What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-09 · 177 added, 429 removed, 596 unchanged (50% of the section changed)

3 unchanged sentences

(Dollars in thousands)

September 30,

Cash and due from banks

Interest-bearing deposits with banks

Federal funds sold

Securities held for investment (fair value:

Debt securities held for investment (fair value:

$ 2,953 and $ 2,984 , respectively)

Securities available for sale at fair value

Debt securities available for sale at fair value

Loans held for sale

Loans (net of unearned interest)

Loans held for investment (net of unearned interest)

Allowance for credit losses

31 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

Loans, including fees

Federal funds sold

Interest-bearing deposits with banks

14 unchanged sentences

Cash management

(Loss)/gain on sale of other assets

Gain on sale of other assets

Total noninterest income

12 unchanged sentences

OTHER COMPREHENSIVE (LOSS) GAIN

Unrealized (loss) gain on securities, net of tax of $ 335 , $ 1 , $( 1,756 ) and $( 1,979 ) respectively

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

Comprehensive income

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Issued at beginning of period

5 unchanged sentences

Common stock issued for stock options

Net cash settlement of options

Stock-based compensation arrangements

4 unchanged sentences

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

Net cash settlement of options

Common stock acquired and canceled

1 unchanged sentence

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized gain/(losses) on securities:

Unrealized (losses)/gains on securities:

Balance at beginning of period

5 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Net amortization of securities premiums and discounts

Realized securities losses (gains)

Realized securities gains

Gain on sales of loans

3 unchanged sentences

Gain on sale of other assets

(Increase)/decrease in interest receivable

(Decrease)/increase in interest payable

Decrease in interest receivable

Decrease in interest payable

Amortization of stock-based compensation arrangements

3 unchanged sentences

Net cash received from acquisitions, net of cash paid

Net (decrease)/increase in federal funds sold

Purchases of held for investment securities

Purchases of available for sale securities

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

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

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

Net increase in federal funds sold

Purchases of held for investment debt securities

Purchases of available for sale debt securities

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

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

Purchase of equity securities

3 unchanged sentences

Purchase of tax credits

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

FINANCING ACTIVITIES

1 unchanged sentence

Net change in short-term borrowings

Proceeds from long-term borrowings

Paydown of long-term borrowings

Issuance of common stock in connection with stock options, net

Common stock acquired

Net cash settlement of options

Cash dividends paid

Net cash provided by financing activities

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

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

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

4 unchanged sentences

Noncash investing and financing activities:

Cash consideration for acquisitions

Fair value of assets acquired in acquisitions

9 unchanged sentences

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., BancFirst Risk & Insurance Company, Pegasus Bank and BancFirst and its subsidiaries.

The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC and BancFirst Agency, Inc.

The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC, BFC-PNC LLC, and BancFirst Agency, Inc.

All significant intercompany accounts and transactions have been eliminated.

6 unchanged sentences

All such adjustments are of a normal and recurring nature.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Such reclassifications had no effect on previously reported cash flows, stockholders’ equity or comprehensive income.

Use of Estimates in the Preparation of Financial Statements

2 unchanged sentences

Such estimates and assumptions may change over time and actual amounts realized may differ from those reported.

Recent Accounting Pronouncements

Standards Adopted During Current Period:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820).” ASU 2018-13 modifies disclosure requirements on fair value measurements in Topic 820.

ASU 2018-13 was effective for the Company on January 1, 2020.

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

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

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

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.

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in

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

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.

Operating results for periods from January 1, 2020 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable standards and the accounting policies described in our 2019 Form 10-K.

The Company recorded a net increase to retained earnings of $ 2.3 million, net of tax of $ 925,000 , as of January 1, 2020 for the cumulative effect of adopting ASC 326, and the impact on our results of operations and cash flows was not material.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30.

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 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.

The following table illustrates the impact of ASC 326 on the allowance for credit losses on the Company’s loans as of January 1, 2020.

