What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 184 added, 102 removed, 818 unchanged (26% of the section changed)

22 unchanged sentences

Short-term borrowings

Long-term borrowings

Accrued interest payable and other liabilities

20 unchanged sentences

Three Months Ended

Six Months Ended

INTEREST INCOME

31 unchanged sentences

NET INCOME PER COMMON SHARE

OTHER COMPREHENSIVE GAIN

Unrealized gain on securities, net of tax of $( 2,176 ) and $( 868 ), respectively

OTHER COMPREHENSIVE (LOSS) GAIN

Unrealized (loss) gain on securities, net of tax of $ 85 , $( 1,112 ), $( 2,091 ) and $( 1,980 ) respectively

Comprehensive income

4 unchanged sentences

Three Months Ended

Six Months Ended

Issued at beginning of period

22 unchanged sentences

(Dollars in thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Net amortization of securities premiums and discounts

Realized securities gains

Realized securities losses (gains)

Gain on sales of loans

3 unchanged sentences

Gain on sale of other assets

Decrease/(increase) in interest receivable

Increase in interest receivable

(Decrease)/increase in interest payable

14 unchanged sentences

Purchase of tax credits

Net cash used in investing activities

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES

1 unchanged sentence

Net change in short-term borrowings

Proceeds from long-term borrowings

Issuance of common stock in connection with stock options, net

1 unchanged sentence

Cash dividends paid

Net cash provided by financing activities

Net cash provided by (used in) financing activities

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

39 unchanged sentences

2018-13 was adopted on January 1, 2020 and did not have a significant impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No.

On January 1, 2020, the Company adopted ASU No.

2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” On January 1, 2020, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

Measurement of Credit Losses on Financial Instruments.” Accounting Standards Codification (“ASC”) 326 replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

1 unchanged sentence

leases recognized by a lessor in accordance with Topic 842 on leases.

In addition, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for purchased loans and securities with credit deterioration and available-for-sale debt securities.

In addition, ASC 326 made changes to the accounting for purchased loans and securities with credit deterioration and available-for-sale debt securities.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

3 unchanged sentences

In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

On January 1, 2020, the amortized cost basis of the PCD assets was adjusted to reflect the addition of approximately $ 1.2 million of the allowance for credit losses.

On January 1, 2020, the amortized cost basis of the PCD assets was adjusted to reflect the addition of approximately $ 1.2 million to the allowance for credit losses.

The Company has not recorded an allowance for credit losses against its available-for-sale securities, as the credit risk is not material.

26 unchanged sentences

Loans that do not share risk characteristics are evaluated on an individual basis.

Loans evaluated individually are not also included in the collective evaluation.

Loans evaluated individually are not included in the collective evaluation.

The Company has made the accounting policy election to use the fair value of the collateral to measure expected credit losses on collateral-dependent financial assets.

When management 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 losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

When management 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 losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

In connection with the adoption of ASC 326, the Company revised certain accounting policies and implemented accounting policy elections.

2 unchanged sentences

Amortized cost is the principal balance outstanding, net of purchase premiums and discounts.

Accrued interest receivable totaled $ 27.4 million at both December 31, 2019 and March 31, 2020, and was reported in accrued interest receivable and other assets on the consolidated balance sheets.

Accrued interest receivable totaled $ 31.0 million at June 30, 2020 and $ 27.4 million at December 31, 2019, and was reported in accrued interest receivable and other assets on the consolidated balance sheets.

The Company has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

9 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Restructured loans are loans on which, due to the borrower’s financial difficulties, the Company has granted a concession that the Company would not otherwise consider for borrowers of similar credit quality.

Troubled debt restructurings are loans on which, due to the borrower’s financial difficulties, the Company has granted a concession that the Company would not otherwise consider for borrowers of similar credit quality.

This may include a transfer of real estate or other assets from the borrower, a modification of loan terms, or a combination of the two.

14 unchanged sentences

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

In connection with our adoption of ASU 2016-13, changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL.

In connection with our adoption of ASC 326, changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL.

The Company has identified the following portfolio segments, which includes the applicable weighted average life, and measures the allowance for credit losses using the vintage loss analysis adjusted for qualitative factors:

39 unchanged sentences

Commonly, such loans are made to finance purchases of consumer goods, such as automobiles, boats, household goods, vacations and education.

