What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 263 added, 217 removed, 1149 unchanged (29% of the section changed)

3 unchanged sentences

(Dollars in thousands)

September 30,

Cash and due from banks

39 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

25 unchanged sentences

Data processing services

Net (income) expense from other real estate owned

Net expense from other real estate owned

Marketing and business promotion

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Issued at beginning of period

Shares issued for stock options

Shares acquired and canceled

Issued at end of period

9 unchanged sentences

Net cash settlement of options

Common stock acquired and canceled

Balance at end of period

8 unchanged sentences

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Cash disbursements for loans originated for sale

Deferred income tax benefit

Deferred income tax (benefit)/provision

Gain on sale of other assets

(Decrease)/increase in interest receivable

Increase/(decrease) in interest payable

Increase in interest payable

Amortization of stock-based compensation arrangements

4 unchanged sentences

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

Net increase in federal funds sold

Net (increase)/decrease in federal funds sold

Purchases of held for investment debt securities

15 unchanged sentences

Issuance of common stock in connection with stock options, net

Common stock acquired

Net cash settlement of options

36 unchanged sentences

The preparation of financial statements in conformity with accounting principles generally accepted in the United States inherently involves the use of estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures.

These estimates relate principally to the determination of the allowance for credit losses, income taxes, the fair value of financial instruments and the valuation of intangibles.

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.

19 unchanged sentences

As a result of the acquisition, the Company recorded a core deposit intangible of approximately $ 5.9 million and goodwill of approximately $ 32.1 million.

These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available.

The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward.

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 it's Texas presence in the Dallas-Fort Worth market.

The acquisition of Worthington complements the Company by expanding its Texas presence in the Dallas-Fort Worth market.

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.

9 unchanged sentences

On January 22, 2021, the Company sold approximately $ 21 million in loans and approximately $ 38 million in deposits from its Hugo, Oklahoma branch to AmeriState Bank in Atoka, Oklahoma.

The Company recorded a gain on the transaction of $ 2.5 million, which is included in noninterest income in the first quarter of 2021.

The Company recorded a gain on the transaction of $ 2.5 million, which is included in noninterest income in 2021.

(3) SECURITIES

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

June 30, 2022

September 30, 2022

(Dollars in thousands)

7 unchanged sentences

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

June 30, 2022

September 30, 2022

(Dollars in thousands)

12 unchanged sentences

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.

On August 25, 2022, the Company purchased United States Treasury Notes of $ 300 million par value with an average yield of 3.27 % and an average maturity of 58 months.

The maturities of debt securities held for investment and available for sale are summarized in the following table using contractual maturities.

1 unchanged sentence

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, 2022

September 30, 2022

December 31, 2021

14 unchanged sentences

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, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands)

Gross losses realized

During the six months ended June 30, 2022, the Company sold $ 226 million of debt securities with an average yield of 0.16 %, which were subsequently reinvested in $ 220 million of debt securities with an average yield of 1.86 %.

In March 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.

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, 2021.

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 nine months ended September 30, 2021.

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

The following table summarizes debt securities with unrealized losses, segregated by the duration of the unrealized loss, at June 30, 2022 and December 31, 2021 respectively:

The following table summarizes debt securities with unrealized losses, segregated by the duration of the unrealized loss, at September 30, 2022 and December 31, 2021 respectively:

Less than 12 Months

2 unchanged sentences

(Dollars in thousands)

June 30, 2022

September 30, 2022

Available for Sale

11 unchanged sentences

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, 2022 and December 31, 2021, the Company also had the ability and intent to hold the debt securities classified as available for sale for a period of time sufficient for a recovery of cost.

Furthermore, as of September 30, 2022 and December 31, 2021, the Company also had the ability and intent to hold the debt securities classified as available for sale for a period of time sufficient for a recovery of cost.

The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were purchased.

4 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

8 unchanged sentences

Consumer non-real estate

(1) Excludes accrued interest receivable of $ 23.3 million at June 30, 2022 and $ 21.0 million at December 31, 2021, that is recorded in accrued interest receivable and other assets.

(2) Includes PPP loans held for investment of $ 3.2 million, net of unamortized processing fees of $ 0 , at June 30, 2022 and $ 80.4 million, net of unamortized processing fees of $ 2.0 million, at December 31, 2021.

(1) Excludes accrued interest receivable of $ 25.4 million at September 30, 2022 and $ 21.0 million at December 31, 2021, that is recorded in accrued interest receivable and other assets.

(2) Includes PPP loans held for investment of $ 1.1 million, net of unamortized processing fees of $ 0 , at September 30, 2022 and $ 80.4 million, net of unamortized processing fees of $ 2.0 million, at December 31, 2021.

Loans that were designated as Other and consisted mainly of Small Business Administration (“SBA”) loans were moved to their more descriptive portfolio segment.

2 unchanged sentences

Since PPP loans are fully guaranteed by the SBA, there is no expected credit loss related to these loans.

T he Company had processing fees, which were recognized as interest income related to the PPP loans totaling approximately $ 400,000 and $ 11.9 million during the three months ended June 30, 2022 and 2021, respectively and $ 2.1 million and $ 21.7 million during the six months ended June 30, 2022 and 2021, respectively.

T he Company had processing fees, which were recognized as interest income related to the PPP loans totaling approximately $ 0 and $ 10.0 million during the three months ended September 30, 2022 and 2021, respectively and $ 2.1 million and $ 31.7 million during the nine months ended September 30, 2022 and 2021, respectively.

The Company's loans are currently 82 % held by BancFirst and 18 % held by Pegasus and Worthington.

7 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

The current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings were not considered to be material.

Other real estate owned included a commercial real estate property recorded at approximately $ 29.7 million at June 30, 2022 and $ 29.5 million at December 31, 2021.

At December 31, 2021, other real estate owned included approximately $ 2.4 million related to the Company's previous headquarters.

Other real estate owned included a commercial real estate property recorded at approximately $ 31.2 million at September 30, 2022 and $ 29.5 million at December 31, 2021.

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

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Rental income

Operating expense

At December 31, 2021, other real estate owned also included approximately $ 2.4 million related to the Company's previous headquarters.

The previous headquarters was sold during the second quarter of 2022.

During the six months ended June 30, 2022, the Company sold property held in other real estate owned for a total gain of $ 3.8 million, compared to a total loss of $ 105,000 in the six months ended June 30, 2021.

During the nine months ended September 30, 2022, the Company sold property held in other real estate owned for a total gain of $ 4.0 million, compared to a total gain of $ 245,000 in the nine months ended September 30, 2021.

Nonaccrual loans

The Company did no t recognize any interest income on nonaccrual loans for either of the six months ended June 30, 2022 or 2021.

In addition, there were no nonaccrual loans for which there is no related allowance for credit losses at both June 30, 2022 and December 31, 2021.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 653,000 for the six months ended June 30, 2022 and approximately $ 1.2 million for the six months ended June 30, 2021.

Nonaccrual loans guaranteed by government agencies totaled approximately $ 2.2 million at June 30, 2022 and approximately $ 3.3 million at December 31, 2021.

The Company did no t recognize any interest income on nonaccrual loans for either of the nine months ended September 30, 2022 or 2021.

In addition, there were no nonaccrual loans for which there is no related allowance for credit losses at both September 30, 2022 and December 31, 2021.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 992,000 for the nine months ended September 30, 2022 and approximately $ 1.7 million for the nine months ended September 30, 2021.

Nonaccrual loans guaranteed by government agencies totaled approximately $ 2.0 million at September 30, 2022 and approximately $ 3.3 million at December 31, 2021.

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

June 30, 2022

September 30, 2022

December 31, 2021

12 unchanged sentences

(Dollars in thousands)

As of June 30, 2022

As of September 30, 2022

Commercial real estate owner occupied

26 unchanged sentences

(Dollars in thousands)

As of June 30, 2022

As of September 30, 2022

Commercial real estate owner occupied

20 unchanged sentences

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

The increase in allowance for credit loss during 2022 was primarily related to the purchase of loans without credit deterioration during the year.

The decrease in the allowance for credit loss during 2021 was driven by a reversal of a pandemic-related provision during 2021 based on sustained improvements in the economy, both nationally and in the Company's markets, which reduced the amount of expected credit loss within the loan portfolio.

This reduction was partially offset by additional allowance for credit loss required for newly acquired loans.

The allowance for credit loss for the oil and gas category was reduced due to the increases in oil and gas commodity prices contributing to a more stable and profitable energy industry;

however this decrease was entirely offset by an increase in allowance for credit loss for the commercial real estate non-owner occupied category due to ongoing uncertainty regarding the pandemic's long-term impact on the office and retail sectors.

The increase in allowance for credit losses during 2022 was related to the purchase of loans without credit deterioration during the year along with loan growth.

The decrease in the allowance for credit losses during 2021 was driven by a reversal of a pandemic-related provision during 2021 based on sustained improvements in the economy, both nationally and in the Company's markets, which reduced the amount of expected credit losses within the loan portfolio.

This reduction during 2021 was partially offset by additional allowance for credit losses required for newly acquired loans.

The allowance for credit losses for the oil and gas category was reduced during 2021 due to the increases in oil and gas commodity prices contributing to a more stable and profitable energy industry;

however this decrease was offset by an increase in allowance for credit losses for the commercial real estate non-owner occupied category due to ongoing uncertainty regarding the pandemic's long-term impact on the office and retail sectors.

The following table details activity in the allowance for credit losses on loans for the period presented.

4 unchanged sentences

(Dollars in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Commercial real estate owner occupied

6 unchanged sentences

Consumer non-real estate

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Commercial real estate owner occupied

10 unchanged sentences

(Dollars in thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Commercial real estate owner occupied

6 unchanged sentences

Consumer non-real estate

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Commercial real estate owner occupied

8 unchanged sentences

The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination.

The credit-deteriorated loans purchased during the six-month periods ended June 30, 2022 and June 30, 2021 were as follows:

The credit-deteriorated loans purchased during the nine-month periods ended September 30, 2022 and September 30, 2021 were as follows:

Loans acquired

2 unchanged sentences

(Dollars in thousands)

For the period ended June 30, 2022

For the period ended September 30, 2022

Purchase price of loans at acquisition

1 unchanged sentence

Par value of acquired loans at acquisition

For the period ended June 30, 2021

For the period ended September 30, 2021

Purchase price of loans at acquisition

3 unchanged sentences

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, 2022 and 2021 , no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent.

During the nine months ended September 30, 2022 and 2021 , no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent.

The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

4 unchanged sentences

(Dollars in thousands)

As of June 30, 2022

As of September 30, 2022

Commercial real estate owner occupied

25 unchanged sentences

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,

Nine Months Ended September 30,

(Dollars in thousands)

2 unchanged sentences

(5) INTANGIBLE ASSETS AND GOODWILL

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

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

(Dollars in thousands)

June 30, 2022

September 30, 2022

Core deposit intangibles

9 unchanged sentences

(Dollars in thousands)

Six months ended June 30, 2022

Nine months ended September 30, 2022

Balance at beginning of period

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Rental expense

As of June 30, 2022 , the right of use lease asset included in accrued interest receivable and other assets on the consolidated balance sheet totaled $ 5.3 million, and a related lease liability included in accrued interest payable and other liabilities on the consolidated balance sheet totaled $ 5.2 million.

As of June 30, 2022 , the Company's operating leases have a weighted-average remaining lease term of 3.4 years and a weighted-average discount rate of 2.3 percent.

As of September 30, 2022 , the right of use lease asset included in accrued interest receivable and other assets on the consolidated balance sheet totaled $ 6.0 million, and a related lease liability included in accrued interest payable and other liabilities on the consolidated balance sheet totaled $ 5.8 million.

As of September 30, 2022 , the Company's operating leases have a weighted-average remaining lease term of 3.6 years and a weighted-average discount rate of 2.4 percent.

The following table presents minimum future commitments by year for the Company’s operating leases.

Such commitments are reflected as undiscounted values and are reconciled to the discounted present value recognized on the consolidated balance sheet.

June 30, 2022

September 30, 2022

(Dollars in thousands)

2022 (six months)

2022 (three months)

Total lease payments

3 unchanged sentences

These assets are classified on the consolidated balance sheet as premises and equipment.

The Company had operating lease revenue of $ 1.4 million and $ 1.3 million for the three months ended June 30, 2022 and June 30, 2021, respectively.

The Company had operating lease revenue of $ 2.7 million for both six months ended June 30, 2022 and June 30, 2021.

The Company had operating lease revenue of $ 1.3 million and $ 1.1 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

The Company had operating lease revenue of $ 4.0 million and $ 3.7 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Lease revenue is included in occupancy, net on the consolidated statement of comprehensive income.

1 unchanged sentence

The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases:

June 30, 2022

September 30, 2022

(Dollars in thousands)

2022 (six months)

2022 (three months)

Total future minimum lease payments

29 unchanged sentences

The Company has had a nonqualified incentive stock option plan, the BancFirst Corporation Stock Option Plan (the “Employee Plan”), since May 1986.

At June 30, 2022 , there were 133,500 shares available for future grants.

At September 30, 2022 , there were 82,500 shares available for future grants.

The Employee Plan will terminate on December 31, 2024 , if not extended.

6 unchanged sentences

Each non-employee director is granted an option for 10,000 shares.

At June 30, 2022 , there were 65,000 shares available for future grants.

At September 30, 2022 , there were 45,000 shares available for future grants.

The Non-Employee Directors’

4 unchanged sentences

Although not required or expected, the Company may settle some options in cash on a limited basis at the discretion of the Company.

During the six months ended June 30, 2021, the Company had cash settlements for 121,330 shares for a total net cash settlement of options of $ 5.5 million that did not increase the outstanding shares of the Company.

During the nine months ended September 30, 2021, the Company had cash settlements for 121,330 shares for a total net cash settlement of options of $ 5.5 million that did not increase the outstanding shares of the Company.

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

(Dollars in thousands, except option data)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Outstanding at December 31, 2021

2 unchanged sentences

Options canceled, forfeited, or expired

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Outstanding at September 30, 2022

Exercisable at September 30, 2022

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

7 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

4 unchanged sentences

The following table shows the unearned stock-based compensation expense:

June 30, 2022

September 30, 2022

(Dollars in thousands)

1 unchanged sentence

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,

Nine Months Ended September 30,

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

15 unchanged sentences

Deferred Stock Compensation Plan (the “Deferred Stock Compensation Plan”) since May 1999.

As of June 30, 2022 , there are 29,879 shares available for future issuance under the Deferred Stock Compensation Plan.

As of September 30, 2022 , there are 28,130 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.

2 unchanged sentences

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 13,288 and 2,161 shares of common stock distributed from the Deferred Stock Compensation Plan during the six months ended June 30, 2022 and 2021, respectively.

There were 16,684 and 2,161 shares of common stock distributed from the Deferred Stock Compensation Plan during the nine months ended September 30, 2022 and 2021, respectively.

A summary of the accumulated stock units is as follows:

September 30,

Accumulated stock units

8 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Number of shares repurchased

4 unchanged sentences

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, 2022 , BancFirst Corporation, BancFirst, Pegasus and Worthington met all capital adequacy requirements to which they are subject.

The Company believes that as of September 30, 2022 , 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:

4 unchanged sentences

(Dollars in thousands)

As of June 30, 2022:

As of September 30, 2022:

Total Capital

10 unchanged sentences

BancFirst Corporation

As of June 30, 2022 , 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”

As of September 30, 2022 , 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.

9 unchanged sentences

Specifically, a bank may exclude all PPP loans pledged as collateral to the PPP Facility from its average total consolidated assets for the purposes of calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility are included.

The PPP loans the Company originated in 2021 and 2020 are included in the calculation of the Company’s leverage ratio as of June 30, 2022 as the Company did not utilize the PPP Facility for funding purposes.

The PPP loans the Company originated in 2021 and 2020 are included in the calculation of the Company’s leverage ratio as of September 30, 2022 as the Company did not utilize the PPP Facility for funding purposes.

(10) NET INCOME PER COMMON SHARE

2 unchanged sentences

(Dollars in thousands, except per share data)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Income available to common stockholders

1 unchanged sentence

Income available to common stockholders plus assumed exercises of stock options

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Income available to common stockholders

1 unchanged sentence

Income available to common stockholders plus assumed exercises of stock options

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Income available to common stockholders

1 unchanged sentence

Income available to common stockholders plus assumed exercises of stock options

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Income available to common stockholders

1 unchanged sentence

Income available to common stockholders plus assumed exercises of stock options

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

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

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:

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

(11) FAIR VALUE MEASUREMENTS

38 unchanged sentences

(Dollars in thousands)

June 30, 2022

September 30, 2022

Debt securities available for sale:

16 unchanged sentences

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,

Nine Months Ended September 30,

Twelve Months Ended

2 unchanged sentences

Transfers to level 2

Total unrealized losses

Balance at the end of the period

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, 2022, the Company did not transfer any debt securities.

During the year ended December 31, 2021, the Company transferred debt securities from Level 3 to Level 2 due to a review of the pricing models that determined some asset backed debt securities to be Level 2.

During the nine months ended September 30, 2022, the Company did not transfer any debt securities.

During the year ended

December 31, 2021, the Company transferred debt securities from Level 3 to Level 2 due to a review of the pricing models that determined some asset backed debt securities to be Level 2.

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

15 unchanged sentences

(Dollars in thousands)

As of and for the Year-to-date Period Ended June 30, 2022

As of and for the Year-to-date Period Ended September 30, 2022

Equity securities

40 unchanged sentences

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:

September 30,

(Dollars in thousands)

19 unchanged sentences

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 no t considered to be significant to the Company at June 30, 2022 or December 31, 2021 .

The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were no t considered to be significant to the Company at September 30, 2022 or December 31, 2021 .

(12) DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

These margins have increased during 2022 due to the current increase in oil and gas prices and customer activity.

These margins are included in other assets totaling $ 98.7 million at June 30, 2022 and $ 14.3 million at December 31, 2021.

These margins are included in other assets totaling $ 24.7 million at September 30, 2022 and $ 14.3 million at December 31, 2021.

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, 2022

September 30, 2022

December 31, 2021

15 unchanged sentences

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

(Dollars in thousands)

7 unchanged sentences

Counterparty credit exposure is managed by selecting highly rated counterparties (rated A- or better by Standard and Poor's) and monitoring market information.

The Company's net credit exposure relating to oil and gas swaps and options with bank counterparties was zero as of both June 30, 2022 and December 31, 2021.

The Company's net credit exposure relating to oil and gas swaps and options with bank counterparties was $ 5.1 million at September 30, 2022 and $ 0 at December 31, 2021.

Balance Sheet Offsetting

15 unchanged sentences

(Dollars in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Net interest income

1 unchanged sentence

Income before taxes

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Net interest income

1 unchanged sentence

Income before taxes

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Net interest income

1 unchanged sentence

Income before taxes

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Net interest income

2 unchanged sentences

Total Assets:

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Management’s Discussio n and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition as of June 30, 2022 and December 31, 2021 and results of operations for the three and six months ended June 30, 2022 should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2021, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The following discussion and analysis of our financial condition as of September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 2022 should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2021, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2021 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.

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Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

The likelihood the Durbin Amendment will impact non-interest income beginning July 1, 2023.

The Durbin Amendment will impact noninterest income beginning July 1, 2023.

Political pressures could further limit our ability to charge for NSF and overdraft fees.

Rising interest rates.

The increased Securities and Exchange Commission's requirements related to environmental, social and governance (ESG) issues, as well as climate disclosures will increase noninterest expense.

The lingering effect of governments’

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

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

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

Inflation, including wage inflation, energy prices, securities markets and monetary fluctuations.

The effect of changes in laws and regulations such as those from the Consumer Financial Protection Bureau, Federal Reserve, and the Federal Deposit Insurance Corporation (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.

The COVID-19 pandemic’s lingering effects on us and our customers, employees and third-party service providers, which may materially affect our business, financial position, operations and prospects.

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Changes in consumer spending, borrowing and savings habits.

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

Changes in the financial performance and/or condition of the Company’s borrowers, including the impact of rising interest rates.

Technological changes.

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Actual results may differ materially from forward-looking statements.

The Company’s net income for the second quarter of 2022 was $44.7 million, compared to $48.2 million for the second quarter of 2021.

Diluted net income per common share was $1.34 and $1.45 for the second quarter of 2022 and 2021, respectively.

The Company’s net interest income for the second quarter of 2022 increased to $86.9 million, compared to $82.4 million for the second quarter of 2021.

Rising short term interest rates contributed to the increase.

The net interest margin for the second quarter was 3.05% and 3.32% or the second quarter of 2021.

The margin for the second quarter of 2021 was positively impacted by higher PPP fees, which were $11.9 million compared to approximately $400,000 for the current quarter.

For the second quarter of 2022 the Company recorded a provision for credit losses of $501,000 compared to a net benefit from reversal of provisions of $9.9 million for the quarter ended June 30, 2021.

Provisions for credit losses have stabilized in 2022 after the economic downturn and recovery from the effects of the COVID pandemic in prior years.

Noninterest income for the second quarter of 2022 totaled $42.6 million down from $44.6 million for the second quarter of 2021.

The decrease in noninterest income in 2022 was due to a purchase gain of $6.0 million that was included in the second quarter of 2021 related to the purchase and assumption transaction with The First National Bank and Trust Company of Vinita, Oklahoma.

Noninterest expense for the second quarter of 2022 was relatively flat at $73.7 million but included a gain of $3.1 million from the sale of the Company’s prior headquarters that was carried in other real estate owned, as well as a write down of an equity investment of $1.5 million.

The Company’s effective tax rate was 19.1% for the second quarter of 2022 compared to 23.4% for the second quarter of 2021.

The lower effective tax rate was driven by the exercise of stock options during the quarter that produced higher tax deductions for compensation, and a lower state income tax rate.

At June 30, 2022, the Company’s total assets were $12.5 billion compared to $9.4 billion at December 31, 2021.

The Company’s net income for the third quarter of 2022 was $55.4 million, compared to $38.8 million for the third quarter of 2021.

Diluted net income per common share was $1.65 and $1.16 for the third quarter of 2022 and 2021, respectively.

The Company’s net interest income for the third quarter of 2022 increased to $100.9 million, compared to $80.2 million for the third quarter of 2021.

Rising interest rates and loan growth contributed to the increase.

The net interest margin for the third quarter was 3.48%, and for the third quarter of 2021 was 3.09%.

Net interest income for the third quarter of 2021 included $10.0 million in Paycheck Protection Program (“PPP”) fees.

For the third quarter of 2022 the Company recorded a provision for credit losses of $2.9 million compared to $1.5 million for the third quarter of 2021.

The Company's view of the likelihood of a significant economic downturn in Oklahoma and Texas remains neutral and therefore expects it will maintain its current level of comparable expected credit losses for the near term.

Noninterest income for the third quarter of 2022 totaled $49.3 million, up from $39.8 million for the third quarter of 2021.

The increase in noninterest income in 2022 was mostly attributable to $3.4 million in sweep fees and $3.2 million of income from an equity interest received through restructuring a loan.

Noninterest expense for the third quarter of 2022 was $79.1 million, up from $70.2 million for the third quarter of last year, primarily due to increases associated with the Worthington acquisition and salary increases.

The Company’s effective tax rate was 19.0% for the third quarter of 2022 compared to 19.7% for the third quarter of 2021.

At September 30, 2022, the Company’s total assets were $12.5 billion compared to $9.4 billion at December 31, 2021.

Deposits totaled $11.1 billion, an increase of $3.0 billion from December 31, 2021.

The consolidated balance sheet growth was driven by the return of customer deposits from off-balance sheet sweep accounts, continued deposit growth and the acquisition of Worthington National Bank.

The consolidated balance sheet growth was driven by the return of customer deposits from off-balance sheet sweep accounts and the acquisition of Worthington National Bank.

Loans totaled $6.8 billion compared to $6.2 billion at December 31, 2021.

Loan growth during the first two quarters of 2022, net of acquired loans and PPP loans, was $247 million, or 4%.

Loan growth during 2022, net of acquired loans and PPP loan runoffs, was $461 million, or 7%.

The Company’s total stockholders’

equity was $1.2 billion, an increase of $23.4 million over December 31, 2021.

Asset quality remained strong as nonaccrual loans continued to decline, totaling $13.7 million, which represented 0.21% of total loans at June 30, 2022, down from 0.34% at year-end 2021.

The allowance for credit losses to total loans stood at 1.31% at June 30, 2022, down from 1.36% at the end of 2021.

Asset quality remained strong as nonaccrual loans continued to decline, totaling $12.0 million, which represented 0.18% of total loans at September 30, 2022, down from 0.34% at year-end 2021.

The allowance for credit losses to total loans was 1.32% at September 30, 2022, down slightly from 1.36% at the end of 2021.

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

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(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 $6.3 million for the three months ended June 30, 2022 compared to approximately $17.4 million for the three months ended June 30, 2021.

Loan fees included in interest income were $13.7 million for the six months ended June 30, 2022 compared to $31.4 million for the six months ended June 30, 2021.

Loan fees included in interest income were $5.7 million for the three months ended September 30, 2022 compared to approximately $14.4 million for the three months ended September 30,

Loan fees included in interest income were $19.4 million for the nine months ended September 30, 2022 compared to $45.8 million for the nine months ended September 30, 2021.

BANCFIRST CORPORATION

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(Dollars in thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Earning assets:

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(Dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Earning assets:

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Income Statement Data

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Net Interest Income

For the three months ended June 30, 2022, net interest income, which is the Company’s principal source of operating revenue, increased $4.5 million or 5.5% compared to the three months ended June 30, 2021.

Rising short term interest rates contributed to the increase along with net interest income related to the Worthington acquisition.

For the three months ended September 30, 2022, net interest income, which is the Company’s principal source of operating revenue, increased $20.8 million or 25.9% compared to the three months ended September 30, 2021.

Rising interest rates and loan growth contributed to the increase.

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 2022 decreased compared to the second quarter of 2021.

The margin for the second quarter of 2021 was positively impacted by higher PPP fees, which were $11.9 million compared to approximately $400,000 for the current quarter.

Net interest income for the six months ended June 30, 2022 increased $2.8 million or 1.8% compared to the six months ended June 30, 2021.

Rising short term interest rates contributed to the increase along with net interest income related to the Worthington acquisition.

As shown in the preceding table, the Company’s net interest margin for the six months ended June 30, 2022 decreased compared to the six months ended June 30, 2021.

The margin for the six months ended June 30, 2021 was positively impacted by higher PPP fees, which were $21.7 million compared to approximately $2.1 million for the six months ended June 30, 2022.

During 2021, the Company’s net interest income and net interest margin had been impacted by the decreases in interest rates stemming from the Federal Reserve's response to the COVID-19 pandemic.

As shown in the preceding table, the Company’s net interest margin for the third quarter of 2022 increased compared to the third quarter of 2021.

The margin for the third quarter of 2021 included $10.0 million in PPP fees.

Net interest income for the nine months ended September 30, 2022 increased $23.6 million or 9.8% compared to the nine months ended September 30, 2021.

Rising interest rates contributed to the increase along with net interest income related to the Worthington acquisition.

As shown in the preceding table, the Company’s net interest margin for the nine months ended September 30, 2022 decreased compared to the nine months ended September 30, 2021.

The margin for the nine months ended September 30, 2021 was positively impacted by higher PPP fees, which were $31.7 million compared to approximately $2.1 million for the nine months ended September 30, 2022.

During 2021, the Company’s net interest income and net interest margin were impacted by the decreases in interest rates stemming from the Federal Reserve's response to the COVID-19 pandemic.

However, during 2022 the Federal Reserve began raising interest rates and the Company's expectation is that interest rates will continue to increase during the year.

Provision for Credit Losses

The Company’s reversal of provision for the second quarter of 2021 was based on improvements in economic conditions and the Company’s outlook for certain economic indicators.

For the third quarter of 2022 the Company recorded a provision for credit losses of $2.9 million compared to $1.5 million for the quarter ended September 30, 2021.

Provisions for credit losses have stabilized in 2022 after the economic downturn and recovery from the effects of the COVID pandemic in prior years.

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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 $805,000 for the second quarter of 2022, compared to net loan charge-offs of $4.2 million for the second quarter of 2021.

The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a low level.

For the six months ended June 30, 2022, the Company recorded a provision for credit losses of $3.4 million, which was substantially related to acquired loans, compared to a net benefit from reversal of provisions of $9.9 million for the six months ended June 30, 2021.

Net loan charge-offs were $80,000 for the third quarter of 2022, compared to net loan charge-offs of $10,000 for the third quarter of 2021.

The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at an unsustainable low level.

For the nine months ended September 30, 2022, the Company recorded a provision for credit losses of $6.3 million, which was related to acquired loans and loan growth, compared to a net benefit from reversal of provisions of $8.5 million for the nine months ended September 30, 2021.

Net loan charge-offs were $436,000, compared to $4.7 million for the same period of the prior year.

Noninterest Income

Noninterest income, as presented in the preceding table, decreased by $2.0 million for the second quarter of 2022 compared to the second quarter of 2021.

The decrease in noninterest income in 2022 was due to a purchase gain of $6.0 million that was included in the second quarter of 2021.

In addition, the Company earned $2.1 million on the sale of loans for second quarter of 2021 compared to $1.3 million for second quarter of 2022.

The income from sales of loans was higher in 2021 due to the increase in volume of mortgage loans originated because of record low mortgage rates.

The Company expects the volume of mortgage loans originated to decrease as interest rates increase.

Noninterest income included non-sufficient funds fees totaling $6.1 million and $5.6 million for the three months ended June 30, 2022 and 2021, respectively.

Noninterest income, as presented in the preceding table, increased by $9.5 million for the third quarter of 2022 compared to the third quarter of 2021.

The increase in noninterest income in 2022 was mostly attributable to $3.4 million in sweep fees and $3.2 million of income from an equity interest received through restructuring a loan.

The Company earned $969,000 on the sale of loans for the third quarter of 2022 compared to $1.6 million for the third quarter of 2021.

The income from sales of loans was higher in 2021 due to the increased volume of mortgage loans originated because of record low mortgage rates.

The Company expects the volume of mortgage loans originated to decrease as mortgage interest rates increase.

Noninterest income included non-sufficient funds ("NSF") and overdraft fees totaling $6.7 million and $6.8 million for the three months ended September 30, 2022 and 2021, respectively.

This represents 13.6% and 17.2% of the Company’s noninterest income for the respective periods.

In addition, the Company had debit card interchange fees totaling $12.5 million and $11.9 million during the three months ended June 30, 2022 and 2021, respectively.

In addition, the Company had debit card interchange fees totaling $12.6 million and $11.7 million during the three months ended September 30, 2022 and 2021, respectively.

This represents 25.5% and 29.5% of the Company’s noninterest income for the respective periods.

Noninterest income increased by $1.7 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The increase in noninterest income was mostly attributable to $5.5 million of income resulting from the application of equity method accounting related to an equity interest received in the process of a loan collection, along with a $3.4 million increase in income from service charges on deposits and increases in trust revenue, insurance commissions and cash management.

Noninterest income increased by $11.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The increase in noninterest income was attributable to $8.8 million of income from an equity interest received through restructuring a loan, along with $5.1 million in sweep fees, a $3.8 million increase in income from service charges on deposits and increases in trust revenue and insurance commissions.

The increase in non-interest income was partially offset by a loss of $4.0 million on bonds resulting from the sale of $226 million of low yielding debt securities, which were subsequently reinvested in higher yielding debt securities.

There was a $2.7 million gain on sale of other assets in the first six months of 2021, compared to $175,000 for 2022.

In addition, there was an acquisition purchase gain of $6.0 million and a gain from the sale of the Company's Hugo, Oklahoma branch of $2.5 million in the first six months of 2021.

The Company earned $4.1 million on the sale of loans for the six months ended June 30, 2021 compared to $2.9 million for the six months ended June 30, 2022.

Noninterest income included non-sufficient fund fees totaling $12.6 million and $11.1 million during the six months ended June 30, 2022 and 2021, respectively.

There was a $216,000 gain on sale of other assets in the first nine months of 2022, compared to $2.7 million for 2021.

In addition, there was an acquisition purchase gain of $4.8 million and a gain from the sale of the Company's Hugo, Oklahoma branch of $2.5 million in the first nine months of 2021.

The Company earned $3.9 million on the sale of loans for the nine months ended September 30, 2022 compared to $5.7 million for the nine months ended September 30, 2021.

Noninterest income included NSF and overdraft fees totaling $19.4 million and $18.0 million during the nine months ended September 30, 2022 and 2021, respectively.

This represents 14.3% and 14.5% of the Company’s noninterest income for the respective periods.

In addition, the Company had debit card interchange fees totaling $24.1 million and $22.5 million during the six months ended June 30, 2022 and 2021, respectively.

In addition, the Company had debit card interchange fees totaling $36.7 million and $34.3 million during the nine months ended September 30, 2022 and 2021, respectively.

This represents 27.1% and 27.6% of the Company’s noninterest income for the respective periods.

Government assistance funds that flowed into the market, including PPP loans and stimulus payments to households, increased both customer liquidity and interchange volume.

This activity resulted in higher debit card interchange fees for the six months ending June 30, 2021.

The Company is subject to political pressures that could limit its ability to charge for non-sufficient funds ("NSF") and overdraft fees.

An increase in customer accounts and interchange volume activity resulted in higher debit card interchange fees.

The Company is subject to political pressures that could limit its ability to charge for NSF and overdraft fees.

As of April 1, 2022, the Company lowered the rates charged on NSF and overdraft fees.

To the extent that increased volume doesn’t overcome these rate changes, the Company could experience lower annual pretax income.

It is likely the Company will exceed $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 would trigger an approximate reduction of annual pretax income from debit card interchange fees of between $22 to $24 million beginning July 1, 2023.

The Company expects to exceed $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 would trigger a reduction of annual pretax income from debit card interchange fees of approximately $22 million beginning July 1, 2023.

Noninterest Expense

Noninterest expense, as presented in the preceding table, was relatively flat for second quarter of 2022 compared to the second quarter of 2021, but included a gain of $3.1 million from the sale of the Company’s prior headquarters that was carried in other real estate owned, as well as a write down of an equity investment of $1.5 million.

For the six months ended June 30, 2022, noninterest expense increased by $7.2 million compared to the six months ended June 30, 2021.

The increase in noninterest expenses was due to the increase in salaries and employee benefits and other expenses related to the Worthington acquisition.

In addition, the six months ended June 30, 2022 included a gain of $3.1 million from the sale of the Company’s prior headquarters that was carried in other real estate owned, as well as a write down of an equity investment of $1.5 million.

The six months ended June 30, 2021 included approximately $4.0 million in acquisition related expenses.

The Company’s effective tax rate was 19.1% for the second quarter of 2022, compared to 23.4% for the second quarter of 2021.

The lower effective tax rate was driven by the exercising of stock options during the second quarter of 2022 that provided higher tax deductions for compensation and a lower state income tax rate.

The Company’s effective tax rate on income before taxes was 18.5% for the first six months of 2022, compared to 21.2% for the first six months of 2021.

Noninterest expense, as presented in the preceding table, increased by $8.9 million for third quarter of 2022 compared to the third quarter of 2021, primarily due to increases related to the Worthington acquisition and salary increases.

For the nine months ended September 30, 2022, noninterest expense increased by $16.1 million compared to the nine months ended September 30, 2021.

The increase in noninterest expenses was due to the increase in salaries and employee benefits and other

expenses related to the Worthington acquisition.

In addition, the nine months ended September 30, 2022 included a gain of $3.1 million from the sale of the Company’s prior headquarters that was carried in other real estate owned, as well as a write down of an equity investment of $1.5 million.

The nine months ended September 30, 2021 included approximately $4.0 million in acquisition related expenses.

The Company’s effective tax rate was 19.0% for the third quarter of 2022, compared to 19.7% for the third quarter of 2021.

The lower effective tax rate was driven by the exercising of stock options during the third quarter of 2022 that provided higher tax deductions for compensation and a lower state income tax rate.

The Company’s effective tax rate on income before taxes was 18.7% for the first nine months of 2022, compared to 20.8% for the first nine months of 2021.

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

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(Dollars in thousands, except per share data)

September 30,

Consolidated Balance Sheet Data

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This measure should not be considered a substitute for operating results determined in accordance with GAAP.

(3) Government agencies guarantee approximately $2.2 million of nonaccrual loans at June 30, 2022.

(3) Government agencies guarantee approximately $2.0 million of nonaccrual loans at September 30, 2022.

Cash and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks and interest-bearing deposits with banks increased by $1.8 billion, or 89.2%, to $3.9 billion, from December 31, 2021 to June 30, 2022.

The aggregate of cash and due from banks and interest-bearing deposits with banks increased by $1.3 billion, or 62.6%, to $3.3 billion, from December 31, 2021 to September 30, 2022.

The increase was primarily related to the return of deposits from off-balance sheet sweep accounts related to the Company’s year-end sweep program, which was partially off-set by the purchase of higher yielding bonds described below.

At June 30, 2022, total debt securities increased $671.4 million, or 125.6% compared to December 31, 2021.

At September 30, 2022, total debt securities increased $987.1 million, or 184.7% compared to December 31, 2021.

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 $60.9 million at June 30, 2022, compared to a net unrealized gain of $2.8 million at December 31, 2021.

The net unrealized loss on debt securities available for sale, before taxes, was $107.7 million at September 30, 2022, compared to a net unrealized gain of $2.8

million at December 31, 2021.

These unrealized losses and gains are included in the Company’s stockholders’

equity as accumulated other

comprehensive income, net of income tax, in the amounts of a loss of $46.5 million at June 30, 2022 and a gain of $2.2 million at December 31, 2021.

During the six months ended June 30, 2022, the Company had a loss of $4.0 million resulting from the sale of $226 million of debt securities with an average yield of 0.16%, which was subsequently reinvested in $220 million of debt securities with an average yield of 1.86%.

equity as accumulated other comprehensive income, net of income tax, in the amounts of a loss of $82.2 million at September 30, 2022 and a gain of $2.2 million at December 31, 2021.

During the nine months ended September 30, 2022, the Company had a loss of $4.0 million resulting from the sale of $226 million of debt securities with an average yield of 0.16%, which was subsequently reinvested in $220 million of debt securities with an average yield of 1.86%.

The Company also made two other purchases of debt securities in 2022.

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

On August 25, 2022, the Company purchased United States Treasury Notes of $300 million par value with an average yield of 3.27% and an average maturity of 58 months.

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

At June 30, 2022, total loans increased $426.4 million or 6.9% compared to December 31, 2021.

Loan growth during the first two quarters of 2022, net of acquired loans and PPP loans, was approximately $247 million, or 4%.

At June 30, 2022, the balance of total PPP loans was $3.2 million, with no unamortized processing fees, compared to $80.4 million, net of unamortized processing fees of $2.0 million at December 31, 2021.

At September 30, 2022, total loans increased $638.4 million or 10.3% compared to December 31, 2021.

Internal loan growth during the first nine months of 2022, net of acquired loans and PPP loans, was approximately $461 million, or 7%.

The acquisition of Worthington also added $257 million of loans.

At September 30, 2022, the balance of total PPP loans was $1.1 million, with no unamortized processing fees, compared to $80.4 million, net of unamortized processing fees of $2.0 million at December 31, 2021.

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

Allowance for Credit Losses

The increase in the allowance for credit loss during 2022 was substantially related to the additional allowance for credit loss required for newly acquired loans.

This reduction was partially offset by additional allowance for credit loss required for newly acquired loans.

The increase in the allowance for credit losses during 2022 was related to the additional allowance for credit losses required for newly acquired loans and loan growth.

This reduction was partially offset by additional allowance for credit losses required for newly acquired loans.

Nonperforming and Restructured Assets

At June 30, 2022, nonperforming and restructured assets decreased $9.2 million to $59.9 million compared to December 31, 2021.

The Company’s level of nonperforming and restructured assets has continued to be relatively low, equating to 0.48% of total assets at June 30, 2022 and 0.73% of total assets at December 31, 2021.

Nonaccrual loans totaled $13.7 million at June 30, 2022, compared to $20.9 million at December 31, 2021.

At September 30, 2022, nonperforming and restructured assets decreased $12.3 million to $56.8 million compared to December 31, 2021.

The Company’s level of nonperforming and restructured assets has continued to be relatively low, equating to 0.46% of total assets at September 30, 2022 and 0.73% of total assets at December 31, 2021.

Nonaccrual loans totaled $12.0 million at September 30, 2022, compared to $20.9 million at December 31, 2021.

The Company’s nonaccrual loans decreased $8.9 million from December 31, 2021 due to resolutions of several loans.

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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 $653,000 for the six months ended June 30, 2022 and $1.2 million for the six months ended June 30, 2021.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $992,000 for the nine months ended September 30, 2022 and $1.7 million for the nine months ended September 30, 2021.

Only a small amount of this interest is expected to be ultimately collected.

Approximately $2.2 million of nonaccrual loans were guaranteed by government agencies at June 30, 2022.

Restructured loans totaled $2.2 million at June 30, 2022 compared to $3.7 million at December 31, 2021.

Approximately $2.0 million of nonaccrual loans were guaranteed by government agencies at September 30, 2022.

Restructured loans totaled $2.2 million at September 30, 2022 compared to $3.7 million at December 31, 2021.

The Company charges interest on principal balances outstanding during deferral periods.

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The above normal risk associated with nonperforming loans has been considered in the determination of the allowance for credit losses.

At June 30, 2022, the allowance for credit losses as a percentage of nonperforming and restructured loans was 420.84%, compared to 284.33%, at December 31, 2021.

At September 30, 2022, the allowance for credit losses as a percentage of nonperforming and restructured loans was 517.17%, compared to 284.33%, at December 31, 2021.

The level of nonperforming loans and credit losses could rise over time as a result of adverse economic conditions.

Other real estate owned (OREO) and repossessed assets totaled $39.2 million at June 30, 2022, compared to $39.6 million at December 31, 2021.

Other real estate owned (OREO) and repossessed assets totaled $39.4 million at September 30, 2022, compared to $39.6 million at December 31, 2021.

Other real estate owned consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale.

Other real estate owned included a commercial real estate property recorded at $29.7 million at June 30, 2022 and $29.5 million at December 31, 2021.

The Company's rental income from OREO was $2.8 million for the three months ended June 30, 2022 compared to $2.2 million for the three months ended June 30, 2021.

The Company's rental income from OREO was $5.6 million for the six months ended June 30, 2022 compared to $4.6 million for the six months ended June 30, 2021.

In addition, the Company's OREO holding expense was $2.6 million for the three months ended June 30, 2022 compared to $3.1 million for the three months ended June 30, 2021.

The Company's OREO holding expense was $5.1 million for the six months ended June 30,

2022 compared to $4.6 million for the six months ended June 30, 2021.

Other real estate owned included a commercial real estate property recorded at $31.2 million at September 30, 2022 and $29.5 million at December 31, 2021.

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

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Rental income

Operating expense

The Company's total rental income from OREO was $2.5 million for the three months ended September 30, 2022 compared to $2.9 million for the three months ended September 30, 2021 and $8.1 million for the nine months ended September 30, 2022 compared to $7.5 million for the nine months ended September 30, 2021.

In addition, the Company's total OREO holding expense was $2.5 million for the three months ended September 30, 2022 compared to $2.1 million for the three months ended September 30, 2021 and $7.6 million for the nine months ended September 30, 2022 compared to $6.8 million for the nine months ended September 30, 2021.

Other real estate owned and repossessed assets are carried at the lower of the book values of the related loans or fair values based upon appraisals, less estimated costs to sell.

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Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $205.4 million and $167.5 million at June 30, 2022 and December 31, 2021, respectively.

Identifiable intangible assets and goodwill totaled $202.9 million and $167.5 million at September 30, 2022 and December 31, 2021, respectively.

The increase in goodwill and intangible assets was due the acquisition of Worthington on February 8, 2022, which added $5.9 million of core deposit intangibles and $32.1 million of goodwill.

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

Other assets includes the cash surrender value of key-man life insurance policies totaling $81.6 million at June 30, 2022 and $81.4 million at December 31, 2021.

Derivative financial instruments consisting of oil and gas swaps and option contracts are included in other assets and totaled $55.2 million at June 31, 2022 and $8.9 million at December 31, 2021.

Other assets includes the cash surrender value of key-man life insurance policies totaling $82.2 million at September 30, 2022 and $81.4 million at December 31, 2021.

Derivative financial instruments consisting of oil and gas swaps and option contracts are included in other assets and totaled $45.2 million at September 31, 2022 and $8.9 million at December 31, 2021.

These derivative financial instruments have increased due to the increase in oil and gas prices and customer activity.

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The margins have increased during 2022 due to the current increase in oil and gas prices and customer activity.

The margins are included in other assets totaling $98.7 million at June 30, 2022 and $14.3 million at December 31, 2021.

The margins are included in other assets totaling $24.7 million at September 30, 2022 and $14.3 million at December 31, 2021.

See Note (12) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s derivative financial instruments.

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The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income.

The balance of equity securities was $10.2 million at June 30, 2022 and $10.6 million at December 31, 2021.

The balance of equity securities was $14.3 million at September 30, 2022 and $10.6 million at December 31, 2021.

The Company reviews its portfolio of equity securities for impairment at least quarterly.

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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 currently does not rely heavily on long-term

borrowings and does not utilize brokered CDs.

The Company maintains federal funds lines of credit with other banks and could also utilize the sale of loans, securities and liquidation of other assets as sources of liquidity and funding.

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, 2021.

At June 30, 2022, deposits totaled $11.1 billion, an increase of $3.1 billion or 37.7% from the December 31, 2021 total.

At September 30, 2022, deposits totaled $11.1 billion, an increase of $3.0 billion or 36.7% from the December 31, 2021 total.

The increase in deposits was primarily related to the return of funds from off-balance sheet sweep accounts related to the Company’s year-end sweep program.

The Company’s core deposits provide it with a stable, low-cost funding source.

Core deposits as a percentage of total deposits were 98.4% at June 30, 2022 and 98.2% at December 31, 2021.

Noninterest-bearing deposits to total deposits were 46.9% at June 30, 2022, compared to 46.7% at December 31, 2021.

Off-balance sheet sweep accounts totaled $2.9 billion at June 30, 2022 compared to $5.1 billion at December 31, 2021, which included a temporary sweep amount of $2.3 billion.

Core deposits as a percentage of total deposits were 98.3% at September 30, 2022 and 98.2% at December 31, 2021.

Noninterest-bearing deposits to total deposits were 47.1% at September 30, 2022, compared to 46.7% at December 31, 2021.

Off-balance sheet sweep accounts totaled $3.0 billion at September 30, 2022 compared to $5.1 billion at December 31, 2021, which included a temporary sweep amount of $2.3 billion.

Subordinated Debt

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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 $6.1 million at June 30, 2022.

Short-term borrowings were $4.6 million at September 30, 2022.

The Company did not have short-term borrowings at December 31, 2021.

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In addition, BancFirst has a $25.0 million line of credit with another financial institution that is an overnight federal funds facility.

As of June 30, 2022 and December 31, 2021, BancFirst had no advances outstanding under either line of credit.

As of September 30, 2022 and December 31, 2021, BancFirst had no advances outstanding under either line of credit.

Pegasus has a $20.0 million line of credit with another financial institution that is an overnight federal funds facility.

As of June 30, 2022 and December 31, 2021, Pegasus had no advances outstanding under its line of credit.

As of September 30, 2022 and December 31, 2021, Pegasus had no advances outstanding under its line of credit.

Worthington has an $8.5 million line of credit with another financial institution that is an overnight federal funds facility, and a line of credit from the FHLB of Dallas, Texas to use for liquidity or to match-fund certain long-term fixed rate loans.

Worthington had no advances outstanding as of June 30, 2022 under either line of credit.

Worthington had no advances outstanding as of September 30, 2022 under either line of credit.

Capital Resources

Stockholders’

equity totaled $1.2 billion at both June 30, 2022 and December 31, 2021.

equity totaled $1.2 billion at both September 30, 2022 and December 31, 2021.

In addition to net income of $136.0 million, other changes in stockholders’

equity during the six months ended June 30, 2022 included $4.6 million related to common stock issuances for stock option exercises and $918,000 related to stock-based compensation, that were partially offset by $23.6 million in dividends and a $48.6 million decrease in accumulated other comprehensive income.

The Company’s leverage ratio and total risk-based capital ratios at June 30, 2022 were well in excess of the regulatory requirements.

equity during the nine months ended September 30, 2022 included $7.0 million related to common stock issuances for stock option exercises and $1.5 million related to stock-based compensation, that were partially offset by $36.7 million in dividends and a $84.4 million decrease in accumulated other comprehensive income.

The Company’s leverage ratio and total risk-based capital ratios at September 30, 2022 were well in excess of the regulatory requirements.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements