Bancfirst Corp: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition as of June 30, 2025 and December 31, 2024 and results of operations for the three and six months ended June 30, 2025 should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2024, and the other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" in Part I, Item 1A of the 2024 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 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.
• Changes in fiscal, monetary or regulatory policy may have adverse consequences including impacts to the labor market, tariffs and inflation which may impact our financial performance.
• Changes in the regulatory environment for the banking industry, including rule-making, supervision, examination, and enforcement.
• The increased time, effort and staffing needs related to ongoing and/or changed regulations from regulatory bodies could negatively impact noninterest expense.
• Local, regional, national and international economic conditions, including the effect of a government shutdown, and the impact they may have on the Company and its customers.
• Inflation, including wage inflation, energy prices, securities markets and monetary fluctuations.
• Changes in oil and gas commodity prices and the potential impact to the related loan portfolio as well as the overall impact to the Oklahoma economic environment.
• Changes in interest rates.
• Potential impacts of adverse developments in the banking industry that could impact customer confidence.
• Further shift in deposit mix from noninterest-bearing deposits to interest-bearing deposits could negatively impact net interest margin.
• Changes in the financial performance and/or condition of the Company’s borrowers, including the impact of higher interest rates.
• Changes in consumer spending, borrowing and savings habits.
• Changes in the mix of loan sectors and types or the level of non-performing assets and charge-offs.
• 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.
• Impairment of the Company’s goodwill or other intangible assets.
• Technological changes, fintech competition and disruption to the traditional banking systems, including emerging regulation around stablecoins, blockchain technology in payment networks and market acceptance of digital assets.
• Cyber threats.
• 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 second quarter of 2025 was $62.3 million, compared to $50.6 million for the second quarter of 2024. Diluted net income per common share was $1.85 and $1.51 for the second quarter of 2025 and 2024, respectively.

The Company’s net interest income for the second quarter of 2025 increased to $121.3 million from $109.9 million for the second quarter of 2024. Higher loan volume along with general growth in earning assets were the primary drivers of the change in net interest income. Net interest margin was virtually unchanged at 3.75% for the second quarter of 2025 and 3.76% for the second quarter of 2024. The Company recorded a provision for credit losses on loans of $1.2 million in the second quarter of 2025 compared to $3.4 million for the second quarter of 2024.

Noninterest income for the second quarter of 2025 totaled $48.0 million compared to $43.9 million for the second quarter of 2024. Trust revenue, treasury income, sweep fees, insurance commissions and other noninterest income each increased when compared to second quarter last year. The increase in other noninterest income was driven by changes in cash surrender value of life insurance as well as gains on disposal of other assets. The increases were partially offset by losses on equity securities in the second quarter of 2025.

Noninterest expense grew to $88.2 million for the second quarter of 2025 compared to $85.3 million in the same quarter in 2024. The increase in noninterest expense was primarily related to growth in salaries and employee benefits of $3.2 million.

At June 30, 2025, the Company’s total assets were $14.0 billion, an increase of $491.5 million from December 31, 2024. Loans grew $91.3 million from December 31, 2024, totaling $8.1 billion at June 30, 2025. Deposits totaled $12.1 billion, an increase of $337.6 million from year-end 2024. Sweep accounts totaled $5.3 billion at June 30, 2025, up $66.8 million from December 31, 2024. The Company’s total stockholders’ equity was $1.7 billion, an increase of $106.9 million over December 31, 2024.

Nonaccrual loans totaled $49.9 million, representing 0.61% of total loans at June 30, 2025, down slightly from 0.72% at year-end 2024. The allowance for credit losses to total loans was 1.19% at June 30, 2025, down from 1.24% at December 31, 2024. Net charge-offs were $4.7 million for the second quarter of 2025, including $3.7 million relating to one real estate loan that was taken into other real estate owned, compared to $999,000 for the second quarter of 2024.

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

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to the Consolidated Financial Statements for disclosures regarding recently issued accounting pronouncements since December 31, 2024, the date of its most recent annual report to stockholders.

SEGMENT INFORMATION

See Note (12) of the Notes to the Consolidated Financial Statements for disclosures regarding business segments.

RESULTS OF OPERATIONS

Average Balances, Income, Expenses and Rates

The following tables present 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 $5.1 million for the three months ended June 30, 2025 compared to $5.5 million for the three months ended June 30, 2024. Loan fees included in interest income were $10.1 million for the six months ended June 30, 2025 compared to $10.9 million for the six months ended June 30, 2024.

BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis

(Dollars in thousands)

33

BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis

(Dollars in thousands)

34

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)

Net Interest Income

For the three months ended June 30, 2025, net interest income, which is the Company’s principal source of operating revenue, increased $11.4 million or 10.3% compared to the three months ended June 30, 2024. Higher loan volume along with general growth in earning assets were the primary drivers of the change in net interest income. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period.

Net interest income for the six months ended June 30, 2025 increased $21.2 million or 9.8% compared to the six months ended June 30, 2024. Higher loan volume along with general growth in earning assets were the primary driver, to the increase.

