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, 2019

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.)

 

101 N. Broadway, Oklahoma City, Oklahoma

 

73102-8405

(Address of principal executive offices)

 

(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

 

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  

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

As of April 30, 2019 there were 32,626,588 shares of the registrant’s Common Stock outstanding.

 

 

 


PART I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

 

2019

 

 

 

2018

 

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

185,958

 

 

$

228,431

 

Interest-bearing deposits with banks

 

 

1,291,447

 

 

 

1,195,824

 

Securities held for investment (fair value: $1,223 and $1,433, respectively)

 

 

1,217

 

 

 

1,428

 

Securities available for sale at fair value

 

 

723,655

 

 

 

770,704

 

Loans held for sale

 

 

7,719

 

 

 

8,174

 

  Loans (net of unearned interest)

 

 

5,042,502

 

 

 

4,975,976

 

  Allowance for loan losses

 

 

(52,915

)

 

 

(51,389

)

Loans, net of allowance for loan losses

 

 

4,989,587

 

 

 

4,924,587

 

Premises and equipment, net

 

 

177,950

 

 

 

174,362

 

Other real estate owned

 

 

6,172

 

 

 

6,690

 

Intangible assets, net

 

 

15,701

 

 

 

16,470

 

Goodwill

 

 

79,749

 

 

 

79,749

 

Accrued interest receivable and other assets

 

 

229,845

 

 

 

167,839

 

Total assets

 

$

7,709,000

 

 

$

7,574,258

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

2,659,584

 

 

$

2,613,876

 

Interest-bearing

 

 

4,046,802

 

 

 

3,991,619

 

Total deposits

 

 

6,706,386

 

 

 

6,605,495

 

Short-term borrowings

 

 

5,200

 

 

 

1,675

 

Accrued interest payable and other liabilities

 

 

42,683

 

 

 

37,495

 

Junior subordinated debentures

 

 

26,804

 

 

 

26,804

 

Total liabilities

 

 

6,781,073

 

 

 

6,671,469

 

 

 

 

 

 

 

 

 

 

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: 32,617,788 and 32,603,926, respectively

 

 

32,618

 

 

 

32,604

 

  Capital surplus

 

 

150,195

 

 

 

149,709

 

  Retained earnings

 

 

744,713

 

 

 

722,615

 

  Accumulated other comprehensive loss, net of income tax of $137

      and $(731), respectively

 

 

401

 

 

 

(2,139

)

Total stockholders' equity

 

 

927,927

 

 

 

902,789

 

Total liabilities and stockholders' equity

 

$

7,709,000

 

 

$

7,574,258

 

 

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,

 

 

 

 

2019

 

 

 

2018

 

INTEREST INCOME

 

 

 

 

 

 

 

 

Loans, including fees

 

$

68,730

 

 

$

62,919

 

Securities:

 

 

 

 

 

 

 

 

Taxable

 

 

4,335

 

 

 

1,898

 

Tax-exempt

 

 

126

 

 

 

171

 

Federal funds sold

 

 

2

 

 

 

104

 

Interest-bearing deposits with banks

 

 

7,748

 

 

 

5,782

 

Total interest income

 

 

80,941

 

 

 

70,874

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

13,537

 

 

 

7,269

 

Short-term borrowings

 

 

10

 

 

 

35

 

Junior subordinated debentures

 

 

491

 

 

 

535

 

Total interest expense

 

 

14,038

 

 

 

7,839

 

Net interest income

 

 

66,903

 

 

 

63,035

 

Provision for loan losses

 

 

1,684

 

 

 

314

 

Net interest income after provision for loan losses

 

 

65,219

 

 

 

62,721

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

Trust revenue

 

 

3,177

 

 

 

3,129

 

Service charges on deposits

 

 

17,663

 

 

 

16,653

 

Securities transactions (includes no accumulated other comprehensive income reclassifications)

 

 

 

 

 

(14

)

Income from sales of loans

 

 

698

 

 

 

651

 

Insurance commissions

 

 

5,265

 

 

 

5,199

 

Cash management

 

 

3,776

 

 

 

3,021

 

(Loss)/gain on sale of other assets

 

 

(4

)

 

 

26

 

Other

 

 

1,426

 

 

 

1,445

 

Total noninterest income

 

 

32,001

 

 

 

30,110

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

36,171

 

 

 

34,190

 

Occupancy, net

 

 

2,627

 

 

 

3,402

 

Depreciation

 

 

2,985

 

 

 

2,410

 

Amortization of intangible assets

 

 

759

 

 

 

733

 

Data processing services

 

 

1,480

 

 

 

1,203

 

Net (income)/expense from other real estate owned

 

 

(484

)

 

 

26

 

Marketing and business promotion

 

 

2,261

 

 

 

2,352

 

Deposit insurance

 

 

533

 

 

 

619

 

Other

 

 

9,874

 

 

 

10,955

 

Total noninterest expense

 

 

56,206

 

 

 

55,890

 

Income before taxes

 

 

41,014

 

 

 

36,941

 

Income tax expense

 

 

9,177

 

 

 

7,321

 

Net income

 

$

31,837

 

 

$

29,620

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

$

0.91

 

Diluted

 

$

0.96

 

 

$

0.89

 

OTHER COMPREHENSIVE GAIN/(LOSS)

 

 

 

 

 

 

 

 

Unrealized gains/(losses) on securities, net of tax of $(868) and $474, respectively

 

 

2,540

 

 

 

(1,388

)

Reclassification adjustment for gains/(losses) included in net income

 

 

 

 

 

 

Other comprehensive gains/(losses), net of tax of $(868) and $474, respectively

 

 

2,540

 

 

 

(1,388

)

Comprehensive income

 

$

34,377

 

 

$

28,232

 

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,

 

 

 

2019

 

 

2018

 

COMMON STOCK

 

 

 

 

 

 

 

 

Issued at beginning of period

 

$

32,604

 

 

$

31,895

 

Shares issued for stock options

 

 

14

 

 

 

80

 

Shares issued for acquisitions

 

 

 

 

 

733

 

Issued at end of period

 

$

32,618

 

 

$

32,708

 

CAPITAL SURPLUS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

149,709

 

 

$

107,481

 

Common stock issued for stock options

 

 

312

 

 

 

1,210

 

Common stock issued for acquisitions

 

 

 

 

 

38,765

 

Stock-based compensation arrangements

 

 

174

 

 

 

306

 

Balance at end of period

 

$

150,195

 

 

$

147,762

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

722,615

 

 

$

638,580

 

Net income

 

 

31,837

 

 

 

29,620

 

Dividends on common stock ($0.30 and $0.21 per share, respectively)

 

 

(9,739

)

 

 

(6,859

)

Balance at end of period

 

$

744,713

 

 

$

661,341

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

Unrealized gains/(losses) on securities:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(2,139

)

 

$

(2,327

)

Net change

 

 

2,540

 

 

 

(1,388

)

Balance at end of period

 

$

401

 

 

$

(3,715

)

Total stockholders’ equity

 

$

927,927

 

 

$

838,096

 

 

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,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

31,837

 

 

$

29,620

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,684

 

 

 

314

 

Depreciation and amortization

 

 

3,744

 

 

 

3,143

 

Net amortization of securities premiums and discounts

 

 

(1,948

)

 

 

(49

)

Realized securities losses

 

 

 

 

 

14

 

Gain on sales of loans

 

 

(698

)

 

 

(651

)

Cash receipts from the sale of loans originated for sale

 

 

43,229

 

 

 

44,558

 

Cash disbursements for loans originated for sale

 

 

(42,094

)

 

 

(43,949

)

Deferred income tax benefit

 

 

(459

)

 

 

(117

)

Gain on other assets

 

 

(499

)

 

 

(21

)

Increase in interest receivable

 

 

(1,500

)

 

 

(1,111

)

Increase in interest payable

 

 

382

 

 

 

353

 

Amortization of stock-based compensation arrangements

 

 

174

 

 

 

306

 

Excess tax benefit from stock-based compensation arrangements

 

 

(102

)

 

 

(647

)

Other, net

 

 

2,910

 

 

 

(5,408

)

Net cash provided by operating activities

 

 

36,660

 

 

 

26,355

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Net cash received from acquisitions, net of cash paid

 

 

 

 

 

6,248

 

Net decrease in federal funds sold

 

 

 

 

 

2,451

 

Purchases of available for sale securities

 

 

 

 

 

(30,861

)

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

 

 

210

 

 

 

213

 

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

 

 

2,406

 

 

 

5,729

 

Proceeds from sales of available for sale securities

 

 

 

 

 

1,460

 

Purchase of equity securities

 

 

(1,828

)

 

 

 

Proceeds from paydowns and sales of equity securities

 

 

110

 

 

 

 

Net change in loans

 

 

(67,249

)

 

 

48,819

 

Purchases of premises, equipment and computer software

 

 

(6,792

)

 

 

(7,168

)

Other, net

 

 

(5,019

)

 

 

(857

)

Net cash (used in) provided by investing activities

 

 

(78,162

)

 

 

26,034

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net change in deposits

 

 

100,582

 

 

 

(31,953

)

Net increase/(decrease) in short-term borrowings

 

 

3,525

 

 

 

(800

)

Issuance of common stock in connection with stock options, net

 

 

326

 

 

 

1,290

 

Cash dividends paid

 

 

(9,781

)

 

 

(6,698

)

Net cash provided by (used in)  financing activities

 

 

94,652

 

 

 

(38,161

)

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

 

 

53,150

 

 

 

14,228

 

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

 

 

1,424,255

 

 

 

1,757,875

 

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

 

$

1,477,405

 

 

$

1,772,103

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

13,655

 

 

$

7,486

 

Cash paid during the period for income taxes

 

$

 

 

$

1,250

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Stock issued in acquisitions

 

$

 

 

$

39,498

 

Cash consideration for acquisitions

 

$

 

 

$

24,722

 

Fair value of assets acquired in acquisitions

 

$

 

 

$

377,320

 

Liabilities assumed in acquisitions

 

$

 

 

$

338,860

 

Unpaid common stock dividends declared

 

$

9,784

 

 

$

6,854

 

 

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, 2018.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., BancFirst Risk & Insurance Company and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC and BancFirst Agency, Inc. 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 the instructions for Form 10-Q. 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, 2018, 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. There have been no significant changes in the accounting policies of the Company since December 31, 2018, the date of the most recent annual report.

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 loan 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 Adopted During Current Period:

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases - (Topic 842)”, amended by ASU 2018-11, “Leases – (Topic 842)”: Targeted Improvements. This new guidance requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than twelve months and provide additional disclosures. The amendments were effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. The Company adopted this new standard on January 1, 2019, using a modified retrospective transition approach and recognized right-of-use lease assets and related lease liabilities totaling $4.3 million. The Company elected to apply certain practical adoption expedients provided under the updates whereby it did not reassess initial direct costs for any existing leases. No cumulative-effect adjustment was recognized as the amount was not material, and the impact on our results of operations and cash flows was also not material. No prior periods were adjusted. See Note 6 for the financial position impact and additional disclosures.

Standards Not Yet Adopted:

6


In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” ASU 2018-13 removes, modifies and adds disclosure requirements on fair value measurements. ASU 2018-13 will be effective for the Company on January 1, 2020. Early adoption is permitted. In addition, early adoption of any removed or modified disclosures and delayed adoption of the additional disclosures until the effective date is also permitted. The Company expects to adopt the standard in the first quarter of 2020.

 

In June 2016, the FASB issued ASU No.  2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgements used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective for the Company on January 1, 2020. The Company is currently evaluating the potential impact of ASU 2016-13 on its financial statements. In that regard, the Company has formed a task force under the direction of its Chief Financial Officer. In preparation, the Company has developed new credit estimation models, processes and controls. Internal validation of the model is underway and expected to be completed early in 2019. The Company has performed test runs of the new processes and controls and expects to begin full parallel runs by mid-2019. The impact of the standard will depend on the composition of the Company’s portfolio as well as economic conditions and forecasts at the time of adoption. The adoption of ASU 2016-13 could result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets. While we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date. The Company expects to adopt the standard in the first quarter of 2020.

 

 

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

 

On April, 23, 2019, the Company entered into an agreement to acquire Pegasus Bank.  See Note (12) for additional information on this subsequent event.

 

On August 31, 2018 BFTower, LLC, a wholly-owned subsidiary of BancFirst purchased Cotter Ranch Tower in Oklahoma City for the Company’s corporate headquarters for $21.0 million. Cotter Ranch Tower was subsequently renamed BancFirst Tower. BancFirst Tower consists of an aggregate of 507,000 square feet, has 36 floors and is the second tallest building in Oklahoma City. The BancFirst Tower will remain an income producing property as approximately 55% is currently leased to outside tenants. BancFirst Tower will allow the Company to consolidate operations from three locations to one and will improve operational efficiencies. Upon consolidation, the Company expects to occupy approximately 35% of BancFirst Tower, resulting in approximately 90% total occupancy.  Renovations on BancFirst Tower will be substantially completed by the end of 2020 and are expected to cost approximately $70 million. The renovation costs include substantial deferred maintenance including HVAC, plumbing, electrical, elevators, building skin and roof while also including much needed improvements to both the interior and exterior common areas including the lobby, underground and outdoor plaza. The Company could start depreciating certain components of the renovation as they are put into service as early as September 2019.  The total purchase price and renovation costs were determined to be favorable to other alternatives, such as constructing new corporate headquarters. On December 14, 2018, BFTower LLC, purchased a 42.6% ownership interest in SFPG, LLC, which is the owner of a 1,568 space parking garage adjacent to BancFirst Tower, for $9.8 million.

 

On January 11, 2018, the Company acquired First Wagoner Corp. and its subsidiary bank, First Bank & Trust Company, with locations in Carney, Grove, Ketchum, Luther, Tulsa and Wagoner. First Bank & Trust Company had approximately $290 million in total assets, $247 million in loans and $251 million in deposits. First Bank & Trust Company operated as a subsidiary of BancFirst Corporation until it was merged into BancFirst on February 16, 2018. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $6.3 million and goodwill of approximately $19.1 million. 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. The acquisition of First Wagoner Corp. and its subsidiary bank, First Bank & Trust Company complements the Company’s community banking strategy by adding an additional five communities to its banking network in Oklahoma.

 

On January 11, 2018, the Company acquired First Chandler Corp. and its subsidiary bank, First Bank of Chandler, with two locations in Chandler. First Bank of Chandler had approximately $88 million in total assets, $66 million in loans and $79 million in deposits. First Bank of Chandler operated as a subsidiary of BancFirst Corporation until it was merged into BancFirst on September 7, 2018. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $2.2 million and goodwill of approximately $6.6 million. The effect of this acquisition was included in the consolidated financial statements of the Company from

7


the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of First Chandler Corp. and its subsidiary bank, First Bank of Chandler complements the Company’s community banking strategy by increasing its banking network in Oklahoma.

 

(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, 2019

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

122

 

 

$

6

 

 

$

 

 

$

128

 

States and political subdivisions

 

 

595

 

 

 

 

 

 

 

 

 

595

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

1,217

 

 

$

6

 

 

$

 

 

$

1,223

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

133

 

 

$

5

 

 

$

 

 

$

138

 

States and political subdivisions

 

 

795

 

 

 

 

 

 

 

 

 

795

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

1,428

 

 

$

5

 

 

$

 

 

$

1,433

 

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, 2019

 

(Dollars in thousands)

 

U.S. treasuries

 

$

651,860

 

 

$

2,847

 

 

$

(1,957

)

 

$

652,750

 

U.S. federal agencies

 

 

28,106

 

 

 

 

 

 

(152

)

 

 

27,954

 

Mortgage backed securities (1)

 

 

16,162

 

 

 

126

 

 

 

(576

)

 

 

15,712

 

States and political subdivisions

 

 

26,989

 

 

 

317

 

 

 

(67

)

 

 

27,239

 

Total

 

$

723,117

 

 

$

3,290

 

 

$

(2,752

)

 

$

723,655

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

699,882

 

 

$

1,108

 

 

$

(3,524

)

 

$

697,466

 

U.S. federal agencies

 

 

30,079

 

 

 

 

 

 