January 1, 2020

As Reported Under ASC 326

Pre ASC 326 Adoption

Impact of ASC 326 Adoption

(Dollars in thousands)

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 on loans

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

In order to estimate expected losses using historical loss information, the Company elected to utilize a methodology known as vintage loss analysis for substantially all of our loan portfolio.

Vintage loss analysis measures impairment based on the age of the accounts and the historical asset performance of assets with similar risk characteristics.

Vintage loss analysis accounts for expected losses by allowing the Company to calculate the cumulative loss rates of a given loan pool and in so doing, determine the loan pool’s lifetime expected loss experience.

This includes a reasonable approximation of probable and estimable future losses determined by applying historical net charge off information to forward looking qualitative and environmental factors.

First, the Company determined the appropriate type of financial assets that share similar risk characteristics, and then the Company developed a cumulative loss curve for the applicable financial assets based on historical data using different “vintages” analyzed by year of origination.

This is done by dividing each year’s net charge-offs by the original principal balance.

The respective vintage’s original principal balance remains the denominator in each annual calculation, as it references the specific vintage’s original balance.

The loss experience of this original balance is tracked annually and summed over the life of the loan for each separate loan pool leaving a cumulative, life of credit loss rate based on historic averages weighted towards more recent loss experience.

In addition to life of credit loss data, primary drivers like macroeconomic indicators of qualitative factors are used as adjustments to the expected loss calculation to reach a forecast supported by both quantitative and qualitative data points.

The intent is to express the impact of changes in external factors while incorporating analysis of where the loan pool is in its loss history.

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

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.

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

The revised accounting policies are described below.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost.

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

Accrued interest receivable totaled $ 28.7 million at September 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.

Interest income is accrued on the unpaid principal balance using the simple-interest method on the daily balances of the principal amounts outstanding.

Interest income on consumer and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection.

Consumer loans are charged off at 180 days past due and commercial loans are charged off to the extent principal or interest is deemed uncollectible.

Past-due status is based on the contractual terms of the loan.

In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero.

Under the cash-basis method, interest income is recorded when the payment is received in cash.

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

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.

Modifications of terms that could potentially qualify as a restructuring include reduction of contractual interest rate, extension of the maturity date at a contractual interest rate lower than the current rate for new debt with similar risk, and a reduction of the face amount of debt or forgiveness of either principal or accrued interest.

A loan continues to qualify as restructured until a consistent payment history or change in the borrower’s financial condition has been evidenced, generally for no less than twelve months.

If the restructuring agreement specifies an interest rate at the time of the restructuring that is greater than or equal to the rate that the Company is willing to accept for a new extension of credit with comparable risk, then the loan is no longer considered a restructured loan if it is in compliance with the modified terms in calendar years after the year of restructure.

Purchased Credit Deteriorated (PCD) Loans :

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination.

An allowance for credit losses is determined using the same methodology as other loans held for investment.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.

Subsequent changes to the allowance for credit losses are recorded through provision expense.

Allowance for Credit Losses - Loans :

The allowance for credit losses is a valuation account that is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

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

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:

Life (in years)

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

These portfolio segments are separately identified because they exhibit distinctive risk characteristics, such as financial asset types, loan purpose, collateral, and industry of the borrower.

A summary of our primary portfolio segments is as follows:

Commercial real estate owner occupied.

Commercial real estate owner occupied are nonresidential property loans for which the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the entity, or an affiliate of the entity, who owns the property.

This category includes, among other loans, loans secured by office buildings, garden office buildings, manufacturing facilities, warehouse and flex warehouse facilities, hospitals, and car washes unless the property is owned by an investor who leases the property to the operator who, in turn, is not related to or affiliated with the investor.

Commercial real estate non-owner occupied.

Commercial real estate non-owner occupied are nonresidential property loans where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing, or permanent financing of the property.

This category includes, among other loans, loans secured by shopping centers, office buildings, hotels/motels, nursing homes, assisted-living facilities, mini-storage warehouse facilities, and similar properties.

Construction and development < 60 months .

Residential development loans include loans to develop raw land into a residential development.

