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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

 

For the quarterly period ended March 31, 2022

OR

 

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

 

For the transition period from to

Commission File Number 0-14384

 

BancFirst Corporation

(Exact name of registrant as specified in charter)

 

 

Oklahoma

 

73-1221379

(State or other Jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

100 N. Broadway Ave., Oklahoma City, Oklahoma

 

73102-8405

(Address of principal executive offices)

 

(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1.00 Par Value Per Share

 

BANF

 

NASDAQ Global Select Market System

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

As of April 29, 2022 there were 32,731,685 shares of the registrant’s Common Stock outstanding.

 

 


 

BancFirst Corporation

Quarterly Report on Form 10-Q

March 31, 2022

 

Table of Contents

 

Item

 

PART I – Financial Information

 

Page

 

1.

 

 

Financial Statements (Unaudited)

 

2

 

 

 

 

Consolidated Balance Sheets

 

2

 

 

 

 

Consolidated Statements of Comprehensive Income

 

3

 

 

 

 

Consolidated Statements of Shareholders’ Equity

 

4

 

 

 

Consolidated Statements of Cash Flow

 

5

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

6

 

2.

 

 

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

 

29

 

3.

 

 

Quantitative and Qualitative Disclosure About Market Risk

 

37

 

4.

 

 

Controls and Procedures

 

37

 

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

1.

 

 

Legal Proceedings

 

38

 

1A.

 

 

Risk Factors

 

38

 

2.

 

 

Unregistered Sales of Equity Securities

 

38

 

3.

 

 

Defaults Upon Senior Securities

 

38

 

4.

 

 

Mine Safety Disclosures

 

38

 

5.

 

 

Other Information

 

38

 

6.

 

Exhibits

 

39

 

Signatures

 

41

 

 


 

PART I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

274,872

 

 

$

228,819

 

Interest-bearing deposits with banks

 

 

3,816,532

 

 

 

1,821,203

 

Federal funds sold

 

 

3,489

 

 

 

800

 

Debt securities held for investment (fair value: $2,917 and $2,978, respectively)

 

 

2,917

 

 

 

2,977

 

Debt securities available for sale at fair value

 

 

1,208,751

 

 

 

531,523

 

Loans held for sale

 

 

10,137

 

 

 

24,776

 

  Loans held for investment (net of unearned interest)

 

 

6,494,340

 

 

 

6,169,442

 

  Allowance for credit losses

 

 

(87,239

)

 

 

(83,936

)

Loans, net of allowance for credit losses

 

 

6,407,101

 

 

 

6,085,506

 

Premises and equipment, net

 

 

283,843

 

 

 

269,047

 

Other real estate owned

 

 

39,617

 

 

 

39,475

 

Intangible assets, net

 

 

25,456

 

 

 

17,566

 

Goodwill

 

 

176,563

 

 

 

149,922

 

Accrued interest receivable and other assets

 

 

375,153

 

 

 

233,998

 

Total assets

 

$

12,624,431

 

 

$

9,405,612

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

5,216,266

 

 

$

3,775,387

 

Interest-bearing

 

 

6,034,705

 

 

 

4,316,527

 

Total deposits

 

 

11,250,971

 

 

 

8,091,914

 

Short-term borrowings

 

 

3,300

 

 

 

 

Accrued interest payable and other liabilities

 

 

116,357

 

 

 

55,977

 

Subordinated debt

 

 

86,001

 

 

 

85,987

 

Total liabilities

 

 

11,456,629

 

 

 

8,233,878

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

  Senior preferred stock, $1.00 par; 10,000,000 shares authorized; none issued

 

 

 

 

 

 

  Cumulative preferred stock, $5.00 par; 900,000 shares authorized; none issued

 

 

 

 

 

 

  Common stock, $1.00 par, 40,000,000 shares authorized; shares issued and
      outstanding:
32,725,587 and 32,603,118, respectively

 

 

32,726

 

 

 

32,603

 

  Capital surplus

 

 

163,392

 

 

 

159,914

 

  Retained earnings

 

 

1,001,200

 

 

 

977,067

 

  Accumulated other comprehensive (loss) income, net of tax of $9,166
      and $(
684), respectively

 

 

(29,516

)

 

 

2,150

 

Total stockholders' equity

 

 

1,167,802

 

 

 

1,171,734

 

Total liabilities and stockholders' equity

 

$

12,624,431

 

 

$

9,405,612

 

 

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

2


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

INTEREST INCOME

 

 

 

 

 

 

Loans, including fees

 

$

72,954

 

 

$

77,662

 

Debt securities:

 

 

 

 

 

 

Taxable

 

 

3,781

 

 

 

1,693

 

Tax-exempt

 

 

26

 

 

 

70

 

Federal funds sold

 

 

1

 

 

 

 

Interest-bearing deposits with banks

 

 

1,757

 

 

 

595

 

Total interest income

 

 

78,519

 

 

 

80,020

 

INTEREST EXPENSE

 

 

 

 

 

 

Deposits

 

 

1,981

 

 

 

2,322

 

Short-term borrowings

 

 

1

 

 

 

1

 

Subordinated debt

 

 

1,030

 

 

 

491

 

Total interest expense

 

 

3,012

 

 

 

2,814

 

Net interest income

 

 

75,507

 

 

 

77,206

 

Provision for credit losses

 

 

2,936

 

 

 

 

Net interest income after provision for credit losses

 

 

72,571

 

 

 

77,206

 

NONINTEREST INCOME

 

 

 

 

 

 

Trust revenue

 

 

3,506

 

 

 

3,102

 

Service charges on deposits

 

 

21,375

 

 

 

19,100

 

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

 

 

(3,915

)

 

 

95

 

Income from sales of loans

 

 

1,666

 

 

 

2,010

 

Insurance commissions

 

 

7,427

 

 

 

5,989

 

Cash management

 

 

3,131

 

 

 

3,003

 

Gain on sale of other assets

 

 

45

 

 

 

2,639

 

Other

 

 

10,415

 

 

 

3,997

 

Total noninterest income

 

 

43,650

 

 

 

39,935

 

NONINTEREST EXPENSE

 

 

 

 

 

 

Salaries and employee benefits

 

 

43,932

 

 

 

39,577

 

Occupancy, net

 

 

4,403

 

 

 

4,348

 

Depreciation

 

 

4,775

 

 

 

3,877

 

Amortization of intangible assets

 

 

831

 

 

 

793

 

Data processing services

 

 

1,805

 

 

 

1,678

 

Net expense from other real estate owned

 

 

1,794

 

 

 

1,510

 

Marketing and business promotion

 

 

2,073

 

 

 

1,879

 

Deposit insurance

 

 

1,128

 

 

 

876

 

Other

 

 

11,771

 

 

 

10,425

 

Total noninterest expense

 

 

72,512

 

 

 

64,963

 

Income before taxes

 

 

43,709

 

 

 

52,178

 

Income tax expense

 

 

7,794

 

 

 

9,658

 

Net income

 

$

35,915

 

 

$

42,520

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

Basic

 

$

1.10

 

 

$

1.30

 

Diluted

 

$

1.08

 

 

$

1.27

 

OTHER COMPREHENSIVE (LOSS) GAIN

 

 

 

 

 

 

Unrealized losses on debt securities, net of tax of $10,219 and $336, respectively

 

 

(32,833

)

 

 

(1,006

)

Reclassification adjustment for losses included in net income, net of tax of $(369) and $0, respectively

 

 

1,167

 

 

 

 

Other comprehensive loss, net of tax of $9,850 and $336, respectively

 

 

(31,666

)

 

 

(1,006

)

Comprehensive income

 

$

4,249

 

 

$

41,514

 

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

3


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

COMMON STOCK

 

 

 

 

 

 

Issued at beginning of period

 

$

32,603

 

 

$

32,720

 

Shares issued for stock options

 

 

123

 

 

 

51

 

Issued at end of period

 

$

32,726

 

 

$

32,771

 

CAPITAL SURPLUS

 

 

 

 

 

 

Balance at beginning of period

 

$

159,914

 

 

$

156,574

 

Common stock issued for stock options

 

 

3,020

 

 

 

1,258

 

Net cash settlement of options

 

 

 

 

 

(958

)

Stock-based compensation arrangements

 

 

458

 

 

 

576

 

Balance at end of period

 

$

163,392

 

 

$

157,450

 

RETAINED EARNINGS

 

 

 

 

 

 

Balance at beginning of period

 

$

977,067

 

 

$

871,161

 

Net income

 

 

35,915

 

 

 

42,520

 

Dividends on common stock ($0.36 and $0.34  per share, respectively)

 

 

(11,782

)

 

 

(11,134

)

Net cash settlement of options

 

 

 

 

 

(4,521

)

Balance at end of period

 

$

1,001,200

 

 

$

898,026

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

Unrealized (losses)/gains on securities:

 

 

 

 

 

 

Balance at beginning of period

 

$

2,150

 

 

$

7,430

 

Net change

 

 

(31,666

)

 

 

(1,006

)

Balance at end of period

 

$

(29,516

)

 

$

6,424

 

Total stockholders’ equity

 

$

1,167,802

 

 

$

1,094,671

 

 

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

4


 

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

35,915

 

 

$

42,520

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

Provision for credit losses

 

 

2,936

 

 

 

 

Depreciation and amortization

 

 

5,606

 

 

 

4,670

 

Net amortization of securities premiums and discounts

 

 

1,921

 

 

 

369

 

Realized securities losses/(gains)

 

 

3,915

 

 

 

(95

)

Gain on sales of loans

 

 

(1,666

)

 

 

(2,010

)

Cash receipts from the sale of loans originated for sale

 

 

83,749

 

 

 

114,517

 

Cash disbursements for loans originated for sale

 

 

(67,444

)

 

 

(98,043

)

Deferred income tax benefit

 

 

(968

)

 

 

(738

)

Gain on sale of other assets

 

 

(771

)

 

 

(2,584

)

Increase/(decrease) in interest receivable

 

 

(4,714

)

 

 

235

 

Increase/(decrease) in interest payable

 

 

485

 

 

 

(329

)

Amortization of stock-based compensation arrangements

 

 

458

 

 

 

576

 

Excess tax benefit from stock-based compensation arrangements

 

 

(1,024

)

 

 

(1,551

)

Other, net

 

 

5,209

 

 

 

11,504

 

Net cash provided by operating activities

 

 

63,607

 

 

 

69,041

 

INVESTING ACTIVITIES

 

 

 

 

 

 

Net cash received from acquisitions, net of cash paid

 

 

121,099

 

 

 

 

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

 

 

 

 

 

(13,733

)

Net increase in federal funds sold

 

 

(76

)

 

 

 

Purchases of available for sale debt securities

 

 

(966,818

)

 

 

(210,662

)

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

 

 

61

 

 

 

7

 

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

 

 

19,689

 

 

 

243,597

 

Proceeds from sales of available for sale securities

 

 

222,473

 

 

 

 

Purchase of equity securities

 

 

(144

)

 

 

(171

)

Proceeds from paydowns and sales of equity securities

 

 

697

 

 

 

194

 

Net change in loans

 

 

(67,669

)

 

 

32,053

 

Net payments on derivative asset contracts

 

 

(70,694

)

 

 

(671

)

Purchases of premises, equipment and computer software

 

 

(6,896

)

 

 

(7,718

)

Purchase of tax credits

 

 

(770

)

 

 

(1,262

)

Other, net

 

 

3,078

 

 

 

2,858

 

Net cash (used in) provided by investing activities

 

 

(745,970

)

 

 

44,492

 

FINANCING ACTIVITIES

 

 

 

 

 

 

Net change in deposits

 

 

2,729,040

 

 

 

1,344,608

 

Net change in short-term borrowings

 

 

3,300

 

 

 

2,650

 

Issuance of common stock in connection with stock options, net

 

 

3,143

 

 

 

1,309

 

Net cash settlement of options

 

 

 

 

 

(5,479

)

Cash dividends paid

 

 

(11,738

)

 

 

(11,125

)

Net cash provided by financing activities

 

 

2,723,745

 

 

 

1,331,963

 

Net increase in cash, due from banks and interest-bearing deposits

 

 

2,041,382

 

 

 

1,445,496

 

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

 

 

2,050,022

 

 

 

1,616,912

 

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

 

$

4,091,404

 

 

$

3,062,408

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during the period for interest

 

$

2,503

 

 

$

3,155

 

Cash paid during the period for income taxes

 

$

 

 

$

1,300

 

Noncash investing and financing activities:

 

 

 

 

 

 

Cash consideration for acquisitions

 

$

77,685

 

 

$

 

Fair value of assets acquired in acquisitions

 

$

510,888

 

 

$

 

Liabilities assumed in acquisitions

 

$

433,203

 

 

$

 

Unpaid common stock dividends declared

 

$

11,781

 

 

$

11,134

 

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

5


 

BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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

 

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., Pegasus Bank ("Pegasus"), Worthington National Bank ("Worthington") and BancFirst and its subsidiaries. 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. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with U.S. GAAP for interim financial information and the instructions for Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). The information contained in the financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021, should be referred to in connection with these unaudited interim consolidated financial statements. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

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

Reclassifications

Certain 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

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

 

Recent Accounting Pronouncements

Standards Not Yet Adopted:

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments – Credit Losses (Topic 326).” ASU 2022-02 eliminates the TDR recognition and measurement guidance and, instead, requires that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan. The Company has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings when adopted. In addition, the update requires that the Company disclose current-period write-offs by year of origination for financing receivables. The current-period write-off amendment should be applied prospectively. The amendments are effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption is permitted; however the Company expects to adopt ASU 2022-02 on January 1, 2023. ASU No. 2022-02 is not expected to have a significant impact on the Company’s financial statements.

