Other loans. Other loans consist of loans approved by the Small Business Administration (“SBA”), which include loans funded through the Paycheck Protection Program (“PPP”). Since PPP loans are fully guaranteed by the SBA, there is no expected credit loss related to these loans. In April 2020, the Company began originating loans to qualified small businesses under the PPP administered by the SBA. The Company had processing fees, which were recognized as interest income related to the PPP loans totaling $11.9 million and $3.7 million during the three months ended June 30, 2021 and 2020, respectively and $21.7 million and $3.7 million during the six months ended June 30, 2021 and 2020, respectively.

BancFirst’s loans are mostly to customers within Oklahoma and approximately 56% 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.

Pegasus Bank’s loans are mostly to customers within Texas and approximately $297 million or 51% of the loans are secured by real estate at June 30, 2021. Pegasus Bank’s commercial and agricultural non-real estate loans were approximately $268 million at June 30, 2021 and approximately $262 million at December 31, 2020.

BancFirst and Pegasus Bank’s commercial and agricultural non-real estate and oil and gas loan categories include upstream and midstream energy loans, and loans to companies that provide ancillary services to the energy industry, such as transportation, wellsite preparation contractors and equipment manufacturers. Energy loans are summarized as follows:

Accounting policies related to appraisals, and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Troubled Debt Restructurings, Other Real Estate Owned and Repossessed Assets and Held for Sale Assets

The following is a summary of troubled debt restructurings and other real estate owned and repossessed assets:

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

During the first half of 2021, the Company completed the move to its new corporate headquarters and transferred approximately $2.4 million from premises and equipment to other real estate owned related to its previous headquarters. In addition, other real estate owned of approximately $2.5 million was purchased from the First National Bank and Trust Company of Vinita, Oklahoma.

During the first half of 2021, the Company sold property held in other real estate owned for a total loss of $105,000, compared to a total gain of $2.3 million in the first half of 2020.

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.2 million for the six months ended June 30, 2021 and approximately $983,000 for the six months ended June 30, 2020.

Nonaccrual loans guaranteed by government agencies totaled approximately $3.5 million at June 30, 2021 and approximately $7.8 million at December 31, 2020.

The following table is a summary of amounts included in nonaccrual loans, segregated by portfolio segment.

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 our loans held for investment:

	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 June 30, 2021
BancFirst
Real estate:
Commercial real estate owner occupied	$	604	$	—	$	1,012	$	1,616	$	659,914	$	661,530	$	80
Commercial real estate non-owner occupied		205		—		112		317		989,243		989,560		37
Construction and development < 60 months		53		1,605		137		1,795		295,410		297,205		137
Construction residential real estate < 60 months		103		—		—		103		208,107		208,210		—
Residential real estate first lien		3,639		447		3,989		8,075		857,482		865,557		2,070
Residential real estate all other		1,195		40		1,536		2,771		160,519		163,290		458
Farmland		1,036		989		4,327		6,352		262,656		269,008		157
Commercial and agricultural non-real estate		3,780		2,821		8,393		14,994		1,090,783		1,105,777		638
Consumer non-real estate		1,620		353		221		2,194		369,363		371,557		190
Oil and gas		—		—		—		—		130,459		130,459		—
Other loans		1,472		478		2,102		4,052		538,982		543,034		619
Pegasus Bank		—		—		—		—		586,043		586,043		—
Total	$	13,707	$	6,733	$	21,829	$	42,269	$	6,148,961	$	6,191,230	$	4,386

