Item 1. Financial Statements.
The accompanying Notes are an integral part of these consolidated financial statements.
The accompanying Notes are an integral part of these consolidated financial statements.
The accompanying Notes are an integral part of these consolidated financial statements.
The accompanying Notes are an integral part of these consolidated financial statements.
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, 2019.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements include the accounts of BancFirst Corporation, Council Oak Partners, LLC, BancFirst Insurance Services, Inc., BancFirst Risk & Insurance Company, Pegasus Bank and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc., BFTower, LLC and BancFirst Agency, Inc. 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, 2019, 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 Adopted During Current Period:
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820).” ASU 2018-13 modifies disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 was effective for the Company on January 1, 2020. ASU No. 2018-13 was adopted on January 1, 2020 and did not have a significant impact on the Company’s financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” On January 1, 2020, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in
6
leases recognized by a lessor in accordance with Topic 842 on leases. In addition, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for purchased loans and securities with credit deterioration and available-for-sale debt securities.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Operating results for periods from January 1, 2020 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable standards and the accounting policies described in our 2019 Form 10-K. The Company recorded a net increase to retained earnings of $2.3 million, net of tax of $925,000, as of January 1, 2020 for the cumulative effect of adopting ASC 326, and the impact on our results of operations and cash flows was not material.
The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets was adjusted to reflect the addition of approximately $1.2 million of the allowance for credit losses.
The Company has not recorded an allowance for credit losses against its available-for-sale securities, as the credit risk is not material. The following table illustrates the impact of ASC 326 on the allowance for credit losses on the Company’s loans as of January 1, 2020.
|
|
|
January 1, 2020
|
|
|
|
|
As Reported Under ASC 326
|
|
|
Pre ASC 326 Adoption
|
|
|
Impact of ASC 326 Adoption
|
|
|
|
|
(Dollars in thousands)
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
$
|
2,819
|
|
|
$
|
5,625
|
|
|
$
|
(2,806
|
)
|
|
Commercial real estate non-owner occupied
|
|
|
2,851
|
|
|
|
8,358
|
|
|
|
(5,507
|
)
|
|
Construction and development < 60 months
|
|
|
1,158
|
|
|
|
2,214
|
|
|
|
(1,056
|
)
|
|
Construction residential real estate < 60 months
|
|
|
1,155
|
|
|
|
1,933
|
|
|
|
(778
|
)
|
|
Residential real estate first lien
|
|
|
4,861
|
|
|
|
8,692
|
|
|
|
(3,831
|
)
|
|
Residential real estate all other
|
|
|
1,359
|
|
|
|
2,767
|
|
|
|
(1,408
|
)
|
|
Farmland
|
|
|
1,413
|
|
|
|
2,821
|
|
|
|
(1,408
|
)
|
|
Commercial and agricultural non-real estate
|
|
|
27,194
|
|
|
|
15,345
|
|
|
|
11,849
|
|
|
Consumer non-real estate
|
|
|
2,630
|
|
|
|
3,252
|
|
|
|
(622
|
)
|
|
Other loans
|
|
|
2,516
|
|
|
|
2,632
|
|
|
|
(116
|
)
|
|
Pegasus Bank
|
|
|
3,087
|
|
|
|
599
|
|
|
|
2,488
|
|
|
Allowance for credit losses on loans
|
|
$
|
51,043
|
|
|
$
|
54,238
|
|
|
$
|
(3,195
|
)
|
The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In order to estimate expected losses using historical loss information, the Company elected to utilize a methodology known as vintage loss analysis for substantially all of our loan portfolio. Vintage loss analysis measures impairment based on the age of the accounts and the historical asset performance of assets with similar risk characteristics. Vintage loss analysis accounts for expected losses by allowing the Company to calculate the cumulative loss rates of a given loan pool and in so doing, determine the loan pool’s lifetime expected loss experience. This includes a reasonable approximation of probable and estimable future losses determined by applying historical net charge off information to forward looking qualitative and environmental factors. First, the Company determined the appropriate type of financial assets that share similar risk characteristics, and then the Company developed a cumulative loss curve for the applicable financial assets based on historical data using different “vintages” analyzed by year of origination. This is done by dividing each year’s net charge-offs by the original principal balance. The respective vintage’s original principal balance remains the denominator in each annual calculation, as it references the specific vintage’s original balance. The loss experience of this original balance is tracked annually and summed over the life of the loan for each separate loan pool leaving a cumulative, life of credit loss rate based on historic averages weighted towards more recent loss experience. In addition to life of credit loss data, primary drivers like macroeconomic indicators of qualitative factors are used as adjustments to the expected loss calculation to reach a forecast supported by both quantitative and qualitative data points. The intent is to express the impact of changes in external factors while incorporating analysis of where the loan pool is in its loss history.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. The Company has made the accounting policy election to use the fair value of the collateral to measure expected credit losses on collateral-dependent financial assets. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially
7
through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
In connection with the adoption of ASC 326, the Company revised certain accounting policies and implemented accounting policy elections. The revised accounting policies are described below.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts. Accrued interest receivable totaled $27.4 million at both December 31, 2019 and March 31, 2020, and was reported in accrued interest receivable and other assets on the consolidated balance sheets. The Company has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses. Interest income is accrued on the unpaid principal balance using the simple-interest method on the daily balances of the principal amounts outstanding.
Interest income on consumer and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Consumer loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollectible. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Restructured loans are loans on which, due to the borrower’s financial difficulties, the Company has granted a concession that the Company would not otherwise consider for borrowers of similar credit quality. This may include a transfer of real estate or other assets from the borrower, a modification of loan terms, or a combination of the two. Modifications of terms that could potentially qualify as a restructuring include reduction of contractual interest rate, extension of the maturity date at a contractual interest rate lower than the current rate for new debt with similar risk, and a reduction of the face amount of debt or forgiveness of either principal or accrued interest. A loan continues to qualify as restructured until a consistent payment history or change in the borrower’s financial condition has been evidenced, generally for no less than twelve months. If the restructuring agreement specifies an interest rate at the time of the restructuring that is greater than or equal to the rate that the Company is willing to accept for a new extension of credit with comparable risk, then the loan is no longer considered a restructured loan if it is in compliance with the modified terms in calendar years after the year of restructure.
Purchased Credit Deteriorated (PCD) Loans: The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.
Allowance for Credit Losses - Loans: The allowance for credit losses is a valuation account that is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. In connection with our adoption of ASU 2016-13, changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL. The Company has identified the following portfolio segments, which includes the applicable weighted average life, and measures the allowance for credit losses using the vintage loss analysis adjusted for qualitative factors:
8
|
Loan Segment
|
|
Life (in years)
|
|
|
BancFirst
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
|
8
|
|
|
Commercial real estate non-owner occupied
|
|
|
6
|
|
|
Construction and development < 60 months
|
|
|
3
|
|
|
Construction residential real estate < 60 months
|
|
|
1
|
|
|
Residential real estate first lien
|
|
|
13
|
|
|
Residential real estate all other
|
|
|
6
|
|
|
Farmland
|
|
|
12
|
|
|
Commercial and agricultural non-real estate
|
|
|
3
|
|
|
Consumer non-real estate
|
|
|
4
|
|
|
Other loans
|
|
|
9
|
|
|
Pegasus Bank
|
|
|
4
|
|
These portfolio segments are separately identified because they exhibit distinctive risk characteristics, such as financial asset types, loan purpose, collateral, and industry of the borrower. A summary of our primary portfolio segments is as follows:
Commercial real estate owner occupied. Commercial real estate owner occupied are nonresidential property loans for which the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the entity, or an affiliate of the entity, who owns the property. This category includes, among other loans, loans secured by office buildings, garden office buildings, manufacturing facilities, warehouse and flex warehouse facilities, hospitals, and car washes unless the property is owned by an investor who leases the property to the operator who, in turn, is not related to or affiliated with the investor.
Commercial real estate non-owner occupied. Commercial real estate non-owner occupied are nonresidential property loans where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing, or permanent financing of the property. This category includes, among other loans, loans secured by shopping centers, office buildings, hotels/motels, nursing homes, assisted-living facilities, mini-storage warehouse facilities, and similar properties.
