockholders' equity (non-GAAP)

 

$

1,140,513

 

 

$

1,048,798

 

Common shares outstanding

 

 

32,939,256

 

 

 

32,875,560

 

Tangible book value per share (non-GAAP)

 

$

34.62

 

 

$

31.90

 

Selected Financial Ratios

 

 

 

 

 

 

Balance Sheet Ratios:

 

 

 

 

 

 

Average loans to deposits (year-to-date)

 

 

67.15

%

 

 

60.06

%

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

 

 

92.38

 

 

 

91.63

 

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

 

 

10.76

 

 

 

9.67

 

Asset Quality Data

 

 

 

 

 

 

Loans past due 90 days and still accruing

 

$

8,799

 

 

$

7,085

 

Nonaccrual loans (3)

 

 

18,047

 

 

 

15,299

 

Other real estate owned and repossessed assets

 

 

41,612

 

 

 

36,936

 

Asset Quality Ratios:

 

 

 

 

 

 

Nonaccrual loans to total loans

 

 

0.25

%

 

 

0.22

%

Allowance for credit losses to total loans

 

 

1.33

 

 

 

1.33

 

Allowance for credit losses to nonaccrual loans

 

 

537.05

 

 

 

606.10

 

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

 

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

 

(3) Government agencies guarantee approximately $6.6 million of nonaccrual loans at June 30, 2023.

 

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

The aggregate of cash and due from banks, federal funds sold and interest-bearing deposits with banks decreased by $758.1 million or 23.9% to $2.4 billion, from December 31, 2022 to June 30, 2023. The decrease was primarily due to the movement of demand deposits into the Company's off-balance sheet sweep account product and loan growth. Sweep accounts were $4.3 billion at June 30, 2023, up $567.7 million from December 31, 2022.

Securities

 

At June 30, 2023, total debt securities increased $30.0 million, or 1.9% compared to December 31, 2022. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized loss on debt securities available for sale, before taxes, was $93.0 million at June 30, 2023, compared to a net unrealized loss of $93.7 million at December 31, 2022. These unrealized losses are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of a loss of $71.0 million at June 30, 2023 and a loss of $71.6 million at December 31, 2022.

36


 

During the six months ended June 30, 2023, the Company purchased debt securities as shown in the consolidated statements of cash flow. The Company did not have any sales of debt securities during the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company had a loss of $4.0 million on bonds resulting from the sale of $226 million of debt securities with an average yield of 0.16%, the proceeds of which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. On January 10, 2022, the Company purchased United States Treasury Notes of $600 million par value with an average yield of 1.42% and an average maturity of 53 months.

 

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

Loans

 

At June 30, 2023, total loans increased $357.7 million or 5.1% compared to December 31, 2022, as a result of internal loan growth. The increase of internal loan growth was 71% from the Company's Oklahoma subsidiary BancFirst and 29% from the Company's Texas subsidiaries Pegasus and Worthington.

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

Allowance for Credit Losses

 

The allowance for credit losses to total loans was 1.33% at both June 30, 2023 and December 31, 2022. The overall credit quality of the Company's loan portfolio has remained strong. If unforeseen adverse changes occur in the national or local economy, or in the credit markets, it would be reasonable to expect that the allowance for credit losses would increase in future periods.

Nonaccrual Loans

Nonaccrual loans totaled $18.0 million at June 30, 2023, compared to $15.3 million at December 31, 2022. The Company’s nonaccrual loans are primarily commercial real estate and commercial non-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 both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $718,000 for the six months ended June 30, 2023 and $653,000 for the six months ended June 30, 2022. Only a small amount of this interest is expected to be ultimately collected. Approximately $6.6 million of nonaccrual loans were guaranteed by government agencies at June 30, 2023.

The classification of a loan as nonaccrual does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the level of collections declines. The above normal risk associated with nonaccrual loans has been considered in the determination of the allowance for credit losses. The level of nonaccrual loans and credit losses could rise over time as a result of adverse economic conditions. The allowance for credit losses as a percentage of nonaccrual loans is shown in the table above.

Modified Loans

As of January 1, 2023, the Company adopted ASU No. 2022-02, which eliminates the Troubled Debt Restructurings (“TDR”) recognition and measurement guidance and, instead, requires that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan when a borrower is experiencing financial difficulty. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of modified loans was approximately $9.7 million during the period ended June 30, 2023.