As of December 31, 2020
BancFirst
Real estate:
Commercial real estate owner occupied	$	1,096	$	108	$	1,164	$	2,368	$	639,619	$	641,987	$	—
Commercial real estate non-owner occupied		323		—		34		357		970,801		971,158		35
Construction and development < 60 months		511		86		—		597		229,018		229,615		—
Construction residential real estate < 60 months		1,106		—		282		1,388		204,807		206,195		282
Residential real estate first lien		5,428		1,463		2,978		9,869		843,447		853,316		945
Residential real estate all other		520		55		1,606		2,181		165,900		168,081		384
Farmland		1,297		344		6,223		7,864		245,094		252,958		135
Commercial and agricultural non-real estate		2,788		1,794		4,345		8,927		1,150,883		1,159,810		465
Consumer non-real estate		2,154		501		534		3,189		352,216		355,405		386
Oil and gas		—		—		—		—		179,355		179,355		—
Other loans		951		1,223		6,618		8,792		813,286		822,078		2,170
Pegasus Bank		—		—		—		—		554,548		554,548		—
Total	$	16,174	$	5,574	$	23,784	$	45,532	$	6,348,974	$	6,394,506	$	4,802

Due to the impacts of the COVID-19 pandemic, the Company had approximately $61.8 million in modified loans as of June 30, 2021 and $81.7 million in modified loans as of December 31, 2020, most of which were secured by commercial real estate. These modifications were undertaken in response to Section 4013 of the CARES Act and the regulatory intent outlined in the Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus and to provide businesses financial flexibility until the economy has time to recover to a more normal level of activity. However, these modifications, which typically involve payment modifications and forbearance, also have the effect of delaying recognition of loans that may ultimately be permanently impaired. The timing and extent of such consequences are difficult to ascertain at this time and are dependent on the duration of the COVID-19 pandemic, the level and success of the government’s economic stimulus, and further regulatory guidance. These modified loans are included in Current Loans in the table above.

The Company considers credit quality indicators to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical credit 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 and the table summarizing our gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2020, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The Company’s revolving loans that are converted to term loans are not material and therefore have not been presented.

The following table summarizes our gross loans held for investment by year of origination and internally assigned credit grades as of June 30, 2021:

	Term Loans Amortized Cost Basis by Origination Year
	2021	2020	2019	2018	2017	Prior	Revolving Loans Amortized Cost Basis	Total
	(Dollars in thousands)
As of June 30, 2021
BancFirst
Commercial real estate owner occupied
Grade 1	$66,327	$135,671	$83,146	$53,559	$36,961	$112,760	$11,507	$499,931
Grade 2	17,354	38,028	30,351	10,695	9,710	40,707	4,904	151,749
Grade 3	3	3,905	27	266	476	2,621	—	7,298
Grade 4	349	—	921	539	—	436	307	2,552
Total commercial real estate owner occupied loans	84,033	177,604	114,445	65,059	47,147	156,524	16,718	661,530
Commercial real estate non-owner occupied
Grade 1	95,260	227,302	147,192	62,169	61,402	137,491	18,024	748,840
Grade 2	16,345	59,541	44,838	37,862	19,357	43,884	4,657	226,484
Grade 3	7,453	—	3,412	214	1,607	865	—	13,551
Grade 4	—	—	50	37	—	598	—	685
Total commercial real estate non-owner occupied loans	119,058	286,843	195,492	100,282	82,366	182,838	22,681	989,560
Construction and development < 60 months
Grade 1	91,143	63,018	66,976	11,381	2,547	3,210	10,454	248,729
Grade 2	12,579	12,938	12,391	2,187	1,811	773	2,128	44,807
Grade 3	1,753	1,690	130	7	—	—	—	3,580
Grade 4	—	—	61	8	20	—	—	89
Total construction and development < 60 months	105,475	77,646	79,558	13,583	4,378	3,983	12,582	297,205
Construction residential real estate < 60 months
Grade 1	101,482	69,169	52	—	20	30	7,264	178,017
Grade 2	14,182	14,919	—	109	—	437	—	29,647
Grade 3	546	—	—	—	—	—	—	546
Total construction residential real estate < 60 months	116,210	84,088	52	109	20	467	7,264	208,210
Residential real estate first lien
Grade 1	134,782	188,553	109,336	69,907	54,107	154,974	—	711,659
Grade 2	22,669	25,098	16,385	19,237	10,187	42,381	—	135,957
Grade 3	1,102	1,809	2,526	901	1,360	4,832	—	12,530
Grade 4	49	511	442	1,149	934	2,326	—	5,411
Total residential real estate first lien	158,602	215,971	128,689	91,194	66,588	204,513	—	865,557
Residential real estate all other
Grade 1	9,847	16,428	11,139	8,009	5,157	15,276	28,321	94,177
Grade 2	746	3,263	1,743	1,325	1,137	2,367	53,510	64,091
Grade 3	272	140	410	248	718	376	1,042	3,206
Grade 4	14	211	—	579	15	652	345	1,816
Total residential real estate all other	10,879	20,042	13,292	10,161	7,027	18,671	83,218	163,290
Farmland
Grade 1	26,621	46,638	25,418	18,375	13,983	35,431	7,521	173,987
Grade 2	8,767	9,048	26,148	5,702	5,457	13,424	10,709	79,255
Grade 3	2,786	2,068	1,676	300	742	1,213	1,842	10,627
Grade 4	—	1,195	—	3,187	296	183	278	5,139
Total farmland	38,174	58,949	53,242	27,564	20,478	50,251	20,350	269,008
Commercial and agricultural non-real estate
Grade 1	190,653	135,726	105,770	64,491	54,567	54,870	220,348	826,425
Grade 2	38,938	47,478	29,481	11,780	3,885	18,985	68,353	218,900
Grade 3	4,900	5,500	1,706	12,010	1,858	639	21,708	48,321
Grade 4	262	1,783	1,555	599	811	1,299	5,822	12,131
Total commercial and agricultural non-real estate	234,753	190,487	138,512	88,880	61,121	75,793	316,231	1,105,777
Consumer non-real estate
Grade 1	110,171	116,215	64,985	27,641	9,497	4,018	7,084	339,611
Grade 2	9,362	9,659	4,641	2,833	1,099	1,653	287	29,534
Grade 3	229	405	787	290	154	147	3	2,015
Grade 4	14	67	180	58	19	55	4	397
Total consumer non-real estate	119,776	126,346	70,593	30,822	10,769	5,873	7,378	371,557
Oil and gas
Grade 1	53,326	115	59	66	—	3,444	33,676	90,686
Grade 2	10,051	3,347	69	—	—	—	9,419	22,886
Grade 3	16,887	—	—	—	—	—	—	16,887
Total oil and gas	80,264	3,462	128	66	—	3,444	43,095	130,459

On January 1, 2020, the Company adopted ASC 326, which replaces the incurred loss methodology for determining its provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model. Upon adoption, the allowance for credit losses was decreased by $3.2 million, with no impact to the consolidated statement of income.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist by identifying by portfolio segments, the applicable weighted average life and measuring the allowance for credit losses using the vintage loss analysis adjusted for qualitative factors. The weighted average lives of the Company’s loans segments are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The decrease in the allowance for credit loss during the second quarter of 2021 was primarily driven by a reversal of provision during the quarter based on sustained improvements in the economy, both nationally and in Oklahoma, which reduced the amount of expected credit loss within the loan portfolio. This reduction was partially offset by additional allowance for credit loss required by newly acquired loans purchased with credit deterioration.

The following table details activity in the allowance for credit losses on 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.

	Allowance for Credit Losses
	Balance at beginning of period		Initial allowance on loans purchased with credit deterioration		Charge- offs			Recoveries		Net charge-offs			(Benefit from) /Provision for credit losses on loans			Balance at end of period
	(Dollars in thousands)
Three Months Ended June 30, 2021
BancFirst
Real estate:
Commercial real estate owner occupied	$	6,595	$	987	$	—		$	1	$	1		$	(828	)	$	6,755
Commercial real estate non-owner occupied		16,955		633		(758	)		—		(758	)		(2,340	)		14,490
Construction and development < 60 months		2,743		173		—			2		2			(25	)		2,893
Construction residential real estate < 60 months		983		—		—			—		—			(94	)		889
Residential real estate first lien		2,592		117		(9	)		12		3			93			2,805
Residential real estate all other		1,873		—		(30	)		1		(29	)		97			1,941
Farmland		3,077		643		—			1		1			(6	)		3,715
Commercial and agricultural non-real estate		32,685		4,711		(3,433	)		125		(3,308	)		(2,473	)		31,615
Consumer non-real estate		3,256		8		(209	)		86		(123	)		174			3,315
Oil and gas		12,131		—		—			—		—			(4,314	)		7,817
Other loans		3,190		—		(9	)		—		(9	)		(43	)		3,138
Pegasus Bank		4,780		—		—			—		—			(190	)		4,590
Total	$	90,860	$	7,272	$	(4,448	)	$	228	$	(4,220	)	$	(9,949	)	$	83,963
Six Months Ended June 30, 2021
BancFirst
Real estate:
Commercial real estate owner occupied	$	7,035	$	987	$	—		$	1	$	1		$	(1,268	)	$	6,755
Commercial real estate non-owner occupied		11,842		633		(796	)		—		(796	)		2,811			14,490
Construction and development < 60 months		2,560		173		—			5		5			155			2,893
Construction residential real estate < 60 months		627		—		—			—		—			262			889
Residential real estate first lien		2,570		117		(52	)		27		(25	)		143			2,805
Residential real estate all other		2,230		—		(46	)		4		(42	)		(247	)		1,941
Farmland		3,136		643		—			1		1			(65	)		3,715
Commercial and agricultural non-real estate		32,400		4,711		(3,537	)		151		(3,386	)		(2,110	)		31,615
Consumer non-real estate		3,377		8		(622	)		198		(424	)		354			3,315
Oil and gas		17,851		—		—			—		—			(10,034	)		7,817
Other loans		3,182		—		(61	)		—		(61	)		17			3,138
Pegasus Bank		4,556		—		—			1		1			33			4,590
Total	$	91,366	$	7,272	$	(5,114	)	$	388	$	(4,726	)	$	(9,949	)	$	83,963

	Allowance for Credit Losses
	Balance at beginning of period		Impact of CECL adoption			Initial allowance on loans purchased with credit deterioration		Charge- offs			Recoveries		Net charge-offs			Provision for /(benefit from) credit losses on loans			Balance at end of period
	(Dollars in thousands)
Three Months Ended June 30, 2020
BancFirst
Real estate:
Commercial real estate owner occupied	$	4,544	$	—		$	—	$	(113	)	$	1	$	(112	)	$	2,198		$	6,630
Commercial real estate non-owner occupied		5,935		—			—		—			—		—			3,548			9,483
Construction and development < 60 months		1,136		—			—		(56	)		3		(53	)		672			1,755
Construction residential real estate < 60 months		1,618		—			—		(28	)		—		(28	)		669			2,259
Residential real estate first lien		6,192		—			—		(66	)		4		(62	)		2,423			8,553
Residential real estate all other		2,292		—			—		(7	)		1		(6	)		434			2,720
Farmland		1,788		—			—		—			—		—			723			2,511
Commercial and agricultural non-real estate		33,993		—			—		(287	)		66		(221	)		264			34,036
Consumer non-real estate		3,385		—			—		(235	)		57		(178	)		1,507			4,714
Oil and gas		3,283		—			—		—			—		—			7,186			10,469
Other loans		2,751		—			—		—			—		—			(238	)		2,513
Pegasus Bank		3,163		—			—		330			417		747			(53	)		3,857
Total	$	70,080	$	—		$	—	$	(462	)	$	549	$	87		$	19,333		$	89,500
Six Months Ended June 30, 2020
BancFirst
Real estate:
Commercial real estate owner occupied	$	5,625	$	(2,806	)	$	432	$	(113	)	$	1	$	(112	)	$	3,491		$	6,630
Commercial real estate non-owner occupied		8,358		(5,507	)		—		—			—		—			6,632			9,483
Construction and development < 60 months		2,214		(1,056	)		—		(59	)		3		(56	)		653			1,755
Construction residential real estate < 60 months		1,933		(778	)		—		(29	)		—		(29	)		1,133			2,259
Residential real estate first lien		8,692		(3,831	)		7		(218	)		6		(212	)		3,897			8,553
Residential real estate all other		2,767		(1,408	)		—		(32	)		28		(4	)		1,365			2,720
Farmland		2,821		(1,408	)		1		—			—		—			1,097			2,511
Commercial and agricultural non-real estate		13,462		13,195			62		(374	)		83		(291	)		7,608			34,036
Consumer non-real estate		3,252		(622	)		—		(556	)		114		(442	)		2,526			4,714
Oil and gas		1,883		(1,346	)		—		—			—		—			9,932			10,469
Other loans		2,632		(116	)		—		—			2		2			(5	)		2,513
Pegasus Bank		599		2,488			—		(241	)		424		183			587			3,857
Total	$	54,238	$	(3,195	)	$	502	$	(1,622	)	$	661	$	(961	)	$	38,916		$	89,500

The Company has previously purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The credit-deteriorated loans purchased during the six-month periods ended June 30, 2021 and June 30, 2020 were as follows:

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. During the six months ended June 30, 2021 and 2020, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

	Collateral Type
	Real Estate		Business Assets		Energy Reserves		Other Assets		Total		Specific Allocation
	(Dollars in thousands)
As of June 30, 2021
BancFirst
Real estate:
Commercial real estate owner occupied	$	645	$	—	$	—	$	—	$	645	$	176
Commercial real estate non-owner occupied		—		—		—		—		—		—
Construction and development < 60 months		—		—		—		—		—		—
Construction residential real estate < 60 months		—		—		—		—		—		—
Residential real estate first lien		806		—		—		—		806		158
Residential real estate all other		650		—		—		—		650		568
Farmland		3,215		—		—		—		3,215		1,123
Commercial and agricultural non-real estate		—		5,211		—		5,188		10,399		778
Consumer non-real estate		—		—		—		22		22		4
Oil and gas		—		—		—		—		—		—
Other loans		—		15		—		—		15		15
Pegasus Bank		—		—		—		—		—		—
Total collateral-dependent loans held for investment	$	5,316	$	5,226	$	—	$	5,210	$	15,752	$	2,822

	Collateral Type
	Real Estate		Business Assets		Energy Reserves		Other Assets		Total		Specific Allocation
	(Dollars in thousands)
As of December 31, 2020
BancFirst
Real estate:
Commercial real estate owner occupied	$	848	$	—	$	—	$	—	$	848	$	226
Commercial real estate non-owner occupied		4,719		—		—		—		4,719		1,000
Construction and development < 60 months		—		—		—		—		—		—
Construction residential real estate < 60 months		—		—		—		—		—		—
Residential real estate first lien		860		—		—		—		860		151
Residential real estate all other		866		—		—		—		866		616
Farmland		3,258		—		—		—		3,258		1,114
Commercial and agricultural non-real estate		—		8,460		—		413		8,873		2,813
Consumer non-real estate		—		—		—		109		109		58
Oil and gas		—		—		—		—		—		—
Other loans		—		13		—		—		13		12
Pegasus Bank		1,257		—		—		—		1,257		222
Total collateral-dependent loans held for investment	$	11,808	$	8,473	$	—	$	522	$	20,803	$	6,212

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.

Transfers from loans and premises and equipment to other real estate owned and repossessed assets during the periods presented are summarized as follows: