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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 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)

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐.

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

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | 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 ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $1.00 Par Value Per Share |  | BANF |  | NASDAQ Global Select Market System

As of October 31, 2019 there were 32,666,268 shares of the registrant’s Common Stock outstanding.

BancFirst Corporation

Quarterly Report on Form 10-Q

September 30, 2019

Table of Contents

Item |  |  |  | Page
|  | PART I – Financial Information |  |
1. |  | Financial Statements (Unaudited) |  | 2
|  | Consolidated Balance Sheets |  | 2
|  | Consolidated Statements of Comprehensive Income |  | 3
|  | Consolidated Statements of Shareholders’ Equity |  | 4
|  | Consolidated Statements of Cash Flow |  | 5
|  | Notes to Consolidated Financial Statements |  | 6
2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 27
3. |  | Quantitative and Qualitative Disclosure About Market Risk |  | 36
4. |  | Controls and Procedures |  | 36
|  | PART II – Other Information |  |
1. |  | Legal Proceedings |  | 37
1A. |  | Risk Factors |  | 37
2. |  | Unregistered Sales of Equity Securities |  | 37
3. |  | Defaults Upon Senior Securities |  | 37
4. |  | Mine Safety Disclosures |  | 37
5. |  | Other Information |  | 37
6. |  | Exhibits |  | 38
Signatures |  | 40

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BANCFIRST CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

|  | September 30, |  |  | December 31, |
|  |  | 2019 |  |  |  | 2018 |
|  | (unaudited) |  |  | (see Note 1) |
ASSETS |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 225,526 |  |  | $ | 228,431 |
Interest-bearing deposits with banks |  |  | 1,476,340 |  |  |  | 1,195,824 |
Federal funds sold |  |  | 300 |  |  |  | — |
Securities held for investment (fair value: $1,911 and $1,433, respectively) |  |  | 1,911 |  |  |  | 1,428 |
Securities available for sale at fair value |  |  | 553,664 |  |  |  | 770,704 |
Loans held for sale |  |  | 16,089 |  |  |  | 8,174 |
Loans (net of unearned interest) |  |  | 5,606,808 |  |  |  | 4,975,976 |
Allowance for loan losses |  |  | (55,928 | ) |  |  | (51,389 | )
Loans, net of allowance for loan losses |  |  | 5,550,880 |  |  |  | 4,924,587 |
Premises and equipment, net |  |  | 203,772 |  |  |  | 174,362 |
Other real estate owned |  |  | 6,829 |  |  |  | 6,690 |
Intangible assets, net |  |  | 24,025 |  |  |  | 16,470 |
Goodwill |  |  | 147,013 |  |  |  | 79,749 |
Accrued interest receivable and other assets |  |  | 182,467 |  |  |  | 167,839 |
Total assets |  | $ | 8,388,816 |  |  | $ | 7,574,258 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 2,879,746 |  |  | $ | 2,613,876 |
Interest-bearing |  |  | 4,450,931 |  |  |  | 3,991,619 |
Total deposits |  |  | 7,330,677 |  |  |  | 6,605,495 |
Short-term borrowings |  |  | 605 |  |  |  | 1,675 |
Accrued interest payable and other liabilities |  |  | 50,978 |  |  |  | 37,495 |
Junior subordinated debentures |  |  | 26,804 |  |  |  | 26,804 |
Total liabilities |  |  | 7,409,064 |  |  |  | 6,671,469 |
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: 32,644,018 and 32,603,926, respectively |  |  | 32,644 |  |  |  | 32,604 |
Capital surplus |  |  | 151,470 |  |  |  | 149,709 |
Retained earnings |  |  | 792,009 |  |  |  | 722,615 |
Accumulated other comprehensive income (loss), net of income tax of $1,248 and $(731), respectively |  |  | 3,629 |  |  |  | (2,139 | )
Total stockholders' equity |  |  | 979,752 |  |  |  | 902,789 |
Total liabilities and stockholders' equity |  | $ | 8,388,816 |  |  | $ | 7,574,258 |

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 |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  |  | 2019 |  |  |  | 2018 |  |  |  | 2019 |  |  |  | 2018 |
INTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 75,260 |  |  | $ | 66,788 |  |  | $ | 214,980 |  |  | $ | 195,311 |
Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 2,361 |  |  |  | 2,246 |  |  |  | 10,551 |  |  |  | 6,100 |
Tax-exempt |  |  | 103 |  |  |  | 145 |  |  |  | 347 |  |  |  | 478 |
Federal funds sold |  |  | 1 |  |  |  | 89 |  |  |  | 3 |  |  |  | 288 |
Interest-bearing deposits with banks |  |  | 8,704 |  |  |  | 8,165 |  |  |  | 24,587 |  |  |  | 21,272 |
Total interest income |  |  | 86,429 |  |  |  | 77,433 |  |  |  | 250,468 |  |  |  | 223,449 |
INTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 13,644 |  |  |  | 11,171 |  |  |  | 40,983 |  |  |  | 28,150 |
Short-term borrowings |  |  | 7 |  |  |  | 42 |  |  |  | 29 |  |  |  | 85 |
Junior subordinated debentures |  |  | 491 |  |  |  | 547 |  |  |  | 1,474 |  |  |  | 1,626 |
Total interest expense |  |  | 14,142 |  |  |  | 11,760 |  |  |  | 42,486 |  |  |  | 29,861 |
Net interest income |  |  | 72,287 |  |  |  | 65,673 |  |  |  | 207,982 |  |  |  | 193,588 |
Provision for loan losses |  |  | 2,758 |  |  |  | 747 |  |  |  | 6,875 |  |  |  | 2,286 |
Net interest income after provision for loan losses |  |  | 69,529 |  |  |  | 64,926 |  |  |  | 201,107 |  |  |  | 191,302 |
NONINTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trust revenue |  |  | 3,490 |  |  |  | 3,281 |  |  |  | 9,917 |  |  |  | 9,806 |
Service charges on deposits |  |  | 19,866 |  |  |  | 18,103 |  |  |  | 56,643 |  |  |  | 52,293 |
Securities transactions (includes accumulated other comprehensive income reclassifications of $0, $9, $0 and $9, respectively) |  |  | — |  |  |  | (64 | ) |  |  | 821 |  |  |  | 37 |
Income from sales of loans |  |  | 964 |  |  |  | 800 |  |  |  | 2,530 |  |  |  | 2,253 |
Insurance commissions |  |  | 5,535 |  |  |  | 5,207 |  |  |  | 15,220 |  |  |  | 14,333 |
Cash management |  |  | 4,430 |  |  |  | 3,383 |  |  |  | 12,608 |  |  |  | 9,785 |
(Loss)/gain on sale of other assets |  |  | (1 | ) |  |  | 195 |  |  |  | (12 | ) |  |  | 348 |
Other |  |  | 1,343 |  |  |  | 1,896 |  |  |  | 3,978 |  |  |  | 4,493 |
Total noninterest income |  |  | 35,627 |  |  |  | 32,801 |  |  |  | 101,705 |  |  |  | 93,348 |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 40,354 |  |  |  | 35,051 |  |  |  | 112,649 |  |  |  | 104,017 |
Occupancy, net |  |  | 3,386 |  |  |  | 3,386 |  |  |  | 8,966 |  |  |  | 10,184 |
Depreciation |  |  | 3,268 |  |  |  | 2,733 |  |  |  | 9,268 |  |  |  | 7,572 |
Amortization of intangible assets |  |  | 842 |  |  |  | 740 |  |  |  | 2,359 |  |  |  | 2,232 |
Data processing services |  |  | 1,467 |  |  |  | 1,418 |  |  |  | 4,209 |  |  |  | 3,816 |
Net expense/(income) from other real estate owned |  |  | 26 |  |  |  | 64 |  |  |  | (361 | ) |  |  | 109 |
Marketing and business promotion |  |  | 2,047 |  |  |  | 1,997 |  |  |  | 6,227 |  |  |  | 5,998 |
Deposit insurance |  |  | (81 | ) |  |  | 597 |  |  |  | 996 |  |  |  | 1,856 |
Other |  |  | 10,882 |  |  |  | 9,823 |  |  |  | 30,692 |  |  |  | 30,171 |
Total noninterest expense |  |  | 62,191 |  |  |  | 55,809 |  |  |  | 175,005 |  |  |  | 165,955 |
Income before taxes |  |  | 42,965 |  |  |  | 41,918 |  |  |  | 127,807 |  |  |  | 118,695 |
Income tax expense |  |  | 9,597 |  |  |  | 9,035 |  |  |  | 28,435 |  |  |  | 25,606 |
Net income |  | $ | 33,368 |  |  | $ | 32,883 |  |  | $ | 99,372 |  |  | $ | 93,089 |
NET INCOME PER COMMON SHARE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 1.02 |  |  | $ | 1.01 |  |  | $ | 3.04 |  |  | $ | 2.85 |
Diluted |  | $ | 1.00 |  |  | $ | 0.98 |  |  | $ | 2.98 |  |  | $ | 2.78 |
OTHER COMPREHENSIVE GAIN/(LOSS) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unrealized (losses)/gains on securities, net of tax of $1, $352, $(1,979) and $1,005, respectively |  |  | (26 | ) |  |  | (1,027 | ) |  |  | 5,768 |  |  |  | (2,956 | ) |
Reclassification adjustment for losses included in net income |  |  | — |  |  |  | (7 | ) |  |  | — |  |  |  | (7 | )
Other comprehensive (losses)/gains, net of tax of $1, $354, $(1,979) and $802, respectively |  |  | (26 | ) |  |  | (1,034 | ) |  |  | 5,768 |  |  |  | (2,963 | )
Comprehensive income |  | $ | 33,342 |  |  | $ | 31,849 |  |  | $ | 105,140 |  |  | $ | 90,126 |

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 |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
COMMON STOCK |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Issued at beginning of period |  | $ | 32,640 |  |  | $ | 32,731 |  |  | $ | 32,604 |  |  | $ | 31,895 |
Shares issued for stock options |  |  | 4 |  |  |  | 19 |  |  |  | 40 |  |  |  | 122 |
Shares issued for acquisitions |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 733 |
Issued at end of period |  | $ | 32,644 |  |  | $ | 32,750 |  |  | $ | 32,644 |  |  | $ | 32,750 |
CAPITAL SURPLUS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 150,995 |  |  | $ | 148,494 |  |  | $ | 149,709 |  |  | $ | 107,481 |
Common stock issued for stock options |  |  | 128 |  |  |  | 395 |  |  |  | 873 |  |  |  | 2,015 |
Common stock issued for acquisitions |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 38,765 |
Stock-based compensation arrangements |  |  | 347 |  |  |  | 353 |  |  |  | 888 |  |  |  | 981 |
Balance at end of period |  | $ | 151,470 |  |  | $ | 149,242 |  |  | $ | 151,470 |  |  | $ | 149,242 |
RETAINED EARNINGS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 769,090 |  |  | $ | 684,425 |  |  | $ | 722,615 |  |  | $ | 638,580 |
Net income |  |  | 33,368 |  |  |  | 32,883 |  |  |  | 99,372 |  |  |  | 93,089 |
Cumulative effect of change in accounting principle |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (618 | )
Dividends on common stock ($0.32, $0.30, $0.92 and $0.72 per share, respectively) |  |  | (10,449 | ) |  |  | (9,827 | ) |  |  | (29,978 | ) |  |  | (23,570 | )
Balance at end of period |  | $ | 792,009 |  |  | $ | 707,481 |  |  | $ | 792,009 |  |  | $ | 707,481 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unrealized gain/(losses) on securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 3,655 |  |  | $ | (3,638 | ) |  | $ | (2,139 | ) |  | $ | (2,327 | )
Net change |  |  | (26 | ) |  |  | (1,034 | ) |  |  | 5,768 |  |  |  | (2,963 | )
Cumulative effect of change in accounting principle |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 618 |
Balance at end of period |  | $ | 3,629 |  |  | $ | (4,672 | ) |  | $ | 3,629 |  |  | $ | (4,672 | )
Total stockholders’ equity |  | $ | 979,752 |  |  | $ | 884,801 |  |  | $ | 979,752 |  |  | $ | 884,801 |

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

4

BANCFIRST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(Dollars in thousands)

|  | Nine Months Ended |
|  | September 30, |
|  | 2019 |  |  | 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |
Net income |  | $ | 99,372 |  |  | $ | 93,089 |
Adjustments to reconcile to net cash provided by operating activities: |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 6,875 |  |  |  | 2,286 |
Depreciation and amortization |  |  | 11,627 |  |  |  | 9,804 |
Net amortization of securities premiums and discounts |  |  | (3,764 | ) |  |  | (141 | )
Realized securities gains |  |  | (821 | ) |  |  | (37 | )
Gain on sales of loans |  |  | (2,530 | ) |  |  | (2,253 | )
Cash receipts from the sale of loans originated for sale |  |  | 164,319 |  |  |  | 145,840 |
Cash disbursements for loans originated for sale |  |  | (169,740 | ) |  |  | (142,207 | )
Deferred income tax (benefit) provision |  |  | (752 | ) |  |  | 83 |
Gain on other assets |  |  | (454 | ) |  |  | (341 | )
Decrease (increase) in interest receivable |  |  | 1,243 |  |  |  | (2,380 | )
Increase in interest payable |  |  | 235 |  |  |  | 764 |
Amortization of stock-based compensation arrangements |  |  | 888 |  |  |  | 981 |
Excess tax benefit from stock-based compensation arrangements |  |  | (288 | ) |  |  | (1,067 | )
Other, net |  |  | 6,255 |  |  |  | 1,188 |
Net cash provided by operating activities |  |  | 112,465 |  |  |  | 105,609 |
INVESTING ACTIVITIES |  |  |  |  |  |  |  |
Net cash received from acquisitions, net of cash paid |  |  | 77,672 |  |  |  | 6,248 |
Net (increase)/decrease in federal funds sold |  |  | (300 | ) |  |  | 22,948 |
Purchases of held for investment securities |  |  | (1,010 | ) |  |  | (225 | )
Purchases of available for sale securities |  |  | (99,093 | ) |  |  | (168,971 | )
Proceeds from maturities, calls and paydowns of held for investment securities |  |  | 527 |  |  |  | 1,077 |
Proceeds from maturities, calls and paydowns of available for sale securities |  |  | 369,073 |  |  |  | 121,581 |
Proceeds from sales of available for sale securities |  |  | — |  |  |  | 31,286 |
Purchase of equity securities |  |  | (2,806 | ) |  |  | (2,118 | )
Proceeds from paydowns and sales of equity securities |  |  | 1,897 |  |  |  | 1,414 |
Net change in loans |  |  | (250,095 | ) |  |  | 81,000 |
Purchases of premises, equipment and computer software |  |  | (19,865 | ) |  |  | (44,398 | )
Other, net |  |  | (2,593 | ) |  |  | (2,283 | )
Net cash provided by investing activities |  |  | 73,407 |  |  |  | 47,559 |
FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Net change in deposits |  |  | 121,260 |  |  |  | (101,874 | )
Net (decrease)/increase in short-term borrowings |  |  | (1,075 | ) |  |  | 1,300 |
Issuance of common stock in connection with stock options, net |  |  | 913 |  |  |  | 2,137 |
Cash dividends paid |  |  | (29,359 | ) |  |  | (20,440 | )
Net cash provided by/(used in) financing activities |  |  | 91,739 |  |  |  | (118,877 | )
Net increase in cash, due from banks and interest-bearing deposits |  |  | 277,611 |  |  |  | 34,291 |
Cash, due from banks and interest-bearing deposits at the beginning of the period |  |  | 1,424,255 |  |  |  | 1,757,875 |
Cash, due from banks and interest-bearing deposits at the end of the period |  | $ | 1,701,866 |  |  | $ | 1,792,166 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |  |  |  |  |  |  |  |
Cash paid during the period for interest |  | $ | 42,100 |  |  | $ | 29,096 |
Cash paid during the period for income taxes |  | $ | 26,775 |  |  | $ | 24,255 |
Noncash investing and financing activities: |  |  |  |  |  |  |  |
Stock issued in acquisitions |  | $ | — |  |  | $ | 39,498 |
Cash consideration for acquisitions |  | $ | 123,457 |  |  | $ | 24,722 |
Fair value of assets acquired in acquisitions |  | $ | 729,365 |  |  | $ | 377,320 |
Liabilities assumed in acquisitions |  | $ | 605,908 |  |  | $ | 338,860 |
Unpaid common stock dividends declared |  | $ | 10,445 |  |  | $ | 9,823 |

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 States of America (U.S. GAAP) and general practice within the banking industry. A summary of significant accounting policies can be found in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Basis of Presentation

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

The accompanying unaudited interim consolidated financial statements and notes are presented in accordance with 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, 2018, 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, 2018, the date of the most recent annual report.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported net cash flows, stockholders’ equity or comprehensive income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States inherently involves the use of estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures. These estimates relate principally to the determination of the allowance for 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases - (Topic 842)”, amended by ASU 2018-11, “Leases – (Topic 842)”: Targeted Improvements. This new guidance requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than twelve months and provide additional disclosures. The amendments were effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. The Company adopted this new standard on January 1, 2019, using a modified retrospective transition approach and recognized right-of-use lease assets and related lease liabilities totaling $4.3 million. The Company elected to apply certain practical adoption expedients provided under the updates whereby it did not reassess initial direct costs for any existing leases. No cumulative-effect adjustment was recognized as the amount was not material, and the impact on our results of operations and cash flows was also not material. No prior periods were adjusted. See Note 6 for the financial position impact and additional disclosures.

