# Bancfirst Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Bancfirst Corp](/companies/banf.md) (CIK 760498)
- Form: 10-Q
- Filed: 2024-05-07
- Accepted by EDGAR: May 7, 2024, 12:25 ET
- Period: 2024-03-31
- Accession: 0000950170-24-054176
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/760498/000095017024054176/banf-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/760498/000095017024054176/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $65.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $13.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $50.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 33,513,412 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $66.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $10.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $14.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Total assets | at 2024-03-31 | $12.60bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $11.13bn | us-gaap:Liabilities |
| Short-term borrowings | at 2024-03-31 | $9.7m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $1.47bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,062 characters.

*The following discussion and analysis of our financial condition as of March 31, 2024 and December 31, 2023 and results of operations for the three months ended March 31, 2024 should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2023, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2023 Form 10-K, and "Item 1A, Risk Factors" in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.*

### FORWARD LOOKING STATEMENTS

The Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 with respect to earnings, credit quality, corporate objectives, interest rates and other financial and business matters. Forward-looking statements include estimates and give management’s current expectations or forecasts of future events. The Company cautions readers that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, including economic conditions; the performance of financial markets and interest rates; legislative and regulatory actions and reforms; competition; as well as other factors, all of which change over time. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes”, “anticipates”, “expects”, “intends”, “targeted”, “continue”, “remain”, “will”, “should”, “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

- The impact of the Durbin Amendment of the Dodd-Frank Act ("Durbin Amendment") on noninterest income beginning July 1, 2023.
- Potential impacts of the adverse developments in the banking industry driven by high-profile bank failures, including impacts on customer confidence, demand deposit outflows and the regulatory response thereto.
- Deterioration in the market for commercial office property could have an adverse effect on the value of the Company's other real estate owned as well as commercial office collateral for the Company's commercial real estate loans.
- Political pressures could further limit our ability to charge NSF and overdraft fees.
- A continuing shift in deposit mix could negatively impact net interest margin.
- Changes in interest rates.
- The increased time, effort and non-interest expense related to ongoing and increased regulations from the Federal Reserve, the Consumer Financial Protection Bureau and the Securities and Exchange Commission, including requirements related to environmental, social and governance issues and climate disclosures.
- Local, regional, national and international economic conditions and the impact they may have on the Company and its customers.
- Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
- Inflation, including wage inflation, energy prices, securities markets and monetary fluctuations.
- Impairment of the Company’s goodwill or other intangible assets.
- Changes in consumer spending, borrowing and savings habits.
- Changes in the financial performance and/or condition of the Company’s borrowers, including the impact of rising interest rates.
- Technological changes.
- Cyber threats.
- The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
- The Company’s success at managing the risks involved in the foregoing items.

Actual results may differ materially from forward-looking statements.

### SUMMARY

The Company’s net income for the first quarter of 2024 was $50.3 million, compared to $57.5 million for the first quarter of 2023. Diluted net income per common share was $1.50 and $1.72 for the first quarter of 2024 and 2023, respectively. The Company’s net interest income for the first quarter of 2024 decreased to $106.1 million from $109.2 million for the first quarter of 2023. Net interest income was negatively impacted by a change in the mix of interest-bearing and non-interest bearing deposits, partially offset by higher loan volume. Net interest margin for the first quarter of 2024 was 3.70% compared to 3.89% for the first quarter of 2023. For the first quarter of 2024, the Company recorded a provision for credit losses of $4.0 million compared to $2.3 million for the first quarter of 2023.

Noninterest income for the first quarter of 2024 totaled $44.9 million compared to $47.8 million for the first quarter of 2023. The decrease in noninterest income was primarily due to an approximate $5.3 million reduction of interchange fees related to the impact of the Durbin Amendment. Trust revenue, sweep fees and insurance commissions all increased when compared to last year.

Noninterest expense for the first quarter of 2024 increased to $82.8 million compared to $80.3 million for the first quarter of 2023. The increase in noninterest expense was primarily related to growth in salaries and employee benefits of $2.3 million.

The Company’s effective tax rate was 21.6% for the first quarter of 2024 compared to 22.6% for the first quarter of 2023.