Advances on the loans typically include land costs, hard costs (grading, utilities, roads, etc.), soft costs (engineering fees, development fees, entitlement fees, etc.) and carrying costs until the development is completed.

Upon completion of the development, the loan is typically repaid through the sale of lots to homebuilders.

Construction residential real estate < 60 months.

Residential construction includes loans to builders for speculative or custom homes, as well as direct loans to individuals for construction of their personal residence.

Custom construction and self-construction loans typically will have commitments in place for long-term financing at the completion of construction.

Speculative construction loans generally will have periodic curtailment plans beginning after completion of construction and a reasonable time for sales to have occurred.

Residential real estate first lien.

Residential real estate first lien loans includes all closed-end loans secured by first liens on 1-to-4 family residential properties.

This category includes property containing 1-to-4 dwelling units (including vacation homes) or more than four dwelling units if each is separated from other units by dividing walls that extend from ground to roof.

This category also includes individual condominium dwelling units and loans secured by an interest in individual cooperative housing units, even if in a building with five or more dwelling units.

Residential real estate all other.

Residential real estate all other loans includes loans secured by junior (i.e., other than first) liens on 1-to-4 family residential properties.

This category includes loans secured by junior liens even if the Company also holds a loan secured by a first lien on the same 1-to-4 family residential property.

This category includes loans secured by all land known to be used or usable for agricultural purposes, such as crop and livestock production.

Farmland includes grazing or pasture land, whether tillable or not and whether wooded or not.

Commercial and agricultural non-real estate.

Commercial and agricultural non-real estate represent loans for working capital, facilities acquisition or expansion, purchase of equipment and other needs of commercial customers primarily located within Oklahoma.

Loans in this category include commercial and industrial, oil and gas, agriculture and state and political subdivisions.

Consumer non-real estate.

Consumer loans are loans to individuals for household, family and other personal expenditures.

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 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 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.

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

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as the political, legal, and regulatory environment, technology and consumer preferences.

Historical loss information is also adjusted for reasonable and supportable changes in national and local economic conditions, such as oil and gas prices, national and local unemployment, real gross domestic product (“GDP”), house price index (“HPI”), consumer price index (“CPI”), rental vacancies, and retail sales.

Economic conditions are forecast as "current conditions" over the forecast period.

Forecast models were used to validate credit performance during the forecast period.

Beyond the reasonable and supportable forecast, the economic expectation reverts to the historical average, which is determined by the weighted average life of each loan pool.

Determining the Contractual Term:

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Troubled Debt Restructurings (TDRs ):

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.

When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures :

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Based on a low likelihood that funding will occur and the Company’s ability to manage the extension of credit to our borrowers, the allowance for credit losses on off-balance sheet credit exposure is not material.

Allowance for Credit Losses - Available-for-Sale Securities :

The Company reviews its portfolio of securities in an unrealized loss position at least quarterly.

The Company first assesses whether it intends to sell or it is more-likely-than-not that it will be required to sell the securities before recovery of the amortized cost basis.

If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors.

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 September 30, 2020 approximately 95 % of the available for sale securities held by the Company were issued by the U.S.

Treasury, or U.S.

government-sponsored entities and agencies.

The Company does not consider the unrealized position of these securities to be the result of credit factors, because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

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 September 30, 2020, the Company had received approximately $ 30.1 million in processing fees from the SBA.

The unamortized balance of these fees on each loan 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 provide 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 September 30, 2020, the Company has identified $ 104.5 million in loans that have been modified according to the CARES Act terms.

As of September 30, 2020, these loans have not been deemed nonaccrual loans.

The Company’s principal subsidiary bank, BancFirst, has entered into an agreement to sell approximately $ 21.5 million in loans and $ 38.0 million in deposits from its Hugo, Oklahoma branch to AmeriState Bank in Atoka, Oklahoma.

The transaction is scheduled to be completed during the first quarter of 2021 and is subject to regulatory approval.

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.

As a result of the purchase, the Company recorded a core deposit intangible of approximately $ 206,000 and goodwill of approximately $ 1.3 million.

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

The purchase did not have a material effect on the Company’s consolidated financial statements.

Citizens was an Oklahoma state-chartered bank with banking locations in Okemah and Paden, Oklahoma.

These banking locations became branches of BancFirst.

In January 2020, the Company sold property held in other real estate owned for a $ 2.2 million gain.

On August 15, 2019 the Company acquired Pegasus Bank, a Texas state-charted bank with three banking locations in Dallas, Texas.

This acquisition is disclosed in Note (2) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

On February 19, 2021, the Company entered into a purchase and assumption agreement with The First National Bank and Trust Company of Vinita, Oklahoma to purchase certain of its assets and assume its deposits and certain other obligations.

The First National Bank and Trust Company of Vinita is a nationally chartered bank with banking locations in Vinita and Grove, Oklahoma.

These banking locations would become branches of BancFirst.

As of December 31, 2020, the First National Bank and Trust Company of Vinita had approximately $ 285 million in total assets, $ 209 million in loans, and $ 258 million in deposits.

The purchase and assumption is expected to be completed during the second quarter of 2021 and is subject to regulatory approval.

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

A gain on the transaction of $ 2.5 million is reflected in the first quarter of 2021.

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

September 30, 2020

March 31, 2021

(Dollars in thousands)

7 unchanged sentences

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

September 30, 2020

March 31, 2021

(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.

September 30, 2020

March 31, 2021

December 31, 2020

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:

September 30, 2020

March 31, 2021

December 31, 2020

2 unchanged sentences

LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

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:

September 30, 2020

March 31, 2021

December 31, 2020

9 unchanged sentences

Other loans (2)

(1) Excludes accrued interest receivable of $ 28.7 million at September 30, 2020 and $ 27.4 million at December 31, 2019, that is recorded in accrued interest receivable and other assets.

(2) Includes PPP loans held for investment of $ 830.3 million, net of unamortized processing fees of $ 22.5 million at September 30, 2020.

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

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

Other loans consist of loans approved by the Small Business Administration (“SBA”), which include loans funded through the Paycheck Protection Program (“PPP”).

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

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

During the three months ended March 31, 2021, $ 9.8 million of processing fees were recognized as interest income related to the PPP loans.

BancFirst’s loans are mostly to customers within Oklahoma and approximately 52 % 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 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 $ 219 million at September 30, 2020 and approximately $ 189 million at December 31, 2019.

The balance of midstream energy loans was approximately $ 47 million at September 30, 2020 and approximately $ 41 million at December 31, 2019.

The balance of the ancillary services energy loans was approximately $ 80 million at September 30, 2020 and approximately $ 90 million at December 31, 2019.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $ 266 million or 50 % of the loans are secured by real estate at September 30, 2020.

Pegasus Bank’s commercial and agricultural non-real estate loan were approximately $ 242 million at September 30, 2020 and approximately $ 172 million at December 31, 2019.

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

The balance of upstream energy loans was approximately $ 183 million at March 31, 2021 and approximately $ 191 million at December 31, 2020.

The balance of midstream energy loans was approximately $ 33 million at March 31, 2021 and approximately $ 50 million at December 31, 2020.

The balance of the ancillary services energy loans was approximately $ 67 million at March 31, 2021 and approximately $ 59 million at December 31, 2020.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $ 294 million or 54 % of the loans are secured by real estate at March 31, 2021.

Pegasus Bank’s commercial and agricultural non-real estate loans were approximately $ 228 million at March 31, 2021 and approximately $ 262 million at December 31, 2020.

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

The balance of upstream energy loans was approximately $ 102 million at September 30, 2020 and approximately $ 57 million at December 31, 2019.

The balance of the ancillary services energy loans was approximately $ 9 million at September 30, 2020 and approximately $ 7 million at December 31, 2019.

As of September 30, 2020, the Company had $ 830.3 million in PPP loans held for investment, net of unamortized processing fees of $ 22.5 million, and approximately $ 1.4 million of PPP loans held for sale.