Construction and development < 60 months. Residential development loans include loans to develop raw land into a residential development. Advances on the loans typically include land costs, hard costs (grading, utilities, roads, etc.), soft costs (engineering fees, development fees, entitlement fees, etc.) and carrying costs until the development is completed. Upon completion of the development, the loan is typically repaid through the sale of lots to homebuilders.
Construction residential real estate < 60 months. Residential construction includes loans to builders for speculative or custom homes, as well as direct loans to individuals for construction of their personal residence. Custom construction and self-construction loans typically will have commitments in place for long-term financing at the completion of construction. Speculative construction loans generally will have periodic curtailment plans beginning after completion of construction and a reasonable time for sales to have occurred.
Residential real estate first lien. Residential real estate first lien loans includes all closed-end loans secured by first liens on 1-to-4 family residential properties. This category includes property containing 1-to-4 dwelling units (including vacation homes) or more than four dwelling units if each is separated from other units by dividing walls that extend from ground to roof. This category also includes individual condominium dwelling units and loans secured by an interest in individual cooperative housing units, even if in a building with five or more dwelling units.
Residential real estate all other. Residential real estate all other loans includes loans secured by junior (i.e., other than first) liens on 1-to-4 family residential properties. This category includes loans secured by junior liens even if the Company also holds a loan secured by a first lien on the same 1-to-4 family residential property.
Farmland. This category includes loans secured by all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland includes grazing or pasture land, whether tillable or not and whether wooded or not.
Commercial and agricultural non-real estate. Commercial and agricultural non-real estate represent loans for working capital, facilities acquisition or expansion, purchase of equipment and other needs of commercial customers primarily located within Oklahoma. Loans in this category include commercial and industrial, oil and gas, agriculture and state and political subdivisions.
Consumer non-real estate. Consumer loans are loans to individuals for household, family and other personal expenditures. Commonly, such loans are made to finance purchases of consumer goods, such as automobiles, boats, household goods, vacations and education.
Other loans. Other loans consist of loans approved by the Small Business Administration.
9
Pegasus Bank. Pegasus Bank’s loans are commercial and consumer loans mostly to customers within Texas secured by real estate. Pegasus Bank also includes commercial and industrial loans, which includes loans to companies in the oil and gas industry.
The Company considers various factors to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loan loss experience and economic conditions.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as the political, legal, and regulatory environment, technology and consumer preferences. Historical loss information is also adjusted for reasonable and supportable changes in national and local economic conditions, such as oil and gas prices, national and local unemployment, real gross domestic product (“GDP”), house price index (“HPI”), consumer price index (“CPI”), rental vacancies, and retail sales. Economic conditions are forecast as "current conditions" over the forecast period. Forecast models were used to validate credit performance during the forecast period. Beyond the reasonable and supportable forecast, the economic expectation reverts to the historical average, which is determined by the weighted average life of each loan pool.
Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Troubled Debt Restructurings (TDRs): A loan for which the terms have been modified resulting in a concession that is not commercially reasonable, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Based on a low likelihood that funding will occur and the Company’s ability to manage the extension of credit to our borrowers, the allowance for credit losses on off-balance sheet credit exposure is not material.
Allowance for Credit Losses - Available-for-Sale Securities: The Company reviews its portfolio of securities in an unrealized loss position at least quarterly. The Company first assesses whether it intends to sell or it is more-likely-than-not that it will be required to sell the securities before recovery of the amortized cost basis. If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense. If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making this assessment, the Company considers, among other things, the period of time the security has been in an unrealized loss position, and performance of any underlying collateral and adverse conditions specifically related to the security. At December 31, 2019 and March 31, 2020 approximately 95% of the available for sale securities held by the Company were issued by the U.S. Treasury, or U.S. government-sponsored entities and agencies. The Company does not consider the unrealized position of these securities to be the result of credit factors, because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company has not recorded an allowance for credit losses against its securities portfolio, as the credit risk is not material.
10
(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS
On March 5, 2020, the Company purchased approximately $47.8 million in total assets, which included $22.9 million in loans, and assumed approximately $45.0 million in deposits and certain other obligations of The Citizens State Bank of Okemah, Oklahoma “Citizens” for a purchase price of $2.9 million. As a result of the purchase, the Company recorded a core deposit intangible of approximately $206,000 and goodwill of approximately $1.3 million. The effect of this purchase was included in the consolidated financial statements of the Company from the date of purchase forward. The purchase did not have a material effect on the Company’s consolidated financial statements. Citizens was an Oklahoma state-chartered bank with banking locations in Okemah and Paden, Oklahoma. These banking locations became branches of BancFirst.
In January 2020, the Company sold property held in other real estate owned for a $2.2 million gain.
On August 15, 2019 the Company acquired Pegasus Bank, a Texas state-charted bank with three banking locations in Dallas, Texas. This acquisition is disclosed in Note (2) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
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, 2020
|
|
(Dollars in thousands)
|
|
|
Mortgage backed securities (1)
|
|
$
|
84
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
88
|
|
|
States and political subdivisions
|
|
|
1,605
|
|
|
|
27
|
|
|
|
—
|
|
|
|
1,632
|
|
|
Other securities
|
|
|
500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
Total
|
|
$
|
2,189
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
2,220
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities (1)
|
|
$
|
93
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
States and political subdivisions
|
|
|
1,310
|
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
1,306
|
|
|
Other securities
|
|
|
500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
Total
|
|
$
|
1,903
|
|
|
$
|
5
|
|
|
$
|
(5
|
)
|
|
$
|
1,903
|
|
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, 2020
|
|
(Dollars in thousands)
|
|
|
U.S. treasuries
|
|
$
|
499,943
|
|
|
$
|
13,412
|
|
|
$
|
—
|
|
|
$
|
513,355
|
|
|
U.S. federal agencies
|
|
|
22,339
|
|
|
|
27
|
|
|
|
(28
|
)
|
|
|
22,338
|
|
|
Mortgage backed securities (1)
|
|
|
16,566
|
|
|
|
345
|
|
|
|
(31
|
)
|
|
|
16,880
|
|
|
States and political subdivisions
|
|
|
24,384
|
|
|
|
245
|
|
|
|
(118
|
)
|
|
|
24,511
|
|
|
Asset backed securities
|
|
|
13,324
|
|
|
|
—
|
|
|
|
(610
|
)
|
|
|
12,714
|
|
|
Total
|
|
$
|
576,556
|
|
|
$
|
14,029
|
|
|
$
|
(787
|
)
|
|
$
|
589,798
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
409,488
|
|
|
$
|
4,974
|
|
|
$
|
(13
|
)
|
|
$
|
414,449
|
|
|
U.S. federal agencies
|
|
|
23,039
|
|
|
|
23
|
|
|
|
(38
|
)
|
|
|
23,024
|
|
|
Mortgage backed securities (1)
|
|
|
16,941
|
|
|
|
128
|
|
|
|
(64
|
)
|
|
|
17,005
|
|
|
States and political subdivisions
|
|
|
22,294
|
|
|
|
282
|
|
|
|
(45
|
)
|
|
|
22,531
|
|
|
Asset backed securities
|
|
|
13,320
|
|
|
|
—
|
|
|
|
(606
|
)
|
|
|
12,714
|
|
|
Total
|
|
$
|
485,082
|
|
|
$
|
5,407
|
|
|
$
|
(766
|
)
|
|
$
|
489,723
|
|
|
|
(1)
|
Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.
|
11
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, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
|
|
(Dollars in thousands)
|
|
|
Held for Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual maturity of debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
300
|
|
|
$
|
301
|
|
|
$
|
300
|
|
|
$
|
300
|
|
|
After one year but within five years
|
|
|
1,291
|
|
|
|
1,318
|
|
|
|
1,058
|
|
|
|
1,055
|
|
|
After five years but within ten years
|
|
|
597
|
|
|
|
600
|
|
|
|
543
|
|
|
|
546
|
|
|
After ten years
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
Total
|
|
$
|
2,189
|
|
|
$
|
2,220
|
|
|
$
|
1,903
|
|
|
$
|
1,903
|
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual maturity of debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
276,869
|
|
|
$
|
277,975
|
|
|
$
|
186,373
|
|
|
$
|
186,539
|
|
|
After one year but within five years
|
|
|
254,913
|
|
|
|
267,320
|
|
|
|
252,519
|
|
|
|
257,430
|
|
|
After five years but within ten years
|
|
|
5,035
|
|
|
|
5,129
|
|
|
|
5,873
|
|
|
|
6,008
|
|
|
After ten years
|
|
|
39,739
|
|
|
|
39,374
|
|
|
|
40,317
|
|
|
|
39,746
|
|
|
Total debt securities
|
|
$
|
576,556
|
|
|
$
|
589,798
|
|
|
$
|
485,082
|
|
|
$
|
489,723
|
|
The following table is a summary of the Company’s book value of securities that were pledged as collateral for public funds on deposit, repurchase agreements and for other purposes as required or permitted by law:
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Book value of pledged securities
|
|
$
|
397,723
|
|
|
$
|
445,702
|
|
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.
