BANCFIRST CORP /OK/ 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition as of March 31, 2021 and December 31, 2020 and results of operations for the three months ended March 31, 2021 should be read in conjunction with our consolidated financial statements and notes to the financial statements for the year ended December 31, 2020, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2020 Form 10-K, and "Item 1A, Risk Factors" in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis. FORWARD LOOKING STATEMENTS The Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. Forward-looking statements include estimates and give management’s current expectations or forecasts of future events. The Company cautions readers that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions; the performance of financial markets and interest rates; legislative and regulatory actions and reforms; competition; as well as other factors, all of which change over time. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes”, “anticipates”, “expects”, “intends”, “targeted”, “continue”, “remain”, “will”, “should”, “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: • The COVID-19 pandemic’s adverse effects on us and our customers, employees and third-party service providers; the adverse impacts of the pandemic on our business, financial position, operations and prospects may be material. It is not possible to accurately predict the extent, severity or duration of the pandemic or when normal economic and operation conditions will return. • The likelihood the Durbin Amendment will impact non-interest income. • The effect of governments’ stimulus programs. • Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact. • Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs. • Inflation, interest rates, energy prices, securities markets and monetary fluctuations. • The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply. • Impairment of the Company’s goodwill or other intangible assets. • Changes in consumer spending, borrowing and savings habits. • Changes in the financial performance and/or condition of the Company’s borrowers. • Technological changes. • Acquisitions and integration of acquired businesses. • The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters. • The Company’s success at managing the risks involved in the foregoing items. Actual results may differ materially from forward-looking statements. 28 THE COVID-19 PANDEMIC The COVID-19 pandemic and actions taken in response to it have negatively impacted the global economy and all financial markets. Since March 31, 2020, these conditions and the related financial impact have continued. Although the Company is not able to estimate the impact of the COVID-19 pandemic and the resultant economic circumstances on a long-term basis at this time, the COVID-19 pandemic could materially affect the Company’s financial and operational results. The Company is closely monitoring its loan portfolio for effects related to COVID-19. See Item 1.A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for further discussion. SUMMARY The Company’s net income for the first quarter of 2021 was $42.5 million, compared to $22.6 million for the first quarter of 2020. Diluted net income per common share was $1.27 and $0.68 for the first quarter of 2021 and 2020, respectively. For the first quarter of 2021, no provision for credit losses was recorded compared to a provision for credit losses of $19.6 million for the first quarter of 2020; the absence of a provision in the first quarter of 2021 was due to improvements in economic conditions and the outlook for certain economic indicators. The Company’s net interest income for the first quarter of 2021 increased to $77.2 million, compared to $74.1 million for the first quarter of 2020. Net interest income increased for the first quarter of 2021 due to loan growth, PPP fee income of approximately $9.8 million and the decrease in interest rates paid on deposits. The net interest margin for the quarter was 3.36%, compared to 3.82% a year ago. Noninterest income for the first quarter of 2021 totaled $39.9 million, compared to $35.1 million for the first quarter of 2020. The increase in noninterest income was due to a gain from the sale of the Company’s Hugo, Oklahoma branch of $2.5 million, $2.4 million in rental income from a real estate property foreclosed on in the fourth quarter of 2020, and a $1.2 million increase in income from sales of mortgage loans, which were partially offset by a $1.3 million decrease in treasury management income. Noninterest expense for the first quarter of 2021 increased to $65.0 million, compared to $61.4 million for the first quarter of 2020 because of $1.4 million of expenses related to such foreclosed property, and a $2.2 million gain on the sale of other real estate owned in the first quarter of 2020 that reduced noninterest expense. The Company’s effective tax rate was 18.5% for the first quarter of 2021 compared to 20.0% for the first quarter of 2020. At March 31, 2021, the Company’s total assets were $10.5 billion, an increase of $1.3 billion from December 31, 2020. Debt securities of $520.5 million at March 31, 2021 were down $34.7 million from December 31, 2020. Loans totaled $6.4 billion, a decrease of $68.1 million from December 31, 2020 partially due to approximately $21 million of loans that were sold with the Company’s Hugo, Oklahoma branch. Deposits totaled $9.4 billion, an increase of $1.3 billion from the December 31, 2020 total. The increase in assets and deposits were primarily related to the Paycheck Protection Program (PPP) and other government stimulus . At March 31, 2021, the Company had PPP loans held for investment of $713.7 million, net of unamortized processing fees of $23.3 million. The Company’s total stockholders’ equity at March 31, 2021 was $1.1 billion, an increase of $26.8 million over December 31, 2020. Off-balance sweep accounts were $2.2 billion at March 31, 2021 compared to $2.7 billion at December 31, 2020. Nonaccrual loans represent 0.55% of total loans at March 31, 2021, down from 0.58% at December 31, 2020. Net charge-offs for the quarter were 0.01% of average loans for the first quarter of 2021, compared to 0.02% of average loans for the first quarter of 2020. The allowance for credit losses to total loans was 1.42% at both March 31, 2021 and December 31, 2020, and the allowance for credit losses to nonaccrual loans was 257.20% compared to 243.35% at December 31, 2020. See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions. FUTURE APPLICATION OF ACCOUNTING STANDARDS There have been no changes in the Registrant’s disclosures regarding recently issued accounting pronouncements since December 31, 2020, the date of its most recent annual report to stockholders. SEGMENT INFORMATION See Note (11) of the Notes to Consolidated Financial Statements for disclosures regarding business segments. 29 RESULTS OF OPERATIONS Average Balances, Income, Expenses and Rates The following table presents, for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances are derived from daily averages. BANCFIRST CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS (Unaudited) Taxable Equivalent Basis (Dollars in thousands) Three Months Ended March 31, 2021 2020 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ASSETS Earning assets: Loans (1) $ 6,400,845 $ 77,766 4.93 % $ 5,770,502 $ 76,658 5.33 % Deb securities – taxable 521,698 1,693 1.32 506,893 2,586 2.05 Debt securities – tax exempt 19,340 88 1.84 17,474 123 2.83 Federal funds sold and interest-bearing deposits with banks 2,387,000 595 0.10 1,493,771 4,769 1.28 Total earning assets 9,328,883 80,142 3.48 7,788,640 84,136 4.33 Nonearning assets: Cash and due from banks 268,848 191,682 Interest receivable and other assets 683,868 582,200 Allowance for credit losses (90,551 ) (51,515 ) Total nonearning assets 862,165 722,367 Total assets $ 10,191,048 $ 8,511,007 LIABILITIES AND STOCKHOLDERS’ EQUITY Interest-bearing liabilities: Transaction deposits $ 766,994 $ 149 0.08 % $ 815,827 $ 515 0.25 % Savings deposits 3,504,020 1,106 0.13 3,020,093 6,249 0.83 Time deposits 657,938 1,067 0.66 697,821 2,636 1.51 Short-term borrowings 2,928 1 0.19 2,448 7 1.18 Junior subordinated debentures 26,804 491 7.43 26,804 491 7.35 Total interest-bearing liabilities 4,958,684 2,814 0.23 4,562,993 9,898 0.87 Interest-free funds: Noninterest-bearing deposits 4,106,084 2,888,342 Interest payable and other liabilities 41,522 36,879 Stockholders’ equity 1,084,758 1,022,793 Total interest free funds 5,232,364 3,948,014 Total liabilities and stockholders’ equity $ 10,191,048 $ 8,511,007 Net interest income $ 77,328 $ 74,238 Net interest spread 3.25 % 3.46 % Effect of interest free funds 0.11 % 0.36 % Net interest margin 3.36 % 3.82 % For these computations, information is shown on a taxable-equivalent basis assuming a 21% tax rate. (1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis. 30 Selected income statement data and other selected data for the comparable periods were as follows: BANCFIRST CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share data) Three Months Ended March 31, 2021 2020 Income Statement Data Net interest income $ 77,206 $ 74,073 Provision for credit losses — 19,583 Securities transactions 95 50 Total noninterest income 39,935 35,145 Salaries and employee benefits 39,577 39,756 Total noninterest expense 64,963 61,385 Net income 42,520 22,608 Per Common Share Data Net income – basic $ 1.30 $ 0.69 Net income – diluted 1.27 0.68 Cash dividends 0.34 0.32 Performance Data Return on average assets 1.69 % 1.07 % Return on average stockholders’ equity 15.90 8.87 Cash dividend payout ratio 26.15 46.38 Net interest spread 3.25 3.46 Net interest margin 3.36 3.82 Efficiency ratio 55.46 56.20 Net charge-offs to average loans 0.01 0.02 Net Interest Income For the three months ended March 31, 2021, net interest income, which is the Company’s principal source of operating revenue, increased $3.1 million or 4.2% compared to the three months ended March 31, 2020. Net interest income increased for the first quarter of 2021 due to loan growth, PPP fee income of approximately $9.8 million and the decrease in interest rates paid on deposits. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. As shown in the preceding table, the Company’s net interest margin for the first quarter of 2021 decreased compared to the first quarter of 2020, primarily due to the lower average rates on loans, federal funds and securities during the quarter. The Company’s net interest income and net interest margin have been, and the Company currently expects them to continue to be, impacted by the decreases in market interest rates. The expectation is that interest rates will remain at these low levels for some period of time in light of the on-going response in Federal Reserve policy driven by the economic disruption arising from the COVID-19 pandemic. Provision for Credit Losses For the first quarter of 2021, no provision for credit losses was recorded, compared to a provision for credit losses of $19.6 million for the first quarter of 2020. The Company’s lack of provision for the first quarter of 2021 was based on improvements in economic conditions and the Company’s outlook for certain economic indicators. The elevated provision during the first quarter of 2020 was based on the Company’s evaluation of the level of uncertainty and lack of clarity of the timing of an end to the COVID-19 pandemic, as well as the magnitude of the government’s stimulus response to it. The Company establishes an allowance as an estimate of the expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change, which could affect the amount of future provisions for credit losses. Net loan charge-offs were $506,000 for the first quarter of 2021, compared to net loan charge-offs of $1.0 million for the first quarter of 2020. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a low level. 31 Noninterest Income Noninterest income, as presented in the preceding table, increased by $4.8 million for first quarter of 2021 compared to the first quarter of 2020. The increase in noninterest income was due to a gain from the sale of the Company’s Hugo, Oklahoma branch of $2.5 million, $2.4 million in rental income from a real estate property foreclosed on in the fourth quarter of 2020, and a $1.2 million increase in income from sales of mortgage loans, which were partially offset by a $1.3 million decrease in treasury management income. Noninterest income included non-sufficient funds fees totaling $5.5 million and $8.3 million for the three month periods ended March 31, 2021 and 2020, respectively. This represents 13.8% and 23.5% of the Company’s noninterest income for the three month periods ended March 31, 2021 and 2020, respectively. In addition, the Company had debit card interchange fees totaling $10.7 million and $8.2 million during the three month periods ended March 31, 2021 and 2020, respectively. This represents 26.7% and 23.3% of the Company’s noninterest income for the three month periods ended March 31, 2021 and 2020, respectively. For the first quarter of 2021 compared to the first quarter of 2020, government assistance funds that flowed into the market, including PPP loans and stimulus payments to households, increased customer liquidity and higher volume of transactions. This activity resulted in lower non-sufficient funds fees and higher debit card interchange fees. Prior to the COVID-19 pandemic, there was little or no likelihood that the Company would surpass $10 billion in total assets for several years. However, with the CARES Act, including PPP loans, stimulus payments to households, and artificially high household savings rates, our deposits and assets have grown dramatically beyond reasonably foreseeable levels. To the extent the COVID-19 pandemic continues and the government response to it continues on the same or similar basis, it is likely the Company will exceed $10 billion in total assets at December 31, 2021. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this would trigger an approximate reduction of annual pretax income from debit card interchange fees of between $17 to $20 million beginning July 1, 2022. The Company earned $2.0 million on the sale of loans for first quarter of 2021 compared to $781,000 for first quarter of 2020. The income from sales of loans increased due to the increase in volume of loans originated due to record low mortgage rates. Noninterest Expense Noninterest expense, as presented in the preceding table, increased by $3.6 million for first quarter of 2021 compared to the first quarter of 2020. The increase in noninterest expenses was due to $1.4 million of expenses related to a real estate property foreclosed on in the fourth quarter of 2020 and a $2.2 million gain on the sale of other real estate owned in the first quarter of 2020 that reduced noninterest expense. Income Taxes The Company’s effective tax rate was 18.5% for the first quarter of 2021, compared to 20.0% for the first quarter of 2020. The effective tax rate was lower for the first quarter of 2021 compared to the first quarter of 2020 primarily because of an increase in employee options exercised during the quarter. The reasons for the difference between the Company’s effective tax rate and the federal statutory rate were tax-exempt income, nondeductible amortization, federal and state tax credits and state tax expense. 32 FINANCIAL POSITION BANCFIRST CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (Dollars in thousands, except per share data) March 31, December 31, 2021 2020 (unaudited) Balance Sheet Data Total assets $ 10,549,305 $ 9,212,357 Total loans (net of unearned interest) 6,380,108 6,448,225 Allowance for credit losses 90,860 91,366 Debt securities 520,543 555,196 Deposits 9,371,940 8,064,704 Stockholders' equity 1,094,671 1,067,885 Book value per share 33.40 32.64 Tangible book value per share (non-GAAP)(1) 28.27 27.47 Reconciliation of Tangible Book Value per Common Share (non-GAAP)(2) Stockholders' equity $ 1,094,671 $ 1,067,885 Less goodwill 149,922 149,922 Less intangible assets, net 18,206 18,999 Tangible stockholders' equity (non-GAAP) $ 926,543 $ 898,964 Common shares outstanding 32,771,013 32,719,852 Tangible book value per share (non-GAAP) $ 28.27 $ 27.47 Selected Financial Ratios Balance Sheet Ratios: Average loans to deposits (year-to-date) 70.84 % 78.28 % Average earning assets to total assets (year-to-date) 91.54 91.90 Average stockholders’ equity to average assets (year-to-date) 10.64 11.17 Asset Quality Data Loans past due 90 days and still accruing $ 5,282 $ 4,802 Nonaccrual loans (3) 35,326 37,545 Restructured loans 7,801 7,784 Total nonperforming and restructured loans 48,409 50,131 Other real estate owned and repossessed assets 30,320 32,480 Total nonperforming and restructured assets 78,729 82,611 Asset Quality Ratios: Nonaccrual loans to total loans 0.55 % 0.58 % Nonperforming and restructured loans to total loans 0.76 0.78 Nonperforming and restructured assets to total assets 0.75 0.90 Allowance for credit losses to total loans 1.42 1.42 Allowance for credit losses to nonperforming and restructured loans 187.69 182.26 Allowance for credit losses to nonaccrual loans 257.20 243.35 (1) Refer to the “Reconciliation of Tangible Book Value per Common Share (non-GAAP)” Table. (2) Tangible book value per common share is stockholders’ equity less goodwill and intangible assets, net, divided by common shares outstanding. This amount is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate the financial condition and capital strength of the Company. This measure should not be considered a substitute for operating results determined in accordance with GAAP. (3) Government Agencies guarantee approximately $6.6 million of nonaccrual loans at March 31, 2021. Cash and Interest-Bearing Deposits with Banks The aggregate of cash and due from banks and interest-bearing deposits with banks increased by $1.4 billion or 89.4% to $3.1 billion, from December 31, 2020 to March 31, 2021. The increase was primarily related to the increase in deposits from PPP and other government stimulus payments. Securities At March 31, 2021, total debt securities decreased $34.7 million, or 6.2% compared to December 31, 2020. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized gain on debt securities available for sale, before taxes, was $8.6 million at March 31, 2021, compared to a net unrealized gain of $9.9 million 33 at December 31, 2020 . These unrealized gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income t ax , in the amounts of a gain of $ 6.4 million at March 31, 2021 and a gain of $ 7.4 million at December 31, 2020 . See Note (3) of the Notes to Consolidated Financial Statements for disclosures regarding the Company’s Securities. Loans At March 31, 2021, total loans decreased $68.1 million or 1.1% compared to December 31, 2020. The decrease in loans was partially due to approximately $21 million of loans that were sold with the Company’s Hugo, Oklahoma branch. At March 31, 2021, the balance of total PPP loans was $713.7 million, net of unamortized processing fees of $23.3 million. See Note (4) of the Notes to Consolidated Financial Statements for disclosures regarding the Company’s loan portfolio segments. Allowance for Credit Losses On January 1, 2020, the Company adopted ASC 326, which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL. At March 31, 2021 and December 31, 2020, the allowance for credit losses to total loans represented 1.42% of total loans. Nonaccrual and Restructured Assets At March 31, 2021, nonperforming and restructured assets decreased $3.9 million to $78.7 million compared to December 31, 2020. The Company’s level of nonperforming and restructured assets has continued to be relatively low, equating to 0.75% of total assets at March 31, 2021 and 0.90% of total assets at December 31, 2020. Nonaccrual loans totaled $35.3 million at March 31, 2021, compared to $37.5 million at December 31, 2020. The Company’s nonaccrual loans are primarily commercial and agricultural non-real estate and farmland. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is not in doubt. 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 $332,000 for the three months ended March 31, 2020. Only a small amount of this interest is expected to be ultimately collected. Approximately $6.6 million of nonaccrual loans were guaranteed by government agencies at March 31, 2021. Restructured loans totaled $7.8 million at both March 31, 2021 and December 31 2020. The Company charges interest on principal balances outstanding during deferral periods. As a result, the current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings whose terms were modified during the period were not considered to be material. The classification of a loan as nonperforming does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the level of collections decline. The above normal risk associated with nonperforming loans has been considered in the determination of the allowance for credit losses. At March 31, 2021, the allowance for credit losses as a percentage of nonperforming and restructured loans was 187.69%, compared to 182.26%, at December 31, 2020. The level of nonperforming loans and credit losses could rise over time as a result of adverse economic conditions. Other real estate owned and repossessed assets totaled $30.3 million at March 31, 2021, compared to $32.5 million at December 31, 2020. Other real estate owned consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. As of both March 31, 2021 and December 31, 2020, other real estate owned included a commercial real estate property recorded at approximately $28 million. Other real estate owned and repossessed assets are carried at the lower of the book values of the related loans or fair values based upon appraisals, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to other real estate owned are charged directly to the allowance for credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to other real estate owned. Decreases in values of properties subsequent to their classification as other real estate owned are charged to operating expense. 34 Intangible Assets, Goodwill and Other Assets Identifiable intangible assets and goodwill totaled $168.1 million and $168.9 million at March 31, 2021 and December 31, 2020, respectively. Other assets includes the cash surrender value of key-man life insurance policies. The balance of the cash surrender value of key-man life insurance policies was $81.3 million at March 31, 2021 and $80.7 million at December 31, 2020. In addition, other assets includes approximately $11.1 million in equity interest of a previous borrower in the oil and gas industry, which was received through bankruptcy proceedings in the fourth quarter of 2020. This asset is carried at cost less 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. Low Income Housing and New Market Tax Credit Investments During 2021, there have not been any material changes in the Company’s low income housing tax credit investments and new market tax credit investments, which are included in other assets on the Company’s balance sheet. See Note (6) of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for disclosures regarding the Company’s low income housing tax credit investments and new market tax credit investments. Liquidity and Funding The Company’s principal source of liquidity and funding is its broad deposit base generated from customer relationships. The availability of deposits is affected by economic conditions, competition with other financial institutions and alternative investments available to customers. Through interest rates paid, service charge levels and services offered, the Company can affect its level of deposits to a limited extent. The level and maturity of funding necessary to support the Company’s lending and investment functions is determined through the Company’s asset/liability management process. The Company currently does not rely heavily on long-term borrowings and does not utilize brokered CDs. The Company maintains federal funds lines of credit with other banks and could also utilize the sale of loans, securities and liquidation of other assets as sources of liquidity and funding. Deposits At March 31, 2021, deposits totaled $9.4 billion, an increase of $1.3 billion or 16.2% from the December 31, 2020 total. The increase in deposits was primarily related to deposits of proceeds from the PPP and government stimulus payments. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 98.6% at March 31, 2021 and 98.2% at December 31, 2020. Noninterest-bearing deposits to total deposits were 45.6% at March 31, 2021, compared to 47.0% at December 31, 2020. Short-Term Borrowings Short-term borrowings, consisting primarily of federal funds purchased and repurchase agreements are another source of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company’s ability to earn a favorable spread on the funds obtained. Short-term borrowings were $3.8 million at March 31, 2021, compared to $1.1 million at December 31, 2020. Long-Term Borrowings The Company has a line of credit from the Federal Home Loan Bank (“FHLB”) of Topeka, Kansas to use for liquidity or to match-fund certain long-term fixed-rate loans. The Company’s assets, including residential first mortgages of $826.6 million, are pledged as collateral for the borrowings under the line of credit. As of March 31, 2021 and December 31, 2020, the Company had no advances outstanding under the line of credit from FHLB. There have not been any other material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Capital Resources Stockholders’ equity totaled $1.1 billion at both March 31, 2021 and December 31, 2020. In addition to net income of $42.5 million, other changes in stockholders’ equity during the three months ended March 31, 2021 included $1.3 million related to common stock issuances, and $576,00 related to stock-based compensation, that were partially offset by $11.1 million in dividends, $5.4 million in settlement of options in cash, and a $1.0 million decrease in other comprehensive income. The Company’s leverage ratio and total risk-based capital ratios at March 31, 2021, were well in excess of the regulatory requirements. See Note (8) of the Notes to Consolidated Financial Statements for a discussion of capital ratio requirements. 35 Liquidity Risk and Off-Balance Sheet Arrangements There have not been any material changes in the Company’s liquidity and off-balance sheet arrangements included in Management’s Discussion and Analysis which was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Item 3. Quantitative and Qualitative Disclosures About Market Risk. There have been no significant changes in the Registrant’s disclosures regarding market risk since December 31, 2020, the date of its most recent annual report to stockholders.