 

 

 

6


 

 

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

 

On February 8, 2022, BancFirst Corporation acquired Worthington for an aggregate cash purchase price of $77.7 million. Worthington is chartered and regulated by the Office of the Comptroller of the Currency (OCC) with one banking location in Arlington, Texas, one in Colleyville, Texas and two in Fort Worth, Texas. At acquisition, Worthington had approximately $484 million in total assets, $257 million in loans and $430 million in deposits. Worthington will continue to operate as “Worthington National Bank” under a separate OCC charter and remain a separate subsidiary of BancFirst Corporation governed by its existing board of directors. BancFirst Corporation intends to provide an appropriate amount of capital or other support to increase Worthington’s ability to approve larger loans and allow Worthington to continue to grow earning assets. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $8.7 million and goodwill of approximately $26.6 million. These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements.

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 (the “Subordinated Notes”) to various institutional accredited investors. See Note (7) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

 

On May 20, 2021, the Company purchased approximately $284 million in total assets, which included approximately $195 million in loans, and assumed approximately $256 million in deposits and certain other obligations, from The First National Bank and Trust Company of Vinita, Oklahoma for a purchase price of approximately $21 million. The Company recorded a bargain purchase gain related to this purchase of approximately $4.8 million, which was included in other noninterest income on the statement of comprehensive income and in other operating activities on the statement of cash flow during the second quarter of 2021. The bargain purchase gain is a noncash item on the statement of cash flow. In addition, the Company recorded expenses related to this purchase of approximately $4.8 million, which were included in noninterest expense during the second quarter of 2021. As a result of the purchase, the Company recorded a core deposit intangible of approximately $1.7 million. The effect of this purchase was included in the consolidated financial statement of the Company from the date of purchase forward. The purchase did not have a material effect on the Company’s consolidated financial statements. The First National Bank and Trust Company of Vinita was a nationally chartered bank with two banking locations in Vinita and Grove, Oklahoma.

 

On January 22, 2021, the Company sold approximately $21 million in loans and approximately $38 million in deposits from its Hugo, Oklahoma branch to AmeriState Bank in Atoka, Oklahoma. The Company recorded a gain on the transaction of $2.5 million, which is included in noninterest income in the first quarter of 2021.

 

 

(3) SECURITIES

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

 

 

 

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

March 31, 2022

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

27

 

 

$

 

 

$

 

 

$

27

 

States and political subdivisions

 

 

2,390

 

 

 

 

 

 

 

 

 

2,390

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,917

 

 

$

 

 

$

 

 

$

2,917

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

32

 

 

$

1

 

 

$

 

 

$

33

 

States and political subdivisions

 

 

2,445

 

 

 

 

 

 

 

 

 

2,445

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

2,977

 

 

$

1

 

 

$

 

 

$

2,978

 

 

7


 

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

 

 

 

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair
Value

 

March 31, 2022

 

(Dollars in thousands)

 

U.S. treasuries

 

$

1,184,289

 

 

$

1,005

 

 

$

(38,996

)

 

$

1,146,298

 

U.S. federal agencies

 

 

20,216

 

 

 

320

 

 

 

(2

)

 

 

20,534

 

Mortgage backed securities (1)

 

 

21,708

 

 

 

51

 

 

 

(798

)

 

 

20,961

 

States and political subdivisions

 

 

4,861

 

 

 

76

 

 

 

(85

)

 

 

4,852

 

Asset backed securities

 

 

13,359

 

 

 

 

 

 

(79

)

 

 

13,280

 

Other securities

 

 

3,000

 

 

 

 

 

 

(174

)

 

 

2,826

 

Total

 

$

1,247,433

 

 

$

1,452

 

 

$

(40,134

)

 

$

1,208,751

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

455,701

 

 

$

3,693

 

 

$

(1,766

)

 

$

457,628

 

U.S. federal agencies

 

 

21,609

 

 

 

335

 

 

 

(2

)

 

 

21,942

 

Mortgage backed securities (1)

 

 

28,897

 

 

 

400

 

 

 

(14

)

 

 

29,283

 

States and political subdivisions

 

 

6,128

 

 

 

194

 

 

 

(3

)

 

 

6,319

 

Asset backed securities

 

 

13,354

 

 

 

3

 

 

 

 

 

 

13,357

 

Other securities

 

 

3,000

 

 

 

 

 

 

(6

)

 

 

2,994

 

Total

 

$

528,689

 

 

$

4,625

 

 

$

(1,791

)

 

$

531,523

 

 

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

 

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

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

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

Amortized
Cost

 

 

Estimated
Fair
Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

581

 

 

$

581

 

 

$

577

 

 

$

577

 

After one year but within five years

 

 

2,332

 

 

 

2,332

 

 

 

2,396

 

 

 

2,397

 

After five years but within ten years

 

 

4

 

 

 

4

 

 

 

4

 

 

 

4

 

After ten years

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

2,917

 

 

$

2,917

 

 

$

2,977

 

 

$

2,978

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

52,902

 

 

$

53,213

 

 

$

58,478

 

 

$

58,688

 

After one year but within five years

 

 

956,577

 

 

 

917,966

 

 

 

408,253

 

 

 

410,049

 

After five years but within ten years

 

 

189,828

 

 

 

190,010

 

 

 

10,851

 

 

 

11,011

 

After ten years

 

 

48,126

 

 

 

47,562

 

 

 

51,107

 

 

 

51,775

 

Total debt securities

 

$

1,247,433

 

 

$

1,208,751

 

 

$

528,689

 

 

$

531,523

 

The following table is a summary of the Company’s book value of securities that were pledged as collateral for public funds on deposit, repurchase agreements and for other purposes as required or permitted by law:

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

483,135

 

 

$

473,026

 

 

 

8


 

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

 

 

 

 

 

 

 

 

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

(Dollars in thousands)

 

Proceeds

 

$

222,473

 

 

$

 

Gross losses realized

 

 

3,990

 

 

 

 

During the three months ended March 31, 2022, the Company sold $226 million of debt securities with an average yield of 0.16%, which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. The Company used specific identification to reclassify the unrealized loss in other comprehensive income to a realized loss, as shown in the consolidated statements of comprehensive income. There were no sales of debt securities and therefore no proceeds from sales or realized securities gains or losses on available for sale debt securities for the three months ended March 31, 2021.

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

 

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

 

 

 

 

 

Less than 12 Months

 

 

More than 12 Months

 

 

Total

 

 

Number of investments

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Unrealized
Losses

 

 

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

50

 

 

$

1,030,589

 

 

$

38,875

 

 

$

4,876

 

 

$

121

 

 

$

1,035,465

 

 

$

38,996

 

U.S. federal agencies

 

2

 

 

 

403

 

 

 

2

 

 

 

 

 

 

 

 

 

403

 

 

 

2

 

Mortgage backed securities

 

63

 

 

 

20,084

 

 

 

798

 

 

 

 

 

 

 

 

 

20,084

 

 

 

798

 

States and political subdivisions

 

6

 

 

 

2,177

 

 

 

85

 

 

 

 

 

 

 

 

 

2,177

 

 

 

85

 

Asset backed securities

 

1

 

 

 

13,280

 

 

 

79

 

 

 

 

 

 

 

 

 

13,280

 

 

 

79

 

Other securities

 

1

 

 

 

2,826

 

 

 

174

 

 

 

 

 

 

 

 

 

2,826

 

 

 

174

 

Total

 

123

 

 

$

1,069,359

 

 

$

40,013

 

 

$

4,876

 

 

$

121

 

 

$

1,074,235

 

 

$

40,134

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

10

 

 

$

298,080

 

 

$

1,766

 

 

$

 

 

$

 

 

$

298,080

 

 

$

1,766

 

U.S. federal agencies

 

1

 

 

 

376

 

 

 

2

 

 

 

 

 

 

 

 

 

376

 

 

 

2

 

Mortgage backed securities

 

7

 

 

 

2,824

 

 

 

14

 

 

 

 

 

 

 

 

 

2,824

 

 

 

14

 

States and political subdivisions

 

2

 

 

 

505

 

 

 

3

 

 

 

 

 

 

 

 

 

505

 

 

 

3

 

Other securities

 

1

 

 

 

2,994

 

 

 

6

 

 

 

 

 

 

 

 

 

2,994

 

 

 

6

 

Total

 

21

 

 

$

304,779

 

 

$

1,791

 

 

$

 

 

$

 

 

$

304,779

 

 

$

1,791

 

 

The Company has the ability and intent to hold the debt securities classified as held for investment until they mature, at which time the Company will receive full value for the debt securities. Furthermore, as of March 31, 2022 and December 31, 2021, the Company also had the ability and intent to hold the debt securities classified as available for sale for a period of time sufficient for a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were purchased. The fair value of those debt securities having unrealized losses is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline. The Company has no intent or requirement to sell before the recovery of the unrealized loss; therefore, no impairment loss was realized in the Company’s consolidated statement of comprehensive income.

9


 

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

 

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

 

 

March 31, 2022

 

 

December 31, 2021

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

    Commercial real estate owner occupied

$

784,619

 

 

$

684,739

 

    Commercial real estate non-owner occupied

 

1,160,506

 

 

 

1,095,324

 

    Construction and development < 60 months

 

458,859

 

 

 

415,466

 

    Construction residential real estate < 60 months

 

282,027

 

 

 

254,524

 

    Residential real estate first lien

 

1,032,732

 

 

 

937,006

 

    Residential real estate all other

 

160,843

 

 

 

161,018

 

    Farmland

 

276,465

 

 

 

272,179

 

  Commercial and agricultural non-real estate

 

1,291,627

 

 

 

1,256,487

 

  Consumer non-real estate

 

419,490

 

 

 

413,370

 

  Oil and gas

 

427,792

 

 

 

428,908

 

  Other loans (2)

 

199,380

 

 

 

250,421

 

           Total (1)

$

6,494,340

 

 

$

6,169,442

 

(1) Excludes accrued interest receivable of $22.1 million at March 31, 2022 and $21.0 million at December 31, 2021, that is recorded in accrued interest receivable and other assets.

 

(2) Includes PPP loans held for investment of $30.6 million, net of unamortized processing fees of $394,000, at March 31, 2022 and $80.4 million, net of unamortized processing fees of $2.0 million, at December 31, 2021.

 

 

Other loans. 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. The Company had processing fees, which were recognized as interest income related to the PPP loans totaling $1.7 million and $9.8 million during the three months ended March 31, 2022 and 2021, respectively.

The Company's loans are currently 84% held by BancFirst and 16% held by Pegasus and Worthington. In addition, approximately 64% of the Company's loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual and related borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

 

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, 2021.

 

The Company's portfolio segment descriptions and the weighted average remaining life of portfolio segments are disclosed in Note (5) to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Troubled Debt Restructurings, Other Real Estate Owned and Repossessed Assets and Held for Sale Assets

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

 

 

 

 

 

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(Dollars in thousands)

 

Troubled debt restructurings

 

$

2,345

 

 

$

3,665

 

Other real estate owned and repossessed assets

 

$

39,729

 

 

$

39,553

 

The Company charges interest on principal balances outstanding on troubled debt restructurings during deferral periods. The current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings were not considered to be material.