At March 31, 2024, the Company’s total assets were $12.6 billion, an increase of $230.4 million from December 31, 2023. Loans grew $127.7 million, totaling $7.8 billion at March 31, 2024. Deposits totaled $10.9 billion, an increase of $209.5 million from December 31, 2023. Off-balance-sheet sweep accounts totaled $4.6 billion at March 31, 2024, up $224.2 million from December 31, 2023. The Company’s total stockholders’ equity at March 31, 2024 was $1.5 billion, an increase of $35.4 million over December 31, 2023.

Asset quality remained strong as the Company’s nonaccrual loans totaled $42.0 million, representing 0.54% of total loans at March 31, 2024 compared to 0.32% at year-end 2023. The allowance for credit losses to total loans was 1.25% at March 31, 2024 virtually unchanged from year-end. Net charge-offs were $3.5 million for the first quarter of 2024 compared to $290,000 for the first quarter of 2023.

### FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to the Consolidated Financial Statements for disclosures regarding recently issued accounting pronouncements since December 31, 2023, the date of its most recent annual report to stockholders.

### SEGMENT INFORMATION

See Note (11) of the Notes to the Consolidated Financial Statements for disclosures regarding business segments.

### RESULTS OF OPERATIONS

### Average Balances, Income, Expenses and Rates

The following table presents certain information related to the Company's consolidated average balance sheet, average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. For these computations: (i) average balances are derived from daily averages, (ii) information is shown on a taxable-equivalent basis assuming a 21% tax rate, and (iii) nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis. Loan fees included in interest income were $5.4 million for the three months ended March 31, 2024 compared to $5.6 million for the three months ended March 31, 2023.

*BANCFIRST CORPORATION*

*CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS*

*(Unaudited)*

*Taxable Equivalent Basis*

*(Dollars in thousands)*

| ASSETS Earning assets: | Three Months Ended March 31, 2024 Average Balance | Interest Income/ Expense | Average Yield/ Rate | 2023 Average Balance | Interest Income/ Expense | Average Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans (1) | $7,730,753 | $132,249 | 6.86% | $7,005,731 | $104,481 | 6.05% |
| Securities – taxable | 1,557,806 | 9,181 | 2.36 | 1,572,278 | 8,991 | 2.32 |
| Securities – tax exempt | 2,642 | 25 | 3.76 | 3,481 | 9 | 1.07 |
| Federal funds sold and interest-bearing deposits with banks | 2,212,788 | 30,316 | 5.50 | 2,799,540 | 32,052 | 4.64 |
| Total earning assets | 11,503,989 | 171,771 | 5.99 | 11,381,030 | 145,533 | 5.19 |
| Nonearning assets: |  |  |  |  |  |  |
| Cash and due from banks | 202,300 |  |  | 218,164 |  |  |
| Interest receivable and other assets | 804,575 |  |  | 795,316 |  |  |
| Allowance for credit losses | (97,061) |  |  | (93,316) |  |  |
| Total nonearning assets | 909,814 |  |  | 920,164 |  |  |
| Total assets | $12,413,803 |  |  | $12,301,194 |  |  |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY** |  |  |  |  |  |  |
| Interest-bearing liabilities: |  |  |  |  |  |  |
| Money market and interest-bearing checking deposits | $4,814,772 | $44,217 | 3.68% | $4,216,293 | $26,866 | 2.58% |
| Savings deposits | 1,056,727 | 9,003 | 3.42 | 1,135,035 | 5,257 | 1.88 |
| Time deposits | 1,027,039 | 11,193 | 4.37 | 705,787 | 3,054 | 1.76 |
| Short-term borrowings | 8,018 | 96 | 4.79 | 6,844 | 83 | 4.94 |
| Subordinated debt | 86,106 | 1,030 | 4.80 | 86,049 | 1,030 | 4.86 |
| Total interest-bearing liabilities | 6,992,662 | 65,539 | 3.76 | 6,150,008 | 36,290 | 2.39 |
| Interest-free funds: |  |  |  |  |  |  |
| Noninterest-bearing deposits | 3,843,371 |  |  | 4,797,014 |  |  |
| Interest payable and other liabilities | 131,898 |  |  | 79,735 |  |  |
| Stockholders’ equity | 1,445,872 |  |  | 1,274,437 |  |  |
| Total interest free funds | 5,421,141 |  |  | 6,151,186 |  |  |
| Total liabilities and stockholders’ equity | $12,413,803 |  |  | $12,301,194 |  |  |
| Net interest income |  | $106,232 |  |  | $109,243 |  |
| Net interest spread |  |  | 2.23% |  |  | 2.80% |
| Effect of interest free funds |  |  | 1.47% |  |  | 1.09% |
| Net interest margin |  |  | 3.70% |  |  | 3.89% |

