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STOCK-BASED COMPENSATION

The Company adopted a nonqualified incentive stock option plan (the “BancFirst ISOP”) in May 1986. The Company amended the BancFirst ISOP to increase the number of shares to be issued under the plan to 3,000,000 shares in May 2013. At September 30, 2013, 185,860 shares were available for future grants. The BancFirst ISOP will terminate on December 31, 2014. The options vest and are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of September 30, 2013 will become exercisable through the year 2020. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

In June 1999, the Company adopted the BancFirst Corporation Non-Employee Directors’ Stock Option Plan (the “BancFirst Directors’ Stock Option Plan”). Each non-employee director is granted an option for 10,000 shares. The Company amended the BancFirst Directors’ Stock Option Plan to increase the number of shares to be issued under the plan to 205,000 shares in May 2009. At September 30, 2013, 5,000 shares were available for future grants. The options vest and are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire at the end of fifteen years from the date of grant. Options outstanding as of September 30, 2013 will become exercisable through the year 2017. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

The Company currently uses newly issued shares for stock option exercises, but reserves the right to use shares purchased under the Company’s Stock Repurchase Program (the “SRP”) in the future.

The following table is a summary of the activity under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:


	Options			Wgtd. Avg. Exercise Price		Wgtd. Avg. Remaining Contractual Term			Aggregate Intrinsic Value
	(Dollars in thousands, except per share data)
Nine Months Ended September 30, 2013
Outstanding at December 31, 2012		1,216,981		$	31.98
Options granted		60,000			44.11
Options exercised		(118,414	)		25.13
Options canceled, forfeited or expired		(5,000	)		43.02

Outstanding at September 30, 2013		1,153,567			33.26		8.69	Yrs	$	24,003

Exercisable at September 30, 2013		540,167			26.74		5.54	Yrs	$	14,763

The following table has additional information regarding options granted and options exercised under both the BancFirst ISOP and the BancFirst Directors’ Stock Option Plan:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands, except per share data)
Weighted average grant-date fair value per share of options granted	$	10.63	$	—	$	9.05	$	—
Total intrinsic value of options exercised		1,424		1,152		2,653		2,180
Cash received from options exercised		1,775		794		2,976		1,516
Tax benefit realized from options exercised		551		446		1,026		843

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility, and the expected term. The fair value of each option is expensed over its vesting period.

The following table is a summary of the Company’s recorded stock-based compensation expense:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Dollars in thousands)
Stock-based compensation expense	$	399		$	391		$	1,094		$	1,189
Tax benefit		(154	)		(151	)		(423	)		(460	)

Stock-based compensation expense, net of tax	$	245		$	240		$	671		$	729

The Company will continue to amortize the remaining fair value of stock options, over the remaining vesting period of approximately seven years. The following table shows the remaining fair value of stock options:


	September 30, 2013
	(Dollars in thousands)
Fair value of stock options	$	4,902

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method:


	Nine Months Ended September 30,
	2013			2012
Risk-free interest rate		2.70	%		1.74	%
Dividend yield		2.00	%		2.00	%
Stock price volatility		18.35	%		32.88	%
Expected term		10	Yrs		10	Yrs

The risk-free interest rate is determined by reference to the spot zero-coupon rate for the U.S. Treasury security with a maturity similar to the expected term of the options. The dividend yield is the expected yield for the expected term. The stock price volatility is estimated from the recent historical volatility of the Company’s stock. The expected term is estimated from the historical option exercise experience.