Other loans consist of loans approved by the Small Business Administration.

Other loans consist of loans approved by the Small Business A dministratio n (SBA), which include loans funded through the Paycheck Protection Program (PPP) .

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

Pegasus Bank.

Pegasus Bank’s loans are c ommercial and consumer loans mostly to customers within Texas secured by real estate.

Pegasus Bank’s loans are commercial and consumer loans mostly to customers within Texas secured by real estate.

Pegasus Bank also includes commercial and industrial loans, which includes loans to companies in the oil and gas industry.

12 unchanged sentences

Troubled Debt Restructurings (TDRs ):

A loan for which the terms have been modified resulting in a concession that is not commercially reasonable, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.

The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method.

11 unchanged sentences

In making this assessment, the Company considers, among other things, the period of time the security has been in an unrealized loss position, and performance of any underlying collateral and adverse conditions specifically related to the security.

At December 31, 2019 and March 31, 2020 approximately 95 % of the available for sale securities held by the Company were issued by the U.S.

At December 31, 2019 and June 30, 2020 approximately 95 % of the available for sale securities held by the Company were issued by the U.S.

Treasury, or U.S.

2 unchanged sentences

Therefore, the Company has not recorded an allowance for credit losses against its securities portfolio, as the credit risk is not material.

PPP Fee Income Policy:

The PPP, established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides that the SBA will pay processing fees of up to 5 % to lenders based on the volume of the PPP loans disbursed.

The fee is based on the balance of each PPP loan outstanding at the time of full disbursement.

As of June 30, 2020, the Company received approximately $ 30.0 million in processing fees from the SBA.

The unamortized balance of these fees is reported on the Company's balance sheet as part of the loan balance to which it relates and is recognized over the remaining life of the loan as an adjustment of yield.

Upon notification from the SBA of the amount of the PPP loan to be forgiven the acceleration of recognition of deferred loan fee will occur for the percentage of the loan forgiven.

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications by Financial Institutions provides temporary relief from the accounting and reporting requirements for TDRs regarding certain loan modifications related to COVID-19 that are offered by financial institutions

Specifically, the CARES Act provides that a financial institution may elect to suspend (1) the requirements under U.S.

GAAP for certain loan modifications that would otherwise be categorized as a TDR and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes.

The modifications that would qualify for this exception include any modification involving a loan that was not more than 30 days past due as of December 31, 2019, that occurs during the “applicable period,” including any of the following:

A forbearance arrangement.

An interest rate modification.

A repayment plan.

Any other similar arrangement that defers or delays the payment of principal or interest.

The exception does not apply to any adverse impact on the credit of a borrower that is not related to the COVID-19 pandemic.

Furthermore, even when the exception is applied, an entity may determine that it is appropriate to place the loan on nonaccrual status.

As of June 30, 2020, the Company has identified $ 939.8 million in loans that have been modified according to these terms.

On March 5, 2020 , the Company purchased approximately $ 47.8 million in total assets, which included $ 22.9 million in loans, and assumed approximately $ 45.0 million in deposits and certain other obligations of The Citizens State Bank of Okemah, Oklahoma “Citizens” for a purchase price of $ 2.9 million.

8 unchanged sentences

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

March 31, 2020

June 30, 2020

(Dollars in thousands)

7 unchanged sentences

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

March 31, 2020

June 30, 2020

(Dollars in thousands)

12 unchanged sentences

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been presented at their contractual maturity.

March 31, 2020

June 30, 2020

December 31, 2019

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:

March 31, 2020

June 30, 2020

December 31, 2019

1 unchanged sentence

Book value of pledged securities

Non-Cash investing activities

On March 31, 2019, the Company had a $ 50.0 million security that matured, was removed from the securities portfolio and moved into accrued interest receivable and other assets on the balance sheet.

The cash for this matured security was received the following day on April 1, 2019.

LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

In connection with our adoption of ASU 2016-13, changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL.

In connection with our adoption of ASC 326 , changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL.

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

March 31, 2020

June 30, 2020

December 31, 2019

8 unchanged sentences

Consumer non-real estate

(1) Excludes accrued interest receivable of $ 27.4 million at March 31, 2020 and December 31, 2019, that is recorded in accrued interest receivable and other assets.

Other loans (2)

(1) Excludes accrued interest receivable of $ 31.0 million at June 30, 2020 and $ 27.4 million at December 31, 2019, that is recorded in accrued interest receivable and other assets.

(2) Includes PPP loans of $ 825.1 million, net of unamortized processing fees of $ 26.2 million, at June 30, 2020.

BancFirst’s loans are mostly to customers within Oklahoma and approximately 50 % of the loans are secured by real estate.

3 unchanged sentences

The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

BancFirst’s commercial and agricultural non-real estate loan category includes reserve based energy loans and a small percentage of loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers.

The balance of reserve based energy loans was approximately $ 248 million at March 31, 2020 and approximately $ 210 million at December 31, 2019.

The balance of the ancillary services energy loans was approximately $ 116 million at March 31, 2020 and approximately $ 110 million at December 31, 2019.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $ 248 million or 52 % of the loans are secured by real estate at March 31, 2020.

Pegasus Bank’s commercial and agricultural non-real estate loan were approximately $ 198 million at March 31, 2020 and approximately $ 172 million at December 31, 2019.

Pegasus Bank’s reserve based energy loans were approximately $ 77 million at March 31, 2020 and approximately $ 44 million at December 31, 2019.

BancFirst’s commercial and agricultural non-real estate loan category includes upstream and midstream energy loans and loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers.

The balance of upstream energy loans was approximately $ 229 million at June 30, 2020 and approximately $ 189 million at December 31, 2019.

The balance of midstream energy loans was approximately $ 45 million at June 30, 2020 and approximately $ 41 million at December 31, 2019.

The balance of the ancillary services energy loans was approximately $ 78 million at June 30, 2020 and approximately $ 90 million at December 31, 2019.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $ 246 million or 51 % of the loans are secured by real estate at June 30, 2020.

Pegasus Bank’s commercial and agricultural non-real estate loan were approximately $ 208 million at June 30, 2020 and approximately $ 172 million at December 31, 2019.

Pegasus Bank’s commercial and agricultural non-real estate loan category includes upstream energy loans and loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers.

The balance of upstream energy loans was approximately $ 88 million at June 30, 2020 and approximately $ 57 million at December 31, 2019.

The balance of the ancillary services energy loans was approximately $ 8 million at June 30, 2020 and approximately $ 7 million at December 31, 2019.

As of June 30, 2020, the Company reported $ 825.1 million in PPP loans, net of unamortized processing fees of $ 26.2 million and recognized $ 3.6 million of processing fees, which were included in interest income.

Accounting policies related to appraisals, and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Nonperforming and Restructured Assets

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

Troubled Debt Restructur ings and Other Real Estate Owned and Repossessed Assets

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

(Dollars in thousands)

Troubled debt restructurings

Other real estate owned and repossessed assets

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

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

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

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

Nonaccrual loans

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 332,000 for the three months ended March 31, 2020 and approximately $ 544,000 for the three months ended March 31, 2019.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 983,000 for the six months ended June 30, 2020 and approximately $ 1.0 million for the six months ended June 30, 2019.

In addition, approximately $ 8.0 million of nonaccrual loans are guaranteed by government agencies.

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

Residential real estate refers to one-to-four family real estate.

March 31, 2020

June 30, 2020

(Dollars in thousands)

20 unchanged sentences

(Dollars in thousands)

As of March 31, 2020

As of June 30, 2020

Commercial real estate owner occupied

14 unchanged sentences

Acquired loans

Due to the impacts of the COVID-19 pandemic, the Company has modified approximately $ 939.8 million in loans, most of which are secured by commercial real estate.

These modifications were undertaken in response to Section 4013 of the CARES Act and the regulatory intent outlined in the Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus and to provide businesses financial flexibility until the economy has time to recover to a more normal level of activity.

However, these modifications, which typically involve payment modifications and forbearance, also have the effect of delaying recognition of loans that may ultimately be permanently impaired.

Consequently, it is reasonable to expect that when temporary regulatory accounting relief and payment modifications cease, there will be a marked increase in credit impairment and restructured loans.

The timing and extent of such consequences are impossible to ascertain at this time and are dependent on the duration of the COVID-19 pandemic, the level and success of the government’s economic stimulus, and further regulatory guidance.

These modified loans are included in current loans in the table above.

Credit Quality Indicators

8 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31, 2020

As of June 30, 2020

Commercial real estate owner occupied

19 unchanged sentences

Allowance for Credit Losses Methodology

On January 1, 2020, the Company adopted ASU 2016-13, which replaces the incurred loss methodology for determining its provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model.

On January 1, 2020, the Company adopted ASC 326, which replaces the incurred loss methodology for determining its provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model.

See Note (1) for additional information regarding the factors that influenced the Company’s current estimate of expected credit losses.

Upon adoption, the allowance for credit losses was decreased by $ 3.2 million, with no impact to the consolidated statement of income.

Subsequent to the adoption of ASU 2016-13, the Company recorded a $ 19.6 million provision for credit losses for the first quarter of 2020 utilizing the newly adopted CECL methodology, a significant increase from prior quarters.

The increase resulted primarily from the anticipated impact on our loan portfolio resulting from the economic outlook related to the COVID-19 pandemic and the decline in energy prices and to a lesser degree, loan growth during the quarter.

Subsequent to the adoption of ASC 326, the Company recorded a $ 38.9 million provision for credit losses for the first six months of 2020 utilizing the newly adopted CECL methodology, a significant increase from the first six months of 2019.

Prolonged low energy prices will not only have a direct impact on the energy portfolio;

7 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Commercial real estate owner occupied

6 unchanged sentences

Consumer non-real estate

Six Months Ended June 30, 2020

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction and development < 60 months

Construction residential real estate < 60 months

Residential real estate first lien

Residential real estate all other

Commercial and agricultural non-real estate

Consumer non-real estate

Allowance for Credit Losses

1 unchanged sentence

(Dollars in thousands)

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Non-residential real estate owner occupied

5 unchanged sentences

Acquired loans

Six Months Ended June 30, 2019

Non-residential real estate owner occupied

Non-residential real estate other

Residential real estate permanent mortgage

Residential real estate all other

Non-consumer non-real estate

Consumer non-real estate

Acquired loans

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 carrying amount of those loans is as follows:

The purchased credit deteriorated loans for the period are as follows:

Loans acquired

2 unchanged sentences

(Dollars in thousands)

As of March 31, 2020

For the period ended June 30, 2020

Purchase price of loans at acquisition

8 unchanged sentences

(Dollars in thousands)

As of March 31, 2020

As of June 30, 2020

Commercial real estate owner occupied

10 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:

Three Months Ended

Six Months Ended

(Dollars in thousands)

4 unchanged sentences

(Dollars in thousands)

As of March 31, 2020

As of June 30, 2020

Core deposit intangibles

5 unchanged sentences

(Dollars in thousands)

Three months ended March 31, 2020

Six months ended June 30, 2020

Balance at beginning of period

3 unchanged sentences

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

Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $ 463,000 and $ 391,000 for the three months ended March 31, 2020 and March 31, 2019, respectively.

As of March 31, 20 20 , r ight of u se lease a sset included in accrued interest receivable and other assets on the balance sheet totaled $ 5.2 million , and a related l ease l iability included in accrued interest payable and other liabilities on the balance sheet totaled $ 5.0 million.

There have been no significant change s in our expected future minimum lease payments since December 31, 201 9 .

The future minimum lease pa yments are disclosed in Note (20 ) to the Company’s Annual Report on Form 10-K for the year ended December 31, 201 9 .

As of March 31, 20 20 , our operating leases have a weighted-average remaining lease term of 3.4 years and a weighted-average discount rate of 3.4 percent.

Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $ 453,000 and $ 376,000 for the three months ended June 30, 2020 and June 30, 2019, respectively.

Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $ 916,000 and $ 767,000 for the six months ended June 30, 2020 and June 30, 2019, respectively.

As of June 30, 2020, right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $ 4.8 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $ 4.6 million.

There have been no significant changes in our expected future minimum lease payments since December 31, 2019.

The future minimum lease payments are disclosed in Note (20) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

As of June 30, 2020, our operating leases have a weighted-average remaining lease term of 3.2 years and a weighted-average discount rate of 3.3 percent.

Maturity of Operating Lease Liabilities

March 31, 2020

June 30, 2020

(Dollars in thousands)

2020 (nine months)

2020 (six months)

Total lease payments

3 unchanged sentences

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

The Company had operating lease revenue of $ 1.4 million and $ 1.5 million for the three months ended March 31, 2020 and March 31, 2019, respectively.

The Company had operating lease revenue of $ 1.4 million and $ 1.5 million for the three months ended June 30, 2020 and June 30, 2019, respectively.

The Company had operating lease revenue of $ 2.8 million and $ 3.1 million for the six months ended June 30, 2020 and June 30, 2019, respectively.

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

2 unchanged sentences

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

March 31, 2020

June 30, 2020

(Dollars in thousands)

2020 (nine months)

2020 (six months)

Total future minimum lease payments

1 unchanged sentence

The Company has had a nonqualified incentive stock option plan (the “BancFirst ISOP”) since May 1986.

At March 31, 2020, there were 116,500 shares available for future grants.

At June 30, 2020, there were 330,000 shares available for future grants.

The BancFirst ISOP will terminate on December 31, 2024 , if not extended.

The options vest and are exercisable beginning four years from the date of grant at the rate of 25 % per year for four years .

Options expire at the end of fifteen years from the date of grant .

Options outstanding as of March 31, 2020 will become exercisable through the year 2027 .

Options expire no later than the end of fifteen years from the date of grant .

The option price must be no less than 100 % of the fair value of the stock relating to such option at the date of grant.

1 unchanged sentence

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

At March 31, 2020, there were 15,000 shares available for future grants.

At June 30, 2020, there were 30,000 shares available for future grants.

The BancFirst Directors’ Stock Option Plan will terminate on December 31, 2024 , if not extended.

The options vest and are exercisable beginning one year from the date of grant at the rate of 25 % per year for four years , and expire at the end of fifteen years from the date of grant.

Options outstanding as of March 31, 2020 will become exercisable through the year 2023 .

The options vest and are exercisable beginning one year from the date of grant at the rate of 25 % per year for four years , and expire no later than the end of fifteen years from the date of grant.

The option price must be no less than 100 % of the fair value of the stock relating to such option at the date of grant.

2 unchanged sentences

(Dollars in thousands, except option data)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Outstanding at December 31, 2019

1 unchanged sentence

Options exercised

Outstanding at March 31, 2020

Exercisable at March 31, 2020

Options canceled, forfeited, or expired

Outstanding at June 30, 2020

Exercisable at June 30, 2020

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

Three Months Ended

Six Months Ended

(Dollars in thousands)

Total intrinsic value of options exercised

5 unchanged sentences

Three Months Ended

Six Months Ended

(Dollars in thousands)

Stock-based compensation expense

2 unchanged sentences

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

March 31, 2020

June 30, 2020

(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:

Three Months Ended

Six Months Ended

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

1 unchanged sentence

0.66 to 1.13%

2.62 to 2.76%

Dividend yield

1 unchanged sentence

22.84 to 33.56%

22.93 to 22.96%

Expected term

5 unchanged sentences

The Company accounts for forfeitures as they occur.

In May 1999, the Company adopted the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “BancFirst Deferred Stock Compensation Plan”).

The Company has amended the BancFirst Deferred Stock Compensation Plan since 1999 to increase the number of shares to be issued under the plan to 244,148 shares.

The Company has had the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “BancFirst Deferred Stock Compensation Plan”) since May 1999.

As of June 30, 2020, there are 28,582 shares available for future issuance under the BancFirst Deferred Stock Compensation Plan.

The BancFirst 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 1,307 and 8,362 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the three months ended March 31, 2020 and March 31, 2019, respectively.

There were 1,307 and 8,362 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the six months ended June 30, 2020 and June 30, 2019, respectively.

A summary of the accumulated stock units is as follows:

5 unchanged sentences

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.

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:

Three Months Ended

Six Months Ended

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 financial statements.

Management believes that as of March 31, 20 20 , the Company , BancFirst and Pegasus Bank met all capital adequacy requirements to which they are subject.

Management believes that as of June 30, 2020, the Company, BancFirst and Pegasus Bank 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 March 31, 2020:

As of June 30, 2020:

Total Capital

10 unchanged sentences

BancFirst Corporation

As of March 31, 2020, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst and Pegasus Bank as “well capitalized” under the prompt corrective action provisions.

As of June 30, 2020, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst and Pegasus Bank as “well capitalized” under the prompt corrective action provisions.

The Common Equity Tier 1 Capital of the Company, BancFirst and Pegasus Bank includes common stock and related paid-in capital and retained earnings.

3 unchanged sentences

There are no conditions or events since the most recent notification of BancFirst and Pegasus Bank’s capital category that management believes would materially change its category under capital requirements existing as of the report date.

In April 2020, the Company began originating loans to qualified small businesses under the PPP administered by the SBA.

Federal bank regulatory agencies have issued an interim final rule that permits banks to neutralize the regulatory capital effects of

participating in the Paycheck Protection Program Lending Facility (the “PPP Facility”) and clarify that PPP loans have a zero percent risk weight under applicable risk-based capital rules.

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

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

As discussed in Note 1 - Significant Accounting Policies, in connection with the adoption of ASC 326, the Company recognized an after-tax cumulative effect reduction to retained earnings totaling $ 2.3 million.

8 unchanged sentences

(Dollars in thousands, except per share data)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Income available to common stockholders

2 unchanged sentences

exercises of stock options

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Income available to common stockholders

2 unchanged sentences

exercises of stock options

Six Months Ended June 30, 2020

Income available to common stockholders

Dilutive effect of stock options

Income available to common stockholders plus assumed

exercises of stock options

Six Months Ended June 30, 2019

Income available to common stockholders

Dilutive effect of stock options

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 March 31, 2020

Three Months Ended March 31, 2019

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

FAIR VALUE MEASUREMENTS

35 unchanged sentences

(Dollars in thousands)

March 31, 2020

June 30, 2020

Securities available for sale:

10 unchanged sentences

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

Three Months Ended

Six Months Ended

Twelve Months Ended

2 unchanged sentences

Transfers from level 2

Total unrealized gains/(losses)

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 three months ended March 31, 2020, the Company transferred securities from Level 2 to Level 3 due to a review of the

pricing models that determined some state and political subdivisions bonds to be Level 3.

During the six months ended June 30, 2020, the Company transferred securities from Level 2 to Level 3 due to a review of the pricing models that determined some state and political subdivisions bonds to be Level 3.

During the twelve months ended December 31, 2019, the Company did no t transfer any securities between levels in the fair value hierarchy.

6 unchanged sentences

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.

Collateral dependent l oans are reported at the fair value of the underlying collateral if repayment is dependent on liquidation of the collateral.

In no case does the fair value of 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 loan losses or a direct charge-down of the loan.

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.

4 unchanged sentences

(Dollars in thousands)

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

As of and for the Year-to-date Period Ended June 30, 2020

Equity securities

28 unchanged sentences

For certain homogeneous categories of loans, such as some residential mortgages, fair values are estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

The fair values of other types of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

The fair values of other types of loans including PPP 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.

The fair values of transaction and savings accounts are the amounts payable on demand at the reporting date.

2 unchanged sentences

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

Long-Term Borrowings

The fair values of fixed-rate long-term borrowings are estimated using rates that would be charged for borrowings of similar remaining maturities.

Junior Subordinated Debentures

17 unchanged sentences

Short-term borrowings

Long-term borrowings

Junior subordinated debentures

6 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 March 31, 2020 or December 31, 2019.

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, 2020 or December 31, 2019.

(11) SEGMENT INFORMATION

9 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Net interest income

1 unchanged sentence

Income before taxes

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Net interest income

1 unchanged sentence

Income before taxes

Six Months Ended June 30, 2020

Net interest income

Noninterest income

Income before taxes

Six Months Ended June 30, 2019

Net interest income

Noninterest income

Income before taxes

Total Assets:

March 31, 2020

June 30, 2020

December 31, 2019

5 unchanged sentences

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