31

Selected income statement data and other selected data for the comparable periods were as follows:

### SELECTED CONSOLIDATED FINANCIAL DATA

### (Dollars in thousands, except per share data)

| Income Statement Data | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net interest income | $106,104 | $109,156 |
| Provision for credit losses | 4,015 | 2,322 |
| Securities transactions | (267) | (213) |
| Total noninterest income | 44,900 | 47,828 |
| Salaries and employee benefits | 51,528 | 49,252 |
| Total noninterest expense | 82,779 | 80,317 |
| Net income | 50,334 | 57,533 |
| **Per Common Share Data** |  |  |
| Net income – basic | $1.53 | $1.75 |
| Net income – diluted | 1.50 | 1.72 |
| Cash dividends | 0.43 | 0.40 |
| **Performance Data** |  |  |
| Return on average assets | 1.63% | 1.90% |
| Return on average stockholders’ equity | 13.96 | 18.31 |
| Cash dividend payout ratio | 28.10 | 22.86 |
| Net interest spread | 2.23 | 2.80 |
| Net interest margin | 3.70 | 3.89 |
| Efficiency ratio | 54.82 | 51.16 |
| Net charge-offs to average loans | 0.05 | 0.00 |

### Net Interest Income

For the three months ended March 31, 2024, net interest income, which is the Company’s principal source of operating revenue, decreased $3.1 million or 2.8% compared to the three months ended March 31, 2023. Net interest income was negatively impacted by a change in the mix of interest-bearing and non-interest bearing deposits, partially offset by higher loan volume. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. As shown in the preceding table, the Company’s net interest margin for the first quarter of 2024 decreased compared to the first quarter of 2023.

Changes in the volume of earning assets and interest-bearing liabilities and changes in interest rates, determine the changes in net interest income. The following volume/rate analysis summarizes the relative contribution of each of these components to the changes in net interest income.

### VOLUME/RATE ANALYSIS

### Taxable Equivalent Basis

*(Dollars in thousands)*

| INCREASE (DECREASE) Interest Income: | Change during the three months ended March 31, 2024 Total | Due to Volume(1) | Due to Rate |
| --- | ---: | ---: | ---: |
| Loans | $27,768 | $12,224 | $15,544 |
| Securities—taxable | 190 | (26) | 216 |
| Securities—tax exempt | 16 | (2) | 18 |
| Federal funds sold and interest-bearing deposits with banks | (1,736) | (6,453) | 4,717 |
| Total interest income | 26,238 | 5,743 | 20,495 |
| **Interest Expense:** |  |  |  |
| Money market and interest-bearing checking deposits | 17,351 | 5,430 | 11,921 |
| Savings deposits | 3,746 | (308) | 4,054 |
| Time deposits | 8,139 | 1,514 | 6,625 |
| Short-term borrowings | 13 | (15) | 28 |
| Subordinated debt | — | 12 | (12) |
| Total interest expense | 29,249 | 6,633 | 22,616 |
| Net interest income | $(3,011) | $(890) | $(2,121) |
| (1) The effects of changes in the mix of earning assets and interest-bearing liabilities have been combined with the changes due to volume. |  |  |  |

### Provision for Credit Losses

The provision for credit losses is presented in the preceding table. The Company establishes an allowance as an estimate of the expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change which could affect the amount of future provisions for credit losses. Net loan charge-offs were $3.5 million for the first quarter of 2024 compared to net loan charge-offs of $290,000 for the first quarter of 2023. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a low level.

### Noninterest Income

Noninterest income, as presented in the preceding table, decreased by $2.9 million for the first quarter of 2024 compared to the first quarter of 2023. The decrease in noninterest income was primarily due to an approximate $5.3 million reduction of interchange fees related to the impact of the Durbin Amendment. Trust revenue, sweep fees and insurance commissions all increased when compared to last year.

Noninterest income included non-sufficient funds ("NSF") and overdraft fees totaling $7.1 million and $6.4 million for the three months ended March 31, 2024 and 2023, respectively. This represents 15.9% and 13.5% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card usage and interchange fees totaling $6.5 million and $12.0 million during the three months ended March 31, 2024 and 2023, respectively. This represents 14.6% and 25.2% of the Company’s noninterest income for the respective periods.