12
|
(4)
|
LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
|
In connection with our adoption of ASU 2016-13, changes were made to our primary portfolio segments to align with the methodology applied in determining the allowance under CECL. Loans held for investment are summarized by portfolio segment as follows:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Amount
|
|
|
Amount
|
|
|
|
(Dollars in thousands)
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
$
|
633,406
|
|
|
$
|
621,188
|
|
|
Commercial real estate non-owner occupied
|
|
911,682
|
|
|
|
851,200
|
|
|
Construction and development < 60 months
|
|
254,204
|
|
|
|
287,138
|
|
|
Construction residential real estate < 60 months
|
|
200,895
|
|
|
|
189,480
|
|
|
Residential real estate first lien
|
|
850,854
|
|
|
|
834,849
|
|
|
Residential real estate all other
|
|
184,848
|
|
|
|
187,647
|
|
|
Farmland
|
|
255,082
|
|
|
|
246,988
|
|
|
Commercial and agricultural non-real estate
|
|
1,710,368
|
|
|
|
1,499,404
|
|
|
Consumer non-real estate
|
|
356,768
|
|
|
|
359,529
|
|
|
Other loans
|
|
156,952
|
|
|
|
154,015
|
|
|
Pegasus Bank
|
|
474,845
|
|
|
|
430,705
|
|
|
Total (1)
|
$
|
5,989,904
|
|
|
$
|
5,662,143
|
|
|
(1) Excludes accrued interest receivable of $27.4 million at March 31, 2020 and December 31, 2019, that is recorded in accrued interest receivable and other assets.
|
|
BancFirst’s loans are mostly to customers within Oklahoma and approximately 55% 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.
BancFirst’s commercial and agricultural non-real estate loan category includes reserve based energy loans and a small percentage of loans to companies that provide ancillary services to the energy industry, such as transportation, preparation contractors and equipment manufacturers. The balance of reserve based energy loans was approximately $248 million at March 31, 2020 and approximately $210 million at December 31, 2019. The balance of the ancillary services energy loans was approximately $116 million at March 31, 2020 and approximately $110 million at December 31, 2019.
Pegasus Bank’s loans are mostly to customers within Texas and approximately $248 million or 52% of the loans are secured by real estate at March 31, 2020. Pegasus Bank’s commercial and agricultural non-real estate loan were approximately $198 million at March 31, 2020 and approximately $172 million at December 31, 2019. Pegasus Bank’s reserve based energy loans were approximately $77 million at March 31, 2020 and approximately $44 million at December 31, 2019.
Accounting policies related to appraisals, and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Nonperforming and Restructured Assets
The following is a summary of restructured assets and other real estate owned and repossessed assets:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Restructured
|
|
$
|
3,158
|
|
|
$
|
18,010
|
|
|
Other real estate owned and repossessed assets
|
|
$
|
6,001
|
|
|
$
|
6,073
|
|
The Company charges interest on principal balances outstanding on restructured loans during deferral periods. The current and future financial effects of the recorded balance of loans considered to be restructured were not considered to be material.
13
Nonaccrual loans
Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $332,000 for the three months ended March 31, 2020 and approximately $544,000 for the three months ended March 31, 2019.
The following table is a summary of amounts included in nonaccrual loans, segregated by portfolio segment. Residential real estate refers to one-to-four family real estate.
|
|
|
March 31, 2020
|
|
|
|
|
(Dollars in thousands)
|
|
|
BancFirst
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
$
|
2,503
|
|
|
Commercial real estate non-owner occupied
|
|
|
465
|
|
|
Construction and development < 60 months
|
|
|
155
|
|
|
Construction residential real estate < 60 months
|
|
|
380
|
|
|
Residential real estate first lien
|
|
|
3,657
|
|
|
Residential real estate all other
|
|
|
838
|
|
|
Farmland
|
|
|
2,687
|
|
|
Commercial and agricultural non-real estate
|
|
|
32,530
|
|
|
Consumer non-real estate
|
|
|
174
|
|
|
Other loans
|
|
|
1,522
|
|
|
Pegasus Bank
|
|
|
270
|
|
|
Total
|
|
$
|
45,181
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
BancFirst
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
Non-residential real estate owner occupied
|
|
$
|
2,275
|
|
|
Non-residential real estate other
|
|
|
1,815
|
|
|
Residential real estate permanent mortgage
|
|
|
1,206
|
|
|
Residential real estate all other
|
|
|
3,060
|
|
|
Non-consumer non-real estate
|
|
|
2,915
|
|
|
Consumer non-real estate
|
|
|
264
|
|
|
Other loans
|
|
|
1,083
|
|
|
Acquired loans
|
|
|
4,496
|
|
|
Pegasus Bank
|
|
|
851
|
|
|
Total
|
|
$
|
17,965
|
|
14
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 our 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, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
$
|
933
|
|
|
$
|
12
|
|
|
$
|
2,548
|
|
|
$
|
3,493
|
|
|
$
|
629,913
|
|
|
$
|
633,406
|
|
|
$
|
192
|
|
|
Commercial real estate non-owner occupied
|
|
|
513
|
|
|
|
38
|
|
|
|
188
|
|
|
|
739
|
|
|
|
910,943
|
|
|
|
911,682
|
|
|
|
—
|
|
|
Construction and development < 60 months
|
|
|
1,696
|
|
|
|
—
|
|
|
|
129
|
|
|
|
1,825
|
|
|
|
252,379
|
|
|
|
254,204
|
|
|
|
—
|
|
|
Construction residential real estate < 60 months
|
|
|
182
|
|
|
|
181
|
|
|
|
238
|
|
|
|
601
|
|
|
|
200,294
|
|
|
|
200,895
|
|
|
|
39
|
|
|
Residential real estate first lien
|
|
|
7,093
|
|
|
|
1,895
|
|
|
|
3,622
|
|
|
|
12,610
|
|
|
|
838,244
|
|
|
|
850,854
|
|
|
|
1,685
|
|
|
Residential real estate all other
|
|
|
1,226
|
|
|
|
149
|
|
|
|
829
|
|
|
|
2,204
|
|
|
|
182,644
|
|
|
|
184,848
|
|
|
|
130
|
|
|
Farmland
|
|
|
1,025
|
|
|
|
467
|
|
|
|
3,451
|
|
|
|
4,943
|
|
|
|
250,139
|
|
|
|
255,082
|
|
|
|
1,406
|
|
|
Commercial and agricultural non-real estate
|
|
|
5,173
|
|
|
|
811
|
|
|
|
4,093
|
|
|
|
10,077
|
|
|
|
1,700,291
|
|
|
|
1,710,368
|
|
|
|
1,451
|
|
|
Consumer non-real estate
|
|
|
2,638
|
|
|
|
724
|
|
|
|
640
|
|
|
|
4,002
|
|
|
|
352,766
|
|
|
|
356,768
|
|
|
|
545
|
|
|
Other loans
|
|
|
3,356
|
|
|
|
479
|
|
|
|
5,537
|
|
|
|
9,372
|
|
|
|
147,580
|
|
|
|
156,952
|
|
|
|
4,617
|
|
|
Pegasus Bank
|
|
|
—
|
|
|
|
—
|
|
|