Provision for Credit Losses on loans

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 $4.7 million for the second quarter of 2025 compared to net loan charge-offs of $999,000 for the second quarter of 2024. The rate of net charge-offs to average total loans continues to be at a low level.

Net loan charge-offs were $5.2 million for the six months ended June 30, 2025, compared to $4.5 million for the same period of the prior year.

Noninterest Income

Noninterest income increased by $4.1 million for the second quarter of 2025 compared to the second quarter of 2024. Trust revenue, treasury income, sweep fees, insurance commissions, and other noninterest income each increased when compared to second quarter last year. The increase in other noninterest income was driven by changes in cash surrender value of life insurance as well as gains on disposal of other assets. The increases were partially offset by losses on equity securities in the second quarter of 2025.

Noninterest income included non-sufficient funds ("NSF") and overdraft fees totaling $7.6 million and $7.3 million for the three months ended June 30, 2025 and 2024, respectively. This represents 15.8% and 16.6% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card usage and interchange fees totaling $6.9 million and $6.8 million during the three months ended June 30, 2025 and 2024, respectively. This represents 14.3% and 15.4% of the Company’s noninterest income for the respective periods.

Noninterest income increased by $8.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Trust revenue, treasury income, sweep fees, insurance commissions, and other noninterest income each increased when compared to the same period last year. The increase in other noninterest income was driven by changes in cash surrender value of life insurance as well as gains on disposal of other assets. The increases were partially offset by losses on equity securities in 2025.

Noninterest income included NSF and overdraft fees totaling $15.0 million and $14.4 million during the six months ended June 30, 2025 and 2024, respectively. This represents 15.5% and 16.2% of the Company’s noninterest income for the respective periods. In addition, the Company had debit card usage and interchange fees totaling $13.4 million and $13.3 million during the six months ended June 30, 2025 and 2024, respectively. This represents 13.8% and 15.0% of the Company’s noninterest income for the respective periods.

Noninterest Expense

Noninterest expense increased by $2.9 million for second quarter of 2025 compared to the second quarter of 2024. The increase in noninterest expenses was primarily related to growth in salaries and employee benefits of $3.2 million.

For the six months ended June 30, 2025, noninterest expense increased by $12.3 million compared to the six months ended June 30, 2024. Higher noninterest expenses in 2025 were primarily related to growth in salaries and employee benefits of $6.3 million, an increase in occupancy expense of $1.4 million and an increase in the net expense from other real estate owned of $1.7 million. In addition, the Company recorded an expense related to the disposition of certain equity investments no longer permissible under the Volcker Rule, which prohibits banks with more than $10 billion in assets from holding certain private equity investments.

Income Taxes

The Company’s effective tax rate was 21.8% for the second quarter of 2025, compared to 22.3% for the second quarter of 2024.

The Company’s effective tax rate was 21.4% for the six months ended June 30, 2025, compared to 22.0% for the six months ended June 30, 2024.

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)

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 $442.9 million or 12.5%, to $4.0 billion from December 31, 2024 to June 30, 2025. The increase was related to an increase of interest-bearing deposits in addition to maturing securities.

Securities

At June 30, 2025, total debt securities decreased $107.2 million, or 8.8% compared to December 31, 2024. 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 $23.0 million at June 30, 2025, compared to a net unrealized loss of $43.1 million at December 31, 2024. These unrealized losses of $17.6 million at June 30, 2025 and $32.9 million at December 31, 2024 are included in the Company’s stockholders’ equity as accumulated other comprehensive loss, net of income tax. During the six months ended June 30, 2025, the Company purchased $233,000 of debt securities compared to $270,000 during the six months ended June 30, 2024. The Company did not sell any debt securities during the six months ended June 30, 2025 or 2024. The Company did not recognize a gain or loss on debt securities during the six months ended June 30, 2025 or 2024. The Company had maturities and paydowns of debt securities totaling $127.7 million during the six months ended June 30, 2025 and $117.0 million during the six months ended June 30, 2024.

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

Loans

At June 30, 2025, total loans increased $91.3 million or 1.1% compared to December 31, 2024 as a result of internal loan growth. Of the total increase in loans, commercial real estate made up the largest increase with $101.5 million. The internal loan growth was primarily from the Company's Oklahoma subsidiary BancFirst.

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

Allowance for Credit Losses

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 $49.9 million at June 30, 2025 compared to $58.0 million at December 31, 2024. The Company’s nonaccrual commercial non-real estate loans made up 14% and nonaccrual commercial real estate made up 59% of nonaccrual 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 $2.3 million for the six months ended June 30, 2025 and $1.8 million for the six months ended June 30, 2024. Only a small amount of this interest is expected to be ultimately collected. Approximately $9.5 million of nonaccrual loans were guaranteed by government agencies at June 30, 2025.

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 level of collections decline. 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.