Through September 30, 2020, $ 7.6 million of processing fees were recognized as interest income.

The balance of upstream energy loans was approximately $ 109 million at March 31, 2021 and approximately $ 107 million at December 31, 2020.

The balance of midstream energy loans was approximately $ 11 million at both March 31, 2021 and December 31, 2020.

The balance of the ancillary services energy loans was approximately $ 15 million at March 31, 2021 and approximately $ 13 million at December 31, 2020.

Accounting policies related to appraisals, and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

1 unchanged sentence

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

September 30,

(Dollars in thousands)

3 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.

At September 30, 2020, the Company’s principal subsidiary bank, BancFirst, had approximately $ 21.5 million in loans at its Hugo, Oklahoma branch that it has entered into an agreement to sell to AmeriState Bank in Atoka, Oklahoma.

Accordingly, as of September 30, 2020, the Company has transferred $ 21.5 million from loans held for investment (net of unearned interest) to loans held for sale.

During the first quarter of 2021, the Company sold property held in other real estate owned for a total loss of $ 55,000 , compared to a total gain of $ 2.2 million in the first quarter of 2020.

Nonaccrual loans

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 2.1 million for the nine months ended September 30, 2020 and approximately $ 1.4 million for the nine months ended September 30, 2019.

Approximately $ 8.4 million of nonaccrual loans are guaranteed by government agencies.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $ 521,000 for the three months ended March 31, 2021 and approximately $ 332,000 for the three months ended March 31, 2020.

Nonaccrual loans guaranteed by government agencies totaled approximately $ 6.6 million at March 31, 2021 and approximately $ 7.8 million at December 31, 2020.

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.

September 30, 2020

March 31, 2021

December 31, 2020

(Dollars in thousands)

7 unchanged sentences

Consumer non-real estate

December 31, 2019

(Dollars in thousands)

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

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.

2 unchanged sentences

(Dollars in thousands)

As of September 30, 2020

As of March 31, 2021

Commercial real estate owner occupied

7 unchanged sentences

As of December 31, 2020

Non-residential real estate owner occupied

Non-residential real estate other

Residential real estate permanent mortgage

Residential real estate other

Non-consumer non-real estate

Consumer other

Acquired loans

Due to the impacts of the COVID-19 pandemic, the Company has approximately $ 104.5 million in modified loans, most of which are secured by commercial real estate, as of September 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

Due to the impacts of the COVID-19 pandemic, the Company had approximately $ 88 million in modified loans as of March 31, 2021 and $ 81.7 million in modified loans as of December 31, 2020, most of which were secured by commercial real estate.

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

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

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

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

4 unchanged sentences

The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The general characteristics of the risk grades and the table summarizing our gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2020, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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

The following table summarizes our gross loans held for investment by year of origination and internally assigned credit grades:

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

Term Loans Amortized Cost Basis by Origination Year

1 unchanged sentence

(Dollars in thousands)

As of September 30, 2020

As of March 31, 2021

Commercial real estate owner occupied

15 unchanged sentences

Total consumer non-real estate

Total oil and gas

Total other loans

3 unchanged sentences

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 ASC 326, the Company recorded a $ 57.7 million provision for credit losses for the first nine months of 2020 utilizing the newly adopted CECL methodology, a significant increase from the first nine months of 2019.

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 first nine months of 2020.

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

it will have an indirect effect on the economies of Oklahoma and the Dallas, Texas market, including higher unemployment, with a residual effect on land values and real estate prices.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist by identifying by portfolio segments, the applicable weighted average life and measuring the allowance for credit losses using the vintage loss analysis adjusted for qualitative factors.