|
270
|
|
|
|
270
|
|
|
|
474,575
|
|
|
|
474,845
|
|
|
|
—
|
|
|
Total
|
|
$
|
23,835
|
|
|
$
|
4,756
|
|
|
$
|
21,545
|
|
|
$
|
50,136
|
|
|
$
|
5,939,768
|
|
|
$
|
5,989,904
|
|
|
$
|
10,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential real estate owner occupied
|
|
$
|
1,600
|
|
|
$
|
967
|
|
|
$
|
5,159
|
|
|
$
|
7,726
|
|
|
$
|
699,690
|
|
|
$
|
707,416
|
|
|
$
|
3,799
|
|
|
Non-residential real estate other
|
|
|
971
|
|
|
|
—
|
|
|
|
1,228
|
|
|
|
2,199
|
|
|
|
1,134,976
|
|
|
|
1,137,175
|
|
|
|
—
|
|
|
Residential real estate permanent mortgage
|
|
|
4,705
|
|
|
|
973
|
|
|
|
2,215
|
|
|
|
7,893
|
|
|
|
332,679
|
|
|
|
340,572
|
|
|
|
1,660
|
|
|
Residential real estate other
|
|
|
4,496
|
|
|
|
1,028
|
|
|
|
2,541
|
|
|
|
8,065
|
|
|
|
912,767
|
|
|
|
920,832
|
|
|
|
549
|
|
|
Non-consumer non-real estate
|
|
|
2,290
|
|
|
|
1,446
|
|
|
|
1,763
|
|
|
|
5,499
|
|
|
|
1,448,894
|
|
|
|
1,454,393
|
|
|
|
354
|
|
|
Consumer other
|
|
|
2,829
|
|
|
|
858
|
|
|
|
592
|
|
|
|
4,279
|
|
|
|
358,075
|
|
|
|
362,354
|
|
|
|
491
|
|
|
Other loans
|
|
|
1,670
|
|
|
|
8
|
|
|
|
4,613
|
|
|
|
6,291
|
|
|
|
147,724
|
|
|
|
154,015
|
|
|
|
4,426
|
|
|
Acquired loans
|
|
|
2,167
|
|
|
|
1,376
|
|
|
|
3,447
|
|
|
|
6,990
|
|
|
|
147,691
|
|
|
|
154,681
|
|
|
|
555
|
|
|
Pegasus Bank
|
|
|
—
|
|
|
|
—
|
|
|
|
851
|
|
|
|
851
|
|
|
|
429,854
|
|
|
|
430,705
|
|
|
|
—
|
|
|
Total
|
|
$
|
20,728
|
|
|
$
|
6,656
|
|
|
$
|
22,409
|
|
|
$
|
49,793
|
|
|
$
|
5,612,350
|
|
|
$
|
5,662,143
|
|
|
$
|
11,834
|
|
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.
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 are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The Company’s revolving loans that are converted to term loans are not material and therefore have not been presented.
15
The following table summarizes our gross loans held for investment by year of origination and internally assigned credit grades:
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Revolving Loans Amortized Cost Basis
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
$25,303
|
|
$133,035
|
|
$92,854
|
|
$60,998
|
|
$48,931
|
|
$133,987
|
|
$10,456
|
|
$505,564
|
|
Grade 2
|
|
8,430
|
|
31,499
|
|
13,264
|
|
12,042
|
|
12,038
|
|
35,219
|
|
3,224
|
|
115,716
|
|
Grade 3
|
|
56
|
|
40
|
|
641
|
|
1,052
|
|
497
|
|
2,668
|
|
3,547
|
|
8,501
|
|
Grade 4
|
|
—
|
|
370
|
|
849
|
|
—
|
|
398
|
|
1,541
|
|
467
|
|
3,625
|
|
Total commercial real estate owner occupied loans
|
|
33,789
|
|
164,944
|
|
107,608
|
|
74,092
|
|
61,864
|
|
173,415
|
|
17,694
|
|
633,406
|
|
Commercial real estate non-owner occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
95,360
|
|
173,469
|
|
133,346
|
|
72,705
|
|
98,735
|
|
110,808
|
|
14,231
|
|
698,654
|
|
Grade 2
|
|
11,131
|
|
69,801
|
|
18,589
|
|
24,363
|
|
12,846
|
|
57,175
|
|
3,801
|
|
197,706
|
|
Grade 3
|
|
1,698
|
|
4,030
|
|
7,213
|
|
782
|
|
44
|
|
971
|
|
142
|
|
14,880
|
|
Grade 4
|
|
—
|
|
95
|
|
191
|
|
—
|
|
—
|
|
156
|
|
—
|
|
442
|
|
Total commercial real estate non-owner occupied loans
|
|
108,189
|
|
247,395
|
|
159,339
|
|
97,850
|
|
111,625
|
|
169,110
|
|
18,174
|
|
911,682
|
|
Construction and development < 60 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
42,312
|
|
101,895
|
|
28,665
|
|
36,294
|
|
3,112
|
|
4,490
|
|
10,045
|
|
226,813
|
|
Grade 2
|
|
12,019
|
|
9,018
|
|
1,732
|
|
869
|
|
172
|
|
581
|
|
404
|
|
24,795
|
|
Grade 3
|
|
34
|
|
2,211
|
|
195
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,440
|
|
Grade 4
|
|
—
|
|
75
|
|
39
|
|
26
|
|
—
|
|
—
|
|
—
|
|
140
|
|
Grade 5
|
|
16
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16
|
|
Total construction and development < 60 months
|
|
54,381
|
|
113,199
|
|
30,631
|
|
37,189
|
|
3,284
|
|
5,071
|
|
10,449
|
|
254,204
|
|
Construction residential real estate < 60 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
38,515
|
|
120,390
|
|
385
|
|
23
|
|
40
|
|
35
|
|
5,174
|
|
164,562
|
|
Grade 2
|
|
9,101
|
|
21,755
|
|
950
|
|
—
|
|
—
|
|
487
|
|
171
|
|
32,464
|
|
Grade 3
|
|
649
|
|
2,597
|
|
203
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,449
|
|
Grade 4
|
|
—
|
|
133
|
|
287
|
|
—
|
|
—
|
|
—
|
|
—
|
|
420
|
|
Total construction residential real estate < 60 months
|
|
48,265
|
|
144,875
|
|
1,825
|
|
23
|
|
40
|
|
522
|
|
5,345
|
|
200,895
|
|
Residential real estate first lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
64,808
|
|
217,000
|
|
100,098
|
|
79,709
|
|
59,462
|
|
176,542
|
|
—
|
|
697,619
|
|
Grade 2
|
|
6,678
|
|
29,159
|
|
25,294
|
|
14,288
|
|
14,068
|
|
41,068
|
|
—
|
|
130,555
|
|
Grade 3
|
|
2,333
|
|
2,468
|
|
1,621
|
|
1,796
|
|
2,330
|
|
7,303
|
|
—
|
|
17,851
|
|
Grade 4
|
|
126
|
|
596
|
|
707
|
|
257
|
|
937
|
|
2,143
|
|
—
|
|
4,766
|
|
Grade 5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
51
|
|
12
|
|
—
|
|
63
|
|
Total residential real estate first lien
|
|
73,945
|
|
249,223
|
|
127,720
|
|
96,050
|
|
76,848
|
|
227,068
|
|
—
|
|
850,854
|
|
Residential real estate all other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
6,151
|
|
20,055
|
|
14,680
|
|
10,701
|
|
7,350
|
|
15,475
|
|
36,405
|
|
110,817
|
|
Grade 2
|
|
1,282
|
|
2,441
|
|
1,640
|
|
1,918
|
|
494
|
|
3,384
|
|
58,583
|
|
69,742
|
|
Grade 3
|
|
25
|
|
850
|
|
1,002
|
|
288
|
|
194
|
|
436
|
|
288
|
|
3,083
|
|
Grade 4
|
|
53
|
|
46
|
|
74
|
|
45
|
|
—
|
|
727
|
|
94
|
|
1,039
|
|
Grade 5
|
|
97
|
|
70
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
167
|
|
Total residential real estate all other
|
|
7,608
|
|
23,462
|
|
17,396
|
|
12,952
|
|
8,038
|
|
20,022
|
|
95,370
|
|
184,848
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
13,825
|
|
35,940
|
|
24,768
|
|
18,410
|
|
16,773
|
|
37,822
|
|
7,733
|
|
155,271
|
|
Grade 2
|
|
6,615
|
|
35,533
|
|
7,464
|
|
7,565
|
|
6,670
|
|
10,788
|
|
9,347
|
|
83,982
|
|
Grade 3
|
|
540
|
|
834
|
|
5,337
|
|
1,132
|
|
589
|
|
1,715
|
|
3,540
|
|
13,687
|
|
Grade 4
|
|
—
|
|
—
|
|
777
|
|
660
|
|
399
|
|
55
|
|
251
|
|
2,142
|
|
Total farmland
|
|
20,980
|
|
72,307
|
|
38,346
|
|
27,767
|
|
24,431
|
|
50,380
|
|
20,871
|
|
255,082
|
|
Commercial and agricultural non-real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
200,458
|
|
306,072
|
|
154,484
|
|
122,613
|
|
60,696
|
|
53,613
|
|
466,220
|
|
1,364,156
|
|
Grade 2
|
|
38,024
|
|
61,920
|
|
32,778
|
|
10,825
|
|
6,101
|
|
29,242
|
|
103,820
|
|
282,710
|
|
Grade 3
|
|
8,868
|
|
5,720
|
|
2,836
|
|
1,833
|
|
4,610
|
|
1,458
|
|
5,976
|
|
31,301
|
|
Grade 4
|
|
26,587
|
|
1,221
|
|
903
|
|
2,529
|
|
111
|
|
290
|
|
437
|
|
32,078
|
|
Grade 5
|
|
—
|
|
83
|
|
—
|
|
—
|
|
—
|
|
—
|
|
40
|
|
123
|
|
Total commercial and agricultural non-real estate
|
|
273,937
|
|
375,016
|
|
191,001
|
|
137,800
|
|
71,518
|
|
84,603
|
|
576,493
|
|
1,710,368
|
|
Consumer non-real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
45,588
|
|
160,489
|
|
74,136
|
|
27,553
|
|
11,129
|
|
4,973
|
|
6,821
|
|
330,689
|
|
Grade 2
|
|
2,927
|
|
10,459
|
|
5,900
|
|
1,963
|
|
1,026
|
|
444
|
|
284
|
|
23,003
|
|
Grade 3
|
|
99
|
|
915
|
|
665
|
|
303
|
|
176
|
|
156
|
|
14
|
|
2,328
|
|
Grade 4
|
|
7
|
|
267
|
|
254
|
|
70
|
|
62
|
|
86
|
|
2
|
|
748
|
|
Total consumer non-real estate
|
|
48,621
|
|
172,130
|
|
80,955
|
|
29,889
|
|
12,393
|
|
5,659
|
|
7,121
|
|
356,768
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
Grade 1
|
|
6,050
|
|
29,014
|
|
29,762
|
|
22,628
|
|
21,756
|
|
16,142
|
|
21,851
|
|
147,203
|
|
Grade 2
|
|
—
|
|
—
|
|
17
|
|
3,080
|
|
1,183
|
|
3,121
|
|
867
|
|
8,268
|
|
Grade 3
|
|
—
|
|
—
|
|
24
|
|
—
|
|
—
|
|
1,346
|
|
—
|
|
1,370
|
|
Grade 4
|
|
—
|
|
—
|
|
—
|
|
12
|
|
28
|
|
71
|
|
—
|
|
111
|
|
Total other loans
|
|
6,050
|
|
29,014
|
|
29,803
|
|
25,720
|
|
22,967
|
|
20,680
|
|
22,718
|
|
156,952
|
|
Pegasus Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1
|
|
35,067
|
|
79,582
|
|
43,442
|
|
30,012
|
|
16,926
|
|
45,404
|
|
80,175
|
|
330,608
|
|
Grade 2
|
|
15,439
|
|
33,869
|
|
11,062
|
|
27,708
|
|
4,209
|
|
8,887
|
|
41,516
|
|
142,690
|
|
Grade 3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,277
|
|
—
|
|
1,277
|
|
Grade 4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
270
|
|
—
|
|
—
|
|
270
|
|
Total Pegasus Bank
|
|
50,506
|
|
113,451
|
|
54,504
|
|
57,720
|
|
21,405
|
|
55,568
|
|
121,691
|
|
474,845
|
|
Total loans held for investment
|
|
$726,271
|
|
$1,705,016
|
|
$839,128
|
|
$597,052
|
|
$414,413
|
|
$812,098
|
|
$895,926
|
|
$5,989,904
|
Allowance for Credit Losses Methodology
On January 1, 2020, the Company adopted ASU 2016-13, which replaces the incurred loss methodology for determining its provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model. See Note (1) for additional information regarding the factors that influenced the Company’s current estimate of expected credit losses. Upon adoption, the allowance for credit losses was decreased by $3.2 million, with no impact to the consolidated statement of income. Subsequent to the adoption of ASU 2016-13, the Company recorded a $19.6 million provision for credit losses for the first quarter of 2020 utilizing the newly adopted CECL methodology, a significant increase from prior quarters. The increase resulted primarily from the anticipated impact on our loan portfolio resulting from the economic outlook related to the COVID-19 pandemic and the decline in energy prices and to a lesser degree, loan growth during the quarter. Prolonged low energy prices will not only have a direct impact on the energy portfolio; it will have an indirect effect on the economies of Oklahoma and the Dallas, Texas market, including higher unemployment, with a residual effect on land values and real estate prices.
The 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
|
|
|
Impact of CECL adoption
|
|
|
Initial allowance on loans purchased with credit deterioration
|
|
|
Charge-
offs
|
|
|
Recoveries
|
|
|
Net
charge-offs
|
|
|
Provision
for credit losses on loans
|
|
|
Balance at
end of
period
|
|
|
|
|
(Dollars in thousands)
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
$
|
5,625
|
|
|
$
|
(2,806
|
)
|
|
$
|
432
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,293
|
|
|
$
|
4,544
|
|
|
Commercial real estate non-owner occupied
|
|
|
8,358
|
|
|
|
(5,507
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,084
|
|
|
|
5,935
|
|
|
Construction and development < 60 months
|
|
|
2,214
|
|
|
|
(1,056
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(19
|
)
|
|
|
1,136
|
|
|
Construction residential real estate < 60 months
|
|
|
1,933
|
|
|
|
(778
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
464
|
|
|
|
1,618
|
|
|
Residential real estate first lien
|
|
|
8,692
|
|
|
|
(3,831
|
)
|
|
|
7
|
|
|
|
(152
|
)
|
|
|
2
|
|
|
|
(150
|
)
|
|
|
1,474
|
|
|
|
6,192
|
|
|
Residential real estate all other
|
|
|
2,767
|
|
|
|
(1,408
|
)
|
|
|
—
|
|
|
|
(25
|
)
|
|
|
27
|
|
|
|
2
|
|
|
|
931
|
|
|
|
2,292
|
|
|
Farmland
|
|
|
2,821
|
|
|
|
(1,408
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
374
|
|
|
|
1,788
|
|
|
Commercial and agricultural non-real estate
|
|
|
15,345
|
|
|
|
11,849
|
|
|
|
62
|
|
|
|
(87
|
)
|
|
|
17
|
|
|
|
(70
|
)
|
|
|
10,090
|
|
|
|
37,276
|
|
|
Consumer non-real estate
|
|
|
3,252
|
|
|
|
(622
|
)
|
|
|
—
|
|
|
|
(321
|
)
|
|
|
57
|
|
|
|
(264
|
)
|
|
|
1,019
|
|
|
|
3,385
|
|
|
Other loans
|
|
|
2,632
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
|
|
233
|
|
|
|
2,751
|
|
|
Pegasus Bank
|
|
|
599
|
|
|
|
2,488
|
|
|
|
—
|
|
|
|
(571
|
)
|
|
|
7
|
|
|
|
(564
|
)
|
|
|
640
|
|
|
|
3,163
|
|
|
Total
|
|
$
|
54,238
|
|
|
$
|
(3,195
|
)
|
|
$
|
502
|
|
|
$
|
(1,160
|
)
|
|
$
|
112
|
|
|
$
|
(1,048
|
)
|
|
$
|
19,583
|
|
|
$
|
70,080
|
|
17
|
|
|
Allowance for Credit Losses
|
|
|
|
|
Balance at
beginning of
period
|
|
|
Charge-
offs
|
|
|
Recoveries
|
|
|
Net
charge-offs
|
|
|
Provision for credit losses on loans
|
|
|
Balance at
end of
period
|
|
|
|
|
(Dollars in thousands)
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential real estate owner occupied
|
|
$
|
6,328
|
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(5
|
)
|
|
$
|
332
|
|
|
$
|
6,655
|
|
|
Non-residential real estate other
|
|
|
11,027
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
341
|
|
|
|
11,362
|
|
|
Residential real estate permanent mortgage
|
|
|
3,261
|
|
|
|
(63
|
)
|
|
|
5
|
|
|
|
(58
|
)
|
|
|
58
|
|
|
|
3,261
|
|
|
Residential real estate all other
|
|
|
10,673
|
|
|
|
(52
|
)
|
|
|
2
|
|
|
|
(50
|
)
|
|
|
423
|
|
|
|
11,046
|
|
|
Non-consumer non-real estate
|
|
|
13,151
|
|
|
|