Other real estate owned includes approximately $2.4 million related to the Company's previous headquarters. As of both March 31, 2022 and December 31, 2021, other real estate owned included a single commercial real estate property recorded at approximately $29.5 million.

10


 

During the three months ended March 31, 2022, the Company sold property held in other real estate owned for a total gain of $726,000, compared to a total loss of $55,000 in the three months ended March 31, 2021.

Nonaccrual loans

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $376,000 for the three months ended March 31, 2022 and approximately $521,000 for the three months ended March 31, 2021.

Nonaccrual loans guaranteed by government agencies totaled approximately $3.4 million at March 31, 2022 and approximately $3.3 million at December 31, 2021.

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

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

3,112

 

 

$

2,900

 

Commercial real estate non-owner occupied

 

 

407

 

 

 

407

 

Construction and development < 60 months

 

 

104

 

 

 

80

 

Construction residential real estate < 60 months

 

 

 

 

 

 

Residential real estate first lien

 

 

2,391

 

 

 

2,763

 

Residential real estate all other

 

 

133

 

 

 

280

 

Farmland

 

 

4,059

 

 

 

4,224

 

  Commercial and agricultural non-real estate

 

 

5,956

 

 

 

7,569

 

  Consumer non-real estate

 

 

111

 

 

 

148

 

  Oil and gas

 

 

 

 

 

1,070

 

  Other loans

 

 

1,180

 

 

 

1,451

 

Total

 

$

17,453

 

 

$

20,892

 

 

11


 

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

 

 

 

Age Analysis of Past Due Loans

 

 

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

 

 

(Dollars in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

731

 

 

$

4

 

 

$

1,621

 

 

$

2,356

 

 

$

782,263

 

 

$

784,619

 

 

$

 

Commercial real estate non-owner occupied

 

 

962

 

 

 

407

 

 

 

 

 

 

1,369

 

 

 

1,159,137

 

 

 

1,160,506

 

 

 

 

Construction and development < 60 months

 

 

106

 

 

 

 

 

 

 

 

 

106

 

 

 

458,753

 

 

 

458,859

 

 

 

 

Construction residential real estate < 60 months

 

 

97

 

 

 

 

 

 

 

 

 

97

 

 

 

281,930

 

 

 

282,027

 

 

 

 

Residential real estate first lien

 

 

3,815

 

 

 

744

 

 

 

2,177

 

 

 

6,736

 

 

 

1,025,996

 

 

 

1,032,732

 

 

 

1,369

 

Residential real estate all other

 

 

350

 

 

 

102

 

 

 

579

 

 

 

1,031

 

 

 

159,812

 

 

 

160,843

 

 

 

559

 

Farmland

 

 

595

 

 

 

433

 

 

 

3,245

 

 

 

4,273

 

 

 

272,192

 

 

 

276,465

 

 

 

37

 

  Commercial and agricultural non-real estate

 

 

6,486

 

 

 

2,994

 

 

 

2,891

 

 

 

12,371

 

 

 

1,279,256

 

 

 

1,291,627

 

 

 

214

 

  Consumer non-real estate

 

 

2,377

 

 

 

416

 

 

 

387

 

 

 

3,180

 

 

 

416,310

 

 

 

419,490

 

 

 

353

 

  Oil and gas

 

 

1,068

 

 

 

83

 

 

 

 

 

 

1,151

 

 

 

426,641

 

 

 

427,792

 

 

 

 

  Other loans

 

 

1,247

 

 

 

1,207

 

 

 

3,836

 

 

 

6,290

 

 

 

193,090

 

 

 

199,380

 

 

 

3,828

 

Total

 

$

17,834

 

 

$

6,390

 

 

$

14,736

 

 

$

38,960

 

 

$

6,455,380

 

 

$

6,494,340

 

 

$

6,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

972

 

 

$

223

 

 

$

1,363

 

 

$

2,558

 

 

$

682,181

 

 

$

684,739

 

 

$

18

 

Commercial real estate non-owner occupied

 

 

7,244

 

 

 

 

 

 

 

 

 

7,244

 

 

 

1,088,080

 

 

 

1,095,324

 

 

 

 

Construction and development < 60 months

 

 

136

 

 

 

 

 

 

 

 

 

136

 

 

 

415,330

 

 

 

415,466

 

 

 

 

Construction residential real estate < 60 months

 

 

2,264

 

 

 

 

 

 

 

 

 

2,264

 

 

 

252,260

 

 

 

254,524

 

 

 

 

Residential real estate first lien

 

 

3,351

 

 

 

567

 

 

 

2,817

 

 

 

6,735

 

 

 

930,271

 

 

 

937,006

 

 

 

1,704

 

Residential real estate all other

 

 

293

 

 

 

30

 

 

 

451

 

 

 

774

 

 

 

160,244

 

 

 

161,018

 

 

 

431

 

Farmland

 

 

253

 

 

 

37

 

 

 

2,077

 

 

 

2,367

 

 

 

269,812

 

 

 

272,179

 

 

 

139

 

  Commercial and agricultural non-real estate

 

 

1,807

 

 

 

199

 

 

 

4,574

 

 

 

6,580

 

 

 

1,249,907

 

 

 

1,256,487

 

 

 

124

 

  Consumer non-real estate

 

 

1,873

 

 

 

321

 

 

 

272

 

 

 

2,466

 

 

 

410,904

 

 

 

413,370

 

 

 

254

 

  Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

428,908

 

 

 

428,908

 

 

 

 

  Other loans

 

 

1,773

 

 

 

347

 

 

 

2,646

 

 

 

4,766

 

 

 

245,655

 

 

 

250,421

 

 

 

2,294

 

Total

 

$

19,966

 

 

$

1,724

 

 

$

14,200

 

 

$

35,890

 

 

$

6,133,552

 

 

$

6,169,442

 

 

$

4,964

 

 

Credit Quality Indicators

The Company considers credit quality indicators to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical credit loss experience and economic conditions. These indicators are reviewed and updated regularly throughout the year. An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions. The general characteristics of the risk grades and the table summarizing the Company’s gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2021, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

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

 

12


 

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Revolving Loans Amortized Cost Basis

 

 

Total

 

 

 

(Dollars in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

53,454

 

 

$

130,071

 

 

$

115,334

 

 

$

94,782

 

 

$

49,997

 

 

$

120,371

 

 

$

24,862

 

 

$

588,871

 

Grade 2

 

 

39,504

 

 

 

39,029

 

 

 

33,297

 

 

 

22,802

 

 

 

9,986

 

 

 

35,244

 

 

 

10,657

 

 

 

190,519

 

Grade 3

 

 

 

 

 

42

 

 

 

459

 

 

 

601

 

 

 

258

 

 

 

541

 

 

 

212

 

 

 

2,113

 

Grade 4

 

 

 

 

 

303

 

 

 

591

 

 

 

870

 

 

 

200

 

 

 

845

 

 

 

307

 

 

 

3,116

 

Total commercial real estate owner occupied

 

 

92,958

 

 

 

169,445

 

 

 

149,681

 

 

 

119,055

 

 

 

60,441

 

 

 

157,001

 

 

 

36,038

 

 

 

784,619

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

27,931

 

 

 

258,527

 

 

 

208,346

 

 

 

116,081

 

 

 

51,072

 

 

 

118,840

 

 

 

37,306

 

 

 

818,103

 

Grade 2

 

 

18,461

 

 

 

52,282

 

 

 

46,895

 

 

 

50,872

 

 

 

42,738

 

 

 

88,046

 

 

 

29,259

 

 

 

328,553

 

Grade 3

 

 

7,063

 

 

 

 

 

 

 

 

 

3,206

 

 

 

107

 

 

 

2,828

 

 

 

 

 

 

13,204

 

Grade 4

 

 

 

 

 

407

 

 

 

 

 

 

 

 

 

207

 

 

 

32

 

 

 

 

 

 

646

 

Total commercial real estate non-owner occupied

 

 

53,455

 

 

 

311,216

 

 

 

255,241

 

 

 

170,159

 

 

 

94,124

 

 

 

209,746

 

 

 

66,565

 

 

 

1,160,506

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

53,028

 

 

 

162,575

 

 

 

39,428

 

 

 

42,116

 

 

 

3,719

 

 

 

6,572

 

 

 

35,506

 

 

 

342,944

 

Grade 2

 

 

14,386

 

 

 

32,079

 

 

 

4,323

 

 

 

13,028

 

 

 

1,825

 

 

 

1,314

 

 

 

44,553

 

 

 

111,508

 

Grade 3

 

 

1,198

 

 

 

3,000

 

 

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,303

 

Grade 4

 

 

 

 

 

 

 

 

33

 

 

 

54

 

 

 

 

 

 

17

 

 

 

 

 

 

104

 

Total construction and development < 60 months

 

 

68,612

 

 

 

197,654

 

 

 

43,889

 

 

 

55,198

 

 

 

5,544

 

 

 

7,903

 

 

 

80,059

 

 

 

458,859

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

54,418

 

 

 

159,373

 

 

 

4,522

 

 

 

33

 

 

 

 

 

 

46

 

 

 

26,274

 

 

 

244,666

 

Grade 2

 

 

8,528

 

 

 

23,471

 

 

 

473

 

 

 

 

 

 

 

 

 

419

 

 

 

3,957

 

 

 

36,848

 

Grade 3

 

 

410

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

513

 

Total construction residential real estate < 60 months

 

 

63,356

 

 

 

182,947

 

 

 

4,995

 

 

 

33

 

 

 

 

 

 

465

 

 

 

30,231

 

 

 

282,027

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

82,439

 

 

 

255,075

 

 

 

172,583

 

 

 

102,582

 

 

 

65,952

 

 

 

174,331

 

 

 

7,895

 

 

 

860,857

 

Grade 2

 

 

11,906

 

 

 

41,467

 

 

 

28,275

 

 

 

15,303

 

 

 

12,622

 

 

 

46,039

 

 

 

 

 

 

155,612

 

Grade 3

 

 

1,293

 

 

 

1,506

 

 

 

886

 

 

 

1,839

 

 

 

1,936

 

 

 

4,688

 

 

 

 

 

 

12,148

 

Grade 4

 

 

 

 

 

131

 

 

 

239

 

 

 

418

 

 

 

983

 

 

 

2,344

 

 

 

 

 

 

4,115

 

Total residential real estate first lien

 

 

95,638

 

 

 

298,179

 

 

 

201,983

 

 

 

120,142

 

 

 

81,493

 

 

 

227,402

 

 

 

7,895

 

 

 

1,032,732

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

5,357

 

 

 

15,974

 

 

 

13,307

 

 

 

7,665

 

 

 

4,976

 

 

 

14,588

 

 

 

31,325

 

 

 

93,192

 

Grade 2

 

 

933

 

 

 

2,028

 

 

 

2,342

 

 

 

1,895

 

 

 

1,470

 

 

 

3,044

 

 

 

52,937

 

 

 

64,649

 

Grade 3

 

 

40

 

 

 

304

 

 

 

95

 

 

 

88

 

 

 

254

 

 

 

946

 

 

 

559

 

 

 

2,286

 

Grade 4

 

 

 

 

 

13

 

 

 

178

 

 

 

 

 

 

38

 

 

 

101

 

 

 

386

 

 

 

716

 

Total residential real estate all other

 

 

6,330

 

 

 

18,319

 

 

 

15,922

 

 

 

9,648

 

 

 

6,738

 

 

 

18,679

 

 

 

85,207

 

 

 

160,843

 

 Farmland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

15,574

 

 

 

44,160

 

 

 

35,899

 

 

 

23,593

 

 

 

12,282

 

 

 

36,405

 

 

 

5,763

 

 

 

173,676

 

Grade 2

 

 

4,505

 

 

 

16,679

 

 

 

7,874

 

 

 

22,007

 

 

 

6,381

 

 

 

16,671

 

 

 

13,102

 

 

 

87,219

 

Grade 3

 

 

1,346

 

 

 

2,896

 

 

 

1,862

 

 

 

1,873

 

 

 

70

 

 

 

2,704

 

 

 

1,880

 

 

 

12,631

 

Grade 4

 

 

 

 

 

1,125

 

 

 

379

 

 

 

 

 

 

979

 

 

 

224

 

 

 

232

 

 

 

2,939

 

Total farmland

 

 

21,425

 

 

 

64,860

 

 

 