Other Real Estate Owned and Repossessed Assets

Other real estate owned (OREO) and repossessed assets totaled $41.6 million at June 30, 2023, compared to $36.9 million at December 31, 2022. The Company has spent $4.4 million on OREO tenant improvement during the six months ended June 30, 2023, which is the contributing factor to the increase. OREO consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. These properties are carried at the lower of the book values of the related loans or fair values based upon appraisals, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to OREO are charged directly to the allowance for credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to OREO. Decreases in values of properties subsequent to their classification as OREO are charged to operating expense.

37


 

OREO included a commercial real estate property recorded at $32.9 million at June 30, 2023 and $29.4 million at December 31, 2022. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from OREO in other noninterest expense on the consolidated statements of comprehensive income.

This property had the following rental income and operating expenses for the periods presented.

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Rental income

 

$

2,778

 

 

$

2,643

 

 

$

5,468

 

 

$

5,313

 

Operating expense

 

 

2,967

 

 

 

2,299

 

 

 

5,348

 

 

 

4,738

 

 

The Company's total rental income and operating expenses from OREO are presented in the following table:

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Rental income

 

$

2,895

 

 

$

2,794

 

 

$

5,716

 

 

$

5,602

 

Operating expense

 

 

3,058

 

 

 

2,559

 

 

 

5,614

 

 

 

5,079

 

Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $200.3 million and $202.0 million at June 30, 2023 and December 31, 2022, respectively.

Other assets includes the cash surrender value of key-man life insurance policies totaling $83.4 million at June 30, 2023 and $82.7 million at December 31, 2022.

Derivative financial instruments consisting of oil and gas swaps and option contracts are included in other assets and totaled $23.3 million at June 30, 2023 and $20.7 million at December 31, 2022. These derivative financial instruments have increased due to the increase in oil and gas prices and customer activity. They require a daily margin to be posted, which fluctuates with oil and gas prices and customer activity. At June 30, 2023, the Company had a margin liability included in other liabilities in the amount of $5.5 million. At December 31, 2022, the Company had a margin asset included in other assets in the amount of $6.6 million. See Note (11) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s derivative financial instruments.

Equity securities are reported in other assets on the consolidated balance sheet. The Company invests in equity securities without readily determinable fair values. These equity securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $15.2 million at June 30, 2023 and $15.5 million at December 31, 2022. The Company reviews its portfolio of equity securities for impairment at least quarterly.

The balance of other assets included equity interests of previous borrowers in the oil and gas industry that were received through bankruptcy proceedings, which totaled $21.4 million at December 31, 2022. This equity interest was sold during the second quarter of 2023 resulting in a zero balance at June 30, 2023. Under the equity method, the carrying value of a bank’s investment in an investee is originally recorded at cost but is adjusted periodically to record as income the bank’s proportionate share of the investee’s earnings or losses and decreased by the amount of cash dividends or similar distributions received from the investee.

Low Income Housing and New Market Tax Credit Investments

During 2023, there have not been any material changes in the Company’s low income housing tax credit ("LIHTC") investments and NMTC investments, which are included in other assets on the Company’s consolidated balance sheet. The Company adopted ASU 2023-02 on January 1, 2023 and as of June 30, 2023 have recorded $26.7 million in other assets and other liabilities on the consolidated balance sheet for unfunded LIHTC commitments and have amortized $2.2 million of NMTC investments to income tax expense for the six months ended June 30, 2023 that would have previously been recorded to other expense. See Note (6) of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for disclosures regarding these investments.

38


 

Liquidity and Funding

The Company’s principal source of liquidity and funding is its broad deposit base generated from customer relationships. The availability of deposits is affected by economic conditions, competition with other financial institutions and alternative investments available to customers. Through interest rates paid, service charge levels and services offered, the Company can affect its level of deposits to a limited extent. The level and maturity of funding necessary to support the Company’s lending and investment functions is determined through the Company’s asset/liability management process. The Company currently does not rely heavily on long-term borrowings and does not utilize brokered CDs. The Company maintains lines of credit from the Federal Home Loan Bank (“FHLB”), federal funds lines of credit with other banks and could also utilize the sale of loans, securities and liquidation of other assets as sources of liquidity and funding. Although the percent of cash and due from banks, interest-bearing deposits with banks and federal funds sold to total assets has decreased to 20.1% at June, 30. 2023, compared to 25.6% at December 31, 2022, the Company is still highly liquid. The decrease was primarily due to the movement of demand deposits into the Company's off-balance sheet sweep account product and loan growth.

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, 2022.

Deposits

At June 30, 2023, deposits totaled $10.5 billion, a decrease of $499.0 million from December 31, 2022 as demand deposits moved into the Company's off balance sheet sweep account product. 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 97.6% at June 30, 2023 and 98.1% at December 31, 2022. Noninterest-bearing deposits to total deposits were 40.9% at June 30, 2023, compared to 45.1% at December 31, 2022. Competition for deposits has recently increased and available yields have similarly increased, causing non-interest bearing deposits to move to interest bearing deposits and off balance sheet sweep account products.

Off-balance sheet sweep accounts totaled $4.3 billion at June 30, 2023 compared to $3.7 billion at December 31, 2022. The Company's sweep accounts affected the balances of both cash and deposits.

Subordinated Debt

See Note (6) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

Short-Term Borrowings and Lines of Credit

Short-term borrowings, consisting primarily of federal funds purchased and repurchase agreements, are another source of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company’s ability to earn a favorable spread on the funds obtained. Short-term borrowings were $3.9 million at June 30, 2023, compared to $300,000 at December 31, 2022. The Company has several lines of credit it can use. At June 30, 2023, BancFirst had $769.6 million available on its line of credit from the FHLB of Topeka, Kansas and a $25.0 million line of credit with another financial institution that is an overnight federal funds facility. Worthington has a $10.5 million line of credit with another financial institution that is an overnight federal funds facility, a federal reserve discount window capacity of $26.8 million and a $74.2 million line of credit from the FHLB of Dallas, Texas.

Capital Resources

Stockholders’ equity totaled $1.3 billion at June 30, 2023 an increase of $90.0 million from December 31, 2022. In addition to net income of $112.5 million, other changes in stockholders’ equity during the six months ended June 30, 2023 included $2.0 million related to common stock issuances for stock option exercises, $1.2 million related to stock-based compensation and a $558,000 increase in accumulated other comprehensive income that were partially offset by $26.3 million in dividends. The Company’s leverage ratio and total risk-based capital ratios at June 30, 2023, were well in excess of the regulatory requirements.

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

Liquidity Risk and Off-Balance Sheet Arrangements

Other than changes in the Company's liquidity elsewhere disclosed in this discussion, there have not been any material changes in the Company’s liquidity risk and off-balance sheet arrangements included in Management’s Discussion and Analysis which was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

 

 

39


 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Company’s disclosures regarding market risk since December 31, 2022, the date of its most recent annual report to stockholders.

 

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s Chief Executive Officer, Chief Financial Officer and its Disclosure Committee, which includes the Company’s Executive Chairman, Chief Risk Officer, Chief Internal Auditor, Chief Asset Quality Officer, Controller, General Counsel and Director of Financial Reporting, have evaluated, as of the last day of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on their evaluation they concluded that the disclosure controls and procedures of the Company are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms.

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

40


 

PART II – OTHER INFORMATION

 

 

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

 

Item 1A. Risk Factors.

The following represents a material change in our risk factors from those disclosed in Part I – “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Recent negative developments in the banking industry could adversely affect our financial condition and results of operations.

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional, as well as community banks like the Company. These developments have negatively impacted customer confidence in regional and community banks that are not considered too big to fail, which has prompted customers to move uninsured deposits to banks that are perceived as too big to fail. Further, competition for deposits has recently increased and available yields have similarly increased, causing non-interest bearing deposits to move to interest bearing deposits and sweeps. If such movement is permanent, it will reduce our net interest margin going forward. The financial impact on the Company of ongoing market volatility, continued inflation and rising interest rates will depend on future developments which are highly uncertain and difficult to predict.

 

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.

41


 

Item 6. Exhibits.

Exhibit
Number

 

Exhibit

3.1

 

Amended and Restated By-Laws of BancFirst Corporation (filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2023 and incorporated herein by reference).

 

 

 

3.2

 

Restated Certificate of Incorporation of BancFirst Corporation dated August 5, 2021 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

 

 

 

10.1

 

BancFirst Corporation 2023 Restricted Stock Unit Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 25, 2023 and incorporated herein by reference).

 

 

 

31.1*

 

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

 

 

 

31.2*

 

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

 

 

 

32**

 

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

 

 

 

101.INS*

 

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

 

 

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104*

 

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

 

* Filed herewith.

** This exhibit is furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

 

 

42


 

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: August 4, 2023

 

/s/ David Harlow

 

 

David Harlow

 

 

President

 

 

Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Date: August 4, 2023

 

/s/ Kevin Lawrence

 

 

Kevin Lawrence

 

 

Executive Vice President

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

43