(70
|
)
|
|
|
67
|
|
|
|
(3
|
)
|
|
|
1,261
|
|
|
|
14,409
|
|
|
Consumer non-real estate
|
|
|
3,065
|
|
|
|
(120
|
)
|
|
|
71
|
|
|
|
(49
|
)
|
|
|
56
|
|
|
|
3,072
|
|
|
Other loans
|
|
|
2,423
|
|
|
|
—
|
|
|
|
35
|
|
|
|
35
|
|
|
|
(50
|
)
|
|
|
2,408
|
|
|
Acquired loans
|
|
|
1,461
|
|
|
|
(26
|
)
|
|
|
4
|
|
|
|
(22
|
)
|
|
|
(737
|
)
|
|
|
702
|
|
|
Total
|
|
$
|
51,389
|
|
|
$
|
(343
|
)
|
|
$
|
185
|
|
|
$
|
(158
|
)
|
|
$
|
1,684
|
|
|
$
|
52,915
|
|
Purchased Credit Deteriorated Loans
The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:
|
|
|
Loans acquired
with deteriorated
credit quality
|
|
|
|
|
(Dollars in thousands)
|
|
|
As of March 31, 2020
|
|
|
|
|
|
Purchase price of loans at acquisition
|
|
$
|
1,761
|
|
|
Allowance for credit losses at acquisition
|
|
|
502
|
|
|
Par value of acquired loans at acquisition
|
|
$
|
2,263
|
|
Collateral Dependent Loans
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:
|
|
|
Collateral Type
|
|
|
|
|
Real Estate
|
|
|
Business Assets
|
|
|
Energy Reserves
|
|
|
Other Assets
|
|
|
|
|
(Dollars in thousands)
|
|
|
As of March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied
|
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Commercial real estate non-owner occupied
|
|
|
1,012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Construction and development < 60 months
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Construction residential real estate < 60 months
|
|
|
199
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Residential real estate first lien
|
|
|
1,590
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Residential real estate all other
|
|
|
3,042
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Farmland
|
|
|
1,112
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Commercial and agricultural non-real estate
|
|
|
—
|
|
|
|
3,081
|
|
|
|
28,604
|
|
|
|
801
|
|
|
Consumer non-real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38
|
|
|
Other loans
|
|
|
—
|
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
Pegasus Bank
|
|
|
1,277
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total collateral-dependent loans held for investment
|
|
$
|
9,070
|
|
|
$
|
3,106
|
|
|
$
|
28,604
|
|
|
$
|
839
|
|
18
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Other real estate owned
|
|
$
|
2,342
|
|
|
$
|
591
|
|
|
Repossessed assets
|
|
|
318
|
|
|
|
301
|
|
|
Total
|
|
$
|
2,660
|
|
|
$
|
892
|
|
|
(5)
|
INTANGIBLE ASSETS AND GOODWILL
|
The following is a summary of intangible assets:
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
|
|
(Dollars in thousands)
|
|
|
As of March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
$
|
35,562
|
|
|
$
|
(14,540
|
)
|
|
$
|
21,022
|
|
|
Customer relationship intangibles
|
|
|
3,391
|
|
|
|
(2,563
|
)
|
|
|
828
|
|
|
Total
|
|
$
|
38,953
|
|
|
$
|
(17,103
|
)
|
|
$
|
21,850
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
$
|
35,856
|
|
|
$
|
(14,131
|
)
|
|
$
|
21,725
|
|
|
Customer relationship intangibles
|
|
|
3,391
|
|
|
|
(2,508
|
)
|
|
|
883
|
|
|
Total
|
|
$
|
39,247
|
|
|
$
|
(16,639
|
)
|
|
$
|
22,608
|
|
The following is a summary of goodwill by business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Executive,
|
|
|
|
|
|
|
|
|
Metropolitan
|
|
|
Community
|
|
|
Pegasus
|
|
|
Financial
|
|
|
Operations
|
|
|
|
|
|
|
|
|
Banks
|
|
|
Banks
|
|
|
Bank
|
|
|
Services
|
|
|
& Support
|
|
|
Consolidated
|
|
|
|
|
(Dollars in thousands)
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
13,767
|
|
|
$
|
59,894
|
|
|
$
|
68,855
|
|
|
$
|
5,464
|
|
|
$
|
624
|
|
|
$
|
148,604
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
1,319
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,319
|
|
|
Balance at beginning and end of period
|
|
$
|
13,767
|
|
|
$
|
61,213
|
|
|
$
|
68,855
|
|
|
$
|
5,464
|
|
|
$
|
624
|
|
|
$
|
149,923
|
|
The Company acquired Citizens on March 5, 2020, which added $1.3 million in goodwill. Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
(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.
Rent expense for all operating leases, including those rented on a monthly or temporary basis totaled approximately $463,000 and $391,000 for the three months ended March 31, 2020 and March 31, 2019, respectively.
19
As of March 31, 2020, right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $5.2 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $5.0 million. There have been no significant changes in our expected future minimum lease payments since December 31, 2019. The future minimum lease payments are disclosed in Note (20) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. As of March 31, 2020, our operating leases have a weighted-average remaining lease term of 3.4 years and a weighted-average discount rate of 3.4 percent.
Maturity of Operating Lease Liabilities
|
|
|
March 31, 2020
|
|
|
|
|
(Dollars in thousands)
|
|
|
2020 (nine months)
|
|
$
|
1,258
|
|
|
2021
|
|
|
1,233
|
|
|
2022
|
|
|
989
|
|
|
2023
|
|
|
558
|
|
|
2024
|
|
|
336
|
|
|
Thereafter
|
|
|
1,163
|
|
|
Total lease payments
|
|
|
5,537
|
|
|
Less imputed Interest
|
|
|
(492
|
)
|
|
Operating lease liability
|
|
$
|
5,045
|
|
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 $1.4 million and $1.5 million for the three months ended March 31, 2020 and March 31, 2019, respectively. Lease revenue is included in occupancy, net on the consolidated statement of comprehensive income.
Future Minimum Lease Payments to be received
The Company does not have operating leases that extend beyond 2030. The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases:
|
|
|
March 31, 2020
|
|
|
|
|
(Dollars in thousands)
|
|
|
2020 (nine months)
|
|
$
|
3,152
|
|
|
2021
|
|
|
3,500
|
|
|
2022
|
|
|
2,932
|
|
|
2023
|
|
|
2,463
|
|
|
2024
|
|
|
1,939
|
|
|
2025-2030
|
|
|
5,629
|
|
|
Total future minimum lease payments
|
|
$
|
19,615
|
|
|
(7)
|
STOCK-BASED COMPENSATION
|
The Company has had a nonqualified incentive stock option plan (the “BancFirst ISOP”) since May 1986. At March 31, 2020, there were 116,500 shares available for future grants. The BancFirst ISOP will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2020 will become exercisable through the year 2027. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.
The Company has had the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”) since June 1999. Each non-employee director is granted an option for 10,000 shares. At March 31, 2020, there were 15,000 shares available for future grants. The BancFirst Directors’ Stock Option Plan will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire at the end of fifteen years from the date of grant. Options outstanding as of March 31, 2020 will become exercisable through the year 2023. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.
20
The Company currently uses newly issued shares for stock option exercises, but reserves the right to use shares purchased under the Company’s Stock Repurchase Program (the “SRP”) in the future.
The following table is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:
|
|
|
|
|
|
|
|
|
|
|
Wgtd. Avg.
|
|
|
|
|
|
|
|
|
|
|
|
Wgtd. Avg.
|
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
Intrinsic
|
|
|
|
|
Options
|
|
|
Price
|
|
|
Term
|
|
Value
|
|
|
|
|
(Dollars in thousands, except option data)
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
1,257,730
|
|
|
$
|
32.70
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
137,500
|
|
|
|
51.30
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(10,400
|
)
|
|
|
19.28
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2020
|
|
|
1,384,830
|
|
|
|
34.65
|
|
|
9.17 Yrs
|
|
$
|
(1,766
|
)
|
|
Exercisable at March 31, 2020
|
|
|
651,830
|
|
|
|
23.49
|
|
|
7.03 Yrs
|
|
$
|
6,439
|
|
The following table has additional information regarding options exercised under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Total intrinsic value of options exercised
|
|
$
|
389
|
|
|
$
|
145
|
|
|
Cash received from options exercised
|
|
|
201
|
|
|
|
156
|
|
|
Tax benefit realized from options exercised
|
|
|
99
|
|
|
|
37
|
|
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Stock-based compensation expense
|
|
$
|
426
|
|
|
$
|
174
|
|
|
Tax benefit
|
|
|
109
|
|
|
|
44
|
|
|
Stock-based compensation expense, net of tax
|
|
$
|
317
|
|
|
$
|
130
|
|
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, 2020
|
|
|
|
|
(Dollars in thousands)
|
|
|
Unearned stock-based compensation expense
|
|
$
|
5,626
|
|
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Weighted average grant-date fair value per share of options granted
|
|
$
|
10.56
|
|
|
$
|
13.67
|
|
|
Risk-free interest rate
|
|
1.13%
|
|
|
2.62 to 2.76%
|
|
|
Dividend yield
|
|
2.00%
|
|
|
2.00%
|
|
|
Stock price volatility
|
|
22.84%
|
|
|
22.93 to 22.96%
|
|
|
Expected term
|
|
10 Yrs
|
|
|
10 Yrs
|
|
21
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.
In May 1999, the Company adopted the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “BancFirst Deferred Stock Compensation Plan”). The Company has amended the BancFirst Deferred Stock Compensation Plan since 1999 to increase the number of shares to be issued under the plan to 244,148 shares. The BancFirst 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 1,307 and 8,362 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the three months ended March 31, 2020 and March 31, 2019, respectively.
A summary of the accumulated stock units is as follows:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Accumulated stock units
|
|
|
144,552
|
|
|
|
143,362
|
|
|
Average price
|
|
$
|
27.68
|
|
|
$
|
27.17
|
|
In November 1999, the Company adopted the SRP. The SRP may be used as a means to increase earnings per share and return on equity, to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and to provide liquidity for stockholders wishing to sell their stock. 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.
The following table is a summary of the shares under the program:
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Number of shares repurchased
|
|
|
59,284
|
|
|
|
—
|
|
|
Average price of shares repurchased
|
|
$
|
52.26
|
|
|
$
|
—
|
|
|
Shares remaining to be repurchased
|
|
|
62,782
|
|
|
|
148,736
|
|
22
The Company, BancFirst and Pegasus Bank 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 the Company’s, BancFirst’s and Pegasus Bank’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. Management believes that as of March 31, 2020, the Company, BancFirst and Pegasus Bank met all capital adequacy requirements to which they are subject. The actual and required capital amounts and ratios are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
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, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets)-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst Corporation
|
|
$
|
937,808
|
|
|
14.30%
|
|
|
$
|
524,592
|
|
|
8.00%
|
|
|
$
|
688,527
|
|
|
10.50%
|
|
|
N/A
|
|
|
N/A
|
|
|
BancFirst
|
|
|
853,975
|
|
|
14.10%
|
|
|
|
484,515
|
|
|
8.00%
|
|
|
|
635,926
|
|
|
10.50%
|
|
|
$
|
605,644
|
|
|
10.00%
|
|
|
Pegasus Bank
|
|
|
65,152
|
|
|
13.31%
|
|
|
|
39,146
|
|
|
8.00%
|
|
|
|
51,379
|
|
|
10.50%
|
|
|
|
48,932
|
|
|
10.00%
|
|
|
Common Equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets)-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst Corporation
|
|
$
|
841,728
|
|
|
12.84%
|
|
|
$
|
295,083
|
|
|
4.50%
|
|
|
$
|
459,018
|
|
|
7.00%
|
|
|
N/A
|
|
|
N/A
|
|
|
BancFirst
|
|
|
767,058
|
|
|
12.67%
|
|
|
|
272,540
|
|
|
4.50%
|
|
|
|
423,951
|
|
|
7.00%
|
|
|
$
|
393,669
|
|
|
6.50%
|
|
|
Pegasus Bank
|
|
|
61,537
|
|
|
12.58%
|
|
|
|
22,019
|
|
|
4.50%
|
|
|
|
34,252
|
|
|
7.00%
|
|
|
|
31,806
|
|
|
6.50%
|
|
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets)-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst Corporation
|
|
$
|
867,728
|
|
|
13.23%
|
|
|
$
|
393,444
|
|
|
6.00%
|
|
|
$
|
557,379
|
|
|
8.50%
|
|
|
N/A
|
|
|
N/A
|
|
|
BancFirst
|
|
|
787,058
|
|
|
13.00%
|
|
|
|
363,387
|
|
|
6.00%
|
|
|
|
514,798
|
|
|
8.50%
|
|
|
$
|
484,515
|
|
|
8.00%
|
|
|
Pegasus Bank
|
|
|
61,537
|
|
|
12.58%
|
|
|
|
29,359
|
|
|
6.00%
|
|
|
|
41,592
|
|
|
8.50%
|
|
|
|
39,146
|
|
|
8.00%
|
|
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Total Assets)-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BancFirst Corporation
|
|
$
|
867,728
|
|
|
10.41%
|
|
|
$
|
333,372
|
|
|
4.00%
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
BancFirst
|
|
|
787,058
|
|
|
10.35%
|
|
|
|
304,312
|
|
|
4.00%
|
|
|
N/A
|
|
|
N/A
|
|
|
$
|
380,390
|
|
|
5.00%
|
|
|
Pegasus Bank
|
|
|
61,537
|
|
|
8.83%
|
|
|
|
27,880
|
|
|
4.00%
|
|
|
N/A
|
|
|
N/A
|
|
|
|
34,850
|
|
|
5.00%
|
|
As of March 31, 2020, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst and Pegasus Bank as “well capitalized” under the prompt corrective action provisions. The Common Equity Tier 1 Capital of the Company, BancFirst and Pegasus Bank 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 the Company, BancFirst and Pegasus Bank 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 notification of BancFirst and Pegasus Bank’s capital category that management believes would materially change its category under capital requirements existing as of the report date.
As discussed in Note 1 - Significant Accounting Policies, in connection with the adoption of ASC 326, the Company recognized an after-tax cumulative effect reduction to retained earnings totaling $2.3 million. In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under U.S. GAAP. The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of CECL on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under U.S. GAAP (as of January 2020) to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company elected not to adopt the five-year transition option.
23
|
(9)
|
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, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
|
$
|
22,608
|
|
|
|
32,679,587
|
|
|
$
|
0.69
|
|
|
Dilutive effect of stock options
|
|
|
—
|
|
|
|
607,772
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders plus assumed
exercises of stock options
|
|
$
|
22,608
|
|
|
|
33,287,359
|
|
|
$
|
0.68
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
|
$
|
31,837
|
|
|
|
32,612,399
|
|
|
$
|
0.98
|
|
|
Dilutive effect of stock options
|
|
|
—
|
|
|
|
680,453
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders plus assumed
exercises of stock options
|
|
$
|
31,837
|
|
|
|
33,292,852
|
|
|
$
|
0.96
|
|
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, 2020
|
|
|
351,862
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
180,000
|
|
|
|
(10)
|
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 management judgment or estimation. This category includes certain impaired 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.