The weighted average life of the Company’s loans segments are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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

1 unchanged sentence

Allowance for Credit Losses

Impact of CECL adoption

Initial allowance on loans purchased with credit deterioration

for credit losses on loans

(Dollars in thousands)

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Commercial real estate owner occupied

6 unchanged sentences

Consumer non-real estate

Nine Months Ended September 30, 2020

Allowance for Credit Losses

Impact of CECL adoption

Initial allowance on loans purchased with credit deterioration

Provision for credit losses on loans

(Dollars in thousands)

Three Months Ended March 31, 2020

Commercial real estate owner occupied

6 unchanged sentences

Consumer non-real estate

Allowance for Credit Losses

Provision for credit losses on loans

(Dollars in thousands)

Three Months Ended September 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

Nine Months Ended September 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 purchased credit deteriorated loans for the period are as follows:

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

The Company did not purchase credit-deteriorated loans during the three-month period ended March 31, 2021.

The credit-deteriorated loans purchased during the three-month period ended March 31, 2020 were as follows:

Loans acquired

2 unchanged sentences

(Dollars in thousands)

For the period ended September 30, 2020

Purchase price of acquired loans

Allowance for credit losses of acquired loans

Par value of acquired loans

For the period ended March 31, 2020

Purchase price of loans at acquisition

Allowance for credit losses at acquisition

Par value of acquired loans at acquisition

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

During the three months ended March 31, 2021 and 2020, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent.

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

Collateral Type

1 unchanged sentence

Energy Reserves

Specific Allocation

(Dollars in thousands)

As of September 30, 2020

As of March 31, 2021

Commercial real estate owner occupied

7 unchanged sentences

Total collateral-dependent loans held for investment

Collateral Type

Business Assets

Energy Reserves

Specific Allocation

(Dollars in thousands)

As of December 31, 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

Total collateral-dependent loans held for investment

Non-Cash Transfers from Loans and Premises and Equipment

1 unchanged sentence

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

Nine Months Ended

September 30,

Three Months Ended

(Dollars in thousands)

4 unchanged sentences

(Dollars in thousands)

As of September 30, 2020

As of March 31, 2021

Core deposit intangibles

5 unchanged sentences

(Dollars in thousands)

Nine months ended September 30, 2020

Balance at beginning of period

Three months ended March 31, 2021

Balance at beginning and end of period

The Company acquired Citizens on March 5, 2020 , which added $ 1.3 million in goodwill.

Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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 $ 504,000 and $ 392,000 for the three months ended September 30, 2020 and September 30, 2019, respectively.

Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $ 1.4 million and $ 1.2 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

As of September 30, 2020, right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $ 4.3 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $ 4.2 million.

Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $ 503,000 and approximately $ 463,000 for the three months ended March 31, 2021 and March 31, 2020, respectively.

As of March 31, 2021, right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $ 4.1 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $ 4.0 million.

There have been no significant changes in our expected future minimum lease payments since December 31, 2020.

The future minimum lease payments are disclosed in Note (20) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

As of September 30, 2020, our operating leases have a weighted-average remaining lease term of 3.4 years and a weighted-average discount rate of 3.3 percent.

As of March 31, 2021, our operating leases have a weighted-average remaining lease term of 3.3 years and a weighted-average discount rate of 3.1 percent.

Maturity of Operating Lease Liabilities

September 30, 2020

March 31, 2021

(Dollars in thousands)

2020 (three months)

2021 (nine 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 $ 1.3 million and $ 1.6 million for the three months ended September 30, 2020 and September 30, 2019, respectively.

The Company had operating lease revenue of $ 4.1 million and $ 4.7 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The Company had operating lease revenue of $ 1.4 million for both the three months ended March 31, 2021 and March 31, 2020.

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:

September 30, 2020

March 31, 2021

(Dollars in thousands)

2020 (three months)

2021 (nine months)

Total future minimum lease payments

STOCK-BASED COMPENSATION

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

At September 30, 2020, there were 321,500 shares available for future grants.

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

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

At March 31, 2021, there were 167,500 shares available for future grants.

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

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

1 unchanged sentence

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

The Company has had the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”) since June 1999.

The Company has had the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”) since June 1999.

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

At September 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.

At March 31, 2021, there were 30,000 shares available for future grants.

The Non-Employee Directors’ Plan will terminate on December 31, 2024 , if not extended.

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

1 unchanged sentence

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

The following table is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:

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

During the three months ended March 31, 2021, the Company had cash settlements for 121,330 shares for a total cost of $ 3.6 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’ Plan:

(Dollars in thousands, except option data)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Outstanding at December 31, 2020

1 unchanged sentence

Options exercised

Options canceled, forfeited, or expired

Outstanding at September 30, 2020

Exercisable at September 30, 2020

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

Outstanding at March 31, 2021

Exercisable at March 31, 2021

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Total intrinsic value of options exercised

5 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Stock-based compensation expense

2 unchanged sentences

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

September 30, 2020

March 31, 2021

(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:

Nine Months Ended

September 30,

Three Months Ended

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

1 unchanged sentence

1.34 to 1.64%

1.55 to 2.76%

Dividend yield

1 unchanged sentence

35.55 to 35.73%

22.93 to 23.63%

Expected term

2 unchanged sentences

The dividend yield is the expected yield for the expected term.

The stock price volatility is estimated from the recent historical volatility of the Company’s stock.

The stock price volatility is

estimated from the recent historical volatility of the Company’s stock.

The expected term is estimated from the historical option exercise experience.

The Company accounts for forfeitures as they occur.

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

As of September 30, 2020, there are 24,982 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.

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

As of March 31, 2021, there are 19,717 shares available for future issuance under the Deferred Stock Compensation Plan.

The Deferred Stock Compensation Plan will terminate on December 31, 2024 , if not extended.

Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 100 % of their board fees.

1 unchanged sentence

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 9,542 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the nine months ended September 30, 2020 and September 30, 2019, respectively.

There were 2,161 and 1,307 shares of common stock distributed from the Deferred Stock Compensation Plan during the three months ended March 31, 2021 and March 31, 2020, respectively.

A summary of the accumulated stock units is as follows:

September 30,

Accumulated stock units

2 unchanged sentences

In November 1999, the Company adopted the SRP.

The SRP may be used as a means to increase earnings per share and return on equity, to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and to provide liquidity for stockholders wishing to sell their stock.

The SRP may be used as a means to increase earnings per share and return on equity.

In addition, the SRP may be used to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options and to provide liquidity for stockholders wishing to sell their stock.

All shares repurchased under the SRP have been retired and not held as treasury stock.

timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee.

The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee.

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

Nine Months Ended

September 30,

Three 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 September 30, 2020, the Company, BancFirst and Pegasus Bank met all capital adequacy requirements to which they are subject.

Management believes that as of March 31, 2021, 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 September 30, 2020:

As of March 31, 2021:

Total Capital

10 unchanged sentences

BancFirst Corporation

As of September 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.

As of March 31, 2021, 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.

4 unchanged sentences

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.

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 September 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.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under U.S.

The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of CECL on their regulatory capital ratios (three-year transition option).

In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under U.S.

GAAP (as of January 2020) to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option).

The Company elected not to adopt the five-year transition option.

The PPP loans the Company originated in 2020 and 2021 are included in the calculation of the Company’s leverage ratio as of March 31, 2021 as the Company did not utilize the PPP Facility for funding purposes.

NET INCOME PER COMMON SHARE

2 unchanged sentences

(Dollars in thousands, except per share data)

Three Months Ended September 30, 2020

Income available to common stockholders

Dilutive effect of stock options

Income available to common stockholders plus assumed

exercises of stock options

Three Months Ended September 30, 2019

Income available to common stockholders

Dilutive effect of stock options

Income available to common stockholders plus assumed

exercises of stock options

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Income available to common stockholders

2 unchanged sentences

exercises of stock options

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Income available to common stockholders

3 unchanged sentences

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 September 30, 2020

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

FAIR VALUE MEASUREMENTS

6 unchanged sentences

Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

This category includes certain impaired loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

This category includes certain collaterally dependent loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

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

1 unchanged sentence

These valuation methodologies were applied to the following categories of the Company’s financial assets and financial liabilities.

Securities Available for Sale

Securities classified as available for sale are reported at fair value.

Debt Securities Available for Sale

Debt securities classified as available for sale are reported at fair value.

Treasuries are valued using Level 1 inputs.

Other securities available for sale including U.S.

Other debt securities available for sale including U.S.

federal agencies, registered mortgage backed securities and state and political subdivisions are valued using prices from an independent pricing service utilizing Level 2 data.

1 unchanged sentence

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

The Company also invests in private label mortgage backed securities for which observable information is not readily available.

These securities are reported at fair value utilizing Level 3 inputs.

For these securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors.

The Company also invests in private label mortgage backed debt securities for which observable information is not readily available.

These debt securities are reported at fair value utilizing Level 3 inputs.

For these debt securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors.

Discount rates are primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally recognized rating agencies adjusted for a lack of trading volume.

13 unchanged sentences

(Dollars in thousands)

September 30, 2020

March 31, 2021

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:

Nine Months Ended

September 30,

Three Months Ended

Twelve Months Ended

1 unchanged sentence

Balance at the beginning of the year

Transfers from level 2

Transfers to level 2

Total unrealized gains/(losses)

1 unchanged sentence

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 nine months ended September 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.

During the three months ended March 31, 2021, the Company transferred securities from Level 3 to Level 2 due to a review of the

pricing models that determined some asset backed securities to be Level 2 .

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

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

3 unchanged sentences

The Company invests in equity securities without readily determinable fair values and utilizes Level 3 inputs.

Beginning January 1, 2018, upon adoption of ASU 2016-01, these securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

These securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

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

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

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

3 unchanged sentences

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

The following table summarizes assets measured at fair value on a nonrecurring basis.

The following table summarizes assets measured at fair value on a nonrecurring basis during the period presented.

The fair value represents end of period values, which approximate fair value measurements that occurred on various measurement dates throughout the period:

1 unchanged sentence

(Dollars in thousands)

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

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

Equity securities

15 unchanged sentences

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

Federal Funds Sold

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

Securities Held for Investment

For securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available.

Debt Securities Held for Investment

For debt securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available.

If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities making adjustments for credit or liquidity if applicable.

3 unchanged sentences

Mortgage loans are generally sold within 30 days of origination.

The Company has an agreement to sell approximately $ 21.5 million of its loans in Hugo, OK to AmeriState Bank.

These loans are included in Loans held for sale.

for sale are valued using Level 2 inputs.

Loans held for sale are valued using Level 2 inputs.

Gains or losses recognized upon the sale of the loans are determined on a specific identification basis.

At December 31, 2020, the Company’s principal subsidiary bank, BancFirst, had approximately $ 21.6 million in loans held for sale at its Hugo, Oklahoma branch that were sold to AmeriState Bank in Atoka, Oklahoma in the first quarter of 2021.

To determine the fair value of loans, the Company uses an exit price calculation, which takes into account factors such as liquidity, credit and the nonperformance risk of loans.

For certain homogeneous categories of loans, such as some residential mortgages, fair 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 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 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 transaction and savings accounts are the amounts payable on demand at the reporting date.

8 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)

2 unchanged sentences

Cash and cash equivalents

Federal funds sold

Securities held for investment

Debt securities held for investment

Loans held for sale

Level 3 inputs:

Securities held for investment

Debt securities held for investment

Loans, net of allowance for credit losses

10 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 September 30, 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 March 31, 2021 or December 31, 2020.

(11) SEGMENT INFORMATION

9 unchanged sentences

(Dollars in thousands)

Three Months Ended September 30, 2020

Net interest income

Noninterest income

Income before taxes

Three Months Ended September 30, 2019

Net interest income

Noninterest income

Income before taxes

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Net interest income

1 unchanged sentence

Income before taxes

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Net interest income

2 unchanged sentences

Total Assets:

September 30, 2020

March 31, 2021

December 31, 2020

3 unchanged sentences

Eliminations are adjustments to consolidate the business units and companies.

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

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