10-Q 1 banf-10q_20170630.htm 10-Q banf-10q_20170630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2017

OR

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

For the transition period from                         to

Commission File Number 0-14384

 

BancFirst Corporation

(Exact name of registrant as specified in charter)

 

 

Oklahoma

 

73-1221379

(State or other Jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

101 N. Broadway, Oklahoma City, Oklahoma

 

73102-8405

(Address of principal executive offices)

 

(Zip Code)

(405) 270-1086

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (sec. 232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  .

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

As of July 28, 2017 there were 15,916,719 shares of the registrant’s Common Stock outstanding.

 

 

 

 


PART I – FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

 

June 30,

 

 

December 31,

 

 

 

 

2017

 

 

 

2016

 

 

 

(unaudited)

 

 

(see Note 1)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

183,753

 

 

$

183,921

 

Interest-bearing deposits with banks

 

 

1,533,147

 

 

 

1,666,540

 

Federal funds sold

 

 

 

 

 

700

 

Securities (fair value: $451,435 and $469,871, respectively)

 

 

451,402

 

 

 

469,833

 

Loans held for sale

 

 

9,061

 

 

 

9,318

 

Loans (net of unearned interest)

 

 

4,578,393

 

 

 

4,400,232

 

Allowance for loan losses

 

 

(49,005

)

 

 

(48,693

)

Loans, net of allowance for loan losses

 

 

4,529,388

 

 

 

4,351,539

 

Premises and equipment, net

 

 

127,819

 

 

 

126,771

 

Other real estate owned

 

 

3,940

 

 

 

3,526

 

Intangible assets, net

 

 

12,203

 

 

 

13,330

 

Goodwill

 

 

54,042

 

 

 

54,042

 

Accrued interest receivable and other assets

 

 

141,834

 

 

 

139,432

 

Total assets

 

$

7,046,589

 

 

$

7,018,952

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

2,551,158

 

 

$

2,526,842

 

Interest-bearing

 

 

3,684,524

 

 

 

3,721,215

 

Total deposits

 

 

6,235,682

 

 

 

6,248,057

 

Short-term borrowings

 

 

1,000

 

 

 

500

 

Accrued interest payable and other liabilities

 

 

29,486

 

 

 

27,342

 

Junior subordinated debentures

 

 

31,959

 

 

 

31,959

 

Total liabilities

 

 

6,298,127

 

 

 

6,307,858

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $1.00 par, 40,000,000 shares authorized; shares issued and

   outstanding: 15,909,219 and 15,810,935, respectively

 

 

15,909

 

 

 

15,811

 

Capital surplus

 

 

121,349

 

 

 

117,541

 

Retained earnings

 

 

610,758

 

 

 

577,648

 

Accumulated other comprehensive income, net of income tax of $(281)

and $(59), respectively

 

 

446

 

 

 

94

 

Total stockholders' equity

 

 

748,462

 

 

 

711,094

 

Total liabilities and stockholders' equity

 

$

7,046,589

 

 

$

7,018,952

 

 

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

 

2


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

54,763

 

 

$

51,046

 

 

$

108,398

 

 

$

101,241

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,906

 

 

 

1,344

 

 

 

3,667

 

 

 

2,671

 

Tax-exempt

 

 

178

 

 

 

243

 

 

 

365

 

 

 

498

 

Federal funds sold

 

 

1

 

 

 

 

 

 

1

 

 

 

 

Interest-bearing deposits with banks

 

 

4,425

 

 

 

1,852

 

 

 

7,865

 

 

 

3,654

 

Total interest income

 

 

61,273

 

 

 

54,485

 

 

 

120,296

 

 

 

108,064

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

4,300

 

 

 

3,092

 

 

 

8,025

 

 

 

6,172

 

Short-term borrowings

 

 

4

 

 

 

2

 

 

 

7

 

 

 

3

 

Junior subordinated debentures

 

 

530

 

 

 

523

 

 

 

1,057

 

 

 

1,045

 

Total interest expense

 

 

4,834

 

 

 

3,617

 

 

 

9,089

 

 

 

7,220

 

Net interest income

 

 

56,439

 

 

 

50,868

 

 

 

111,207

 

 

 

100,844

 

Provision for loan losses

 

 

1,841

 

 

 

2,804

 

 

 

1,913

 

 

 

6,907

 

Net interest income after provision for loan losses

 

 

54,598

 

 

 

48,064

 

 

 

109,294

 

 

 

93,937

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust revenue

 

 

2,894

 

 

 

2,602

 

 

 

5,846

 

 

 

5,067

 

Service charges on deposits

 

 

16,448

 

 

 

15,485

 

 

 

32,226

 

 

 

30,195

 

Securities transactions (includes accumulated other comprehensive income reclassifications of $(142), $0, $(142) and $100, respectively)

 

 

(330

)

 

 

(65

)

 

 

(330

)

 

 

35

 

Income from sales of loans

 

 

816

 

 

 

695

 

 

 

1,448

 

 

 

1,257

 

Insurance commissions

 

 

3,728

 

 

 

3,255

 

 

 

8,291

 

 

 

7,390

 

Cash management

 

 

2,799

 

 

 

2,732

 

 

 

5,553

 

 

 

5,050

 

(Loss)/gain on sale of other assets

 

 

(25

)

 

 

55

 

 

 

(49

)

 

 

59

 

Other

 

 

1,653

 

 

 

1,298

 

 

 

3,083

 

 

 

2,621

 

Total noninterest income

 

 

27,983

 

 

 

26,057

 

 

 

56,068

 

 

 

51,674

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

31,547

 

 

 

30,008

 

 

 

62,201

 

 

 

59,365

 

Occupancy, net

 

 

2,992

 

 

 

3,071

 

 

 

5,966

 

 

 

5,898

 

Depreciation

 

 

2,392

 

 

 

2,567

 

 

 

4,812

 

 

 

5,097

 

Amortization of intangible assets

 

 

547

 

 

 

580

 

 

 

1,094

 

 

 

1,161

 

Data processing services

 

 

1,097

 

 

 

1,174

 

 

 

2,292

 

 

 

2,389

 

Net expense/(income) from other real estate owned

 

 

202

 

 

 

35

 

 

 

252

 

 

 

(1,106

)

Marketing and business promotion

 

 

1,559

 

 

 

1,624

 

 

 

3,774

 

 

 

3,479

 

Deposit insurance

 

 

542

 

 

 

855

 

 

 

1,130

 

 

 

1,694

 

Other

 

 

8,075

 

 

 

7,806

 

 

 

17,020

 

 

 

16,034

 

Total noninterest expense

 

 

48,953

 

 

 

47,720

 

 

 

98,541

 

 

 

94,011

 

Income before taxes

 

 

33,628

 

 

 

26,401

 

 

 

66,821

 

 

 

51,600

 

Income tax expense

 

 

10,446

 

 

 

8,908

 

 

 

21,589

 

 

 

17,528

 

Net income

 

$

23,182

 

 

$

17,493

 

 

$

45,232

 

 

$

34,072

 

NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.46

 

 

$

1.12

 

 

$

2.85

 

 

$

2.19

 

Diluted

 

$

1.42

 

 

$

1.10

 

 

$

2.78

 

 

$

2.15

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities, net of tax of $(280), $(345), $(167) and $(719), respectively

 

 

443

 

 

 

546

 

 

 

265

 

 

 

1,137

 

Reclassification adjustment for losses/(gains) included in net income, net of tax of $(55), $0, $(55) and $39, respectively

 

 

87

 

 

 

 

 

 

87

 

 

 

(61

)

Other comprehensive gains, net of tax of $(335), $(345), $(222) and $(680), respectively

 

 

530

 

 

 

546

 

 

 

352

 

 

 

1,076

 

Comprehensive income

 

$

23,712

 

 

$

18,039

 

 

$

45,584

 

 

$

35,148

 

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

3


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued at beginning of period

 

$

15,891

 

 

$

15,528

 

 

$

15,811

 

 

$

15,597

 

Shares issued

 

 

18

 

 

 

32

 

 

 

98

 

 

 

63

 

Shares acquired and canceled

 

 

 

 

 

 

 

 

 

 

 

(100

)

Issued at end of period

 

$

15,909

 

 

$

15,560

 

 

$

15,909

 

 

$

15,560

 

CAPITAL SURPLUS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

120,435

 

 

$

103,978

 

 

$

117,541

 

 

$

102,865

 

Common stock issued

 

 

671

 

 

 

996

 

 

 

3,343

 

 

 

1,867

 

Tax effect of stock options

 

 

 

 

 

252

 

 

 

 

 

 

43

 

Stock-based compensation arrangements

 

 

243

 

 

 

450

 

 

 

465

 

 

 

901

 

Balance at end of period

 

$

121,349

 

 

$

105,676

 

 

$

121,349

 

 

$

105,676

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

593,631

 

 

$

541,098

 

 

$

577,648

 

 

$

535,521

 

Net income

 

 

23,182

 

 

 

17,493

 

 

 

45,232

 

 

 

34,072

 

Dividends on common stock ($0.38, $0.36, $0.76 and $0.72 per share, respectively)

 

 

(6,055

)

 

 

(5,600

)

 

 

(12,122

)

 

 

(11,179

)

Common stock acquired and canceled

 

 

 

 

 

 

 

 

 

 

 

(5,423

)

Balance at end of period

 

$

610,758

 

 

$

552,991

 

 

$

610,758

 

 

$

552,991

 

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(84

)

 

$

2,057

 

 

$

94

 

 

$

1,527

 

Net change

 

 

530

 

 

 

546

 

 

 

352

 

 

 

1,076

 

Balance at end of period

 

$

446

 

 

$

2,603

 

 

$

446

 

 

$

2,603

 

Total stockholders’ equity

 

$

748,462

 

 

$

676,830

 

 

$

748,462

 

 

$

676,830

 

 

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

 

4


BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

45,232

 

 

$

34,072

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,913

 

 

 

6,907

 

Depreciation and amortization

 

 

5,906

 

 

 

6,258

 

Net amortization of securities premiums and discounts

 

 

(103

)

 

 

184

 

Realized securities losses/(gains)

 

 

330

 

 

 

(35

)

Gain on sales of loans

 

 

(1,448

)

 

 

(1,257

)

Cash receipts from the sale of loans originated for sale

 

 

97,146

 

 

 

86,121

 

Cash disbursements for loans originated for sale

 

 

(95,477

)

 

 

(81,566

)

Deferred income tax benefit

 

 

(723

)

 

 

(1,917

)

Loss/(gain) on other assets

 

 

62

 

 

 

(1,316

)

Increase in interest receivable

 

 

(1,107

)

 

 

(1,040

)

Increase in interest payable

 

 

126

 

 

 

14

 

Amortization of stock-based compensation arrangements

 

 

465

 

 

 

901

 

Excess tax benefit from stock-based compensation arrangements

 

 

(1,784

)

 

 

 

Other, net

 

 

3,234

 

 

 

(4,867

)

Net cash provided by operating activities

 

$

53,772

 

 

$

42,459

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Net decrease in federal funds sold

 

 

700

 

 

 

Purchases of held for investment securities

 

 

(220

)

 

 

(215

)

Purchases of available for sale securities

 

 

(42,006

)

 

 

(8,553

)

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

 

 

644

 

 

 

690

 

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

 

 

60,360

 

 

 

102,677

 

Proceeds from sales of available for sale securities

 

 

 

 

 

300

 

Net change in loans

 

 

(181,851

)

 

 

(98,555

)

Purchases of premises, equipment and computer software

 

 

(6,568

)

 

 

(5,048

)

Proceeds from the sale of other real estate owned and other assets

 

 

2,088

 

 

 

7,020

 

Net cash used in investing activities

 

 

(166,853

)

 

 

(1,684

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net change in deposits

 

 

(12,375

)

 

 

(29,376

)

Net increase in short-term borrowings

 

 

500

 

 

 

3,000

 

Issuance of common stock, net

 

 

3,441

 

 

 

1,973

 

Common stock acquired

 

 

 

 

 

(5,523

)

Cash dividends paid

 

 

(12,046

)

 

 

(11,204

)

Net cash used in financing activities

 

 

(20,480

)

 

 

(41,130

)

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

 

 

(133,561

)

 

 

(355

)

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

 

 

1,850,461

 

 

 

1,598,177

 

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

 

$

1,716,900

 

 

$

1,597,822

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

8,963

 

 

$

7,207

 

Cash paid during the period for income taxes

 

$

20,450

 

 

$

17,900

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid common stock dividends declared

 

$

6,045

 

 

$

5,590

 

 

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

 

5


BANCFIRST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(1)

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of BancFirst Corporation and its subsidiaries (the “Company”) conform to accounting principles generally accepted in the United State 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, 2016.

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 and Insurance Company, and BancFirst and its subsidiaries. The principal operating subsidiaries of BancFirst are Council Oak Investment Corporation, Council Oak Real Estate, Inc. and BancFirst Agency, Inc.  All significant intercompany accounts and transactions have been eliminated. Assets held in a fiduciary or agency capacity are not assets of the Company and, accordingly, are not included in the unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BancFirst Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016, should be referred to in connection with these unaudited interim consolidated financial statements. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

The unaudited interim consolidated financial statements contained herein reflect all adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position and results of operations of the Company for the interim periods presented. All such adjustments are of a normal and recurring nature. There have been no significant changes in the accounting policies of the Company since December 31, 2016, the date of the most recent annual report.

Use of Estimates in the Preparation of Financial Statements

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

Recent Accounting Pronouncements

Standards Adopted During Current Period:

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. The Company opted for early adoption of ASU 2017-08, as was permitted, on January 1, 2017. ASU 2017-08 did not have a significant impact on the Company’s financial statements and no prior periods were adjusted.

In October 2016, the FASB issued ASU No. 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control.” ASU 2016-17 updates ASU No. 2015-02 to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. ASU 2016-17 was adopted on January 1, 2017 and did not have a significant impact on the Company’s financial statements and no prior periods were adjusted.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09 all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was

6


available. Because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also allows entities to make an entity-wide accounting policy election to account for forfeitures when they occur, which the Company has elected to do. ASU 2016-09 changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. ASU 2016-09 was adopted on January 1, 2017 and did not have a significant impact on the Company’s financial statements. In addition, ASU 2016-09 was applied prospectively and no prior periods were adjusted. The excess tax benefit for share-based payment awards that were exercised during the six months ended June 30, 2017 was approximately $1.8 million.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40).”  ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about the Company’s ability to continue as a going concern and related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date the financial statements are issued.  ASU 2014-15 was adopted on January 1, 2017. Adoption of ASU 2014-15 did not have a significant effect on the Company’s financial statements.

Standards Not Yet Adopted:

In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about types of changes to the terms or conditions of share-based payment awards that would require an entity to apply modification accounting under ASC 718. ASU 2017-09 will be effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements. Early adoption is permitted with prospective applications.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 removes the second step of goodwill testing. ASU 2017-04 will be effective on January 1, 2020 and is not expected to have a significant impact on the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business. ASU 2017-01 will be effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements.

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” ASU 2016-16 provides guidance stating that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 will be effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 will be effective on January 1, 2018. Early adoption is permitted with retrospective applications. The Company is currently evaluating the potential impact of ASU 2016-15 on its 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.” ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgements used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. The Company is currently evaluating the potential impact of ASU 2016-13 on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases - (Topic 842).” ASU 2016-02 requires that lessees recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Adoption of ASU 2016-02 is not expected to have a significant effect on the Company’s financial statements.

7


In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10).” ASU 2016-01 require all equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in the fair value recognized through net income. In addition, the amendment will require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is not permitted. Adoption of ASU 2016-01 is not expected to have a significant effect on the Company’s financial statements.

In January of 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customer (Topic 606).” ASU 2014-09 implements a comprehensive new revenue recognition standard that will supersede substantially all existing revenue recognition guidance. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in a manner that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, which comprises a significant portion of the Company’s revenue stream. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606).” ASU 2015-14 is an amendment to defer the effective date of ASU 2014-09. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Adoption of ASU 2014-09 may require the Company to amend how it recognizes certain recurring revenue streams related to trust fees, which are recorded in non-interest expense; however, the Company does not expect the adoption of ASU 2014-09 to have a significant impact on the Company’s financial statements.

 

 

(2)

RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

 

Effective June 1, 2017, the Company organized a new captive insurance company named BancFirst Risk and Insurance Company ("the Captive"). The Captive is a wholly-owned subsidiary of BancFirst Corporation and is regulated by the Oklahoma Insurance Department. It insures certain risks of the Company and has entered into reinsurance agreements with a risk-sharing pool.

 

 

(3)

SECURITIES

The following table summarizes securities held for investment and securities available for sale:

 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

(Dollars in thousands)

 

Held for investment, at cost (fair value: $3,975 and $4,403, respectively)

 

$

3,942

 

 

$

4,365

 

Available for sale, at fair value

 

 

447,460

 

 

 

465,468

 

Total

 

$

451,402

 

 

$

469,833

 

 

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

 

 

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

June 30, 2017

 

(Dollars in thousands)

 

Mortgage backed securities (1)

 

$

217

 

 

$

12

 

 

$

 

 

$

229

 

States and political subdivisions

 

 

3,225

 

 

 

22

 

 

 

(1

)

 

 

3,246

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

3,942

 

 

$

34

 

 

$

(1

)

 

$

3,975

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed securities (1)

 

$

252

 

 

$

17

 

 

$

 

 

$

269

 

States and political subdivisions

 

 

3,613

 

 

 

25

 

 

 

(4

)

 

 

3,634

 

Other securities

 

 

500

 

 

 

 

 

 

 

 

 

500

 

Total

 

$

4,365

 

 

$

42

 

 

$

(4

)

 

$

4,403

 

8


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

 

 

 

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair

Value

 

June 30, 2017

 

(Dollars in thousands)

 

U.S. treasuries

 

$

284,791

 

 

$

867

 

 

$

(271

)

 

$

285,387

 

U.S. federal agencies

 

 

98,311

 

 

 

397

 

 

 

(310

)

 

 

98,398

 

Mortgage backed securities (1)

 

 

19,052

 

 

 

246

 

 

 

(513

)

 

 

18,785

 

States and political subdivisions

 

 

38,129

 

 

 

865

 

 

 

(59

)

 

 

38,935

 

Other securities (2)

 

 

6,450

 

 

 

189

 

 

 

(684

)

 

 

5,955

 

Total

 

$

446,733

 

 

$

2,564

 

 

$

(1,837

)

 

$

447,460

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

268,763

 

 

$

700

 

 

$

(920

)

 

$

268,543

 

U.S. federal agencies

 

 

129,674

 

 

 

373

 

 

 

(405

)

 

 

129,642

 

Mortgage backed securities (1)

 

 

19,949

 

 

 

290

 

 

 

(567

)

 

 

19,672

 

States and political subdivisions

 

 

40,335

 

 

 

836

 

 

 

(129

)

 

 

41,042

 

Other securities (2)

 

 

6,594

 

 

 

125

 

 

 

(150

)

 

 

6,569

 

Total

 

$

465,315