46,014

 

 

 

47,473

 

 

 

19,712

 

 

 

56,004

 

 

 

20,977

 

 

 

276,465

 

 Commercial and agricultural non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

77,553

 

 

 

296,814

 

 

 

93,424

 

 

 

75,665

 

 

 

20,679

 

 

 

67,573

 

 

 

315,085

 

 

 

946,793

 

Grade 2

 

 

17,955

 

 

 

75,007

 

 

 

30,905

 

 

 

20,516

 

 

 

27,531

 

 

 

12,032

 

 

 

138,823

 

 

 

322,769

 

Grade 3

 

 

1,562

 

 

 

2,516

 

 

 

1,717

 

 

 

1,136

 

 

 

2,259

 

 

 

1,105

 

 

 

7,479

 

 

 

17,774

 

Grade 4

 

 

358

 

 

 

799

 

 

 

266

 

 

 

947

 

 

 

509

 

 

 

1,171

 

 

 

241

 

 

 

4,291

 

Total commercial and agricultural non-real estate

 

 

97,428

 

 

 

375,136

 

 

 

126,312

 

 

 

98,264

 

 

 

50,978

 

 

 

81,881

 

 

 

461,628

 

 

 

1,291,627

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

55,988

 

 

 

175,287

 

 

 

67,276

 

 

 

36,818

 

 

 

13,972

 

 

 

5,867

 

 

 

21,964

 

 

 

377,172

 

Grade 2

 

 

6,002

 

 

 

16,755

 

 

 

6,569

 

 

 

4,973

 

 

 

1,806

 

 

 

2,179

 

 

 

1,749

 

 

 

40,033

 

Grade 3

 

 

136

 

 

 

636

 

 

 

299

 

 

 

364

 

 

 

129

 

 

 

103

 

 

 

3

 

 

 

1,670

 

Grade 4

 

 

51

 

 

 

143

 

 

 

84

 

 

 

224

 

 

 

110

 

 

 

3

 

 

 

 

 

 

615

 

Total consumer non-real estate

 

 

62,177

 

 

 

192,821

 

 

 

74,228

 

 

 

42,379

 

 

 

16,017

 

 

 

8,152

 

 

 

23,716

 

 

 

419,490

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

91,575

 

 

 

122,401

 

 

 

32,400

 

 

 

8,174

 

 

 

1,174

 

 

 

110

 

 

 

93,578

 

 

 

349,412

 

Grade 2

 

 

7,623

 

 

 

8,352

 

 

 

8,426

 

 

 

5,558

 

 

 

9,919

 

 

 

278

 

 

 

30,820

 

 

 

70,976

 

Grade 3

 

 

 

 

 

4,914

 

 

 

9

 

 

 

 

 

 

 

 

 

227

 

 

 

1,185

 

 

 

6,335

 

Grade 4

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69

 

 

 

1,069

 

Total oil and gas

 

 

99,198

 

 

 

136,667

 

 

 

40,835

 

 

 

13,732

 

 

 

11,093

 

 

 

615

 

 

 

125,652

 

 

 

427,792

 

 Other loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

 

5,658

 

 

 

60,549

 

 

 

38,097

 

 

 

26,158

 

 

 

18,786

 

 

 

14,429

 

 

 

30,235

 

 

 

193,912

 

Grade 2

 

 

 

 

 

296

 

 

 

 

 

 

 

 

 

65

 

 

 

2,933

 

 

 

471

 

 

 

3,765

 

Grade 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140

 

 

 

82

 

 

 

1,052

 

 

 

1,274

 

Grade 4

 

 

 

 

 

 

 

 

17

 

 

 

109

 

 

 

169

 

 

 

52

 

 

 

82

 

 

 

429

 

Total other loans

 

 

5,658

 

 

 

60,845

 

 

 

38,114

 

 

 

26,267

 

 

 

19,160

 

 

 

17,496

 

 

 

31,840

 

 

 

199,380

 

Total loans held for investment

 

$

666,235

 

 

$

2,008,089

 

 

$

997,214

 

 

$

702,350

 

 

$

365,300

 

 

$

785,344

 

 

$

969,808

 

 

$

6,494,340

 

 

13


 

 

Allowance for Credit Losses Methodology

 

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

The increase in allowance for credit loss during 2022 was primarily related to the purchase of loans without credit deterioration during the quarter. The decrease in the allowance for credit loss during 2021 was driven by a reversal of a pandemic-related provision during 2021 based on sustained improvements in the economy, both nationally and in the Company's markets, which reduced the amount of expected credit loss within the loan portfolio. This reduction was partially offset by additional allowance for credit loss required by newly acquired loans.

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

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Initial allowance on loans purchased with credit deterioration

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,410

 

 

$

 

 

$

(16

)

 

$

48

 

 

$

32

 

 

$

346

 

 

$

6,788

 

Commercial real estate non-owner occupied

 

 

16,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,687

 

 

 

20,674

 

Construction and development < 60 months

 

 

3,490

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

(184

)

 

 

3,309

 

Construction residential real estate < 60 months

 

 

1,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,072

 

 

 

2,164

 

Residential real estate first lien

 

 

3,076

 

 

 

2

 

 

 

(44

)

 

 

7

 

 

 

(37

)

 

 

380

 

 

 

3,421

 

Residential real estate all other

 

 

2,104

 

 

 

 

 

 

 

 

 

402

 

 

 

402

 

 

 

(399

)

 

 

2,107

 

Farmland

 

 

4,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(439

)

 

 

4,383

 

  Commercial and agricultural non-real estate

 

 

26,073

 

 

 

48

 

 

 

(171

)

 

 

113

 

 

 

(58

)

 

 

(77

)

 

 

25,986

 

  Consumer non-real estate

 

 

3,734

 

 

 

28

 

 

 

(80

)

 

 

38

 

 

 

(42

)

 

 

51

 

 

 

3,771

 

  Oil and gas

 

 

12,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,573

)

 

 

11,405

 

  Other loans

 

 

3,170

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

 

 

72

 

 

 

3,231

 

Total

 

$

83,936

 

 

$

78

 

 

$

(322

)

 

$

611

 

 

$

289

 

 

$

2,936

 

 

$

87,239

 

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,911

 

 

$

 

 

$

 

 

$

 

 

$

(406

)

 

$

6,505

 

Commercial real estate non-owner occupied

 

 

12,318

 

 

 

(38

)

 

 

 

 

 

(38

)

 

 

5,219

 

 

 

17,499

 

Construction and development < 60 months

 

 

2,723

 

 

 

 

 

 

3

 

 

 

3

 

 

 

217

 

 

 

2,943

 

Construction residential real estate < 60 months

 

 

726

 

 

 

 

 

 

 

 

 

 

 

 

366

 

 

 

1,092

 

Residential real estate first lien

 

 

2,822

 

 

 

(43

)

 

 

15

 

 

 

(28

)

 

 

143

 

 

 

2,937

 

Residential real estate all other

 

 

2,236

 

 

 

(16

)

 

 

3

 

 

 

(13

)

 

 

(343

)

 

 

1,880

 

Farmland

 

 

3,153

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

3,088

 

  Commercial and agricultural non-real estate

 

 

33,020

 

 

 

(104

)

 

 

27

 

 

 

(77

)

 

 

922

 

 

 

33,865

 

  Consumer non-real estate

 

 

3,542

 

 

 

(413

)

 

 

112

 

 

 

(301

)

 

 

180

 

 

 

3,421

 

  Oil and gas

 

 

20,733

 

 

 

 

 

 

 

 

 

 

 

 

(6,293

)

 

 

14,440

 

  Other loans

 

 

3,182

 

 

 

(52

)

 

 

 

 

 

(52

)

 

 

60

 

 

 

3,190

 

Total

 

$

91,366

 

 

$

(666

)

 

$

160

 

 

$

(506

)

 

$

 

 

$

90,860

 

 

 

14


 

Purchased Credit Deteriorated Loans

 

The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The Company did not purchase credit-deteriorated loans during the three-month period ended March 31, 2021. The credit-deteriorated loans purchased during the three months ended March 31, 2022 were as follows:

 

 

 

Loans acquired
with deteriorated
credit quality

 

 

 

(Dollars in thousands)

 

For the period ended March 31, 2022

 

 

 

Purchase price of loans at acquisition

 

$

661

 

Allowance for credit losses at acquisition

 

 

78

 

Par value of acquired loans at acquisition

 

$

739

 

 

 

 

 

 

 

15


 

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. During the three months ended March 31, 2022 and 2021, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

1,894

 

 

$

 

 

$

 

 

$

 

 

$

1,894

 

 

$

569

 

Commercial real estate non-owner occupied

 

 

1,563

 

 

 

 

 

 

 

 

 

 

 

 

1,563

 

 

 

282

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate first lien

 

 

756

 

 

 

 

 

 

 

 

 

 

 

 

756

 

 

 

107

 

Residential real estate all other

 

 

55

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

35

 

Farmland

 

 

7,290

 

 

 

 

 

 

 

 

 

 

 

 

7,290

 

 

 

1,322

 

  Commercial and agricultural non-real estate

 

 

 

 

 

5,072

 

 

 

 

 

 

5,777

 

 

 

10,849

 

 

 

4,451

 

  Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

85

 

 

 

85

 

 

 

57

 

  Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Other loans

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

110

 

 

 

72

 

Total collateral-dependent loans held for investment

 

$

11,558

 

 

$

5,182

 

 

$

 

 

$

5,862

 

 

$

22,602

 

 

$

6,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

1,952

 

 

$

 

 

$

 

 

$

 

 

$

1,952

 

 

$

576

 

Commercial real estate non-owner occupied

 

 

1,404

 

 

 

 

 

 

 

 

 

 

 

 

1,404

 

 

 

263

 

Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate first lien

 

 

871

 

 

 

 

 

 

 

 

 

 

 

 

871

 

 

 

143

 

Residential real estate all other

 

 

199

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

178

 

Farmland

 

 

8,703

 

 

 

 

 

 

 

 

 

 

 

 

8,703

 

 

 

1,805

 

  Commercial and agricultural non-real estate

 

 

 

 

 

6,363

 

 

 

 

 

 

5,202

 

 

 

11,565

 

 

 

4,867

 

  Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

54

 

 

 

20

 

  Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Other loans

 

 

 

 

 

109

 

 

 

 

 

 

 

 

 

109

 

 

 

71

 

Total collateral-dependent loans held for investment

 

$

13,129

 

 

$

6,472

 

 

$

 

 

$

5,256

 

 

$

24,857

 

 

$

7,923

 

Non-Cash Transfers from Loans and Premises and Equipment

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

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

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

2,153

 

 

$

357

 

Repossessed assets

 

 

277

 

 

 

220

 

Total

 

$

2,430

 

 

$

577

 

 

16


 

 

(5) INTANGIBLE ASSETS AND GOODWILL

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

 

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

36,154

 

 

$

(11,087

)

 

$

25,067

 

Customer relationship intangibles

 

 

3,350

 

 

 

(2,961

)

 

 

389

 

Total

 

$

39,504

 

 

$

(14,048

)

 

$

25,456

 

December 31, 2021

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

$

27,433

 

 

$

(10,311

)

 

$

17,122

 

Customer relationship intangibles

 

 

3,350

 

 

 

(2,906

)

 

 

444

 

Total

 

$

30,783

 

 

$

(13,217

)

 

$

17,566

 

 

The following is a summary of goodwill by business segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metropolitan Banks

 

 

Community Banks

 

 

Pegasus

 

 

Worthington

 

 

Other Financial Services

 

 

Executive, Operations & Support

 

 

Consolidated

 

 

 

(Dollars in thousands)

 

Three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

13,767

 

 

$

61,212

 

 

$

68,855

 

 

$

 

 

$

5,464

 

 

$

624

 

 

$

149,922

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

26,641

 

 

 

 

 

 

 

 

 

26,641

 

Balance at beginning and end of period

 

$

13,767

 

 

$

61,212

 

 

$

68,855

 

 

$

26,641

 

 

$

5,464

 

 

$

624

 

 

$

176,563

 

The Company acquired Worthington on February 8, 2022, which added core deposit intangibles and goodwill shown in the tables above. See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions.

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, 2021.

 

(6) LEASES

 

Lessee

 

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.

 

The following table presents rent expense for all operating leases, including those rented on a monthly or temporary basis as of the periods indicated:

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Rental expense

 

$

425

 

 

$

503

 

 

As of March 31, 2022, the right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $5.0 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $4.9 million. As of March 31, 2022, the Company's operating leases have a weighted-average remaining lease term of 3.5 years and a weighted-average discount rate of 2.5 percent.

17


 

 

The following table presents minimum future commitments by year for the Company’s operating leases. Such commitments are reflected as undiscounted values and are reconciled to the discounted present value recognized on the balance sheet.

 

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

2022 (nine months)

 

$

1,085

 

2023

 

 

1,106

 

2024

 

 

742

 

2025

 

 

687

 

2026

 

 

597

 

Thereafter

 

 

1,402

 

Total lease payments

 

 

5,619

 

Less imputed Interest

 

 

(731

)

Operating lease liability

 

$

4,888

 

 

 

Lessor

 

The Company is a lessor of operating leases, which primarily consist of office space in buildings and parking lots. These assets are classified on the balance sheet as premises and equipment. The Company had operating lease revenue of $1.3 million and $1.4 million for the three months ended March 31, 2022 and 2021, respectively. Lease revenue is included in occupancy, net on the consolidated statement of comprehensive income.

 

The Company does not have operating leases that extend beyond 2031. The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases:

 

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

2022 (nine months)

 

$

2,741

 

2023

 

 

2,956

 

2024

 

 

2,886

 

2025

 

 

2,197

 

2026

 

 

1,847

 

2027-2031

 

 

3,559

 

Total future minimum lease payments

 

$

16,186

 

 

(7) SUBORDINATED DEBT

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

 

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

18


 

31, 2021. Then, from and including June 30, 2031, to but excluding the maturity date, the Subordinated Notes will bear interest at a floating rate equal to the benchmark (initially, three-month term SOFR), reset quarterly, plus a spread of 229 basis points, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Subordinated Notes mature on June 30, 2036.

 

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

 

(8) STOCK-BASED COMPENSATION

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, 2022, there were 116,000 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. Options expire no later than the end of fifteen years from the date of grant. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

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 March 31, 2022, there were 40,000 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. 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 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.

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 net cash settlement of options of $5.5 million that did not increase the outstanding shares of the Company.

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

 

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

 

 

 

 

 

 

Wgtd. Avg.

 

 

Remaining

 

Aggregate

 

 

 

 

 

 

Exercise

 

 

Contractual

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

Value

 

 

 

(Dollars in thousands, except option data)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2021

 

 

1,303,250

 

 

$

40.90

 

 

 

 

 

 

Options granted

 

 

42,500

 

 

 

77.32

 

 

 

 

 

 

Options exercised

 

 

(116,292

)

 

 

25.71

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

1,229,458

 

 

 

43.59

 

 

8.39 Yrs

 

$

48,705

 

Exercisable at March 31, 2022

 

 

516,083

 

 

 

29.07

 

 

7.15 Yrs

 

$

27,941

 

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

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Total intrinsic value of options exercised

 

$

5,964

 

 

$

7,303

 

Cash received from options exercised

 

 

2,989

 

 

 

3,966

 

Tax benefit realized from options exercised

 

 

1,434

 

 

 

1,860

 

 

19


 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility and the expected term. The fair value of each option is expensed over its vesting period.

The following table is a summary of the Company’s recorded stock-based compensation expense:

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Stock-based compensation expense

 

$

458

 

 

$

576

 

Tax benefit

 

 

110

 

 

 

147

 

Stock-based compensation expense, net of tax

 

$

348

 

 

$

429

 

The Company will continue to amortize the unearned stock-based compensation expense over the remaining vesting period of approximately seven years. The following table shows the unearned stock-based compensation expense:

 

 

 

March 31, 2022

 

 

 

(Dollars in thousands)

 

Unearned stock-based compensation expense

 

$

7,780

 

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method on options granted during the periods presented:

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

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

 

$

26.21

 

 

$

23.80

 

Risk-free interest rate

 

1.75 to 2.14%

 

 

1.34 to1.64%

 

Dividend yield

 

2.00%

 

 

2.00%

 

Stock price volatility

 

34.61 to 34.69%

 

 

35.55 to 35.73%

 

Expected term

 

10 Yrs

 

 

10 Yrs

 

The risk-free interest rate is determined by reference to the spot zero-coupon rate for the U.S. Treasury security with a maturity similar to the expected term of the options. The dividend yield is the expected yield for the expected term. The stock price volatility is estimated from the recent historical volatility of the Company’s stock. The expected term is estimated from the historical option exercise experience. The Company accounts for forfeitures as they occur.

The Company has had the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “Deferred Stock Compensation Plan”) since May 1999. As of March 31, 2022, there are 31,914 shares available for future issuance under the Deferred Stock Compensation Plan. The Deferred Stock Compensation Plan will terminate on December 31, 2024, if not extended. Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 100% of their board fees. They are credited for each deferral with a number of stock units based on the current market price of the Company’s stock, which accumulate in an account until such time as the director or community board member terminates serving as a board member. Shares of common stock of the Company are then distributed to the terminating director or community board member based upon the number of stock units accumulated in his or her account. There were 6,177 and 2,161 shares of common stock distributed from the Deferred Stock Compensation Plan during the three months ended March 31, 2022 and 2021, respectively.

A summary of the accumulated stock units is as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accumulated stock units

 

 

148,788

 

 

 

152,754

 

Average price

 

$

31.82

 

 

$

30.86

 

 

 

20


 

 

(9) STOCKHOLDERS’ EQUITY

In November 1999, the Company adopted the SRP. The SRP may be used as a means to increase earnings per share and return on equity. In addition, the SRP may be used to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options and to provide liquidity for stockholders wishing to sell their stock. All shares repurchased under the SRP have been retired and not held as treasury stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee. During September 2021, the SRP was amended to permit the repurchase of an additional 650,000 shares.

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

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Number of shares repurchased

 

 

 

 

 

 

Average price of shares repurchased

 

$

 

 

$

 

Shares remaining to be repurchased

 

 

500,486

 

 

 

62,782

 

BancFirst Corporation, BancFirst, Pegasus and Worthington are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“FDIC”). These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of BancFirst Corporation’s, BancFirst’s, Pegasus’s and Worthington's assets, liabilities and certain off-balance-sheet items calculated under regulatory practices. Failure to meet the minimum capital requirements can initiate certain mandatory or discretionary actions by the regulatory agencies that could have a direct material effect on the Company’s financial statements. The Company believes that as of March 31, 2022, BancFirst Corporation, BancFirst, Pegasus and Worthington met all capital adequacy requirements to which they are subject. The actual and required capital amounts and ratios are shown in the following table:

 

 

 

 

 

 

 

 

Required

 

 

 

To Be Well

 

 

 

 

 

 

 

For Capital

 

With

 

Capitalized Under

 

 

 

 

 

 

 

Adequacy

 

Capital Conservation

 

Prompt Corrective

 

 

Actual

 

Purposes

 

Buffer

 

Action Provisions

 

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

Amount

 

 

Ratio

 

 

(Dollars in thousands)

As of March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,167,735

 

 

15.99%

 

$

584,236

 

 

8.00%

 

$

766,810

 

 

10.50%

 

N/A

 

 

N/A

BancFirst

 

 

1,010,124

 

 

16.25%

 

 

497,404

 

 

8.00%

 

 

652,843

 

 

10.50%

 

$

621,755

 

 

10.00%

Pegasus

 

 

95,969

 

 

11.83%

 

 

64,878

 

 

8.00%

 

 

85,153

 

 

10.50%

 

 

81,098

 

 

10.00%

Worthington

 

 

39,569

 

 

15.45%

 

 

20,490

 

 

8.00%

 

 

26,893

 

 

10.50%

 

 

25,613

 

 

10.00%

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

995,299

 

 

13.63%

 

$

328,633

 

 

4.50%

 

$

511,207

 

 

7.00%

 

N/A

 

 

N/A

BancFirst

 

 

912,401

 

 

14.67%

 

 

279,790

 

 

4.50%

 

 

435,229

 

 

7.00%

 

$

404,141

 

 

6.50%

Pegasus

 

 

89,376

 

 

11.02%

 

 

36,494

 

 

4.50%

 

 

56,768

 

 

7.00%

 

 

52,714

 

 

6.50%

Worthington

 

 

36,365

 

 

14.20%

 

 

11,526

 

 

4.50%

 

 

17,929

 

 

7.00%

 

 

16,648

 

 

6.50%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Risk Weighted Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,021,299

 

 

13.98%

 

$

438,177

 

 

6.00%

 

$

620,751

 

 

8.50%

 

N/A

 

 

N/A

BancFirst

 

 

932,401

 

 

15.00%

 

 

373,053

 

 

6.00%

 

 

528,492

 

 

8.50%

 

$

497,404

 

 

8.00%

Pegasus

 

 

89,376

 

 

11.02%

 

 

48,659

 

 

6.00%

 

 

68,933

 

 

8.50%

 

 

64,878

 

 

8.00%

Worthington

 

 

36,365

 

 

14.20%

 

 

15,368

 

 

6.00%

 

 

21,771

 

 

8.50%

 

 

20,490

 

 

8.00%

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(to Total Assets)-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BancFirst Corporation

 

$

1,021,299

 

 

8.66%

 

$

471,735

 

 

4.00%

 

N/A

 

 

N/A

 

N/A

 

 

N/A

BancFirst

 

 

932,401

 

 

9.08%

 

 

410,756

 

 

4.00%

 

N/A

 

 

N/A

 

$

513,445

 

 

5.00%

Pegasus

 

 

89,376

 

 

6.81%

 

 

52,515

 

 

4.00%

 

N/A

 

 

N/A

 

 

65,644

 

 

5.00%

Worthington

 

 

36,365

 

 

7.65%

 

 

19,019

 

 

4.00%

 

N/A

 

 

N/A

 

 

23,774

 

 

5.00%

 

21


 

As of March 31, 2022, the most recent notifications from the Federal Reserve Bank of Kansas City, the FDIC and the Comptroller of the Currency, categorized BancFirst, Pegasus and Worthington as “well capitalized” under the prompt corrective action provisions. The Common Equity Tier 1 Capital of BancFirst Corporation, BancFirst, Pegasus and Worthington includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, the election was made to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 Capital. Common Equity Tier 1 Capital for BancFirst Corporation, BancFirst, Pegasus and Worthington is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. The Company’s trust preferred securities have continued to be included in Tier 1 capital, as the Company’s total assets do not exceed $15 billion. There are no conditions or events since the most recent notifications to BancFirst Corporation, BancFirst, Pegasus and Worthington of their capital category that management believes would materially change their category under capital requirements existing as of the report date.

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of Subordinated Notes. The Subordinated Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines.

In April 2020, the Company began originating loans to qualified small businesses under the PPP administered by the SBA. Federal bank regulatory agencies have issued an interim final rule that permits banks to neutralize the regulatory capital effects of participating in the Paycheck Protection Program Lending Facility (the “PPP Facility”) and clarify that PPP loans have a zero percent risk weight under applicable risk-based capital rules. Specifically, a bank may exclude all PPP loans pledged as collateral to the PPP Facility from its average total consolidated assets for the purposes of calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility are included. The PPP loans the Company originated in 2021 and 2020 are included in the calculation of the Company’s leverage ratio as of March 31, 2022 as the Company did not utilize the PPP Facility for funding purposes.

 

(10) NET INCOME PER COMMON SHARE

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

 

 

 

Income
(Numerator)

 

 

Shares
(Denominator)

 

 

Per Share
Amount

 

 

 

(Dollars in thousands, except per share data)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

35,915

 

 

 

32,666,916

 

 

$

1.10

 

Dilutive effect of stock options

 

 

 

 

 

648,417

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

35,915

 

 

 

33,315,333

 

 

$

1.08

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

42,520

 

 

 

32,756,852

 

 

$

1.30

 

Dilutive effect of stock options

 

 

 

 

 

651,264

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

Income available to common stockholders plus assumed exercises of stock options

 

$

42,520

 

 

 

33,408,116

 

 

$

1.27

 

 

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:

 

 

 

Shares

 

Three Months Ended March 31, 2022

 

 

105,278

 

Three Months Ended March 31, 2021

 

 

110,144

 

 

 

 

22


 

 

(11) FAIR VALUE MEASUREMENTS

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

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

Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. This category includes certain collaterally dependent loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

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

A description of the valuation methodologies and key inputs used to measure financial assets and financial liabilities at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to the following categories of the Company’s financial assets and financial liabilities.

Debt Securities Available for Sale

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

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

Derivatives

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

23


 

 

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of the periods presented, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

 

 

Level 1 Inputs

 

 

Level 2 Inputs

 

 

Level 3 Inputs

 

 

Total Fair Value

 

 

 

(Dollars in thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,146,298

 

 

$

 

 

$

 

 

$

1,146,298

 

U.S. federal agencies

 

 

 

 

 

20,534

 

 

 

 

 

 

20,534

 

Mortgage-backed securities

 

 

 

 

 

20,961

 

 

 

 

 

 

20,961

 

States and political subdivisions

 

 

 

 

 

4,612

 

 

 

240

 

 

 

4,852

 

Asset backed securities

 

 

 

 

 

13,280

 

 

 

 

 

 

13,280

 

Other debt securities

 

 

 

 

 

2,826

 

 

 

 

 

 

2,826

 

Derivative assets

 

 

 

 

 

62,701

 

 

 

 

 

 

62,701

 

Derivative liabilities

 

 

 

 

 

61,651

 

 

 

 

 

 

61,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

457,628

 

 

$

 

 

$

 

 

$

457,628

 

U.S. federal agencies

 

 

 

 

 

21,942

 

 

 

 

 

 

21,942

 

Mortgage-backed securities

 

 

 

 

 

29,283

 

 

 

 

 

 

29,283

 

States and political subdivisions

 

 

 

 

 

5,999

 

 

 

320

 

 

 

6,319

 

Asset backed securities

 

 

 

 

 

13,357

 

 

 

 

 

 

13,357

 

Other debt securities

 

 

 

 

 

2,994

 

 

 

 

 

 

2,994

 

Derivative assets

 

 

 

 

 

8,946

 

 

 

 

 

 

8,946

 

Derivative liabilities

 

 

 

 

 

8,237

 

 

 

 

 

 

8,237

 

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

 

 

 

Three Months Ended March 31,

 

 

Twelve Months Ended
December 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Balance at the beginning of the year

 

$

320

 

 

$

12,869

 

Transfers to level 2

 

 

 

 

 

(12,714

)

Purchases

 

 

 

 

 

240

 

Settlements

 

 

(80

)

 

 

(75

)

Balance at the end of the period

 

$

240

 

 

$

320

 

The Company’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting period. During the three months ended March 31, 2022, the Company did not transfer any debt securities. During the year ended December 31, 2021, the Company transferred debt securities from Level 3 to Level 2 due to a review of the pricing models that determined some asset backed debt securities to be Level 2.

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

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

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

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

24


 

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

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

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

The following table summarizes assets measured at fair value on a nonrecurring basis during the period presented. The fair value represents end of period values, which approximate fair value measurements that occurred on various measurement dates throughout the period:

 

 

 

Total Fair Value

 

 

 

Level 3

 

 

 

(Dollars in thousands)

 

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

 

 

 

Equity securities

 

$

10,187

 

Collateral dependent loans

 

 

642

 

Repossessed assets

 

 

96

 

Other real estate owned

 

 

279

 

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

 

 

 

Equity securities

 

$

10,590

 

Collateral dependent loans

 

 

13,195

 

Repossessed assets

 

 

78

 

Other real estate owned

 

 

7,496

 

 

Estimated Fair Value of Financial Instruments

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

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

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

Federal Funds Sold

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

Debt Securities Held for Investment

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

Loans Held For Sale

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

Loans

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

25


 

values are estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair values of other types of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits

The fair values of transaction and savings accounts are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using the rates currently offered for deposits of similar remaining maturities.

Short-Term Borrowings

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

Subordinated Debt

The fair values of subordinated debt are estimated using the rates that would be charged for subordinated debt of similar remaining maturities.

Loan Commitments and Letters of Credit

The fair values of commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the terms of the agreements. The fair values of letters of credit are based on fees currently charged for similar agreements.

The estimated fair values of the Company’s financial instruments that are reported at amortized cost in the Company’s consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

Carrying
Amount

 

 

Fair Value

 

 

Carrying
Amount

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,091,404

 

 

$

4,091,404

 

 

$

2,050,022

 

 

$

2,050,022

 

Federal funds sold

 

 

3,489

 

 

 

3,489

 

 

 

800

 

 

 

800

 

Debt securities held for investment

 

 

27

 

 

 

27

 

 

 

32

 

 

 

33

 

Loans held for sale

 

 

10,137

 

 

 

10,137

 

 

 

24,776

 

 

 

24,776

 

Level 3 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities held for investment

 

 

2,890

 

 

 

2,890

 

 

 

2,945

 

 

 

2,945

 

Loans, net of allowance for credit losses

 

 

6,407,101

 

 

 

6,276,465

 

 

 

6,085,506

 

 

 

6,059,716

 

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Level 2 inputs:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,250,971

 

 

 

11,258,118

 

 

 

8,091,914

 

 

 

8,161,553

 

Short-term borrowings

 

 

3,300

 

 

 

3,300

 

 

 

 

 

 

 

Subordinated debt

 

 

86,001

 

 

 

85,736

 

 

 

85,987

 

 

 

90,391

 

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments

 

 

 

 

 

3,958

 

 

 

 

 

 

3,648

 

Letters of credit

 

 

 

 

 

522

 

 

 

 

 

 

621

 

Non-financial Assets and Non-financial Liabilities Measured at Fair Value

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Certain non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis include intangible assets and other non-financial long-lived assets measured at fair value and adjusted for impairment. These items are evaluated at least annually for impairment. The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were not considered to be significant to the Company at March 31, 2022 or December 31, 2021.

 

 

26


 

 

(12) DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company enters into oil and gas swaps and options contracts to accommodate the business needs of its customers. Upon the origination of an oil or gas swap or option contract with a customer, to mitigate the exposure to fluctuations in oil and gas prices, the Company simultaneously enters into an offsetting contract with a counterparty. These derivatives are not designated as hedged instruments and are recorded on the Company's consolidated balance sheet at fair value and are included in other assets. The Company's derivative financial instruments require a daily margin to be posted, which fluctuates with oil and gas prices. These margins have increased during 2022 due to the current increase in oil and gas prices and customer activity. These margins are included in other assets totaling $84.6 million at March 31, 2022 and $14.3 million at December 31, 2022.

 

The Company utilizes dealer quotations and observable market data inputs to substantiate internal valuation models. The notional amounts and estimated fair values of oil and gas derivative positions outstanding are presented in the following table:

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Oil and Natural Gas Swaps and Options

 

Notional Units

 

Notional
Amount

 

 

Estimated
Fair Value

 

 

Notional
Amount

 

 

Estimated
Fair Value

 

 

 

 

 

(Notional amounts and dollars in thousands)

 

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Barrels

 

 

3,622

 

 

$

40,556

 

 

 

2,585

 

 

$

6,563

 

Derivative liabilities

 

Barrels

 

 

(3,622

)

 

 

(39,883

)

 

 

(2,585

)

 

 

(6,129

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

MMBTUs

 

 

24,462

 

 

 

22,145

 

 

 

19,752

 

 

 

2,383

 

Derivative liabilities

 

MMBTUs

 

 

(24,462

)

 

 

(21,768

)

 

 

(19,752

)

 

 

(2,108

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Fair Value

 

Included in

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

Other assets

 

 

 

 

 

62,701

 

 

 

 

 

 

8,946

 

Derivative liabilities

 

Other liabilities

 

 

 

 

 

(61,651

)

 

 

 

 

 

(8,237

)

 

The following table is a summary of the Company's recognized income related to the activity, which was included in other noninterest income:

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Derivative income

 

$

159

 

 

$

2

 

 

 

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

 

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

 

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

 

Balance Sheet Offsetting

 

Derivatives may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company's derivative transactions with upstream financial institution counterparties and bank customers are generally executed under International Swaps and Derivative Association ("ISDA") master agreements, which include "right of set-off" provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments for financial reporting purposes.

 

 

 

27


 

(13) SEGMENT INFORMATION

The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The six principal business units are metropolitan banks, community banks, Pegasus, Worthington, other financial services and executive, operations and support. Metropolitan banks, community banks, Pegasus and Worthington offer traditional banking products such as commercial and retail lending and a full line of deposit accounts. Metropolitan banks consist of banking locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Pegasus consists of banking locations in the Dallas metropolitan area. Worthington consists of banking locations in the Fort Worth metropolitan area. Other financial services are specialty product business units including guaranteed small business lending, residential mortgage lending, trust services, securities brokerage, electronic banking and insurance. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units.

The results of operations and selected financial information for the six business units are as follows:

 

 

Metropolitan
Banks

 

 

Community
Banks

 

 

Pegasus

 

 

Worthington

 

 

Other
Financial
Services

 

 

Executive,
Operations
& Support

 

 

Eliminations

 

 

Consolidated

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

19,608

 

 

$

44,568

 

 

$

7,620

 

 

$

1,694

 

 

$

2,913

 

 

$

(907

)

 

$

11

 

 

$

75,507

 

Noninterest income

 

 

9,773

 

 

 

16,845

 

 

 

191

 

 

 

133

 

 

 

12,983

 

 

 

42,574

 

 

 

(38,849

)

 

 

43,650

 

Income before taxes

 

 

18,171

 

 

 

31,339

 

 

 

2,827

 

 

 

385

 

 

 

6,045

 

 

 

23,648

 

 

 

(38,706

)

 

 

43,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

19,333

 

 

$

42,770

 

 

$

5,359

 

 

$

 

 

$

9,882

 

 

$

(407

)

 

$

269

 

 

$

77,206

 

Noninterest income

 

 

5,144

 

 

 

14,976

 

 

 

384

 

 

 

 

 

 

11,575

 

 

 

49,731

 

 

 

(41,875

)

 

 

39,935

 

Income before taxes

 

 

13,924

 

 

 

29,769

 

 

 

1,645

 

 

 

 

 

 

5,951

 

 

 

42,340

 

 

 

(41,451

)

 

 

52,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2022

 

$

3,514,435

 

 

$

6,868,166

 

 

$

1,461,916

 

 

$

517,238

 

 

$

91,699

 

 

$

1,591,150

 

 

$

(1,420,173

)

 

$

12,624,431

 

December 31, 2021

 

 

2,627,874

 

 

 

5,821,220

 

 

 

1,045,699

 

 

 

 

 

 

71,694

 

 

 

1,201,974

 

 

 

(1,362,849

)

 

 

9,405,612

 

 

The financial information for each business unit is presented on the basis used internally by management to evaluate performance and allocate resources. The Company utilizes a transfer pricing system to allocate the benefit or cost of funds provided or used by the various business units. Certain services provided by the support group to other business units, such as item processing, are allocated at rates approximating the cost of providing the services. Eliminations are adjustments to consolidate the business units and companies.

 

28


 

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, 2022 and December 31, 2021 and results of operations for the three months ended March 31, 2022 should be read in conjunction with our consolidated financial statements and notes to the financial statements for the year ended December 31, 2021, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2021 Form 10-K, and "Item 1A, Risk Factors" in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

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 probability the Durbin Amendment will impact non-interest income.
Political pressures could further limit our ability to charge for NSF and overdraft fees.
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, including wage inflation, interest rates, energy prices, securities markets and monetary fluctuations.
The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.
The COVID-19 pandemic’s adverse effects on us and our customers, employees and third-party service providers, which may materially affect our business, financial position, operations and prospects.
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.

29


 

SUMMARY

 

The Company’s net income for the first quarter of 2022 was $35.9 million, compared to $42.5 million for the first quarter of 2021. Diluted net income per common share was $1.08 and $1.27 for the first quarter of 2022 and 2021, respectively. The Company’s net interest income for the first quarter of 2022 decreased to $75.5 million, compared to $77.2 million for the first quarter of 2021. The decrease was due to the decline of PPP fee income of approximately $8.1 million, partially offset by the increase in interest income on debt securities of $2.0 million, an increase of $1.2 million related to interest-bearing deposits at the Federal Reserve and $1.7 million in net interest income related to the Worthington acquisition. The net interest margin for the first quarter was 2.78%, compared to 3.36% a year ago. The decrease in margin was due to lower PPP fees earned during the quarter and an increase in cash held at the Federal Reserve. For the first quarter of 2022 a provision of $2.9 million was recorded, which was substantially related to acquired loans during the quarter, compared to no provision for credit losses recorded for March 31, 2021. Noninterest income for the first quarter of 2022 totaled $43.7 million, compared to $39.9 million for the first quarter of 2021. The increase in noninterest income was mostly attributable to $4.9 million of income resulting from the application of equity method accounting related to an equity interest received in the process of a loan collection, along with a $2.3 million increase in income from service charges on deposits and $1.4 million increase in insurance commissions. The increase in non-interest income was partially offset by a loss of $4.0 million on bonds resulting from the sale of $226 million of low yielding debt securities, which were subsequently reinvested in higher yielding debt securities and a $2.6 million gain on sale of other assets in the first quarter last year. Noninterest expense for the first quarter of 2022 increased to $72.5 million compared to $65.0 million for the first quarter of 2021 because of the increase in salaries and employee benefits of approximately $4.4 million and other expenses related to the Worthington acquisition. The Company’s effective tax rate was 17.8% for the first quarter of 2022 compared to 18.5% for the first quarter of 2021. The lower effective tax rate was driven by the exercising of stock options during the quarter and a lower state income tax rate.

At March 31, 2022, the Company’s total assets were $12.6 billion, an increase of $3.2 billion from December 31, 2021. Debt securities of $1.2 billion were up $677.2 million from December 31, 2021. Loans totaled $6.5 billion, an increase of $310.3 million from December 31, 2021. Loans increased $257.4 million due to the acquisition of Worthington. At March 31, 2022, the balance of the PPP loans was $30.6 million, compared to $80.4 million at December 31, 2021. Deposits totaled $11.3 billion, an increase of $3.2 billion from the December 31, 2021 total. The increase in assets and deposits from December 31, 2021 was primarily related to the return of off-balance sheet sweep accounts related to the Company’s year-end sweep program. Off-balance sheet sweep accounts totaled $2.9 billion at March 31, 2022 compared to $5.1 billion at December 31, 2021. The Company’s total stockholders’ equity at March 31, 2022 was $1.2 billion, a decrease of $3.9 million over December 31, 2021. The decrease in stockholders equity was due to unrealized losses included in other comprehensive income.

 

Nonaccrual loans represented 0.27% of total loans at March 31, 2022, down from 0.34% at December 31, 2021. The allowance for credit losses to total loans was 1.34% at March 31, 2022 compared to 1.36% at December 31, 2021, and the allowance for credit losses to nonaccrual loans was approximately 500% at March 31, 2022 compared to 402% at December 31, 2021. At March 31, 2022, the Company’s nonaccrual loans were $17.5 million compared to $20.9 million at year-end 2021.

 

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

 

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to the Consolidated Financial Statements for disclosures regarding changes in the Company’s disclosures regarding recently issued accounting pronouncements since December 31, 2021, the date of its most recent annual report to stockholders.

SEGMENT INFORMATION

See Note (13) of the Notes to the Consolidated Financial Statements for disclosures regarding business segments.

RESULTS OF OPERATIONS

Average Balances, Income, Expenses and Rates

The following table presents, for the periods indicated, certain information related to the Company's average balance sheet, 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.

30


 

 

BANCFIRST CORPORATION

 

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

 

(Unaudited)

 

Taxable Equivalent Basis

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

Interest

 

 

Average

 

 

 

 

 

Interest

 

 

Average

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

Balance

 

 

Expense

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

 

$

6,359,795

 

 

$

73,066

 

 

 

4.66

%

 

$

6,400,845

 

 

$

77,766

 

 

 

4.93

%

Debt securities – taxable

 

 

1,105,222

 

 

 

3,781

 

 

 

1.39

 

 

 

521,698

 

 

 

1,693

 

 

 

1.32

 

Debt securities – tax exempt

 

 

4,774

 

 

 

34

 

 

 

2.93

 

 

 

19,340

 

 

 

88

 

 

 

1.84

 

Federal funds sold and interest-bearing deposits with banks

 

 

3,548,875

 

 

 

1,758

 

 

 

0.20

 

 

 

2,387,000

 

 

 

595

 

 

 

0.10

 

Total earning assets

 

 

11,018,666

 

 

 

78,639

 

 

 

2.89

 

 

 

9,328,883

 

 

 

80,142

 

 

 

3.48

 

Nonearning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

269,015

 

 

 

 

 

 

 

 

 

268,848

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

785,248

 

 

 

 

 

 

 

 

 

683,868

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(85,228

)

 

 

 

 

 

 

 

 

(90,551

)

 

 

 

 

 

 

Total nonearning assets

 

 

969,035

 

 

 

 

 

 

 

 

 

862,165

 

 

 

 

 

 

 

Total assets

 

$

11,987,701

 

 

 

 

 

 

 

 

$

10,191,048

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

942,178

 

 

$

191

 

 

 

0.08

%

 

$

766,994

 

 

$

149

 

 

 

0.08

%

Savings deposits

 

 

4,170,503

 

 

 

1,141

 

 

 

0.11

 

 

 

3,504,020

 

 

 

1,106

 

 

 

0.13

 

Time deposits

 

 

654,091

 

 

 

649

 

 

 

0.40

 

 

 

657,938

 

 

 

1,067

 

 

 

0.66

 

Short-term borrowings

 

 

2,459

 

 

 

1

 

 

 

0.12

 

 

 

2,928

 

 

 

1

 

 

 

0.19

 

Subordinated debt

 

 

85,992

 

 

 

1,030

 

 

 

4.86

 

 

 

26,804

 

 

 

491

 

 

 

7.43

 

Total interest-bearing liabilities

 

 

5,855,223

 

 

 

3,012

 

 

 

0.21

 

 

 

4,958,684

 

 

 

2,814

 

 

 

0.23

 

Interest-free funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,883,050

 

 

 

 

 

 

 

 

 

4,106,084

 

 

 

 

 

 

 

Interest payable and other liabilities

 

 

67,688

 

 

 

 

 

 

 

 

 

41,522

 

 

 

 

 

 

 

Stockholders’ equity

 

 

1,181,740

 

 

 

 

 

 

 

 

 

1,084,758

 

 

 

 

 

 

 

Total interest free funds

 

 

6,132,478

 

 

 

 

 

 

 

 

 

5,232,364

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

11,987,701

 

 

 

 

 

 

 

 

$

10,191,048

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

75,627

 

 

 

 

 

 

 

 

$

77,328

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

2.68

%

 

 

 

 

 

 

 

 

3.25

%

Effect of interest free funds

 

 

 

 

 

 

 

 

0.10

%

 

 

 

 

 

 

 

 

0.11

%

Net interest margin

 

 

 

 

 

 

 

 

2.78

%

 

 

 

 

 

 

 

 

3.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

31


 

 

 

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,

 

 

 

2022

 

 

2021

 

Income Statement Data

 

 

 

 

 

 

Net interest income

 

$

75,507

 

 

$

77,206

 

Provision for credit losses

 

 

2,936

 

 

 

 

Securities transactions

 

 

(3,915

)

 

 

95

 

Total noninterest income

 

 

43,650

 

 

 

39,935

 

Salaries and employee benefits

 

 

43,932

 

 

 

39,577

 

Total noninterest expense

 

 

72,512

 

 

 

64,963

 

Net income

 

 

35,915

 

 

 

42,520

 

Per Common Share Data

 

 

 

 

 

 

Net income – basic

 

$

1.10

 

 

$

1.30

 

Net income – diluted

 

 

1.08

 

 

 

1.27

 

Cash dividends

 

 

0.36

 

 

 

0.34

 

Performance Data

 

 

 

 

 

 

Return on average assets

 

 

1.22

%

 

 

1.69

%

Return on average stockholders’ equity

 

 

12.33

 

 

 

15.90

 

Cash dividend payout ratio

 

 

32.73

 

 

 

26.15

 

Net interest spread

 

 

2.68

 

 

 

3.25

 

Net interest margin

 

 

2.78

 

 

 

3.36

 

Efficiency ratio

 

 

60.85

 

 

 

55.46

 

Net charge-offs to average loans

 

 

0.00

 

 

 

0.01

 

Net Interest Income

For the three months ended March 31, 2022, net interest income, which is the Company’s principal source of operating revenue, decreased $1.7 million or 2.2% compared to the three months ended March 31, 2021. The decrease was due to the decline of PPP fee income of approximately $8.1 million, partially offset by the increase in interest income on debt securities of $2.0 million, an increase of $1.2 million related to interest-bearing deposits at the Federal Reserve and $1.7 million in net interest income related to the Worthington acquisition. 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 2022 decreased compared to the first quarter of 2021. The decrease in margin was due to lower PPP fees earned during the quarter and an increase in cash held at the Federal Reserve.

The Company’s net interest income and net interest margin have been impacted by the decreases in interest rates stemming from the Federal Reserve's response to the COVID-19 pandemic. However, the Company's expectation is that interest rates will increase during the year.

Provision for Credit Losses

For the first quarter of 2022, the Company recorded a provision for credit losses of $2.9 million, which was substantially related to acquired loans during the quarter, compared to no provision for credit losses recorded for the first quarter of 2021. 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 $289,000 for the first quarter of 2022, compared to net loan charge-offs of $506,000 for the first quarter of 2021. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a low level.

32


 

Noninterest Income

Noninterest income, as presented in the preceding table, increased by $3.7 million for the first quarter of 2022 compared to the first quarter of 2021. The increase in noninterest income was mostly attributable to $4.9 million of income resulting from the application of equity method accounting related to an equity interest received in the process of a loan collection, along with a $2.3 million increase in income from service charges on deposits and $1.4 million increase in insurance commissions. The increase in non-interest income was partially offset by a loss of $4.0 million on bonds resulting from the sale of $226 million of low yielding debt securities, which were subsequently reinvested in higher yielding debt securities, and a $2.6 million gain on sale of other assets in the first quarter last year.

Noninterest income included non-sufficient funds fees totaling $6.5 million and $5.5 million for the three months ended March 31, 2022 and 2021, respectively. This represents 15.0% and 13.8% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card interchange fees totaling $11.7 million and $10.7 million during the three months ended March 31, 2022 and 2021, respectively. This represents 26.7% of the Company’s noninterest income for both periods.

The Company is subject to political pressures that could limit its ability to charge for non-sufficient funds ("NSF") and overdraft fees. It is expected that recent changes to the Company's rates charged on NSF and overdraft fees will lower annual pretax income by $6 to $7 million.

It is probable the Company will exceed $10 billion in total assets at December 31, 2022. Pursuant to the Durbin Amendment of the Dodd-Frank Act, based on current run rates, this would trigger an approximate reduction of annual pretax income from debit card interchange fees of between $22 to $24 million beginning July 1, 2023.

Noninterest Expense

Noninterest expense, as presented in the preceding table, increased by $7.5 million for first quarter of 2022 compared to the first quarter of 2021. The increase in noninterest expenses was due to the increase in salaries and employee benefits of approximately $4.4 million and other expenses related to the Worthington acquisition.

 

Income Taxes

 

The Company’s effective tax rate was 17.8% for the first quarter of 2022, compared to 18.5% for the first quarter of 2021. The lower effective tax rate was driven by the exercising of stock options during the first quarter of 2022 and a lower state income tax rate. 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.

 

33


 

FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

Total assets

 

$

12,624,431

 

 

$

9,405,612

 

Total loans (net of unearned interest)

 

 

6,504,477

 

 

 

6,194,218

 

Allowance for credit losses

 

 

87,239

 

 

 

83,936

 

Debt securities

 

 

1,211,668

 

 

 

534,500

 

Deposits

 

 

11,250,971

 

 

 

8,091,914

 

Stockholders' equity

 

 

1,167,802

 

 

 

1,171,734

 

Book value per share

 

 

35.68

 

 

 

35.94

 

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

 

 

29.51

 

 

 

30.80

 

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

 

 

 

 

Stockholders' equity

 

$

1,167,802

 

 

$

1,171,734

 

Less goodwill

 

 

176,563

 

 

 

149,922

 

Less intangible assets, net

 

 

25,456

 

 

 

17,566

 

Tangible stockholders' equity (non-GAAP)

 

$

965,783

 

 

$

1,004,246

 

Common shares outstanding

 

 

32,725,587

 

 

 

32,603,118

 

Tangible book value per share (non-GAAP)

 

$

29.51

 

 

$

30.80

 

Selected Financial Ratios

 

 

 

 

 

 

Balance Sheet Ratios:

 

 

 

 

 

 

Average loans to deposits (year-to-date)

 

 

59.72

%

 

 

64.27

%

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

 

 

91.92

 

 

 

91.96

 

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

 

 

9.86

 

 

 

10.32

 

Asset Quality Data

 

 

 

 

 

 

Loans past due 90 days and still accruing

 

$

6,360

 

 

$

4,964

 

Nonaccrual loans (3)

 

 

17,453

 

 

 

20,892

 

Restructured loans

 

 

2,345

 

 

 

3,665

 

Total nonperforming and restructured loans

 

 

26,158

 

 

 

29,521

 

Other real estate owned and repossessed assets

 

 

39,729

 

 

 

39,553

 

Total nonperforming and restructured assets

 

 

65,887

 

 

 

69,074

 

Asset Quality Ratios:

 

 

 

 

 

 

Nonaccrual loans to total loans

 

 

0.27

%

 

 

0.34

%

Nonperforming and restructured loans to total loans

 

 

0.40

 

 

 

0.48

 

Nonperforming and restructured assets to total assets

 

 

0.52

 

 

 

0.73

 

Allowance for credit losses to total loans

 

 

1.34

 

 

 

1.36

 

Allowance for credit losses to nonperforming and restructured loans

 

 

333.51

 

 

 

284.33

 

Allowance for credit losses to nonaccrual loans

 

 

499.83

 

 

 

401.76

 

(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 $3.4 million of nonaccrual loans at March 31, 2022.

 

Cash and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks and interest-bearing deposits with banks increased by $2.0 billion or 99.6% to $4.1 billion, from December 31, 2021 to March 31, 2022. The increase was primarily related to the return of off-balance sheet sweep accounts related to the Company’s year-end sweep program, which was partially off-set by the purchase of higher yielding bonds described below.

Securities

 

At March 31, 2022, total debt securities increased $677.2 million, or 126.7% compared to December 31, 2021. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized loss on debt securities available for sale, before taxes, was $38.7 million at March 31, 2022, compared to a net unrealized gain of $2.8 million at December 31, 2021. These unrealized losses and gains are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of a loss of $29.5 million at March 31, 2022 and a gain of $2.2 million at December 31, 2021. During the quarter ended March 31, 2022, the Company had a loss of $4.0 million on bonds resulting from the sale

34


 

of $226 million of debt securities with an average yield of 0.16%, which were subsequently reinvested in $220 million of debt securities with an average yield of 1.86%. On January 10, 2022, the Company purchased United States Treasury Notes of $600 million par value with an average yield of 1.42% and an average maturity of 53 months.

 

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

Loans

 

At March 31, 2022, total loans increased $310.3 million or 5.0% compared to December 31, 2021. Loans increased $257.4 million due to the acquisition of Worthington. At March 31, 2022, the balance of total PPP loans was $30.6 million, net of unamortized processing fees of approximately $394,000 compared to $80.4 million, net of unamortized processing fees of $2.0 million at December 31, 2021.

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

Allowance for Credit Losses

 

The increase in the allowance for credit loss during 2022 was substantially related to the additional allowance for credit loss required by newly acquired loans. The decrease in the allowance for credit loss during 2021 was driven by a reversal of a pandemic-related provision during 2021 based on sustained improvements in the economy, both nationally and in the Company's markets, which reduced the amount of expected credit loss within the loan portfolio. This reduction was partially offset by additional allowance for credit loss required by newly acquired loans.

Nonperforming and Restructured Assets

At March 31, 2022, nonperforming and restructured assets decreased $3.2 million to $65.9 million compared to December 31, 2021. The Company’s level of nonperforming and restructured assets has continued to be relatively low, equating to 0.52% of total assets at March 31, 2022 and 0.73% of total assets at December 31, 2021.

Nonaccrual loans totaled $17.5 million at March 31, 2022, compared to $20.9 million at December 31, 2021. The Company’s nonaccrual loans decreased $3.4 million from December 31, 2021 due to resolutions of several loans. 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, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $376,000 for the three months ended March 31, 2022 and $521,000 for the three months ended March 31, 2021. Only a small amount of this interest is expected to be ultimately collected. Approximately $3.4 million of nonaccrual loans were guaranteed by government agencies at March 31, 2022.

Restructured loans totaled $2.3 million at March 31, 2022 compared to $3.7 million at December 31, 2021. 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 declines. The above normal risk associated with nonperforming loans has been considered in the determination of the allowance for credit losses. At March 31, 2022, the allowance for credit losses as a percentage of nonperforming and restructured loans was 333.51%, compared to 284.33%, at December 31, 2021. The level of nonperforming loans and credit losses could rise over time as a result of adverse economic conditions.

Other real estate owned (OREO) and repossessed assets totaled $39.7 million at March 31, 2022, compared to $39.6 million at December 31, 2021. Other real estate owned consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. As of both March 31, 2022 and December 31, 2021, other real estate owned included a commercial real estate property recorded at approximately $29.5 million. The Company's rental income from OREO was approximately $2.8 million for the three months ended March 31, 2022 compared to approximately $2.4 million for the three months ended March 31, 2021. In addition, the Company's OREO holding expense was approximately $2.5 million for the three months ended March 31, 2022 compared to approximately $1.5 million for the three months ended March 31, 2021. Other real estate owned and repossessed assets are carried at the lower of the book values of the related loans or fair values based upon appraisals, less estimated costs to sell. 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

35


 

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.

Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $202.0 million and $167.5 million at March 31, 2022 and December 31, 2021, respectively. The increase in goodwill and intangible assets was due the acquisition of Worthington on February 8, 2022, which added approximately $8.7 million of core deposit intangibles and approximately $26.6 million of goodwill. See Note (2) of the Notes to Consolidated Financial Statements for disclosure regarding the Company’s recent developments, including mergers and acquisitions.

Other assets includes the cash surrender value of key-man life insurance policies totaling $81.0 million at March 31, 2022 and $81.4 million at December 31, 2021.

The Company's derivative financial instruments are included in other assets and totaled $62.7 million at March 31, 2022 and $8.9 million at December 31, 2022. The derivative financial instruments have increased due to the increase in oil and gas prices and customer activity. The Company's derivative financial instruments require a daily margin to be posted, which fluctuates with oil and gas prices. These margins have increased during 2022 due to the current increase in oil and gas prices and customer activity. These margins are included in other assets totaling $84.6 million at March 31, 2022 and $14.3 million at December 31, 2022. See Note (12) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s derivative financial instruments.

Equity securities are reported in other assets on the balance sheet. The Company invests in equity securities without readily determinable fair values. These equity securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $10.2 million at March 31, 2022 and $10.6 million at December 31, 2021. The Company reviews its portfolio of equity securities for impairment at least quarterly.

Low Income Housing and New Market Tax Credit Investments

During 2022, 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, 2021, for disclosures regarding these 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.

There have not been any other material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Deposits

At March 31, 2022, deposits totaled $11.3 billion, an increase of $3.2 billion or 39.0% from the December 31, 2021 total. The increase in deposits was primarily related to the return of off-balance sheet sweep accounts related to the Company’s year-end sweep program. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 98.5% at March 31, 2022 and 98.2% at December 31, 2021. Noninterest-bearing deposits to total deposits were 46.4% at March 31, 2022, compared to 46.7% at December 31, 2021.

 

In addition, off-balance sheet sweep accounts totaled $2.9 billion at March 31, 2022 compared to $5.1 billion at December 31, 2021, which included a temporary sweep amount of approximately $2.3 billion. The year-end sweep program affected the balances of both assets and deposits.

36


 

Subordinated Debt

On June 17, 2021, the Company completed a private placement, under Regulation D of the Securities Act of 1933, of $60 million aggregate principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2036 to various institutional accredited investors. See Note (7) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

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 $3.3 million at March 31, 2022. The Company did not have short-term borrowings at December 31, 2021.

Lines of Credit

BancFirst 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. In addition, BancFirst has a $25.0 million line of credit with another financial institution that is an overnight federal funds facility. As of March 31, 2022 and December 31, 2021, BancFirst had no advances outstanding under either line of credit. Pegasus has a $20.0 million line of credit with another financial institution that is an overnight federal funds facility. As of March 31, 2022 and December 31, 2021, Pegasus had no advances outstanding under its line of credit. Worthington has an $8.5 million line of credit with another financial institution that is an overnight federal funds facility, and a line of credit from the FHLB of Dallas, Texas to use for liquidity or to match-fund certain long-term fixed rate loans. Worthington had no advances outstanding as of March 31, 2022 under either line of credit.

Capital Resources

Stockholders’ equity totaled $1.2 billion at both March 31, 2022 and December 31, 2021. In addition to net income of $35.9 million, other changes in stockholders’ equity during the three months ended March 31, 2022 included $3.1 million related to common stock issuances for stock option exercises and $458,000 related to stock-based compensation, that were partially offset by $11.8 million in dividends and a $31.7 million decrease in accumulated other comprehensive income. The Company’s leverage ratio and total risk-based capital ratios at March 31, 2022, were well in excess of the regulatory requirements.

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

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, 2021.

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Company’s disclosures regarding market risk since December 31, 2021, the date of its most recent annual report to stockholders.

 

Item 4. Controls and Procedures.

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

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

37


 

PART II – OTHER INFORMATION

 

 

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

 

Item 1A. Risk Factors.

As of March 31, 2022, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

None.

 

Item 5. Other Information.

None.

38


 

Item 6. Exhibits.

 

Exhibit
Number

 

Exhibit

 

 

 

 

 

 

2.1

 

Share Exchange Agreement by and between BancFirst Corporation and Pegasus Bank dated April 23, 2019 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K/A dated April 25, 2019 and incorporated herein by reference).

 

3.1

 

Amended and Restated By-Laws of BancFirst Corporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated July 27, 2021 and incorporated herein by reference).

 

 

 

3.2

 

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

 

 

 

4.1

 

Instruments defining the rights of securities holders (see Exhibits 3.1 and 3.2 above).

 

4.2

 

Description of Registrant’s Securities (filed as Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

 

4.3

 

Form of Amended and Restated Trust Agreement relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

 

 

 

4.4

 

Form of 7.20% Cumulative Trust Preferred Security Certificate for BFC Capital Trust II (filed as Exhibit D to Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

 

 

 

4.5

 

Form of Indenture relating to the 7.20% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust II (filed as Exhibit 4.1 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

 

 

 

4.6

 

Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (filed as Exhibit 4.2 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).

 

 

 

4.7

 

Form of Guarantee of BancFirst Corporation relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.7 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).

 

 

 

10.1

 

BancFirst Corporation Employee Stock Ownership and Trust Agreement adopted effective January 1, 2015 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2015 and incorporated herein by reference).

 

10.2

 

Amendment Number One to the BancFirst Corporation Employee Stock Ownership Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).

 

 

 

10.3

 

BancFirst Corporation Employee Stock Ownership Plan 2019 Amendment Number One (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

 

 

 

10.4

 

Adoption Agreement for the BancFirst Corporation Thrift Plan adopted April 21, 2016 effective January 1, 2016. (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2016 and incorporated herein by reference).

 

10.5

 

Amendment Number One to the BancFirst Corporation Thrift Plan. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).

 

10.6

 

2019 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference).

 

 

 

10.7

 

2020 Amendment BancFirst Corporation Thrift Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form

8-K for dated December 17, 2020 and incorporated herein by reference).

 

 

 

10.8

 

Amended and Restated BancFirst Corporation Stock Option Plan. (filed as exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

 

39


 

 

 

 

10.9

 

Amended and Restated BancFirst Corporation Non-Employee Directors’ Stock Option Plan. (filed as exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

 

 

 

10.10

 

Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan. (filed as exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2021 and incorporated herein by reference).

 

 

 

10.11

 

Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).

 

10.12

 

First Amendment to Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).

 

 

 

10.13

 

Subordinated Note Purchase Agreement. (filed as exhibit 10.1 to the Company's Current Report on Form 8-K dated June 17, 2021 and incorporated herein by reference).

 

 

 

31.1*

 

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

 

 

 

31.2*

 

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

 

 

 

32*

 

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

 

 

 

101.INS*

 

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

 

 

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104*

 

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

 

 

 

 

* Filed herewith.

 

40


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

BANCFIRST CORPORATION

 

 

(Registrant)

 

 

 

Date: May 6, 2022

 

/s/ David Harlow

 

 

David Harlow

 

 

President

 

 

Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Date: May 6, 2022

 

/s/ Kevin Lawrence

 

 

Kevin Lawrence

 

 

Executive Vice President

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

41