(160

)

 

 

29,919

 

Mortgage backed securities (1)

 

 

16,367

 

 

 

114

 

 

 

(573

)

 

 

15,908

 

States and political subdivisions

 

 

27,246

 

 

 

277

 

 

 

(112

)

 

 

27,411

 

Total

 

$

773,574

 

 

$

1,499

 

 

$

(4,369

)

 

$

770,704

 

 

 

(1)

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

 

 

8


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, 2019

 

 

December 31, 2018

 

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

Amortized

Cost

 

 

Estimated

Fair

Value

 

 

 

(Dollars in thousands)

 

Held for Investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

295

 

 

$

295

 

 

$

495

 

 

$

495

 

After one year but within five years

 

 

368

 

 

 

370

 

 

 

369

 

 

 

370

 

After five years but within ten years

 

 

552

 

 

 

556

 

 

 

562

 

 

 

565

 

After ten years

 

 

2

 

 

 

2

 

 

 

2

 

 

 

3

 

Total

 

$

1,217

 

 

$

1,223

 

 

$

1,428

 

 

$

1,433

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity of debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

403,084

 

 

$

402,210

 

 

$

411,256

 

 

$

410,327

 

After one year but within five years

 

 

273,033

 

 

 

274,838

 

 

 

313,416

 

 

 

311,924

 

After five years but within ten years

 

 

7,265

 

 

 

7,487

 

 

 

7,524

 

 

 

7,685

 

After ten years

 

 

39,735

 

 

 

39,120

 

 

 

41,378

 

 

 

40,768

 

Total debt securities

 

$

723,117

 

 

$

723,655

 

 

$

773,574

 

 

$

770,704

 

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, 2019

 

 

December 31, 2018

 

 

 

(Dollars in thousands)

 

Book value of pledged securities

 

$

418,807

 

 

$

472,053

 

 

Non-Cash investing activities

On March 31, 2019, the Company had a $50.0 million security that matured, was removed from the securities portfolio and moved into accrued interest receivable and other assets on the balance sheet. The cash for this matured security was received the following day on April 1, 2019.

 

 

 

9


(4)

LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

 

(Dollars in thousands)

 

Commercial and financial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,043,848

 

 

 

20.70

%

 

$

1,032,787

 

 

 

20.76

%

Oil & gas production and equipment

 

 

106,991

 

 

 

2.12

 

 

 

94,729

 

 

 

1.90

 

Agriculture

 

 

130,717

 

 

 

2.59

 

 

 

136,313

 

 

 

2.74

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

73,051

 

 

 

1.45

 

 

 

76,211

 

 

 

1.53

 

Tax-exempt

 

 

49,833

 

 

 

0.99

 

 

 

48,415

 

 

 

0.97

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

469,826

 

 

 

9.32

 

 

 

451,224

 

 

 

9.07

 

Farmland

 

 

227,526

 

 

 

4.51

 

 

 

219,241

 

 

 

4.41

 

One to four family residences

 

 

982,605

 

 

 

19.49

 

 

 

979,170

 

 

 

19.68

 

Multifamily residential properties

 

 

68,412

 

 

 

1.36

 

 

 

65,949

 

 

 

1.33

 

Commercial

 

 

1,514,266

 

 

 

30.03

 

 

 

1,506,937

 

 

 

30.28

 

Consumer

 

 

326,002

 

 

 

6.46

 

 

 

328,069

 

 

 

6.59

 

Other (not classified above)

 

 

49,425

 

 

 

0.98

 

 

 

36,931

 

 

 

0.74

 

Total loans

 

$

5,042,502

 

 

 

100.00

%

 

$

4,975,976

 

 

 

100.00

%

The Company’s loans are mostly to customers within Oklahoma and approximately 65% of the 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.

The Company’s commercial and industrial loan category includes a small percentage of loans to companies that provide ancillary services to the oil and gas industry, such as transportation, preparation contractors and equipment manufacturers. The balance of these loans was approximately $61 million at March 31, 2019 and approximately $60 million at December 31, 2018.

Accounting policies related to appraisals, nonaccruals and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands)

 

Past due 90 days or more and still accruing

 

$

2,170