Modified Loans

The current and future financial effects of the recorded balance of loans considered to be modified during the period were not material. The recorded balance of loans modified during the six months ended June 30, 2025 was approximately $3.6 million compared to $14.8 million during the year ended December 31, 2024.

Other Real Estate Owned and Repossessed Assets

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. During the six months ended June 30, 2025 the Company foreclosed on a construction and development real estate loan and recorded $15.6 million in other real estate owned ("OREO"), which was the primary reason for the increase in OREO. The Company's write-downs of OREO totaled $20,000 for the six months ended June 30, 2025 compared to $50,000 for the six months ended June 30, 2024.

OREO also included a larger commercial real estate property recorded at $30.7 million at June 30, 2025 and $28.1 million at December 31, 2024. During the six months ended June 30, 2025, the Company made $2.6 million 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)

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

(Dollars in thousands)

Intangible Assets, Goodwill and Other Assets

Identifiable intangible assets and goodwill totaled $193.7 million and $195.4 million at June 30, 2025 and December 31, 2024, respectively.

Other assets included the cash surrender value of key-man life insurance policies totaling $84.7 million at June 30, 2025 and $84.4 million at December 31, 2024.

Derivative financial instruments consisting of oil and gas swaps and option contracts are included in other assets and totaled $16.1 million at June 30, 2025 and $10.5 million at December 31, 2024. They require a daily margin to be posted, which fluctuates with oil and gas prices and customer activity. The Company had a margin asset included in other assets in the amount of $3.6 million at June 30, 2025 and $463,000 at December 31, 2024. See Note (11) 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 $8.2 million at June 30, 2025 and $13.4 million at December 31, 2024. The decrease in equity securities in 2025 was primarily due to the disposition of certain equity investments no longer permissible under the Volcker rule which prohibits banks with more than $10 billion in assets from holding certain private equity investments. The Company reviews its portfolio of equity securities for impairment at least quarterly.

Low-Income Housing, New Market Tax Credit Investments and Historic Tax Credit Investments

During 2025, the Company’s low-income housing tax credit ("LIHTC") investments increased $33.9 million totaling $92.5 million at June 30, 2025, New Markets Tax Credits ("NMTC") investments increased $3.9 million totaling $11.4 million at June 30, 2025 and the Historic Tax Credit Investments remained at $6.3 million at June 30, 2025, all of which are included in other assets on the Company’s consolidated balance sheet. Unfunded commitments related to these investments increased $27.4 million totaling $67.0 million at June 30, 2025, all of which are included in other liabilities 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, 2024 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 percent of cash and due from banks, interest-bearing deposits with banks and federal funds sold to total assets of 28.5% at June 30, 2025, compared to 26.2% at December 31, 2024.

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, 2024.

Deposits

At June 30, 2025, deposits totaled $12.1 billion, an increase of $337.6 million from December 31, 2024. 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 95.5% at both June 30, 2025 and December 31, 2024. Noninterest-bearing deposits to total deposits were 32.9% at June 30, 2025 compared to 33.3% at December 31, 2024.

Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Total uninsured deposits were $4.0 billion at both June 30, 2025 and December 31, 2024, as calculated per regulatory guidance. This was approximately 32.8% of deposits at June 30, 2025 and 33.7% at December 31, 2024. The Company has existing and contingent sources of liquidity equivalent to approximately 150% of it uninsured deposits.

Off-balance-sheet sweep accounts totaled $5.3 billion at June 30, 2025 compared to $5.2 billion at December 31, 2024. 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 (6) of the Notes to Consolidated Financial Statements for a complete discussion of the Company’s subordinated debt.

Lines of Credit

The Company has several lines of credit available. At June 30, 2025, BancFirst had $906.6 million available on its line of credit from the FHLB of Topeka, Kansas. At June 30, 2025, BancFirst had no advances outstanding under this line of credit. Pegasus had a Federal Reserve discount window capacity of $119.0 million. At June 30, 2025, Pegasus had no advances outstanding under this line of credit. Worthington had $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 $30.2 million and a $87.7 million line of credit from the FHLB of Dallas, Texas to use for liquidity or to match-fund certain long-term rate loans. Worthington had no advances outstanding at June 30, 2025 under any of these lines of credit.

Capital Resources

Stockholders’ equity totaled $1.7 billion at June 30, 2025, an increase of $106.9 million from December 31, 2024. In addition to net income of $118.5 million, other changes in stockholders’ equity during the six months ended June 30, 2025 included $2.0 million related to common stock issuances for stock-based compensation plans, $1.7 million related to stock-based compensation and $15.3 million in accumulated other comprehensive income that were partially offset by $30.6 million in dividends. The Company’s leverage ratio and total risk-based capital ratios at June 30, 2025 were well in excess of the regulatory requirements.

See Note (8) 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, 2024.

There have been no significant changes in the Company’s disclosures regarding market risk since December 31, 2024, the date of its most recent annual report to stockholders.

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 Chairman of the Board, 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.

As of June 30, 2025, 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, 2024.