24
Securities Available for Sale
Securities classified as available for sale are reported at fair value. U.S. Treasuries are valued using Level 1 inputs. Other securities available for sale including U.S. federal agencies, registered mortgage backed securities and state and political subdivisions are valued using prices from an independent pricing service utilizing Level 2 data. 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 securities for which observable information is not readily available. These securities are reported at fair value utilizing Level 3 inputs. For these securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors. Discount rates are primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are developed by investment securities professionals involved in the active trading of similar securities.
The Company reviews the prices for Level 1 and Level 2 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 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 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.
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, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
513,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
513,355
|
|
|
U.S. federal agencies
|
|
|
—
|
|
|
|
22,338
|
|
|
|
—
|
|
|
|
22,338
|
|
|
Mortgage-backed securities
|
|
|
—
|
|
|
|
16,880
|
|
|
|
—
|
|
|
|
16,880
|
|
|
States and political subdivisions
|
|
|
—
|
|
|
|
22,856
|
|
|
|
1,655
|
|
|
|
24,511
|
|
|
Asset backed securities
|
|
|
—
|
|
|
|
—
|
|
|
|
12,714
|
|
|
|
12,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
414,449
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
414,449
|
|
|
U.S. federal agencies
|
|
|
—
|
|
|
|
23,024
|
|
|
|
—
|
|
|
|
23,024
|
|
|
Mortgage-backed securities
|
|
|
—
|
|
|
|
17,005
|
|
|
|
—
|
|
|
|
17,005
|
|
|
States and political subdivisions
|
|
|
—
|
|
|
|
22,531
|
|
|
|
—
|
|
|
|
22,531
|
|
|
Asset backed securities
|
|
|
—
|
|
|
|
—
|
|
|
|
12,714
|
|
|
|
12,714
|
|
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Dollars in thousands)
|
|
|
Balance at the beginning of the year
|
|
$
|
12,714
|
|
|
$
|
13,443
|
|
|
Transfers from level 2
|
|
|
1,648
|
|
|
|
—
|
|
|
Settlements
|
|
|
—
|
|
|
|
(695
|
)
|
|
Total unrealized gains/(losses)
|
|
|
7
|
|
|
|
(34
|
)
|
|
Balance at the end of the period
|
|
$
|
14,369
|
|
|
$
|
12,714
|
|
The Company’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting period. During the three months ended March 31, 2020, the Company transferred securities from Level 2 to Level 3 due to a review of the
25
pricing models that determined some state and political subdivisions bonds to be Level 3. During the twelve months ended December 31, 2019, the Company did not transfer any securities between levels in the fair value hierarchy.
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. Beginning January 1, 2018, upon adoption of ASU 2016-01, these securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. 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 management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. In no case does the fair value of a collateral dependent loan exceed the fair value of the underlying collateral. The collateral dependent loans are adjusted to fair value through a specific allocation of the allowance for loan losses or a direct charge-down of the loan.
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. 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, 2020
|
|
|
|
|
|
|
Equity securities
|
|
$
|
9,802
|
|
|
|
Collateral dependent loans
|
|
|
26,751
|
|
|
|
Repossessed assets
|
|
|
136
|
|
|
|
Other real estate owned
|
|
|
1,904
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year-to-date Period Ended December 31, 2019
|
|
|
|
|
|
|
Equity securities
|
|
$
|
10,121
|
|
|
|
Collateral dependent loans
|
|
|
45,687
|
|
|
|
Repossessed assets
|
|
|
465
|
|
|
|
Other real estate owned
|
|
|
3,024
|
|
|
|
|
|
|
|
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.
26
Federal Funds Sold
The carrying amount of these short-term instruments is based on a reasonable estimate of fair value.
Securities Held for Investment
For securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities making adjustments for credit or liquidity if applicable.
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 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.
Junior Subordinated Debentures
The fair values of junior subordinated debentures are estimated using the rates that would be charged for junior subordinated debentures 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.
27
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
|
|
(Dollars in thousands)
|
|
|
FINANCIAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,548,860
|
|
|
$
|
1,548,860
|
|
|
$
|
1,868,281
|
|
|
$
|
1,868,281
|
|
|
Federal funds sold
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Securities held for investment
|
|
|
309
|
|
|
|
314
|
|
|
|
1,403
|
|
|
|
1,403
|
|
|
Loans held for sale
|
|
|
16,161
|
|
|
|
16,161
|
|
|
|
11,001
|
|
|
|
11,001
|
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held for investment
|
|
|
1,880
|
|
|
|
1,906
|
|
|
|
500
|
|
|
|
500
|
|
|
Loans, net of allowance for credit losses
|
|
|
5,919,824
|
|
|
|
5,961,792
|
|
|
|
5,607,905
|
|
|
|
5,625,005
|
|
|
FINANCIAL LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
7,573,200
|
|
|
|
7,590,873
|
|
|
|
7,483,635
|
|
|
|
7,497,429
|
|
|
Short-term borrowings
|
|
|
1,400
|
|
|
|
1,400
|
|
|
|
1,100
|
|
|
|
1,100
|
|
|
Junior subordinated debentures
|
|
|
26,804
|
|
|
|
28,981
|
|
|
|
26,804
|
|
|
|
29,324
|
|
|
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
|
|
|
|
|
2,656
|
|
|
|
|
|
|
|
2,832
|
|
|
Letters of credit
|
|
|
|
|
|
|
471
|
|
|
|
|
|
|
|
485
|
|
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, 2020 or December 31, 2019.
(11)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 five principal business units are metropolitan banks, community banks, Pegasus Bank, other financial services and executive, operations and support. Metropolitan banks, community banks and Pegasus Bank 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 Bank consists of banking locations in the Dallas 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.
28
The results of operations and selected financial information for the four business units are as follows:
|
|
|
Metropolitan
Banks
|
|
|
Community
Banks
|
|
|
Pegasus Bank
|
|
|
Other
Financial
Services
|
|
|
Executive,
Operations
& Support
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
(Dollars in thousands)
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
22,184
|
|
|
$
|
44,498
|
|
|
$
|
5,608
|
|
|
$
|
1,583
|
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
74,073
|
|
|
Noninterest income
|
|
|
4,700
|
|
|
|
15,853
|
|
|
|
131
|
|
|
|
10,890
|
|
|
|
27,483
|
|
|
|
(23,912
|
)
|
|
|
35,145
|
|
|
Income before taxes
|
|
|
10,413
|
|
|
|
24,436
|
|
|
|
1,598
|
|
|
|
5,759
|
|
|
|
9,403
|
|
|
|
(23,359
|
)
|
|
|
28,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
21,353
|
|
|
$
|
43,407
|
|
|
$
|
—
|
|
|
$
|
1,171
|
|
|
$
|
972
|
|
|
$
|
—
|
|
|
$
|
66,903
|
|
|
Noninterest income
|
|
|
4,209
|
|
|
|
14,885
|
|
|
|
—
|
|
|
|
9,873
|
|
|
|
35,521
|
|
|
|
(32,487
|
)
|
|
|
32,001
|
|
|
Income before taxes
|
|
|
15,369
|
|
|
|
28,045
|
|
|
|
—
|
|
|
|
4,499
|
|
|
|
25,023
|
|
|
|
(31,922
|
)
|
|
|
41,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
2,863,800
|
|
|
$
|
5,157,675
|
|
|
$
|
757,946
|
|
|
$
|
108,546
|
|
|
$
|
845,160
|
|
|
$
|
(1,064,031
|
)
|
|
$
|
8,669,096
|
|
|
December 31, 2019
|
|
|
2,806,021
|
|
|
|
4,998,247
|
|
|
|
738,351
|
|
|
|
102,442
|
|
|
|
950,920
|
|
|
|
(1,030,223
|
)
|
|
|
8,565,758
|
|
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. Capital expenditures are generally charged to the business unit using the asset.
29