The Company is subject to political pressures that could limit our ability to charge for NSF and overdraft fees. Over the last few years the Company lowered the rates charged on NSF and overdraft fees. Also, the Company became subject to the reduced interchange fees under the Durbin Amendment effective July 1, 2023. Consequently, the Company's interchange fee revenue was reduced by approximately $11.2 million in the last half of 2023. The Company expects to experience a reduction of approximately $10.5 million in the first half of 2024.

### Noninterest Expense

Noninterest expense, as presented in the preceding table, increased by $2.5 million for first quarter of 2024 compared to the first quarter of 2023. The increase in noninterest expenses was primarily related to growth in salaries and employee benefits of $2.3 million.

### Income Taxes

The Company’s effective tax rate was 21.6% for the first quarter of 2024, compared to 22.6% for the first quarter of 2023. The primary reasons for the difference between the Company’s effective tax rate and the federal statutory rate were tax-exempt income, nondeductible amortization, federal and state tax credits and state tax expense.

### FINANCIAL POSITION

*BANCFIRST CORPORATION*

*SELECTED CONSOLIDATED FINANCIAL DATA*

*(Dollars in thousands, except per share data)*

*(unaudited)*

| Balance Sheet Data | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Total assets | $12,602,425 | $12,372,042 |
| Total loans (net of unearned interest) | 7,787,857 | 7,660,134 |
| Allowance for credit losses | 97,267 | 96,800 |
| Debt securities | 1,534,651 | 1,555,095 |
| Deposits | 10,909,621 | 10,700,122 |
| Stockholders' equity | 1,469,312 | 1,433,891 |
| Book value per share | 44.57 | 43.54 |
| Tangible book value per share (non-GAAP)(1) | 38.56 | 37.50 |
| **Reconciliation of Tangible Book Value per Common Share (non-GAAP)(2)** |  |  |
| Stockholders' equity | $1,469,312 | $1,433,891 |
| Less goodwill | 182,263 | 182,263 |
| Less intangible assets, net | 15,818 | 16,704 |
| Tangible stockholders' equity (non-GAAP) | $1,271,231 | $1,234,924 |
| Common shares outstanding | 32,966,678 | 32,933,018 |
| Tangible book value per share (non-GAAP) | $38.56 | $37.50 |
| **Selected Financial Ratios** |  |  |
| Balance Sheet Ratios: |  |  |
| Average loans to deposits (year-to-date) | 71.97% | 68.87% |
| Average earning assets to total assets (year-to-date) | 92.67 | 92.39 |
| Average stockholders’ equity to average assets (year-to-date) | 11.65 | 11.03 |
| **Asset Quality Data** |  |  |
| Loans past due 90 days and still accruing | $6,332 | $9,542 |
| Nonaccrual loans (3) | 41,996 | 24,573 |
| Other real estate owned and repossessed assets | 35,116 | 34,200 |
| Asset Quality Ratios: |  |  |
| Nonaccrual loans to total loans | 0.54% | 0.32% |
| Allowance for credit losses to total loans | 1.25 | 1.26 |
| Allowance for credit losses to nonaccrual loans | 231.61 | 393.92 |
| (1) Refer to the “Reconciliation of Tangible Book Value per Common Share (non-GAAP)” Table. |  |  |
| (2) Tangible book value per common share is stockholders’ equity less goodwill and intangible assets, net, divided by common shares outstanding. This amount is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate the financial condition and capital strength of the Company. This measure should not be considered a substitute for operating results determined in accordance with GAAP. |  |  |
| (3) Government agencies guaranteed approximately $6.6 million of nonaccrual loans at March 31, 2024. |  |  |

### Cash and Due from Banks, Federal Funds Sold and Interest-Bearing Deposits with Banks

The aggregate of cash and due from banks, federal funds sold and interest-bearing deposits with banks increased by $127.5 million or 5.3%, to $2.5 billion from December 31, 2023 to March 31, 2024. The increase was related to an increase of interest-bearing deposits.

### Securities

At March 31, 2024, total debt securities decreased $20.4 million, or 1.3% compared to December 31, 2023. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized loss on debt securities available for sale, before taxes, was $68.5 million at March 31, 2024, compared to a net unrealized loss of $65.5 million at December 31, 2023. These unrealized losses of $52.3 million at March 31, 2024 and $50.0 million at December 31, 2023 are included in the Company’s stockholders’ equity as accumulated other comprehensive loss, net of income tax. The Company did not purchase or sell any debt securities during the quarter ended March 31, 2024.

See Note (2) of the Notes to Consolidated Financial Statements for disclosures regarding the Company’s securities.

### Loans

At March 31, 2024, total loans increased $127.7 million or 1.7% compared to December 31, 2023 as a result of internal loan growth. The internal loan growth was primarily from the Company's Oklahoma subsidiary BancFirst, with loans essentially flat for the Company's Texas subsidiaries, Pegasus and Worthington.

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

### Allowance for Credit Losses

The allowance for credit losses to total loans was 1.25% at March 31, 2024 compared to 1.26% at December 31, 2023. The overall credit quality of the Company's loan portfolio has remained strong. If unforeseen adverse changes occur in the national or local economy, or in the credit markets, it would be reasonable to expect that the allowance for credit losses would increase in future periods.

### Nonaccrual Loans

Nonaccrual loans totaled $42.0 million at March 31, 2024 compared to $24.6 million at December 31, 2023. The level of the Company's nonaccrual loans remains low. The Company’s nonaccrual loans are primarily construction and development real estate loans and commercial non-real estate loans. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $696,000 for the three months ended March 31, 2024 and $358,000 for the three months ended March 31, 2023. Only a small amount of this interest is expected to be ultimately collected. Approximately $6.6 million of nonaccrual loans were guaranteed by government agencies at March 31, 2024.

The classification of a loan as nonaccrual does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the risk of loss is heightened. The above normal risk associated with nonaccrual loans has been considered in the determination of the allowance for credit losses. The level of nonaccrual loans and credit losses could rise over time as a result of adverse economic conditions. The allowance for credit losses as a percentage of nonaccrual loans is shown in the table above.

### Modified Loans

As of January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2022-02, which eliminated the Troubled Debt Restructurings (“TDR”) recognition and measurement guidance and, instead, requires that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan when a borrower is experiencing financial difficulty. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of loans modified during the period ended March 31, 2024 was approximately $1.1 million compared to $5.3 million during the year ended December 31, 2023.

### Other Real Estate Owned and Repossessed Assets

Other real estate owned (OREO) and repossessed assets totaled $35.1 million at March 31, 2024 compared to $34.2 million at December 31, 2023. OREO consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. These properties are carried at the lower of the book values of the related loans or fair values based upon appraisals of the properties, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to OREO are charged directly to the allowance for credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to OREO. Decreases in values of properties subsequent to their classification as OREO are charged to operating expense.

OREO included a larger commercial real estate property recorded at $30.4 million at March 31, 2024 and $29.4 million at December 31, 2023. During the quarter ended March 31, 2024, the Company made $996,000 of tenant improvements to this property, which contributed to the increase of total OREO. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from OREO in other noninterest expense on the consolidated statements of comprehensive income.

This property had the following rental income and operating expenses for the periods presented:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Rental income | $2,941 | $2,690 |
| Operating expense | 2,250 | 2,381 |

The Company's total rental income and operating expenses from OREO are presented in the following table:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Rental income | $3,002 | $2,820 |
| Operating expense | 2,329 | 2,557 |

### Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $198.1 million and $199.0 million at March 31, 2024 and December 31, 2023, respectively.

Other assets includes the cash surrender value of key-man life insurance policies totaling $84.4 million at both March 31, 2024 and December 31, 2023.

Derivative financial instruments consisting of oil and gas swaps and option contracts are included in other assets and totaled $27.4 million at March 31, 2024 and $41.1 million at December 31, 2023. They require a daily margin to be posted, which fluctuates with oil and gas prices and customer activity. At March 31, 2024, the Company had a margin asset included in other assets in the amount of $4.3 million. At December 31, 2023, the Company had a margin liability included in other liabilities in the amount of $15.5 million. See Note (10) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s derivative financial instruments.

Equity securities are reported in other assets on the Company’s consolidated balance sheet. The Company invests in equity securities without readily determinable fair values. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $13.2 million at March 31, 2024 and $13.1 million at December 31, 2023. The Company reviews its portfolio of equity securities for impairment at least quarterly.