6

Standards Not Yet Adopted:

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” ASU 2018-13 removes, modifies and adds disclosure requirements on fair value measurements. ASU 2018-13 will be effective for the Company on January 1, 2020. Early adoption is permitted. In addition, early adoption of any removed or modified disclosures and delayed adoption of the additional disclosures until the effective date is also permitted. The Company expects to adopt the standard in the first quarter of 2020.

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 for the Company on January 1, 2020. The Company is currently evaluating the potential impact of ASU 2016-13 on its financial statements. In that regard, the Company has formed a task force under the direction of its Chief Financial Officer. In preparation, the Company has developed new credit estimation models, processes and controls. Internal validation of the model is underway and expected to be completed during the fourth quarter of 2019. The Company has performed test runs of the new processes and controls and begun full parallel runs. The adoption of ASU 2016-13 could result in an increase or decrease in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that the Company establish an allowance for expected credit losses for certain debt securities and other financial assets. While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date. The Company expects to adopt the standard in the first quarter of 2020.

(2) RECENT DEVELOPMENTS, INCLUDING MERGERS AND ACQUISITIONS

On August 15, 2019, BancFirst Corporation acquired Pegasus Bank, for an aggregate cash purchase price of $123.5 million. Pegasus Bank is a Texas state-chartered bank with three banking locations in Dallas, Texas. Upon acquisition, Pegasus Bank had approximately $651.1 million in total assets, $389.9 million in loans and $603.9 million in deposits. Pegasus Bank will continue to operate as “Pegasus Bank” under a separate Texas state-charter and remain an independent subsidiary of BancFirst Corporation. BancFirst Corporation intends to provide an appropriate amount of capital or other support to increase Pegasus Bank’s ability to approve larger loans and allow Pegasus Bank to continue to grow their assets. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $9.9 million and goodwill of approximately $67.3 million. The initial accounting for the business combination is not complete due to limited time since the acquisition date. However, we do not expect any acquisition related adjustments to be material to the financial statements. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of Pegasus Bank complements the Company by expanding into the high-growth Dallas market.

On August 31, 2018, BFTower, LLC, a wholly-owned subsidiary of BancFirst purchased Cotter Ranch Tower in Oklahoma City for the Company’s corporate headquarters for $21.0 million. Cotter Ranch Tower was subsequently renamed BancFirst Tower. BancFirst Tower consists of an aggregate of 507,000 square feet, has 36 floors and is the second tallest building in Oklahoma City. The BancFirst Tower will remain an income producing property as approximately 55% is currently, and is intended to continue to be, leased to outside tenants. BancFirst Tower will allow the Company to consolidate operations from three locations to one and will improve operational efficiencies. Upon consolidation, the Company expects to occupy approximately 35% of BancFirst Tower, resulting in approximately 90% total occupancy. Renovations on BancFirst Tower are expected to be completed by the end of 2021 and are expected to cost approximately $75 million. The renovation costs include substantial deferred maintenance including HVAC, plumbing, electrical, elevators, building skin and roof while also including much needed improvements to both the interior and exterior common areas including the lobby, underground and outdoor plaza. The Company could start depreciating certain components of the renovation as they are put into service as early as December 2019. The Company estimates spending approximately $12 million on tenant improvements for the approximate 165,000 square feet that the Company will occupy. The total purchase price, renovation costs, and Company tenant improvement costs were determined to be favorable to other alternatives, such as constructing new corporate headquarters or leasing space. On December 14, 2018, BFTower LLC, purchased a 42.6% ownership interest in SFPG, LLC, which is the owner of a 1,568 space parking garage adjacent to BancFirst Tower, for $9.8 million.

On January 11, 2018, the Company acquired First Wagoner Corp. and its subsidiary bank, First Bank & Trust Company, with locations in Carney, Grove, Ketchum, Luther, Tulsa and Wagoner. First Bank & Trust Company had approximately $290 million in total assets, $247 million in loans and $251 million in deposits. First Bank & Trust Company operated as a subsidiary of BancFirst Corporation until it was merged into BancFirst on February 16, 2018. As a result of the acquisition, the Company recorded a core

7

deposit intangible of approximately $6.3 million and goodwill of approximately $19.1 million. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of First Wagoner Corp. and its subsidiary bank, First Bank & Trust Company complements the Company’s community banking strategy by adding an additional five communities to its banking network in Oklahoma.

On January 11, 2018, the Company acquired First Chandler Corp. and its subsidiary bank, First Bank of Chandler, with two locations in Chandler. First Bank of Chandler had approximately $88 million in total assets, $66 million in loans and $79 million in deposits. First Bank of Chandler operated as a subsidiary of BancFirst Corporation until it was merged into BancFirst on September 7, 2018. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $2.2 million and goodwill of approximately $6.6 million. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of First Chandler Corp. and its subsidiary bank, First Bank of Chandler complements the Company’s community banking strategy by increasing its banking network in Oklahoma.

(3) | SECURITIES

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

|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |
September 30, 2019 |  | (Dollars in thousands) |
Mortgage backed securities (1) |  | $ | 101 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 105 |
States and political subdivisions |  |  | 1,310 |  |  |  | 1 |  |  |  | (5 | ) |  |  | 1,306 |
Other securities |  |  | 500 |  |  |  | — |  |  |  | — |  |  |  | 500 |
Total |  | $ | 1,911 |  |  | $ | 5 |  |  | $ | (5 | ) |  | $ | 1,911 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage backed securities (1) |  | $ | 133 |  |  | $ | 5 |  |  | $ | — |  |  | $ | 138 |
States and political subdivisions |  |  | 795 |  |  |  | — |  |  |  | — |  |  |  | 795 |
Other securities |  |  | 500 |  |  |  | — |  |  |  | — |  |  |  | 500 |
Total |  | $ | 1,428 |  |  | $ | 5 |  |  | $ | — |  |  | $ | 1,433 |

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

|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |
September 30, 2019 |  | (Dollars in thousands) |
U.S. treasuries |  | $ | 463,898 |  |  | $ | 5,286 |  |  | $ | (238 | ) |  | $ | 468,946 |
U.S. federal agencies |  |  | 23,731 |  |  |  | 36 |  |  |  | (25 | ) |  |  | 23,742 |
Mortgage backed securities (1) |  |  | 17,400 |  |  |  | 142 |  |  |  | (70 | ) |  |  | 17,472 |
States and political subdivisions |  |  | 23,270 |  |  |  | 315 |  |  |  | (36 | ) |  |  | 23,549 |
Asset backed securities |  |  | 13,491 |  |  |  | — |  |  |  | (533 | ) |  |  | 12,958 |
Other securities |  |  | 6,997 |  |  |  | 1 |  |  |  | (1 | ) |  |  | 6,997 |
Total |  | $ | 548,787 |  |  | $ | 5,780 |  |  | $ | (903 | ) |  | $ | 553,664 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 699,882 |  |  | $ | 1,108 |  |  | $ | (3,524 | ) |  | $ | 697,466 |
U.S. federal agencies |  |  | 30,079 |  |  |  | — |  |  |  | (160 | ) |  |  | 29,919 |
Mortgage backed securities (1) |  |  | 2,352 |  |  |  | 114 |  |  |  | (1 | ) |  |  | 2,465 |
States and political subdivisions |  |  | 27,246 |  |  |  | 277 |  |  |  | (112 | ) |  |  | 27,411 |
Asset backed securities |  |  | 14,015 |  |  |  | — |  |  |  | (572 | ) |  |  | 13,443 |
Total |  | $ | 773,574 |  |  | $ | 1,499 |  |  | $ | (4,369 | ) |  | $ | 770,704 |

| (1) | Primarily consists of FHLMC, FNMA, GNMA and mortgage backed securities through U.S. agencies.

8

The maturities of debt securities held for investment and available for sale are summarized in the following table using contractual maturities. Actual maturities may differ from contractual maturities due to obligations that are called or prepaid. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been presented at their contractual maturity.

|  | September 30, 2019 |  |  | December 31, 2018 |
|  | Amortized Cost |  |  | Estimated Fair Value |  |  | Amortized Cost |  |  | Estimated Fair Value |
|  | (Dollars in thousands) |
Held for Investment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contractual maturity of debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Within one year |  | $ | 300 |  |  | $ | 300 |  |  | $ | 495 |  |  | $ | 495 |
After one year but within five years |  |  | 1,063 |  |  |  | 1,060 |  |  |  | 369 |  |  |  | 370 |
After five years but within ten years |  |  | 546 |  |  |  | 549 |  |  |  | 562 |  |  |  | 565 |
After ten years |  |  | 2 |  |  |  | 2 |  |  |  | 2 |  |  |  | 3 |
Total |  | $ | 1,911 |  |  | $ | 1,911 |  |  | $ | 1,428 |  |  | $ | 1,433 |
Available for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contractual maturity of debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Within one year |  | $ | 211,927 |  |  | $ | 211,804 |  |  | $ | 411,256 |  |  | $ | 410,327 |
After one year but within five years |  |  | 289,140 |  |  |  | 294,436 |  |  |  | 313,416 |  |  |  | 311,924 |
After five years but within ten years |  |  | 6,359 |  |  |  | 9,206 |  |  |  | 7,524 |  |  |  | 7,685 |
After ten years |  |  | 41,361 |  |  |  | 38,218 |  |  |  | 41,378 |  |  |  | 40,768 |
Total debt securities |  | $ | 548,787 |  |  | $ | 553,664 |  |  | $ | 773,574 |  |  | $ | 770,704 |

The following table is a summary of the Company’s book value of securities that were pledged as collateral for public funds on deposit, repurchase agreements and for other purposes as required or permitted by law:

|  | September 30, 2019 |  |  | December 31, 2018 |
|  | (Dollars in thousands) |
Book value of pledged securities |  | $ | 391,249 |  |  | $ | 472,053 |

(4) | LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

|  | September 30, 2019 |  |  | December 31, 2018 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
|  | (Dollars in thousands) |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 1,098,602 |  |  |  | 19.60 | % |  | $ | 1,032,787 |  |  |  | 20.76 | %
Oil & gas production and equipment |  |  | 143,083 |  |  |  | 2.55 |  |  |  | 94,729 |  |  |  | 1.90 |
Agriculture |  |  | 130,150 |  |  |  | 2.32 |  |  |  | 136,313 |  |  |  | 2.74 |
State and political subdivisions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 71,521 |  |  |  | 1.28 |  |  |  | 76,211 |  |  |  | 1.53 |
Tax-exempt |  |  | 52,261 |  |  |  | 0.93 |  |  |  | 48,415 |  |  |  | 0.97 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 464,341 |  |  |  | 8.28 |  |  |  | 451,224 |  |  |  | 9.07 |
Farmland |  |  | 242,181 |  |  |  | 4.32 |  |  |  | 219,241 |  |  |  | 4.41 |
One to four family residences |  |  | 1,010,237 |  |  |  | 18.02 |  |  |  | 979,170 |  |  |  | 19.68 |
Multifamily residential properties |  |  | 114,558 |  |  |  | 2.04 |  |  |  | 65,949 |  |  |  | 1.33 |
Commercial |  |  | 1,480,898 |  |  |  | 26.41 |  |  |  | 1,506,937 |  |  |  | 30.28 |
Consumer |  |  | 355,923 |  |  |  | 6.35 |  |  |  | 328,069 |  |  |  | 6.59 |
Other (not classified above) |  |  | 50,909 |  |  |  | 0.91 |  |  |  | 36,931 |  |  |  | 0.74 |
Pegasus Bank |  |  | 392,144 |  |  |  | 6.99 |  |  |  | — |  |  |  | — |
Total loans |  | $ | 5,606,808 |  |  |  | 100.00 | % |  | $ | 4,975,976 |  |  |  | 100.00 | %

9

BancFirst’s loans are mostly to customers within Oklahoma and approximately 59% of the loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual and related borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

BancFirst’s commercial and industrial loan category includes a small percentage of loans to companies that provide ancillary services to the oil and gas industry, such as transportation, preparation contractors and equipment manufacturers. The balance of these loans was approximately $83 million at September 30, 2019 and approximately $60 million at December 31, 2018.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $209 million or 53% of the loans are secured by real estate. Pegasus Bank’s commercial and industrial loans were approximately $160 million, of which approximately $40 million were loans to companies in the oil and gas industry.

Accounting policies related to appraisals, nonaccruals and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

|  | September 30, |  |  | December 31, |
|  | 2019 |  |  | 2018 |
|  | (Dollars in thousands) |
Past due 90 days or more and still accruing |  | $ | 11,215 |  |  | $ | 1,916 |
Nonaccrual |  |  | 19,995 |  |  |  | 22,603 |
Restructured |  |  | 17,504 |  |  |  | 13,188 |
Total nonperforming and restructured loans |  |  | 48,714 |  |  |  | 37,707 |
Other real estate owned and repossessed assets |  |  | 7,055 |  |  |  | 6,873 |
Total nonperforming and restructured assets |  | $ | 55,769 |  |  | $ | 44,580 |

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.4 million for the nine months ended September 30, 2019 and approximately $1.7 million for the nine months ended September 30, 2018.

The Company charges interest on principal balances outstanding on restructured loans during deferral periods. The current and future financial effects of the recorded balance of loans considered to be restructured were not considered to be material.

Loans are segregated into classes based upon the nature of the collateral and the borrower. These classes are used to estimate the allowance for loan losses. The following table is a summary of amounts included in nonaccrual loans, segregated by class of loans. Residential real estate refers to one-to-four family real estate.

|  | September 30, 2019 |  |  | December 31, 2018 |
|  | (Dollars in thousands) |
BancFirst |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 2,082 |  |  | $ | 838 |
Non-residential real estate other |  |  | 1,718 |  |  |  | 187 |
Residential real estate permanent mortgage |  |  | 1,291 |  |  |  | 954 |
Residential real estate all other |  |  | 6,142 |  |  |  | 5,488 |
Commercial and financial: |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 3,171 |  |  |  | 5,682 |
Consumer non-real estate |  |  | 412 |  |  |  | 437 |
Other loans |  |  | 368 |  |  |  | 490 |
Acquired loans |  |  | 3,932 |  |  |  | 8,527 |
Pegasus Bank |  |  | 879 |  |  |  | — |
Total |  | $ | 19,995 |  |  | $ | 22,603 |

10

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following table presents an age analysis of past due loans, segregated by class of loans:

|  | Age Analysis of Past Due Loans |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days and Greater |  |  | Total Past Due Loans |  |  | Current Loans |  |  | Total Loans |  |  | Accruing Loans 90 Days or More Past Due |
|  | (Dollars in thousands) |
As of September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 1,325 |  |  | $ | 935 |  |  | $ | 4,859 |  |  | $ | 7,119 |  |  | $ | 678,852 |  |  | $ | 685,971 |  |  | $ | 3,808 |
Non-residential real estate other |  |  | 1,066 |  |  |  | — |  |  |  | 73 |  |  |  | 1,139 |  |  |  | 1,189,409 |  |  |  | 1,190,548 |  |  |  | — |
Residential real estate permanent mortgage |  |  | 1,387 |  |  |  | 1,166 |  |  |  | 1,930 |  |  |  | 4,483 |  |  |  | 334,943 |  |  |  | 339,426 |  |  |  | 1,297 |
Residential real estate all other |  |  | 2,633 |  |  |  | 665 |  |  |  | 5,694 |  |  |  | 8,992 |  |  |  | 882,771 |  |  |  | 891,763 |  |  |  | 442 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 1,642 |  |  |  | 665 |  |  |  | 2,358 |  |  |  | 4,665 |  |  |  | 1,419,409 |  |  |  | 1,424,074 |  |  |  | 420 |
Consumer non-real estate |  |  | 1,899 |  |  |  | 695 |  |  |  | 578 |  |  |  | 3,172 |  |  |  | 355,152 |  |  |  | 358,324 |  |  |  | 376 |
Other loans |  |  | 683 |  |  |  | 737 |  |  |  | 4,340 |  |  |  | 5,760 |  |  |  | 149,582 |  |  |  | 155,342 |  |  |  | 4,340 |
Acquired loans |  |  | 1,529 |  |  |  | 989 |  |  |  | 2,088 |  |  |  | 4,606 |  |  |  | 164,610 |  |  |  | 169,216 |  |  |  | 532 |
Pegasus Bank |  |  | — |  |  |  | 879 |  |  |  | — |  |  |  | 879 |  |  |  | 391,265 |  |  |  | 392,144 |  |  |  | — |
Total |  | $ | 12,164 |  |  | $ | 6,731 |  |  | $ | 21,920 |  |  | $ | 40,815 |  |  | $ | 5,565,993 |  |  | $ | 5,606,808 |  |  | $ | 11,215 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 5,114 |  |  | $ | 810 |  |  | $ | 43 |  |  | $ | 5,967 |  |  | $ | 620,654 |  |  | $ | 626,621 |  |  | $ | — |
Non-residential real estate other |  |  | 2,772 |  |  |  | 32 |  |  |  | 114 |  |  |  | 2,918 |  |  |  | 1,143,210 |  |  |  | 1,146,128 |  |  |  | — |
Residential real estate permanent mortgage |  |  | 2,448 |  |  |  | 653 |  |  |  | 693 |  |  |  | 3,794 |  |  |  | 324,908 |  |  |  | 328,702 |  |  |  | 430 |
Residential real estate all other |  |  | 1,728 |  |  |  | 292 |  |  |  | 2,799 |  |  |  | 4,819 |  |  |  | 822,685 |  |  |  | 827,504 |  |  |  | 612 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 3,620 |  |  |  | 702 |  |  |  | 833 |  |  |  | 5,155 |  |  |  | 1,278,499 |  |  |  | 1,283,654 |  |  |  | 282 |
Consumer non-real estate |  |  | 1,991 |  |  |  | 565 |  |  |  | 559 |  |  |  | 3,115 |  |  |  | 323,747 |  |  |  | 326,862 |  |  |  | 325 |
Other loans |  |  | 322 |  |  |  | 158 |  |  |  | 178 |  |  |  | 658 |  |  |  | 141,251 |  |  |  | 141,909 |  |  |  | — |
Acquired loans |  |  | 5,240 |  |  |  | 1,669 |  |  |  | 4,936 |  |  |  | 11,845 |  |  |  | 282,751 |  |  |  | 294,596 |  |  |  | 267 |
Total |  | $ | 23,235 |  |  | $ | 4,881 |  |  | $ | 10,155 |  |  | $ | 38,271 |  |  | $ | 4,937,705 |  |  | $ | 4,975,976 |  |  | $ | 1,916 |

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect the full amount of scheduled principal and interest payments in accordance with the original contractual terms of the loan agreement. If a loan is impaired, a specific valuation allowance may be allocated, if necessary, so that the loan is reported, net of allowance for loss, at the present value of future cash flows using the loan’s existing rate, or the fair value of collateral if repayment is expected solely from the collateral.

11

The following table presents impaired loans, segregated by class of loans. During the period ended September 30, 2019 and September 30, 2018, no material amount of interest income was recognized on impaired loans subsequent to their classification as impaired.

|  | Impaired Loans |
|  | Unpaid Principal Balance |  |  | Recorded Investment with Allowance |  |  | Related Allowance |  |  | Average Recorded Investment |
|  | (Dollars in thousands) |
As of September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 12,817 |  |  | $ | 12,566 |  |  | $ | 450 |  |  | $ | 9,352 |
Non-residential real estate other |  |  | 3,873 |  |  |  | 3,593 |  |  |  | 279 |  |  |  | 2,501 |
Residential real estate permanent mortgage |  |  | 3,060 |  |  |  | 2,768 |  |  |  | 254 |  |  |  | 2,422 |
Residential real estate all other |  |  | 7,752 |  |  |  | 7,483 |  |  |  | 3,264 |  |  |  | 6,801 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 11,853 |  |  |  | 11,237 |  |  |  | 923 |  |  |  | 11,131 |
Consumer non-real estate |  |  | 959 |  |  |  | 826 |  |  |  | 108 |  |  |  | 718 |
Other loans |  |  | 4,917 |  |  |  | 4,708 |  |  |  | 94 |  |  |  | 424 |
Acquired loans |  |  | 6,108 |  |  |  | 4,603 |  |  |  | 2 |  |  |  | 7,199 |
Pegasus Bank |  |  | 2,989 |  |  |  | 2,190 |  |  |  | — |  |  |  | 1,089 |
Total |  | $ | 54,328 |  |  | $ | 49,974 |  |  | $ | 5,374 |  |  | $ | 41,637 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 7,126 |  |  | $ | 6,933 |  |  | $ | 202 |  |  | $ | 7,739 |
Non-residential real estate other |  |  | 949 |  |  |  | 757 |  |  |  | 50 |  |  |  | 6,057 |
Residential real estate permanent mortgage |  |  | 1,789 |  |  |  | 1,545 |  |  |  | 127 |  |  |  | 1,650 |
Residential real estate all other |  |  | 7,177 |  |  |  | 6,862 |  |  |  | 2,433 |  |  |  | 7,154 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 18,507 |  |  |  | 10,977 |  |  |  | 881 |  |  |  | 12,140 |
Consumer non-real estate |  |  | 928 |  |  |  | 829 |  |  |  | 131 |  |  |  | 846 |
Other loans |  |  | 710 |  |  |  | 490 |  |  |  | 35 |  |  |  | 481 |
Acquired loans |  |  | 12,846 |  |  |  | 9,864 |  |  |  | 2 |  |  |  | 11,050 |
Total |  | $ | 50,032 |  |  | $ | 38,257 |  |  | $ | 3,861 |  |  | $ | 47,117 |

Credit Risk Monitoring and Loan Grading

The Company considers various factors to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loan loss experience and economic conditions.

An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Pegasus Bank Credit Quality Indicators

Pegasus Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Pegasus Bank analyzes loans individually by classifying the loans as to credit risk. Pegasus Bank uses the following definitions for risk ratings:

Pass

12

Loans classified as a pass are loans with low to average risk. These loans are included in grade 1 and 2 for the purposes of the following table:

Special Mention

Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Pegasus Bank’s credit position at some future date. These loans are included in grade 3 for the purposes of the following table:

Substandard

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Pegasus Bank will sustain some loss if the deficiencies are not corrected. These loans are included in grade 4 for the purposes of the following table:

Doubtful

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These loans, if any, would be included in grade 5 for the purposes of the following table:

The following table presents internal loan grading by class of loans:

|  | Internal Loan Grading |
|  | Grade |
|  |  | 1 |  |  |  | 2 |  |  |  | 3 |  |  |  | 4 |  |  |  | 5 |  |  | Total |
|  | (Dollars in thousands) |
As of September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 531,883 |  |  | $ | 125,467 |  |  | $ | 26,082 |  |  | $ | 2,539 |  |  | $ | — |  |  | $ | 685,971 |
Non-residential real estate other |  |  | 896,692 |  |  |  | 264,421 |  |  |  | 28,669 |  |  |  | 766 |  |  |  | — |  |  |  | 1,190,548 |
Residential real estate permanent mortgage |  |  | 288,714 |  |  |  | 41,332 |  |  |  | 7,104 |  |  |  | 2,225 |  |  |  | 51 |  |  |  | 339,426 |
Residential real estate all other |  |  | 697,825 |  |  |  | 172,253 |  |  |  | 14,986 |  |  |  | 6,699 |  |  |  | — |  |  |  | 891,763 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 1,136,324 |  |  |  | 256,992 |  |  |  | 28,590 |  |  |  | 2,168 |  |  |  | — |  |  |  | 1,424,074 |
Consumer non-real estate |  |  | 333,508 |  |  |  | 21,608 |  |  |  | 2,410 |  |  |  | 798 |  |  |  | — |  |  |  | 358,324 |
Other loans |  |  | 149,914 |  |  |  | 3,878 |  |  |  | 1,528 |  |  |  | 22 |  |  |  | — |  |  |  | 155,342 |
Acquired loans |  |  | 98,685 |  |  |  | 59,027 |  |  |  | 7,223 |  |  |  | 4,067 |  |  |  | 214 |  |  |  | 169,216 |
Pegasus Bank |  |  | 258,497 |  |  |  | 131,458 |  |  |  | 1,310 |  |  |  | 879 |  |  |  | — |  |  |  | 392,144 |
Total |  | $ | 4,392,042 |  |  | $ | 1,076,436 |  |  | $ | 117,902 |  |  | $ | 20,163 |  |  | $ | 265 |  |  | $ | 5,606,808 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 451,059 |  |  | $ | 157,715 |  |  | $ | 16,949 |  |  | $ | 898 |  |  | $ | — |  |  | $ | 626,621 |
Non-residential real estate other |  |  | 932,454 |  |  |  | 188,341 |  |  |  | 25,146 |  |  |  | 187 |  |  |  | — |  |  |  | 1,146,128 |
Residential real estate permanent mortgage |  |  | 279,870 |  |  |  | 39,806 |  |  |  | 7,401 |  |  |  | 1,625 |  |  |  | — |  |  |  | 328,702 |
Residential real estate all other |  |  | 644,217 |  |  |  | 162,003 |  |  |  | 15,232 |  |  |  | 6,052 |  |  |  | — |  |  |  | 827,504 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 1,000,089 |  |  |  | 264,134 |  |  |  | 15,128 |  |  |  | 4,303 |  |  |  | — |  |  |  | 1,283,654 |
Consumer non-real estate |  |  | 302,217 |  |  |  | 21,600 |  |  |  | 2,255 |  |  |  | 790 |  |  |  | — |  |  |  | 326,862 |
Other loans |  |  | 136,132 |  |  |  | 5,542 |  |  |  | 116 |  |  |  | 119 |  |  |  | — |  |  |  | 141,909 |
Acquired loans |  |  | 156,008 |  |  |  | 109,075 |  |  |  | 20,884 |  |  |  | 8,284 |  |  |  | 345 |  |  |  | 294,596 |
Total |  | $ | 3,902,046 |  |  | $ | 948,216 |  |  | $ | 103,111 |  |  | $ | 22,258 |  |  | $ | 345 |  |  | $ | 4,975,976 |

13

Allowance for Loan Losses Methodology

The allowance for loan losses (“ALL”) methodology is disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The following table details activity in the ALL by class of loans for the period presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

|  | ALL |
|  | Balance at beginning of period |  |  | Charge- offs |  |  | Recoveries |  |  | Net charge-offs |  |  | Provisions charged to operations |  |  | Balance at end of period |
|  | (Dollars in thousands) |
Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 6,887 |  |  | $ | (2 | ) |  | $ | 1 |  |  | $ | (1 | ) |  | $ | 72 |  |  | $ | 6,958 |
Non-residential real estate other |  |  | 11,287 |  |  |  | (35 | ) |  |  | 33 |  |  |  | (2 | ) |  |  | 478 |  |  |  | 11,763 |
Residential real estate permanent mortgage |  |  | 3,325 |  |  |  | (63 | ) |  |  | 2 |  |  |  | (61 | ) |  |  | 97 |  |  |  | 3,361 |
Residential real estate all other |  |  | 11,721 |  |  |  | (29 | ) |  |  | 2 |  |  |  | (27 | ) |  |  | 507 |  |  |  | 12,201 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 15,232 |  |  |  | (244 | ) |  |  | 49 |  |  |  | (195 | ) |  |  | 347 |  |  |  | 15,384 |
Consumer non-real estate |  |  | 3,234 |  |  |  | (287 | ) |  |  | 66 |  |  |  | (221 | ) |  |  | 261 |  |  |  | 3,274 |
Other loans |  |  | 2,449 |  |  |  | — |  |  |  | 9 |  |  |  | 9 |  |  |  | 189 |  |  |  | 2,647 |
Acquired loans |  |  | 973 |  |  |  | (1,517 | ) |  |  | 53 |  |  |  | (1,464 | ) |  |  | 767 |  |  |  | 276 |
Pegasus Bank |  |  | — |  |  |  | — |  |  |  | 24 |  |  |  | 24 |  |  |  | 40 |  |  |  | 64 |
Total |  | $ | 55,108 |  |  | $ | (2,177 | ) |  | $ | 239 |  |  | $ | (1,938 | ) |  | $ | 2,758 |  |  | $ | 55,928 |
Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 6,328 |  |  | $ | (11 | ) |  | $ | 2 |  |  | $ | (9 | ) |  | $ | 639 |  |  | $ | 6,958 |
Non-residential real estate other |  |  | 11,027 |  |  |  | (57 | ) |  |  | 34 |  |  |  | (23 | ) |  |  | 759 |  |  |  | 11,763 |
Residential real estate permanent mortgage |  |  | 3,261 |  |  |  | (130 | ) |  |  | 11 |  |  |  | (119 | ) |  |  | 219 |  |  |  | 3,361 |
Residential real estate all other |  |  | 10,673 |  |  |  | (224 | ) |  |  | 29 |  |  |  | (195 | ) |  |  | 1,723 |  |  |  | 12,201 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 13,151 |  |  |  | (401 | ) |  |  | 201 |  |  |  | (200 | ) |  |  | 2,433 |  |  |  | 15,384 |
Consumer non-real estate |  |  | 3,065 |  |  |  | (569 | ) |  |  | 175 |  |  |  | (394 | ) |  |  | 603 |  |  |  | 3,274 |
Other loans |  |  | 2,423 |  |  |  | — |  |  |  | 87 |  |  |  | 87 |  |  |  | 137 |  |  |  | 2,647 |
Acquired loans |  |  | 1,461 |  |  |  | (1,713 | ) |  |  | 206 |  |  |  | (1,507 | ) |  |  | 322 |  |  |  | 276 |
Pegasus Bank |  |  | — |  |  |  | — |  |  |  | 24 |  |  |  | 24 |  |  |  | 40 |  |  |  | 64 |
Total |  | $ | 51,389 |  |  | $ | (3,105 | ) |  | $ | 769 |  |  | $ | (2,336 | ) |  | $ | 6,875 |  |  | $ | 55,928 |

14

|  | ALL |
|  | Balance at beginning of period |  |  | Charge- offs |  |  | Recoveries |  |  | Net charge-offs |  |  | Provisions charged to operations |  |  | Balance at end of period |
|  | (Dollars in thousands) |
Three Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 6,426 |  |  | $ | (179 | ) |  | $ | 15 |  |  | $ | (164 | ) |  | $ | 164 |  |  | $ | 6,426 |
Non-residential real estate other |  |  | 10,705 |  |  |  | (8 | ) |  |  | — |  |  |  | (8 | ) |  |  | (49 | ) |  |  | 10,648 |
Residential real estate permanent mortgage |  |  | 3,307 |  |  |  | (39 | ) |  |  | — |  |  |  | (39 | ) |  |  | 43 |  |  |  | 3,311 |
Residential real estate all other |  |  | 10,123 |  |  |  | (71 | ) |  |  | 95 |  |  |  | 24 |  |  |  | 274 |  |  |  | 10,421 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 15,069 |  |  |  | (343 | ) |  |  | 7 |  |  |  | (336 | ) |  |  | (337 | ) |  |  | 14,396 |
Consumer non-real estate |  |  | 2,839 |  |  |  | (294 | ) |  |  | 70 |  |  |  | (224 | ) |  |  | 298 |  |  |  | 2,913 |
Other loans |  |  | 2,328 |  |  |  | — |  |  |  | 6 |  |  |  | 6 |  |  |  | 88 |  |  |  | 2,422 |
Acquired loans |  |  | 1,403 |  |  |  | (337 | ) |  |  | 6 |  |  |  | (331 | ) |  |  | 266 |  |  |  | 1,338 |
Total |  | $ | 52,200 |  |  | $ | (1,271 | ) |  | $ | 199 |  |  | $ | (1,072 | ) |  | $ | 747 |  |  | $ | 51,875 |
Nine Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 6,195 |  |  | $ | (198 | ) |  | $ | 16 |  |  | $ | (182 | ) |  | $ | 413 |  |  | $ | 6,426 |
Non-residential real estate other |  |  | 10,519 |  |  |  | (9 | ) |  |  | 39 |  |  |  | 30 |  |  |  | 99 |  |  |  | 10,648 |
Residential real estate permanent mortgage |  |  | 3,226 |  |  |  | (101 | ) |  |  | 26 |  |  |  | (75 | ) |  |  | 160 |  |  |  | 3,311 |
Residential real estate all other |  |  | 9,672 |  |  |  | (312 | ) |  |  | 101 |  |  |  | (211 | ) |  |  | 960 |  |  |  | 10,421 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 15,334 |  |  |  | (652 | ) |  |  | 30 |  |  |  | (622 | ) |  |  | (316 | ) |  |  | 14,396 |
Consumer non-real estate |  |  | 2,793 |  |  |  | (738 | ) |  |  | 194 |  |  |  | (544 | ) |  |  | 664 |  |  |  | 2,913 |
Other loans |  |  | 2,481 |  |  |  | (2 | ) |  |  | 30 |  |  |  | 28 |  |  |  | (87 | ) |  |  | 2,422 |
Acquired loans |  |  | 1,446 |  |  |  | (530 | ) |  |  | 29 |  |  |  | (501 | ) |  |  | 393 |  |  |  | 1,338 |
Total |  | $ | 51,666 |  |  | $ | (2,542 | ) |  | $ | 465 |  |  | $ | (2,077 | ) |  | $ | 2,286 |  |  | $ | 51,875 |

The following table details the amount of ALL by class of loans for the period presented, detailed on the basis of the impairment methodology used by the Company.

|  | ALL |
|  | September 30, 2019 |  |  | December 31, 2018 |
|  | Individually evaluated for impairment |  |  | Collectively evaluated for impairment |  |  | Individually evaluated for impairment |  |  | Collectively evaluated for impairment |
|  | (Dollars in thousands) |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 1,110 |  |  | $ | 5,848 |  |  | $ | 669 |  |  | $ | 5,659 |
Non-residential real estate other |  |  | 1,152 |  |  |  | 10,611 |  |  |  | 1,119 |  |  |  | 9,908 |
Residential real estate permanent mortgage |  |  | 556 |  |  |  | 2,805 |  |  |  | 505 |  |  |  | 2,756 |
Residential real estate all other |  |  | 4,379 |  |  |  | 7,822 |  |  |  | 3,413 |  |  |  | 7,260 |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 3,185 |  |  |  | 12,199 |  |  |  | 2,114 |  |  |  | 11,037 |
Consumer non-real estate |  |  | 355 |  |  |  | 2,919 |  |  |  | 374 |  |  |  | 2,691 |
Other loans |  |  | 17 |  |  |  | 2,630 |  |  |  | 65 |  |  |  | 2,358 |
Acquired loans |  |  | — |  |  |  | 276 |  |  |  | — |  |  |  | 1,461 |
Pegasus Bank |  |  | — |  |  |  | 64 |  |  |  | — |  |  |  | — |
Total |  | $ | 10,754 |  |  | $ | 45,174 |  |  | $ | 8,259 |  |  | $ | 43,130 |

15

The following table details the loans outstanding by class of loans for the period presented, on the basis of the impairment methodology used by the Company.

|  | Loans |
|  | September 30, 2019 |  |  | December 31, 2018 |
|  | Individually evaluated for impairment |  |  | Collectively evaluated for impairment |  |  | Loans acquired with deteriorated credit quality |  |  | Individually evaluated for impairment |  |  | Collectively evaluated for impairment |  |  | Loans acquired with deteriorated credit quality |
|  | (Dollars in thousands) |
BancFirst |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-residential real estate owner occupied |  | $ | 28,622 |  |  | $ | 657,349 |  |  | $ | — |  |  | $ | 17,846 |  |  | $ | 608,775 |  |  | $ | — |
Non-residential real estate other |  |  | 29,435 |  |  |  | 1,161,113 |  |  |  | — |  |  |  | 25,333 |  |  |  | 1,120,795 |  |  |  | — |
Residential real estate permanent mortgage |  |  | 9,380 |  |  |  | 330,046 |  |  |  | — |  |  |  | 9,026 |  |  |  | 319,676 |  |  |  | — |
Residential real estate all other |  |  | 21,685 |  |  |  | 870,078 |  |  |  | — |  |  |  | 21,285 |  |  |  | 806,219 |  |  |  | — |
Commercial and financial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-consumer non-real estate |  |  | 30,626 |  |  |  | 1,393,448 |  |  |  | — |  |  |  | 19,432 |  |  |  | 1,264,222 |  |  |  | — |
Consumer non-real estate |  |  | 3,208 |  |  |  | 355,116 |  |  |  | — |  |  |  | 3,093 |  |  |  | 323,769 |  |  |  | — |
Other loans |  |  | 175 |  |  |  | 155,167 |  |  |  | — |  |  |  | 209 |  |  |  | 141,700 |  |  |  | — |
Acquired loans |  |  | 10,504 |  |  |  | 157,761 |  |  |  | 951 |  |  |  | 22,132 |  |  |  | 265,084 |  |  |  | 7,380 |
Pegasus Bank |  |  | — |  |  |  | 389,955 |  |  |  | 2,189 |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 133,635 |  |  | $ | 5,470,033 |  |  | $ | 3,140 |  |  | $ | 118,356 |  |  | $ | 4,850,240 |  |  | $ | 7,380 |

Non-Cash Transfers from Loans and Premises and Equipment

Transfers from loans and premises and equipment to other real estate owned and repossessed assets are non-cash transactions, and are not included in the statements of cash flow. Such transfers during the periods presented, are summarized as follows:

|  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |
|  | (Dollars in thousands) |
Other real estate owned |  | $ | 2,972 |  |  | $ | 2,944 |
Repossessed assets |  |  | 946 |  |  |  | 842 |
Total |  | $ | 3,918 |  |  | $ | 3,786 |

(5) | INTANGIBLE ASSETS

The following is a summary of intangible assets:

|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |
|  | (Dollars in thousands) |
As of September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Core deposit intangibles |  | $ | 35,855 |  |  | $ | (13,210 | ) |  | $ | 22,645 |
Customer relationship intangibles |  |  | 5,699 |  |  |  | (4,376 | ) |  |  | 1,323 |
Mortgage servicing intangibles |  |  | 375 |  |  |  | (318 | ) |  |  | 57 |
Total |  | $ | 41,929 |  |  | $ | (17,904 | ) |  | $ | 24,025 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Core deposit intangibles |  | $ | 25,907 |  |  | $ | (11,113 | ) |  | $ | 14,794 |
Customer relationship intangibles |  |  | 5,699 |  |  |  | (4,115 | ) |  |  | 1,584 |
Mortgage servicing intangibles |  |  | 397 |  |  |  | (305 | ) |  |  | 92 |
Total |  | $ | 32,003 |  |  | $ | (15,533 | ) |  | $ | 16,470 |

16

The following is a summary of goodwill by business segment:

|  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  | Executive, |  |  |  |  |
|  | Metropolitan |  |  | Community |  |  | Pegasus |  |  | Financial |  |  | Operations |  |  |  |  |
|  | Banks |  |  | Banks |  |  | Bank |  |  | Services |  |  | & Support |  |  | Consolidated |
|  | (Dollars in thousands) |
Nine months ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 13,767 |  |  | $ | 59,894 |  |  | $ | — |  |  | $ | 5,464 |  |  | $ | 624 |  |  | $ | 79,749 |
Acquisitions |  |  | — |  |  |  | — |  |  |  | 67,264 |  |  |  | — |  |  |  | — |  |  |  | 67,264 |
Balance at beginning and end of period |  | $ | 13,767 |  |  | $ | 59,894 |  |  | $ | 67,264 |  |  | $ | 5,464 |  |  | $ | 624 |  |  | $ | 147,013 |

The Company acquired Pegasus Bank on August 15, 2019, which added $67.3 million in goodwill. The Company did not apply push down accounting and therefore the goodwill associated with this acquisition is included at the holding company level.

Additional information for intangible assets can be found in Note (7) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

(6) | LEASES

Lessee

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases - (Topic 842),” which requires the recognition of the Company’s operating leases on its balance sheet. See Note (1) for additional information.

The Company has operating leases, which primarily consist of office space in buildings, ATM locations, storage facilities, parking lots and land on which it owns certain buildings. Rent expense for all operating leases totaled approximately $357,000 and $398,000 for the three months ended September 30, 2019 and September 30, 2018, respectively. Rent expense for all operating leases totaled approximately $1.1 million and $1.2 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. As of September 30, 2019, a right of use lease asset included in accrued interest receivable and other assets on the balance sheet totaled $6.1 million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $6.1 million. There have been no significant changes in our expected future minimum lease payments since December 31, 2018, which are disclosed in Note (19) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. As of September 30, 2019, our operating leases have a weighted-average remaining lease term of 4.1 years and a weighted-average discount rate of 3.4 percent.

Maturity of Operating Lease Liabilities

|  | September 30, 2019 |
|  | (Dollars in thousands) |
2019 (three months) |  | $ | 11 |
2020 |  |  | 688 |
2021 |  |  | 118 |
2022 |  |  | 1,361 |
2023 |  |  | 857 |
Thereafter |  |  | 3,049 |
Operating Lease Liability |  | $ | 6,084 |

Lessor

The Company is a lessor of operating leases, which primarily consist of office space in buildings and parking lots. These assets are classified on the balance sheet as premises and equipment. The Company had operating lease revenue of $1.6 million for the three months ended September 30, 2019 and $4.7 million for the nine months ended September 30, 2019, which is included in occupancy, net on the consolidated statement of comprehensive income.

17

Future Minimum Lease Payments to be received

The Company does not have operating leases that extend beyond 2026. The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases:

|  | September 30, 2019 |
|  | (Dollars in thousands) |
2019 (three months) |  | $ | 1,066 |
2020 |  |  | 2,770 |
2021 |  |  | 1,939 |
2022 |  |  | 1,294 |
2023 |  |  | 832 |
2024 |  |  | 289 |
2025-2026 |  |  | 367 |
Total Future Minimum Lease Payments |  | $ | 8,557 |

(7) | STOCK-BASED COMPENSATION

The Company adopted a nonqualified incentive stock option plan (the “BancFirst ISOP”) in May 1986. The Company has amended the BancFirst ISOP since 1986 to increase the number of shares to be issued under the plan to 6,484,530 shares. At September 30, 2019, there were 330,000 shares available for future grants. The BancFirst ISOP will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning four years from the date of grant at the rate of 25% per year for four years. Options expire at the end of fifteen years from the date of grant. Options outstanding as of September 30, 2019 will become exercisable through the year 2026. 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 has amended the BancFirst Directors’ Stock Option Plan since 1999 to increase the number of shares to be issued under the plan to 530,000 shares. At September 30, 2019, there were 15,000 shares available for future grants. The BancFirst Directors’ Stock Option Plan will terminate on December 31, 2024, if not extended. The options vest and are exercisable beginning one year from the date of grant at the rate of 25% per year for four years, and expire at the end of fifteen years from the date of grant. Options outstanding as of September 30, 2019 will become exercisable through the year 2023. The option price must be no less than 100% of the fair value of the stock relating to such option at the date of grant.

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

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

|  |  |  |  |  |  |  |  |  | Wgtd. Avg. |  |  |  |
|  |  |  |  |  | Wgtd. Avg. |  |  | Remaining |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Contractual |  | Intrinsic |
|  | Options |  |  | Price |  |  | Term |  | Value |
|  | (Dollars in thousands, except option data) |
Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2018 |  |  | 1,216,700 |  |  | $ | 28.48 |  |  |  |  |  |  |
Options granted |  |  | 95,000 |  |  |  | 55.63 |  |  |  |  |  |  |
Options exercised |  |  | (30,550 | ) |  |  | 23.24 |  |  |  |  |  |  |
Options canceled, forfeited, or expired |  |  | (22,500 | ) |  |  | 51.83 |  |  |  |  |  |  |
Outstanding at September 30, 2019 |  |  | 1,258,650 |  |  |  | 30.24 |  |  | 9.21 Yrs |  | $ | 31,698 |
Exercisable at September 30, 2019 |  |  | 652,150 |  |  |  | 22.53 |  |  | 6.86 Yrs |  | $ | 21,451 |

18

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (Dollars in thousands) |  |  | (Dollars in thousands) |
Total intrinsic value of options exercised |  | $ | 87 |  |  | $ | 766 |  |  | $ | 991 |  |  | $ | 4,593 |
Cash received from options exercised |  |  | 99 |  |  |  | 413 |  |  |  | 710 |  |  |  | 2,057 |
Tax benefit realized from options exercised |  |  | 22 |  |  |  | 195 |  |  |  | 252 |  |  |  | 1,170 |

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, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (Dollars in thousands) |  |  | (Dollars in thousands) |
Stock-based compensation expense |  | $ | 347 |  |  | $ | 353 |  |  | $ | 888 |  |  | $ | 981 |
Tax benefit |  |  | 88 |  |  |  | 90 |  |  |  | 226 |  |  |  | 250 |
Stock-based compensation expense, net of tax |  | $ | 259 |  |  | $ | 263 |  |  | $ | 662 |  |  | $ | 731 |

The Company will continue to amortize the unearned stock-based compensation expense over the remaining vesting period of approximately seven years. The following table shows the unearned stock-based compensation expense:

|  | September 30, 2019 |
|  | (Dollars in thousands) |
Unearned stock-based compensation expense |  | $ | 3,676 |

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method on options granted during the periods presented:

|  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |
Weighted average grant-date fair value per share of options granted |  | $ | 13.31 |  |  | $ | 14.93 |
Risk-free interest rate |  | 1.55 to 2.76% |  |  | 2.55 to 3.05% |
Dividend yield |  | 2.00% |  |  | 2.00% |
Stock price volatility |  | 22.93 to 23.63% |  |  | 23.05 to 23.46% |
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. The Company accounts for forfeitures as they occur.

In May 1999, the Company adopted the BancFirst Corporation Directors’ Deferred Stock Compensation Plan (the “BancFirst Deferred Stock Compensation Plan”). The Company has amended the BancFirst Deferred Stock Compensation Plan since 1999 to increase the number of shares to be issued under the plan to 244,148 shares. The BancFirst Deferred Stock Compensation Plan will terminate on December 31, 2024, if not extended. Under the plan, directors and members of the community advisory boards of the Company and its subsidiaries may defer up to 100% of their board fees. They are credited for each deferral with a number of stock units based on the current market price of the Company’s stock, which accumulate in an account until such time as the director or community board member terminates serving as a board member. Shares of common stock of the Company are then distributed to the terminating director or community board member based upon the number of stock units accumulated in his or her account. There were 9,542 and 3,891 shares of common stock distributed from the BancFirst Deferred Stock Compensation Plan during the nine months ended September 30, 2019 and September 30, 2018, respectively.

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A summary of the accumulated stock units is as follows:

|  | September 30, |  |  | December 31, |
|  | 2019 |  |  | 2018 |
Accumulated stock units |  |  | 141,086 |  |  |  | 143,347 |
Average price |  | $ | 26.68 |  |  | $ | 24.91 |

(8) | STOCKHOLDERS’ EQUITY

In November 1999, the Company adopted a Stock Repurchase Program (the “SRP”). The SRP may be used as a means to increase earnings per share and return on equity, to purchase treasury stock for the exercise of stock options or for distributions under the Deferred Stock Compensation Plan, to provide liquidity for optionees to dispose of stock from exercises of their stock options, and to provide liquidity for stockholders wishing to sell their stock. All shares repurchased under the SRP have been retired and not held as treasury stock. The timing, price and amount of stock repurchases under the SRP may be determined by management and approved by the Company’s Executive Committee.

The following table is a summary of the shares under the program:

|  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |
Number of shares repurchased |  |  | — |  |  |  | — |
Average price of shares repurchased |  | $ | — |  |  | $ | — |
Shares remaining to be repurchased |  |  | 148,736 |  |  |  | 300,000 |

The Company, BancFirst and Pegasus Bank are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“FDIC”). These guidelines are used to evaluate capital adequacy and involve both quantitative and qualitative evaluations of the Company’s and BancFirst’s assets, liabilities and certain off-balance-sheet items calculated under regulatory practices. Failure to meet the minimum capital requirements can initiate certain mandatory or discretionary actions by the regulatory agencies that could have a direct material effect on the Company’s financial statements. Management believes that as of September 30, 2019, the Company, BancFirst and Pegasus Bank met all capital adequacy requirements to which they are subject. The actual and required capital amounts and ratios are shown in the following table:

|  |  |  |  |  |  |  |  |  | Required |  |  |  |  |  | To Be Well |
|  |  |  |  |  |  |  |  |  | For Capital |  |  | With |  |  | Capitalized Under |
|  |  |  |  |  |  |  |  |  | Adequacy |  |  | Capital Conservation |  |  | Prompt Corrective |
|  | Actual |  |  | Purposes |  |  | Buffer |  |  | Action Provisions |
|  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
|  | (Dollars in thousands) |
As of September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(to Risk Weighted Assets)- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst Corporation |  | $ | 887,070 |  |  | 14.34% |  |  | $ | 494,966 |  |  | 8.00% |  |  | $ | 649,643 |  |  | 10.50% |  |  | N/A |  |  | N/A |
BancFirst |  |  | 812,703 |  |  | 14.12% |  |  |  | 460,315 |  |  | 8.00% |  |  |  | 604,164 |  |  | 10.50% |  |  | $ | 575,394 |  |  | 10.00% |
Pegasus Bank |  |  | 55,783 |  |  | 13.38% |  |  |  | 33,359 |  |  | 8.00% |  |  |  | 43,784 |  |  | 10.50% |  |  |  | 41,699 |  |  | 10.00% |
Common Equity Tier 1 Capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(to Risk Weighted Assets)- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst Corporation |  | $ | 805,142 |  |  | 13.01% |  |  | $ | 278,418 |  |  | 4.50% |  |  | $ | 433,095 |  |  | 7.00% |  |  | N/A |  |  | N/A |
BancFirst |  |  | 736,839 |  |  | 12.81% |  |  |  | 258,927 |  |  | 4.50% |  |  |  | 402,776 |  |  | 7.00% |  |  | $ | 374,006 |  |  | 6.50% |
Pegasus Bank |  |  | 52,286 |  |  | 12.54% |  |  |  | 18,765 |  |  | 4.50% |  |  |  | 29,190 |  |  | 7.00% |  |  |  | 27,105 |  |  | 6.50% |
Tier 1 Capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(to Risk Weighted Assets)- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst Corporation |  | $ | 831,142 |  |  | 13.43% |  |  | $ | 371,225 |  |  | 6.00% |  |  | $ | 525,901 |  |  | 8.50% |  |  | N/A |  |  | N/A |
BancFirst |  |  | 756,839 |  |  | 13.15% |  |  |  | 345,236 |  |  | 6.00% |  |  |  | 489,085 |  |  | 8.50% |  |  | $ | 460,315 |  |  | 8.00% |
Pegasus Bank |  |  | 52,286 |  |  | 12.54% |  |  |  | 25,020 |  |  | 6.00% |  |  |  | 35,444 |  |  | 8.50% |  |  |  | 33,359 |  |  | 8.00% |
Tier 1 Capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(to Total Assets)- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BancFirst Corporation |  | $ | 831,142 |  |  | 10.59% |  |  | $ | 314,007 |  |  | 4.00% |  |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A |
BancFirst |  |  | 756,839 |  |  | 10.06% |  |  |  | 300,900 |  |  | 4.00% |  |  | N/A |  |  | N/A |  |  | $ | 376,124 |  |  | 5.00% |
Pegasus Bank |  |  | 52,286 |  |  | 7.71% |  |  |  | 27,139 |  |  | 4.00% |  |  | N/A |  |  | N/A |  |  |  | 33,924 |  |  | 5.00% |

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As of September 30, 2019, the most recent notification from the Federal Reserve Bank of Kansas City and the FDIC categorized BancFirst and Pegasus Bank as “well capitalized” under the prompt corrective action provisions. The Company’s trust preferred securities have continued to be included in Tier 1 capital, as the Company’s total assets do not exceed $15 billion. There are no conditions or events since the most recent notifications of BancFirst or Pegasus Bank’s capital category that management believes would materially change its category under capital requirements existing as of the report date.

(9) | NET INCOME PER COMMON SHARE

Basic and diluted net income per common share based on weighted-average shares outstanding are calculated as follows:

|  | Income (Numerator) |  |  | Shares (Denominator) |  |  | Per Share Amount |
|  | (Dollars in thousands, except per share data) |
Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders |  | $ | 33,368 |  |  |  | 32,641,902 |  |  | $ | 1.02 |
Dilutive effect of stock options |  |  | — |  |  |  | 685,311 |  |  |  |  |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders plus assumed exercises of stock options |  | $ | 33,368 |  |  |  | 33,327,213 |  |  | $ | 1.00 |
Three Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders |  | $ | 32,883 |  |  |  | 32,742,480 |  |  | $ | 1.01 |
Dilutive effect of stock options |  |  | — |  |  |  | 761,663 |  |  |  |  |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders plus assumed exercises of stock options |  | $ | 32,883 |  |  |  | 33,504,143 |  |  | $ | 0.98 |
Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders |  | $ | 99,372 |  |  |  | 32,627,924 |  |  | $ | 3.04 |
Dilutive effect of stock options |  |  | — |  |  |  | 686,374 |  |  |  |  |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders plus assumed exercises of stock options |  | $ | 99,372 |  |  |  | 33,314,298 |  |  | $ | 2.98 |
Nine Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders |  | $ | 93,089 |  |  |  | 32,678,310 |  |  | $ | 2.85 |
Dilutive effect of stock options |  |  | — |  |  |  | 752,451 |  |  |  |  |
Diluted |  |  |  |  |  |  |  |  |  |  |  |
Income available to common stockholders plus assumed exercises of stock options |  | $ | 93,089 |  |  |  | 33,430,761 |  |  | $ | 2.78 |

The following table shows the number of options that were excluded from the computation of diluted net income per common share for each period because the options were anti-dilutive for the period:

|  | Shares |
Three Months Ended September 30, 2019 |  |  | 164,696 |
Three Months Ended September 30, 2018 |  |  | 83,799 |
Nine Months Ended September 30, 2019 |  |  | 174,489 |
Nine Months Ended September 30, 2018 |  |  | 84,368 |

(10) | FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the price that would be received to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants on the measurement date.

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FASB Accounting Standards Codification (“ASC”) Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

| • | Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

| • | Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument.

| • | Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes certain impaired loans, repossessed assets, other real estate owned, goodwill and other intangible assets.

Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis

A description of the valuation methodologies and key inputs used to measure financial assets and financial liabilities at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to the following categories of the Company’s financial assets and financial liabilities.

Securities Available for Sale

Securities classified as available for sale are reported at fair value. U.S. Treasuries are valued using Level 1 inputs. Other securities available for sale including U.S. federal agencies, registered mortgage backed securities and state and political subdivisions are valued using prices from an independent pricing service utilizing Level 2 data. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. The Company also invests in private label mortgage backed securities for which observable information is not readily available. These securities are reported at fair value utilizing Level 3 inputs. For these securities, management determines the fair value based on replacement cost, the income approach or information provided by outside consultants or lead investors.

The Company reviews the prices for Level 1 and Level 2 securities supplied by the independent pricing service for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities that are esoteric or that have complicated structures. The Company’s portfolio primarily consists of traditional investments including U.S. Treasury obligations, federal agency mortgage pass-through securities, general obligation municipal bonds and a small amount of municipal revenue bonds. Pricing for such instruments is fairly generic and is easily obtained. For in-state bond issues that have relatively low issue sizes and liquidity, the Company utilizes the same parameters for pricing mentioned in the preceding paragraph adjusted for the specific issue. Periodically, the Company will validate prices supplied by the independent pricing service by comparison to prices obtained from third party sources.

Derivatives

Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains dealer and market quotations to value its oil and gas swaps and options. The Company utilizes dealer quotes and observable market data inputs to substantiate internal valuation models.

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The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of the periods presented, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

|  | Level 1 Inputs |  |  | Level 2 Inputs |  |  | Level 3 Inputs |  |  | Total Fair Value |
|  | (Dollars in thousands) |
September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | 468,946 |  |  | $ | — |  |  | $ | — |  |  | $ | 468,946 |
U.S. federal agencies |  |  | — |  |  |  | 23,742 |  |  |  | — |  |  |  | 23,742 |
Mortgage-backed securities |  |  | — |  |  |  | 17,472 |  |  |  | — |  |  |  | 17,472 |
States and political subdivisions |  |  | — |  |  |  | 23,549 |  |  |  | — |  |  |  | 23,549 |
Asset backed securities |  |  | — |  |  |  | — |  |  |  | 12,958 |  |  |  | 12,958 |
Other securities |  |  | — |  |  |  | 6,997 |  |  |  | — |  |  |  | 6,997 |
Derivative assets |  |  | — |  |  |  | 18 |  |  |  | — |  |  |  | 18 |
Derivative liabilities |  |  | — |  |  |  | 14 |  |  |  | — |  |  |  | 14 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | 697,466 |  |  | $ | — |  |  | $ | — |  |  | $ | 697,466 |
U.S. federal agencies |  |  | — |  |  |  | 29,919 |  |  |  | — |  |  |  | 29,919 |
Mortgage-backed securities |  |  | — |  |  |  | 2,465 |  |  |  | — |  |  |  | 2,465 |
States and political subdivisions |  |  | — |  |  |  | 27,411 |  |  |  | — |  |  |  | 27,411 |
Asset backed securities |  |  | — |  |  |  | — |  |  |  | 13,443 |  |  |  | 13,443 |
Derivative assets |  |  | — |  |  |  | 252 |  |  |  | — |  |  |  | 252 |
Derivative liabilities |  |  | — |  |  |  | 238 |  |  |  | — |  |  |  | 238 |

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the periods presented were as follows:

|  | Nine Months Ended September 30, |  |  | Twelve Months Ended December 31, |
|  | 2019 |  |  | 2018 |
|  | (Dollars in thousands) |
Balance at the beginning of the year |  | $ | 13,443 |  |  | $ | 14,467 |
Settlements |  |  | (525 | ) |  |  | (1,037 | )
Total unrealized gains |  |  | 40 |  |  |  | 13 |
Balance at the end of the period |  | $ | 12,958 |  |  | $ | 13,443 |

The Company’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting period. During the nine months ended September 30, 2019 and 2018, the Company did not transfer any securities between levels in the fair value hierarchy.

Financial Assets and Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities are reported at fair value utilizing Level 3 inputs.

The Company invests in equity securities without readily determinable fair values and utilizes Level 3 inputs. Beginning January 1, 2018, upon adoption of ASU 2016-01, these securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income.

Impaired loans are reported at the fair value of the underlying collateral if repayment is dependent on liquidation of the collateral. In no case does the fair value of an impaired loan exceed the fair value of the underlying collateral. The impaired loans are adjusted to fair value through a specific allocation of the allowance for loan losses or a direct charge-down of the loan.

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Repossessed assets, upon initial recognition, are measured and adjusted to fair value through a charge-off to the allowance for possible loan losses based upon the fair value of the repossessed asset.

Other real estate owned is revalued at fair value subsequent to initial recognition, with any losses recognized in net expense from other real estate owned.

The following table summarizes assets measured at fair value on a nonrecurring basis. The fair value represents end of period values, which approximate fair value measurements that occurred on various measurement dates throughout the period:

|  | Total Fair Value |
|  | Level 3 |
|  | (Dollars in thousands) |
As of and for the Year-to-date Period Ended September 30, 2019 |  |  |  |
Equity securities |  | $ | 9,251 |
Impaired loans (less specific allowance) |  |  | 44,600 |
Repossessed assets |  |  | 215 |
Other real estate owned |  |  | 1,980 |
As of and for the Year-to-date Period Ended December 31, 2018 |  |  |  |
Equity securities |  | $ | 7,521 |
Impaired loans (less specific allowance) |  |  | 34,396 |
Repossessed assets |  |  | 183 |
Other real estate owned |  |  | 4,683 |

Estimated Fair Value of Financial Instruments

The Company is required under current authoritative accounting guidance to disclose the estimated fair value of their financial instruments that are not recorded at fair value. For the Company, as for most financial institutions, substantially all of its assets and liabilities are considered financial instruments. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents Include: Cash and Due from Banks and Interest-Bearing Deposits

The carrying amount of these short-term instruments is a reasonable estimate of fair value.

Securities Held for Investment

For securities held for investment, which are generally traded in secondary markets, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities making adjustments for credit or liquidity if applicable.

Loans Held For Sale

The Company originates mortgage loans to be sold. At the time of origination, the acquiring bank has already been determined and the terms of the loan, including interest rate, have already been set by the acquiring bank, allowing the Company to originate the loan at fair value. Mortgage loans are generally sold within 30 days of origination. Loans held for sale are valued using Level 2 inputs. Gains or losses recognized upon the sale of the loans are determined on a specific identification basis.

Loans

To determine the fair value of loans, the Company uses an exit price calculation, which takes into account factors such as liquidity, credit and the nonperformance risk of loans. For certain homogeneous categories of loans, such as some residential mortgages, fair values are estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair values of other types of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

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Deposits

The fair values of transaction and savings accounts are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings

The amounts payable on these short-term instruments are reasonable estimates of fair value.

Junior Subordinated Debentures

The fair values of junior subordinated debentures are estimated using the rates that would be charged for junior subordinated debentures of similar remaining maturities.

Loan Commitments and Letters of Credit

The fair values of commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the terms of the agreements. The fair values of letters of credit are based on fees currently charged for similar agreements.

The estimated fair values of the Company’s financial instruments that are reported at amortized cost in the Company’s consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows:

|  | September 30, |  |  | December 31, |
|  | 2019 |  |  | 2018 |
|  | Carrying Amount |  |  | Fair Value |  |  | Carrying Amount |  |  | Fair Value |
|  | (Dollars in thousands) |
FINANCIAL ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Level 2 inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,702,166 |  |  | $ | 1,702,166 |  |  | $ | 1,424,255 |  |  | $ | 1,424,255 |
Securities held for investment |  |  | 1,411 |  |  |  | 1,411 |  |  |  | 928 |  |  |  | 933 |
Loans held for sale |  |  | 16,089 |  |  |  | 16,089 |  |  |  | 8,174 |  |  |  | 8,174 |
Level 3 inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities held for investment |  |  | 500 |  |  |  | 500 |  |  |  | 500 |  |  |  | 500 |
Loans, net of allowance for loan losses |  |  | 5,550,880 |  |  |  | 5,586,751 |  |  |  | 4,924,587 |  |  |  | 4,901,159 |
FINANCIAL LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Level 2 inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 7,330,677 |  |  |  | 7,342,023 |  |  |  | 6,605,495 |  |  |  | 6,713,542 |
Short-term borrowings |  |  | 605 |  |  |  | 605 |  |  |  | 1,675 |  |  |  | 1,675 |
Junior subordinated debentures |  |  | 26,804 |  |  |  | 29,120 |  |  |  | 26,804 |  |  |  | 29,549 |
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loan commitments |  |  |  |  |  |  | 2,694 |  |  |  |  |  |  |  | 2,158 |
Letters of credit |  |  |  |  |  |  | 473 |  |  |  |  |  |  |  | 421 |

Non-financial Assets and Non-financial Liabilities Measured at Fair Value

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Certain non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis include intangible assets (excluding mortgage service rights, which are valued periodically) and other non-financial long-lived assets measured at fair value and adjusted for impairment. These items are evaluated at least annually for impairment. The overall levels of non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis were not considered to be significant to the Company at September 30, 2019 or December 31, 2018.

(11)SEGMENT INFORMATION

The Company evaluates its performance with an internal profitability measurement system that measures the profitability of its business units on a pre-tax basis. The five principal business units are metropolitan banks, community banks, Pegasus Bank, other financial services and executive, operations and support. Metropolitan banks, community banks and Pegasus Bank offer traditional banking products such as commercial and retail lending and a full line of deposit accounts. Metropolitan banks consist of banking

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locations in the metropolitan Oklahoma City and Tulsa areas. Community banks consist of banking locations in communities throughout Oklahoma. Pegasus Bank consist s of banking locations in the Dallas metropolitan area. Other financial services are specialty product business units including guaranteed small business lending, residential mortgage lending, trust services, securities brokerage, electronic banking and insurance. The executive, operations and support groups represent executive management, operational support and corporate functions that are not allocated to the other business units.

The results of operations and selected financial information for the four business units are as follows:

|  | Metropolitan Banks |  |  | Community Banks |  |  | Pegasus Bank |  |  | Other Financial Services |  |  | Executive, Operations & Support |  |  | Eliminations |  |  | Consolidated |
|  | (Dollars in thousands) |
Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 21,955 |  |  | $ | 44,707 |  |  | $ | 2,954 |  |  | $ | 1,654 |  |  | $ | 1,017 |  |  | $ | — |  |  | $ | 72,287 |
Noninterest income |  |  | 4,862 |  |  |  | 16,823 |  |  |  | 109 |  |  |  | 10,916 |  |  |  | 39,640 |  |  |  | (36,723 | ) |  |  | 35,627 |
Income before taxes |  |  | 15,670 |  |  |  | 29,710 |  |  |  | 1,404 |  |  |  | 6,239 |  |  |  | 25,882 |  |  |  | (35,940 | ) |  |  | 42,965 |
Three Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 21,313 |  |  | $ | 42,773 |  |  | $ | — |  |  | $ | 1,241 |  |  | $ | 346 |  |  | $ | — |  |  | $ | 65,673 |
Noninterest income |  |  | 4,266 |  |  |  | 15,404 |  |  |  | — |  |  |  | 10,264 |  |  |  | 36,503 |  |  |  | (33,636 | ) |  |  | 32,801 |
Income before taxes |  |  | 16,538 |  |  |  | 27,515 |  |  |  | — |  |  |  | 4,440 |  |  |  | 26,344 |  |  |  | (32,919 | ) |  |  | 41,918 |
Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 64,746 |  |  | $ | 132,889 |  |  | $ | 2,954 |  |  | $ | 4,236 |  |  | $ | 3,157 |  |  | $ | — |  |  | $ | 207,982 |
Noninterest income |  |  | 13,706 |  |  |  | 47,951 |  |  |  | 109 |  |  |  | 30,894 |  |  |  | 113,078 |  |  |  | (104,033 | ) |  |  | 101,705 |
Income before taxes |  |  | 45,905 |  |  |  | 87,796 |  |  |  | 1,404 |  |  |  | 16,310 |  |  |  | 78,495 |  |  |  | (102,103 | ) |  |  | 127,807 |
Nine Months Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 62,701 |  |  | $ | 126,223 |  |  | $ | — |  |  | $ | 4,074 |  |  | $ | 590 |  |  | $ | — |  |  | $ | 193,588 |
Noninterest income |  |  | 12,391 |  |  |  | 44,189 |  |  |  | — |  |  |  | 28,784 |  |  |  | 102,306 |  |  |  | (94,322 | ) |  |  | 93,348 |
Income before taxes |  |  | 46,157 |  |  |  | 81,805 |  |  |  | — |  |  |  | 13,511 |  |  |  | 69,881 |  |  |  | (92,659 | ) |  |  | 118,695 |
Total Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2019 |  | $ | 2,720,095 |  |  | $ | 4,970,497 |  |  | $ | 731,400 |  |  | $ | 112,527 |  |  | $ | 867,134 |  |  | $ | (1,012,837 | ) |  | $ | 8,388,816 |
December 31, 2018 |  |  | 2,743,876 |  |  |  | 4,892,946 |  |  |  | — |  |  |  | 84,706 |  |  |  | 861,782 |  |  |  | (1,009,052 | ) |  |  | 7,574,258 |

The financial information for each business unit is presented on the basis used internally by management to evaluate performance and allocate resources. The Company utilizes a transfer pricing system to allocate the benefit or cost of funds provided or used by the various business units. Certain services provided by the support group to other business units, such as item processing, are allocated at rates approximating the cost of providing the services. Eliminations are adjustments to consolidate the business units and companies. Capital expenditures are generally charged to the business unit using the asset.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis presents factors that the Company believes are relevant to an assessment and understanding of the Company’s consolidated financial position and results of operations. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and the Company’s consolidated financial statements and the related Notes included in Item 1.

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:

| • | Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

| • | Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.

| • | Inflation, interest rate, crude oil price, securities market and monetary fluctuations.

| • | The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company must comply.

| • | 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.

| • | Technological changes.

| • | Acquisitions and integration of acquired businesses.

| • | 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

BancFirst Corporation’s net income for the third quarter of 2019 was $33.4 million, compared to $32.9 million for the third quarter of 2018. Diluted net income per common share was $1.00 and $0.98 for the third quarter of 2019 and 2018, respectively.

Net income was $99.4 million, or $2.98 diluted earnings per share, for the nine months ended September 30, 2019, compared to net income of $93.1 million, or $2.78 diluted earnings per share, for the nine months ended September 30, 2018. On August 15, 2019 the Company completed the acquisition of Pegasus Bank in Dallas, Texas. As a result, the third quarter of 2019 included acquisition related expenses of approximately $3.1 million. On January 11, 2018 the Company completed the acquisitions of two Oklahoma banking corporations. Consequently, the nine months ended September 30, 2018 included acquisition related expenses of approximately $2.6 million.

The Company’s net interest income for the third quarter of 2019 increased to $72.3 million, compared to $65.7 million for the third quarter of 2018. The net interest margin for the quarter was 3.89%, compared to 3.68% a year ago. The Company’s net interest

27

margin for the third quarter of 2019 compared to the third quarter of 2018 increased primarily due to the higher average federal funds rate in the third quarter of 2019 and loan growth during the quarter. The Company’s provision for loan losses for the third quarter of 201 9 was $2.8 million, compared to $747,000 a year ago. The increase in the provision was primarily due to downgrades of a few commercial loans during the quarter. Net charge-offs for the third quarter of 2019 were 0.0 4% of average loans compared to 0.02% of average loans in 2018. Net charge-offs for the full year of 2019 were 0.0 5% of average loans compared to 0.0 4% of average loans in 2018. Noninterest income for the quarter totaled $3 5.6 million, compared to $3 2.8 million last year. The increase in noninterest income was primarily due to growth in debit card usage fees and sweep fees. Noninterest expense for the quarter totaled $62.2 million, compared to $5 5.8 million last year. The increase in noninterest expenses was primarily due to salary increases in 2019 and greater acquisition related expenses in 2019.

At September 30, 2019, the Company’s total assets were $8.4 billion, an increase of $814.6 million from December 31, 2018. Securities of $555.6 million were down $216.6 million from December 31, 2018. Loans totaled $5.6 billion, an increase of $638.7 million from December 31, 2018. Deposits totaled $7.3 billion, an increase of $725.2 million from the December 31, 2018 total. The Company’s total stockholders’ equity was $979.8 million, an increase of $77.0 million over December 31, 2018.

On August 15, 2019, BancFirst Corporation acquired Pegasus Bank, for an aggregate cash purchase price of $123.5 million. Pegasus Bank is a Texas state-chartered bank with three banking locations in Dallas, Texas. Upon acquisition, Pegasus Bank had approximately $651.1 million in total assets, $389.9 million in loans, and $603.9 million in deposits. Pegasus Bank will continue to operate as “Pegasus Bank” under a separate Texas state-charter and remain an independent subsidiary of BancFirst Corporation. BancFirst Corporation intends to provide an appropriate amount of capital to increase Pegasus Bank’s ability to approve larger loans and allow Pegasus Bank to continue to grow their assets. As a result of the acquisition, the Company recorded a core deposit intangible of approximately $9.9 million and goodwill of approximately $67.3 million. The initial accounting for the business combination is not complete due to limited time since the acquisition date. However, we do not expect any acquisition related adjustments to be material to the financial statements. The effect of this acquisition was included in the consolidated financial statements of the Company from the date of acquisition forward. The acquisition did not have a material effect on the Company’s consolidated financial statements. The acquisition of Pegasus Bank complements the Company by expanding into the high-growth Dallas market.

Asset quality remained strong during the third quarter of 2019. Nonperforming and restructured assets represented 0.67% of total assets at September 30, 2019 and 0.59% at December 31, 2018. The allowance to total loans was 0.99% down slightly from 1.03% at year-end 2018. The allowance to nonperforming and restructured loans was 114.06% compared to 136.29% at year-end 2018.

On August 31, 2018, BFTower, LLC, a wholly-owned subsidiary of BancFirst, purchased the Cotter Ranch Tower in Oklahoma City for the Company’s corporate headquarters for $21.0 million. Cotter Ranch Tower was subsequently renamed BancFirst Tower. BancFirst Tower consists of an aggregate of 507,000 square feet, has 36 floors and is the second tallest building in Oklahoma City. The BancFirst Tower will remain an income producing property as approximately 55% is currently, and is intended to continue to be, leased to outside tenants. BancFirst Tower will allow the Company to consolidate operations from three locations to one and will improve operational efficiencies. Upon consolidation, the Company expects to initially occupy approximately 35% of the BancFirst Tower, resulting in approximately 90% total occupancy. Renovations on BancFirst Tower are expected to be completed by the end of 2021 and are expected to cost approximately $75 million. The renovation costs include substantial deferred maintenance including HVAC, plumbing, electrical, elevators, building skin and roof while also including much needed improvements to both the interior and exterior common areas including the lobby, underground and outdoor plaza. The Company could start depreciating certain components of the renovation as they are put into service as early as December 2019. The Company estimates spending approximately $12 million on tenant improvements for the approximate 165,000 square feet that the Company will occupy. The total purchase price, renovation costs, and Company tenant improvement costs were determined to be favorable to other alternatives, such as constructing new corporate headquarters or leasing space. On December 14, 2018, BFTower LLC, purchased a 42.6% ownership interest in SFPG, LLC, which is the owner of a 1,568 space parking garage adjacent to BancFirst Tower, for $9.8 million.

On January 11, 2018, the Company completed the acquisitions of two Oklahoma banking corporations. First Wagoner Corporation and its subsidiary bank, First Bank & Trust Company, and First Chandler Corp. and its subsidiary bank, First Bank of Chandler, had combined total assets of approximately $378 million. The Company exchanged a combination of cash and stock for these transactions.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See Note (1) of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

SEGMENT INFORMATION

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

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RESULTS OF OPERATIONS

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

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited)

(Dollars in thousands, except per share data)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Income Statement Data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 72,287 |  |  | $ | 65,673 |  |  | $ | 207,982 |  |  | $ | 193,588 |
Provision for loan losses |  |  | 2,758 |  |  |  | 747 |  |  |  | 6,875 |  |  |  | 2,286 |
Securities transactions |  |  | — |  |  |  | (64 | ) |  |  | 821 |  |  |  | 37 |
Total noninterest income |  |  | 35,627 |  |  |  | 32,801 |  |  |  | 101,705 |  |  |  | 93,348 |
Salaries and employee benefits |  |  | 40,354 |  |  |  | 35,051 |  |  |  | 112,649 |  |  |  | 104,017 |
Total noninterest expense |  |  | 62,191 |  |  |  | 55,809 |  |  |  | 175,005 |  |  |  | 165,955 |
Net income |  |  | 33,368 |  |  |  | 32,883 |  |  |  | 99,372 |  |  |  | 93,089 |
Per Common Share Data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income – basic |  | $ | 1.02 |  |  | $ | 1.01 |  |  | $ | 3.04 |  |  | $ | 2.85 |
Net income – diluted |  |  | 1.00 |  |  |  | 0.98 |  |  |  | 2.98 |  |  |  | 2.78 |
Cash dividends |  |  | 0.32 |  |  |  | 0.30 |  |  |  | 0.92 |  |  |  | 0.72 |
Performance Data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  |  | 1.65 | % |  |  | 1.71 | % |  |  | 1.71 | % |  |  | 1.64 | %
Return on average stockholders’ equity |  |  | 13.80 |  |  |  | 14.86 |  |  |  | 14.14 |  |  |  | 14.62 |
Cash dividend payout ratio |  |  | 31.37 |  |  |  | 29.70 |  |  |  | 30.26 |  |  |  | 25.26 |
Net interest spread |  |  | 3.34 |  |  |  | 3.20 |  |  |  | 3.30 |  |  |  | 3.28 |
Net interest margin |  |  | 3.89 |  |  |  | 3.68 |  |  |  | 3.88 |  |  |  | 3.68 |
Efficiency ratio |  |  | 57.63 |  |  |  | 56.67 |  |  |  | 56.51 |  |  |  | 57.84 |
Net charge-offs to average loans |  |  | 0.04 |  |  |  | 0.02 |  |  |  | 0.05 |  |  |  | 0.04 |

Net Interest Income

For the three months ended September 30, 2019, net interest income, which is the Company’s principal source of operating revenue, increased $6.6 million or 10.1% compared to the three months ended September 30, 2018. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The Company’s net interest margin for the third quarter of 2019 compared to the third quarter of 2018 increased primarily due to the higher average federal funds rate in the third quarter of 2019 and loan growth during such quarter. If the federal funds rate continues to decline compared to the average for the current quarter, the Company expects the yield on earning assets to decrease, which would negatively impact the net interest margin.

Net interest income for the nine months ended September 30, 2019 increased $14.4 million or 7.4% compared to the nine months ended September 30, 2018. The net interest margin for the year-to-date increased compared to the same period of the previous year, as shown in the preceding table. The increase in the margin was primarily due to the higher average federal funds rate throughout 2019 compared to 2018 and loan growth during 2019. If the federal funds rate continues to decline compared to the average for the current year, the Company expects the yield on earning assets to decrease, which would negatively impact the net interest margin.

Provision for Loan Losses

The Company’s provision for loan losses for the third quarter of 2019 was $2.8 million compared to $747,000 a year ago. The increase in the provision was primarily due to downgrades of a few commercial loans during the quarter. The Company establishes an allowance as an estimate of the probable inherent losses in the loan portfolio at the balance sheet date. Management believes the allowance for loan losses is appropriate based upon management’s best estimate of probable losses that have been incurred within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the amount of future provisions for loan losses. Net loan charge-offs were $1.9 million for the third quarter of 2019, primarily related to the charge-off of acquired loans, compared to $1.1 million for the third quarter of 2018. The rate of net charge-offs to average total loans, as presented in the preceding table, continues to be at a very low level.

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For the nine months ended September 30, 201 9, the Company’s provision for loan losses was $6.9 million compared to $2.3 million for the nine months ended September 30, 201 8. The increase in the provision was primarily due to downgrades of a few commercial loans as well as loan growth during 2019. Net loan charge-offs were $2.3 million, compared to $2.1 million for the same period of the prior year.

Noninterest Income

Noninterest income, as presented in the preceding table, increased by $2.8 million for third quarter of 2019 compared to the third quarter of 2018. The increase in noninterest income was primarily due to growth in debit card usage fees and sweep fees. The Company had fees from debit card usage totaling $8.7 million and $7.4 million during the three month periods ended September 30, 2019 and 2018, respectively. This represents 24.3% and 22.7% of the Company’s noninterest income for the three month periods ended September 30, 2019 and 2018, respectively. In addition, the Company has non-sufficient funds fees totaling $8.8 million and $8.2 million for the three month periods ended September 30, 2019 and 2018, respectively. This represents 24.7% and 24.9% of the Company’s noninterest income for the three month periods ended September 30, 2019 and 2018, respectively.

Noninterest income for the nine months ended September 30, 2019 totaled $101.7 million compared to $93.3 million for the nine months ended September 30, 2018. The increase in noninterest income was primarily due to growth in debit card usage fees, sweep fees, insurance commissions and equity security gains of $821,000. Fees from debit card usage totaled $25.1 million and $21.7 million during the nine months ended September 30, 2019 and 2018, respectively. This represents 24.6% and 23.2% of the Company’s noninterest income for the nine month periods ended September 30, 2019 and 2018, respectively. In addition, the Company had non-sufficient fund fees totaling $24.5 million and $23.0 million during the nine months ended September 30, 2019 and 2018, respectively. This represents 24.1% and 24.6% of the Company’s noninterest income for the nine month periods ended September 30, 2019 and 2018, respectively.

The Durbin Amendment is a provision in the larger Dodd-Frank Act that gave the Federal Reserve the authority to establish rates on debit card transactions. The Durbin Amendment aims to control debit card interchange fees and restrict anti-competitive practices. The law applies to banks with over $10 billion in assets and limits these banks on what they charge for debit card interchange fees. If the Company grows to exceed $10 billion in assets, the Durbin Amendment will decrease the Company’s income from debit card usage fees by approximately $15 million annually based on current volume.

Noninterest Expense

For the three months ended September 30, 2019, noninterest expense totaled $62.2 million, compared to $55.8 million for the three months ended September 30, 2018. The increase in noninterest expenses was primarily due to salary increases in 2019 and acquisition related expenses of approximately $3.1 million.

For the nine months ended September 30, 2019, noninterest expense totaled $175.0 million compared to $166.0 million for the nine months ended September 30, 2018. The increase in noninterest expense was due to salary increases and acquisition related expenses of approximately $3.1 million in 2019 partially offset by a decrease in other expense due to acquisition related expenses of approximately $2.6 million in 2018.

Income Taxes

The Company’s effective tax rate on income before taxes was 22.3% for the third quarter of 2019, compared to 21.6% for the third quarter of 2018. The increase in the effective tax rate compared to the third quarter of 2018 was due to a decrease in option exercises during the quarter.

The Company’s effective tax rate on income before taxes was 22.3% for the first nine months of 2019, compared to 21.6% for the first nine months of 2018. The increase in the effective tax rate compared 2018 was due to a decrease in option exercises during such year.

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FINANCIAL POSITION

BANCFIRST CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share data)

|  | September 30, |  |  | December 31, |
|  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  |  |  |
Balance Sheet Data |  |  |  |  |  |  |  |
Total assets |  | $ | 8,388,816 |  |  | $ | 7,574,258 |
Total loans (net of unearned interest) |  |  | 5,622,897 |  |  |  | 4,984,150 |
Allowance for loan losses |  |  | 55,928 |  |  |  | 51,389 |
Debt securities |  |  | 555,575 |  |  |  | 772,132 |
Deposits |  |  | 7,330,677 |  |  |  | 6,605,495 |
Stockholders' equity |  |  | 979,752 |  |  |  | 902,789 |
Book value per share |  |  | 30.01 |  |  |  | 27.69 |
Tangible book value per share (non-GAAP)(1) |  |  | 24.77 |  |  |  | 24.74 |
Average loans to deposits (year-to-date) |  |  | 76.15 | % |  |  | 74.63 | %
Average earning assets to total assets (year-to-date) |  |  | 92.36 |  |  |  | 92.90 |
Average stockholders’ equity to average assets (year-to-date) |  |  | 12.07 |  |  |  | 11.37 |
Asset Quality Ratios |  |  |  |  |  |  |  |
Nonperforming and restructured loans to total loans |  |  | 0.87 | % |  |  | 0.76 | %
Nonperforming and restructured assets to total assets |  |  | 0.66 |  |  |  | 0.59 |
Allowance for loan losses to total loans |  |  | 0.99 |  |  |  | 1.03 |
Allowance for loan losses to nonperforming and restructured loans |  |  | 114.81 |  |  |  | 136.29 |
Reconciliation of Tangible Book Value per Common Share (non-GAAP)(2) |  |  |  |  |  |  |  |
Stockholders' equity |  | $ | 979,752 |  |  | $ | 902,789 |
Less goodwill |  |  | 147,013 |  |  |  | 79,749 |
Less intangible assets, net |  |  | 24,025 |  |  |  | 16,470 |
Tangible stockholders' equity (non-GAAP) |  | $ | 808,714 |  |  | $ | 806,570 |
Common shares outstanding |  |  | 32,644,018 |  |  |  | 32,603,926 |
Tangible book value per share (non-GAAP) |  | $ | 24.77 |  |  | $ | 24.74 |
(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. |

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

The aggregate of cash and due from banks, interest-bearing deposits with banks and federal funds sold increased by $277.9 million or 19.5% to $1.7 billion, from December 31, 2018 to September 30, 2019. The increase was primarily from cash from the Pegasus Bank acquisition and maturities of U. S. treasury securities.

Securities

At September 30, 2019, total debt securities decreased $216.6 million, or 28.1% compared to December 31, 2018, due to maturing U.S. treasury securities. The size of the Company’s securities portfolio is determined by the Company’s liquidity and asset/liability management. The net unrealized gain on securities available for sale, before taxes, was $4.9 million at September 30, 2019, compared to a net unrealized loss of $2.9 million at December 31, 2018. These unrealized gains and losses are included in the Company’s stockholders’ equity as accumulated other comprehensive income, net of income tax, in the amounts of a gain of $3.6 million at September 30, 2019 and a loss of $2.1 million at December 31, 2018.

Loans (Including Acquired Loans)

At September 30, 2019, loans totaled $5.6 billion, an increase of $638.7 million from December 31, 2018. The increase in loans was due to internal growth, and the acquisition of Pegasus Bank, which added approximately $389.9 million in the third quarter of 2019.

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Allowance for Loan Losses/Fair Value Adjustments on Acquired Loans

At September 30, 2019, the allowance for loan losses to total loans represented 0.99% of total loans, compared to 1.03% at December 31, 2018.

The fair value adjustment on BancFirst and Pegasus Bank acquired loans consists of an interest rate component to adjust the effective rates on the loans to market rates and a credit component to adjust for estimated credit exposures in the acquired loans. The interest rate component was $1.9 million at September 30, 2019 and $2.2 million at December 31, 2018. The credit component of the adjustment was $7.6 million at September 30, 2019 and $7.6 million at December 31, 2018. The BancFirst acquired loans outstanding were $169.2 million at September 30, 2019 and $294.6 million at December 31, 2018. The Pegasus Bank acquired loans were approximately $371.1 million at September 30, 2019.

Nonperforming and Restructured Assets

Nonperforming and restructured assets totaled $55.8 million at September 30, 2019, compared to $44.6 million at December 31, 2018. The Company’s level of nonperforming and restructured assets has continued to be relatively low.

Nonaccrual loans totaled $20.0 million at September 30, 2019, compared to $22.6 million at the end of 2018. The Company’s nonaccrual loans are primarily commercial and 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 interest or principal or both is in serious doubt. Interest income is recognized on certain of these loans on a cash basis if the full collection of the remaining principal balance is reasonably expected. Otherwise, interest income is not recognized until the principal balance is fully collected. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.4 million for the nine months ended September 30, 2019 and $1.7 million for the nine months ended September 30, 2018. Only a small amount of this interest is expected to be ultimately collected.

Restructured loans totaled $17.5 million at September 30, 2019, compared to $13.2 million at the end of 2018. The increase in restructured loans was due primarily to a few commercial loans identified as troubled debt restructurings during the year. The Company charges interest on principal balances outstanding during deferral periods. As a result, the current and future financial effects of the recorded balance of loans considered to be troubled debt restructurings whose terms were modified during the period were not considered to be material.

Other real estate owned and repossessed assets totaled $7.1 million at September 30, 2019, compared to $6.9 million at December 31, 2018.

Potential problem loans are performing loans to borrowers with a weakened financial condition, or which are experiencing unfavorable trends in their financial condition, which causes management to have concerns as to the ability of such borrowers to comply with the existing repayment terms. The Company had approximately $17.4 million of these loans at September 30, 2019, compared to $8.0 million at December 31, 2018. Potential problem loans are not included in nonperforming and restructured loans. In general, these loans are adequately collateralized and have no specific identifiable probable loss. Loans which are considered to have identifiable probable loss potential are placed on nonaccrual status, are allocated a specific allowance for loss or are directly charged-down, and are reported as nonperforming.

Liquidity and Funding

Deposits

At September 30, 2019, deposits totaled $7.3 billion, an increase of $725.2 million from the December 31, 2018 total primarily related to the acquisition of Pegasus Bank, which added approximately $603.9 million in deposits. 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 98.3% at September 30, 2019 and 98.1% at December 31, 2018. Noninterest-bearing deposits to total deposits were 39.3% at September 30, 2019, compared to 39.6% at December 31, 2018.

Short-Term Borrowings

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 $605,000 at September 30, 2019, compared to $1.7 million at December 31, 2018.

32

Long-Term Borrowings

The Company has a line of credit from the Federal Home Loan Bank (“FHLB”) of Topeka, Kansas to use for liquidity or to match-fund certain long-term fixed-rate loans. The Company’s assets, including residential first mortgages of $794.1 million, are pledged as collateral for the borrowings under the line of credit. As of September 30, 2019 and December 31, 2018, the Company had no advances outstanding under the line of credit from FHLB. In addition, the Company has a revolving line of credit with another financial institution with the ability to draw up to $10.0 million with no advances outstanding. This line of credit has a variable rate based on prime rate minus 25 basis points and matures in 2020.

Parent Company Cash

Parent company cash decreased from $105.1 million at December 31, 2018 to $2.9 million at September 30, 2019 due to the $123.5 million purchase price for Pegasus Bank and a subsequent $5.0 million capital infusion.

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, 2018.

Capital Resources

Stockholders’ equity totaled $979.8 million at September 30, 2019, compared to $902.8 million at December 31, 2018. In addition to net income of $99.4 million, other changes in stockholders’ equity during the nine months ended September 30, 2019 included $913,000 related to common stock issuances for stock option exercises, $888,000 related to stock-based compensation and a $5.8 million increase in other comprehensive income, that were partially offset by $30.0 million in dividends. The Company’s leverage ratio and total risk-based capital ratios at September 30, 2019, were well in excess of the regulatory requirements.

See Note (8) of the Notes to Consolidated Financial Statements for a discussion of capital ratio requirements.

CONTRACTUAL OBLIGATIONS

There have not been any material changes in the resources required for scheduled repayments of contractual obligations from the table of Contractual Cash Obligations 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, 2018.

33

BANCFIRST CORPORATION

CONSOLIDATED AVERAGE BALANCE SHEETS AND INTEREST MARGIN ANALYSIS

(Unaudited)

Taxable Equivalent Basis

(Dollars in thousands)

|  | Three Months Ended September 30, |
|  | 2019 |  |  | 2018 |
|  |  |  |  |  | Interest |  |  | Average |  |  |  |  |  |  | Interest |  |  | Average |
|  | Average |  |  | Income/ |  |  | Yield/ |  |  | Average |  |  | Income/ |  |  | Yield/ |
|  | Balance |  |  | Expense |  |  | Rate |  |  | Balance |  |  | Expense |  |  | Rate |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans (1) |  | $ | 5,376,278 |  |  | $ | 75,446 |  |  |  | 5.57 | % |  | $ | 4,973,580 |  |  | $ | 66,852 |  |  |  | 5.33 | %
Securities – taxable |  |  | 427,152 |  |  |  | 2,361 |  |  |  | 2.19 |  |  |  | 432,935 |  |  |  | 2,246 |  |  |  | 2.06 |
Securities – tax exempt |  |  | 17,399 |  |  |  | 130 |  |  |  | 2.96 |  |  |  | 23,469 |  |  |  | 184 |  |  |  | 3.10 |
Federal funds sold and interest-bearing deposits with banks |  |  | 1,577,446 |  |  |  | 8,705 |  |  |  | 2.19 |  |  |  | 1,657,460 |  |  |  | 8,254 |  |  |  | 1.98 |
Total earning assets |  |  | 7,398,275 |  |  |  | 86,642 |  |  |  | 4.65 |  |  |  | 7,087,444 |  |  |  | 77,536 |  |  |  | 4.34 |
Nonearning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  |  | 178,862 |  |  |  |  |  |  |  |  |  |  |  | 182,449 |  |  |  |  |  |  |  |  |
Interest receivable and other assets |  |  | 500,067 |  |  |  |  |  |  |  |  |  |  |  | 414,096 |  |  |  |  |  |  |  |  |
Allowance for loan losses |  |  | (56,056 | ) |  |  |  |  |  |  |  |  |  |  | (52,293 | ) |  |  |  |  |  |  |  |
Total nonearning assets |  |  | 622,873 |  |  |  |  |  |  |  |  |  |  |  | 544,252 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 8,021,148 |  |  |  |  |  |  |  |  |  |  | $ | 7,631,696 |  |  |  |  |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transaction deposits |  | $ | 737,162 |  |  | $ | 646 |  |  |  | 0.35 | % |  | $ | 775,122 |  |  | $ | 744 |  |  |  | 0.38 | %
Savings deposits |  |  | 2,835,855 |  |  |  | 10,127 |  |  |  | 1.42 |  |  |  | 2,553,401 |  |  |  | 8,010 |  |  |  | 1.24 |
Time deposits |  |  | 690,867 |  |  |  | 2,871 |  |  |  | 1.65 |  |  |  | 736,060 |  |  |  | 2,417 |  |  |  | 1.30 |
Short-term borrowings |  |  | 1,063 |  |  |  | 7 |  |  |  | 2.72 |  |  |  | 8,960 |  |  |  | 42 |  |  |  | 1.85 |
Junior subordinated debentures |  |  | 26,804 |  |  |  | 491 |  |  |  | 7.27 |  |  |  | 31,959 |  |  |  | 547 |  |  |  | 6.80 |
Total interest-bearing liabilities |  |  | 4,291,751 |  |  |  | 14,142 |  |  |  | 1.31 |  |  |  | 4,105,502 |  |  |  | 11,760 |  |  |  | 1.14 |
Interest-free funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing deposits |  |  | 2,720,830 |  |  |  |  |  |  |  |  |  |  |  | 2,610,935 |  |  |  |  |  |  |  |  |
Interest payable and other liabilities |  |  | 49,262 |  |  |  |  |  |  |  |  |  |  |  | 37,051 |  |  |  |  |  |  |  |  |
Stockholders’ equity |  |  | 959,305 |  |  |  |  |  |  |  |  |  |  |  | 878,208 |  |  |  |  |  |  |  |  |
Total interest free funds |  |  | 3,729,397 |  |  |  |  |  |  |  |  |  |  |  | 3,526,194 |  |  |  |  |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 8,021,148 |  |  |  |  |  |  |  |  |  |  | $ | 7,631,696 |  |  |  |  |  |  |  |  |
Net interest income |  |  |  |  |  | $ | 72,500 |  |  |  |  |  |  |  |  |  |  | $ | 65,776 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  |  |  |  | 3.34 | % |  |  |  |  |  |  |  |  |  |  | 3.20 | %
Effect of interest free funds |  |  |  |  |  |  |  |  |  |  | 0.55 | % |  |  |  |  |  |  |  |  |  |  | 0.48 | %
Net interest margin |  |  |  |  |  |  |  |  |  |  | 3.89 | % |  |  |  |  |  |  |  |  |  |  | 3.68 | %
(1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis |

34

|  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |
|  |  |  |  |  | Interest |  |  | Average |  |  |  |  |  |  | Interest |  |  | Average |
|  | Average |  |  | Income/ |  |  | Yield/ |  |  | Average |  |  | Income/ |  |  | Yield/ |
|  | Balance |  |  | Expense |  |  | Rate |  |  | Balance |  |  | Expense |  |  | Rate |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans (1) |  | $ | 5,158,737 |  |  | $ | 215,462 |  |  |  | 5.58 | % |  | $ | 4,975,621 |  |  | $ | 195,657 |  |  |  | 5.26 | %
Securities – taxable |  |  | 613,365 |  |  |  | 10,551 |  |  |  | 2.30 |  |  |  | 437,379 |  |  |  | 6,100 |  |  |  | 1.86 |
Securities – tax exempt |  |  | 19,687 |  |  |  | 439 |  |  |  | 2.98 |  |  |  | 26,969 |  |  |  | 606 |  |  |  | 3.00 |
Federal funds sold and interest-bearing deposits with banks |  |  | 1,397,739 |  |  |  | 24,590 |  |  |  | 2.35 |  |  |  | 1,609,596 |  |  |  | 21,560 |  |  |  | 1.79 |
Total earning assets |  |  | 7,189,528 |  |  |  | 251,042 |  |  |  | 4.67 |  |  |  | 7,049,565 |  |  |  | 223,923 |  |  |  | 4.25 |
Nonearning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  |  | 178,826 |  |  |  |  |  |  |  |  |  |  |  | 184,170 |  |  |  |  |  |  |  |  |
Interest receivable and other assets |  |  | 469,615 |  |  |  |  |  |  |  |  |  |  |  | 395,607 |  |  |  |  |  |  |  |  |
Allowance for loan losses |  |  | (53,814 | ) |  |  |  |  |  |  |  |  |  |  | (52,190 | ) |  |  |  |  |  |  |  |
Total nonearning assets |  |  | 594,627 |  |  |  |  |  |  |  |  |  |  |  | 527,587 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 7,784,155 |  |  |  |  |  |  |  |  |  |  | $ | 7,577,152 |  |  |  |  |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transaction deposits |  | $ | 743,158 |  |  | $ | 1,967 |  |  |  | 0.35 | % |  | $ | 801,750 |  |  | $ | 1,740 |  |  |  | 0.29 | %
Savings deposits |  |  | 2,700,393 |  |  |  | 30,852 |  |  |  | 1.53 |  |  |  | 2,502,746 |  |  |  | 20,305 |  |  |  | 1.08 |
Time deposits |  |  | 688,056 |  |  |  | 8,164 |  |  |  | 1.59 |  |  |  | 756,041 |  |  |  | 6,105 |  |  |  | 1.08 |
Short-term borrowings |  |  | 1,650 |  |  |  | 29 |  |  |  | 2.31 |  |  |  | 6,332 |  |  |  | 85 |  |  |  | 1.79 |
Junior subordinated debentures |  |  | 26,804 |  |  |  | 1,474 |  |  |  | 7.35 |  |  |  | 31,959 |  |  |  | 1,626 |  |  |  | 6.80 |
Total interest-bearing liabilities |  |  | 4,160,061 |  |  |  | 42,486 |  |  |  | 1.37 |  |  |  | 4,098,828 |  |  |  | 29,861 |  |  |  | 0.97 |
Interest-free funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing deposits |  |  | 2,643,189 |  |  |  |  |  |  |  |  |  |  |  | 2,594,714 |  |  |  |  |  |  |  |  |
Interest payable and other liabilities |  |  | 41,138 |  |  |  |  |  |  |  |  |  |  |  | 32,518 |  |  |  |  |  |  |  |  |
Stockholders’ equity |  |  | 939,767 |  |  |  |  |  |  |  |  |  |  |  | 851,092 |  |  |  |  |  |  |  |  |
Total interest free funds |  |  | 3,624,094 |  |  |  |  |  |  |  |  |  |  |  | 3,478,324 |  |  |  |  |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 7,784,155 |  |  |  |  |  |  |  |  |  |  | $ | 7,577,152 |  |  |  |  |  |  |  |  |
Net interest income |  |  |  |  |  | $ | 208,556 |  |  |  |  |  |  |  |  |  |  | $ | 194,062 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  |  |  |  | 3.30 | % |  |  |  |  |  |  |  |  |  |  | 3.28 | %
Effect of interest free funds |  |  |  |  |  |  |  |  |  |  | 0.58 | % |  |  |  |  |  |  |  |  |  |  | 0.40 | %
Net interest margin |  |  |  |  |  |  |  |  |  |  | 3.88 | % |  |  |  |  |  |  |  |  |  |  | 3.68 | %
(1) Nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis |

35

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the Registrant’s disclosures regarding market risk since December 31, 2018, the date of its most recent annual report to stockholders.

Item 4. Controls and Procedures.

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 Vice President of Corporate Finance, have evaluated, as of the last day of the period covered by this report, the Company’s disclosure controls and procedures. 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.

No changes were made to the Company’s internal control over financial reporting during the period covered by this report that materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

36

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

The Company has been named as a defendant in various legal actions arising from the conduct of its normal business activities. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in the opinion of the Company, any such liability will not have a material adverse effect on the consolidated financial statements of the Company.

Item 1A. Risk Factors.

Except as set forth below, as of September 30, 2019, 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, 2018:

The Company’s noninterest income may be reduced

The Durbin Amendment is a provision in the larger Dodd-Frank Act that gave the Federal Reserve the authority to establish rates on debit card transactions. The Durbin Amendment aims to control debit card interchange fees and restrict anti-competitive practices. The law applies to banks with over $10 billion in assets and limits these banks on what they charge for debit card interchange fees. If the Company grows to exceed $10 billion in assets, the Durbin Amendment will decrease the Company’s income from debit card usage fees by approximately $15 million annually based on current volume.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

37

Item 6. Exhibits.

Exhibit Number |  | Exhibit
2.1 |  | Share Exchange Agreement by and between BancFirst Corporation and Pegasus Bank dated April 23, 2019 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K/A dated April 25, 2019 and incorporated herein by reference).
3.1 |  | Amended and Restated By-Laws of BancFirst Corporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 30, 2015 and incorporated herein by reference).
3.2 |  | Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of BancFirst Corporation dated May 31, 2017 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 31, 2017 and incorporated herein by reference).
4.1 |  | Instruments defining the rights of securities holders (see Exhibits 3.1 and 3.2 above).
4.2 |  | Form of Amended and Restated Trust Agreement relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
4.3 |  | Form of 7.20% Cumulative Trust Preferred Security Certificate for BFC Capital Trust II (filed as Exhibit D to Exhibit 4.5 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
4.4 |  | Form of Indenture relating to the 7.20% Junior Subordinated Deferrable Interest Debentures of BancFirst Corporation issued to BFC Capital Trust II (filed as Exhibit 4.1 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).
4.5 |  | Form of Certificate of 7.20% Junior Subordinated Deferrable Interest Debenture of BancFirst Corporation (filed as Exhibit 4.2 to the Company’s registration statement on Form S-3, File No. 333-112488 dated February 4, 2004, and incorporated herein by reference).
4.6 |  | Form of Guarantee of BancFirst Corporation relating to the 7.20% Cumulative Trust Preferred Securities of BFC Capital Trust II (filed as Exhibit 4.7 to the Company’s registration statement on Form S-3/A, File No. 333-112488 dated February 23, 2004, and incorporated herein by reference).
4.7 |  | Form of Guarantee Agreement by and between CSB Bancshares, Inc. and Wilmington Trust Company (filed as Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).
4.8 |  | Form of Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures of CSB Bancshares, Inc., issued to Wilmington Trust Company (filed as Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).
4.9 |  | Form of First Supplemental Indenture relating to the Floating Rate Junior Subordinated Deferrable Interest Debentures by and between Wilmington Trust Company and BancFirst Corporation (filed as Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015 and incorporated herein by reference).
10.1 |  | BancFirst Corporation Employee Stock Ownership and Trust Agreement adopted effective January 1, 2015 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2015 and incorporated herein by reference).
10.2 |  | Amendment Number One to the BancFirst Corporation Employee Stock Ownership Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).
10.3 |  | Adoption Agreement for the BancFirst Corporation Thrift Plan adopted April 21, 2016 effective January 1, 2016 (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2016 and incorporated herein by reference).
10.4 |  | Amendment Number One to the BancFirst Corporation Thrift Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 26, 2018 and incorporated herein by reference).
10.5 |  | Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).

38

Exhibit Number |  | Exhibit
10.6 |  | First Amendment to Purchase and Sale Agreement and Escrow Instructions by and between Cotter Tower – Oklahoma L.P. and BancFirst Corporation (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 5, 2018 and incorporated herein by reference).
10.7 |  | Sixth Amended and Restated BancFirst Corporation Directors’ Deferred Stock Compensation Plan (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2019 and incorporated herein by reference).
10.8 |  | Sixth Amended and Restated BancFirst Corporation Directors’ Stock Option Plan (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2019 and incorporated herein by reference).
10.9 |  | Fifteenth Amended and Restated BancFirst Corporation Stock Option Plan (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2019 and incorporated herein by reference).
31.1* |  | Chief Executive Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2* |  | Chief Financial Officer’s Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32* |  | CEO’s & CFO’s Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101* |  | Interactive Data File - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
104* |  | Cover Page Interactive Date File (formatted as Inline XBRL and included in Exhibit 101).

* | Filed herewith.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | BANCFIRST CORPORATION
|  | (Registrant)
Date: November 8, 2019 |  | /s/ David Harlow
|  | David Harlow
|  | President
|  | Chief Executive Officer
|  | (Principal Executive Officer)
Date: November 8, 2019 |  | /s/ Kevin Lawrence
|  | Kevin Lawrence
|  | Executive Vice President
|  | Chief Financial Officer
|  | (Principal Financial Officer)

40