### Low-Income Housing and New Market Tax Credit Investments

During 2024, there have not been any material changes in the Company’s low-income housing tax credit ("LIHTC") investments and New Markets Tax Credits ("NMTC") investments, which are included in other assets on the Company’s consolidated balance sheet.

See Note (6) of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for disclosures regarding these investments.

### Liquidity and Funding

The Company’s principal source of liquidity and funding is its broad deposit base generated from customer relationships. The availability of deposits is affected by economic conditions, competition with other financial institutions and alternative investments available to customers. Through interest rates paid, service charge levels and services offered, the Company can affect its level of deposits to a limited extent. The level and maturity of funding necessary to support the Company’s lending and investment functions is determined through the Company’s asset/liability management process. The Company currently does not rely heavily on long-term borrowings and does not utilize brokered CDs. The Company maintains lines of credit from the Federal Home Loan Bank (“FHLB”), federal funds lines of credit with other banks and could also utilize the sale of loans, securities and liquidation of other assets as sources of liquidity and funding. The Company is highly liquid with 20% of cash and due from banks, interest-bearing deposits with banks and federal funds sold to total assets.

There have not been any other material changes from the liquidity and funding discussion included in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

### Deposits

At March 31, 2024, deposits totaled $10.9 billion, an increase of $209.5 million from December 31, 2023. The Company’s core deposits provide it with a stable, low-cost funding source. The Company’s core deposits as a percentage of total deposits were 97.1% at March 31, 2024 and 97.4% at December 31, 2023. Noninterest-bearing deposits to total deposits were 35.3% at March 31, 2024 compared to 37.2% at December 31, 2023. Quantitative tightening by the Federal Reserve and competition for deposits has increased and available yields have similarly increased, causing non-interest bearing deposits to move to interest-bearing deposits and off-balance-sheet sweep account products.

Off-balance-sheet sweep accounts totaled $4.6 billion at March 31, 2024 compared to $4.3 billion at December 31, 2023. The movement of customers' funds into the Company's off-balance-sheet sweep accounts affected the balances of both cash and deposits.

### Subordinated Debt

See Note (5) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

### Short-Term Borrowings and Lines of Credit

Short-term borrowings, consisting primarily of federal funds purchased and repurchase agreements, are another source of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company’s ability to earn a favorable spread on the funds obtained. Short-term borrowings were $9.7 million at March 31, 2024 compared to $3.4 million at December 31, 2023.

The Company has several lines of credit available. At March 31, 2024, BancFirst had $835.0 million available on its line of credit from the FHLB of Topeka, Kansas and a $25.0 million line of credit with another financial institution that is an overnight federal funds facility. At March 31, 2024, BancFirst had no advances outstanding under either line of credit. Worthington has $10.5 million in lines of credit with other financial institutions that serve as overnight federal funds facilities, a Federal Reserve discount window capacity of $29.0 million and an $81.9 million line of credit from the FHLB of Dallas, Texas to use for liquidity or to match-fund certain long-term rate loans. Worthington has no advances outstanding at March 31, 2024 under any of these lines of credit.

### Capital Resources

Stockholders’ equity totaled $1.5 billion at March 31, 2024, an increase of $35.4 million from December 31, 2023. In addition to net income of $50.3 million, other changes in stockholders’ equity during the three months ended March 31, 2024 included $851,000 related to common stock issuances for stock option exercises and $662,000 related to stock-based compensation that were partially offset by a $2.3 million decrease in accumulated other comprehensive income and $14.2 million in dividends. The Company’s leverage ratio and total risk-based capital ratios at March 31, 2024 were well in excess of the regulatory requirements.

See Note (7) of the Notes to Consolidated Financial Statements for a discussion of capital ratios and requirements.

### Liquidity Risk and Off-Balance-Sheet Arrangements

There have not been any material changes in the Company’s liquidity risk and off-balance-sheet arrangements included in Management’s Discussion and Analysis which was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 173 characters.

There have been no significant changes in the Company’s disclosures regarding market risk since December 31, 2023, the date of its most recent annual report to stockholders.

## Controls and procedures

As filed, 1,340 characters.

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

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

## Risk factors

As filed, 202 characters.

As of March 31, 2024, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Filed May 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-054176. Last ingested by Listed: Nov 2, 2026, 16:30 ET. No prices; not investment advice.