Loans Held for Investment and Allowance for Credit Losses on Loans

3 Months Ended

Mar. 31, 2025

Loans Held for Investment and Allowance for Credit Losses on Loans

(3) LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

Loans held for investment are summarized by portfolio segment as follows:


	March 31, 2025		December 31, 2024
	(Dollars in thousands)
Real estate:
Commercial real estate owner occupied		938,368		931,709
Commercial real estate non-owner occupied		1,630,208		1,578,483
Construction and development < 60 months		747,671		756,662
Construction residential real estate < 60 months		247,725		250,373
Residential real estate first lien		1,449,075		1,431,265
Residential real estate all other		282,314		275,461
Agriculture		456,110		449,190
Commercial non-real estate		1,352,493		1,363,462
Consumer non-real estate		478,912		478,647
Oil and gas		511,651		509,858
Total (1)	$	8,094,527	$	8,025,110
(1) Excludes accrued interest receivable of $40.4 million at March 31, 2025 and $40.9 million at December 31, 2024, that is recorded in accrued interest receivable and other assets.

The Company's loans are currently 83% held by BancFirst and 17% held by Pegasus and Worthington. In addition, approximately 71% of the Company's 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/or securities. The Company’s interest in collateral is secured through filing mortgages and liens, or by possession of the collateral.

The Company's portfolio segment descriptions and the weighted average remaining life of portfolio segments are disclosed in Note (5) to the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Other Real Estate Owned and Repossessed Assets and Loan Modifications

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



	March 31, 2025		December 31, 2024
	(Dollars in thousands)
Other real estate owned and repossessed assets	$	35,542	$	33,665

As of both March 31, 2025 and December 31, 2024, other real estate owned included a commercial real estate property recorded at approximately $29.5 million and $28.1 million, respectively. The increase in OREO and this commercial real estate property was due to tenant improvements during the three months ended March 31, 2025. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from other real estate owned in noninterest expense on the consolidated statements of comprehensive income.

This property had the following rental income and operating expenses for the periods presented.


	For the Three Months Ended March 31,
	2025		2024
	(Dollars in thousands)
Rental income	$	3,121	$	2,941
Operating expense		2,624		2,250

During the three months ended March 31, 2025, the Company sold property held in other real estate owned for a total gain of $25,000, compared to a total gain of $177,000 in the three months ended March 31, 2024.

The Company charges interest on principal balances outstanding on modified loans during deferral periods. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of loans modified during the three months ended March 31, 2025 was approximately $1.9 million compared to $14.8 million during the year ended December 31, 2024.

Nonaccrual loans

The Company did not recognize any interest income on nonaccrual loans for either the three months ended March 31, 2025 or 2024. In addition, all loans identified as nonaccrual loans have related allowances for credit losses at March 31, 2025 and December 31, 2024, respectively. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.0 million for the three months ended March 31, 2025 and approximately $696,000 for the three months ended March 31, 2024.

Nonaccrual loans guaranteed by government agencies totaled approximately $9.2 million at March 31, 2025 and approximately $9.0 million at December 31, 2024.

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


	March 31, 2025		December 31, 2024
	(Dollars in thousands)
Real estate:
Commercial real estate owner occupied	$	8,156	$	7,957
Commercial real estate non-owner occupied		8,010		8,913
Construction and development < 60 months		20,603		20,445
Construction residential real estate < 60 months		2,115		1,481
Residential real estate first lien		4,753		5,193
Residential real estate all other		918		653
Agriculture		1,344		2,047
Commercial non-real estate		7,673		8,552
Consumer non-real estate		1,109		1,028
Oil and gas		1,690		1,715
Total	$	56,371	$	57,984

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 the Company's 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 March 31, 2025
Real estate:
Commercial real estate owner occupied	$	4,753	$	201	$	7,690	$	12,644	$	925,724	$	938,368	$	436
Commercial real estate non-owner occupied		782		—		233		1,015		1,629,193		1,630,208		228
Construction and development < 60 months		1,011		16		20,685		21,712		725,959		747,671		174
Construction residential real estate < 60 months		165		113		1,239		1,517		246,208		247,725		—
Residential real estate first lien		5,429		2,975		4,379		12,783		1,436,292		1,449,075		1,739
Residential real estate all other		3,374		131		981		4,486		277,828		282,314		248
Agriculture		4,167		944		1,185		6,296		449,814		456,110		632
Commercial non-real estate		7,423		429		5,610		13,462		1,339,031		1,352,493		1,151
Consumer non-real estate		3,685		832		1,247		5,764		473,148		478,912		512
Oil and gas		108		450		1,111		1,669		509,982		511,651		—
Total	$	30,897	$	6,091	$	44,360	$	81,348	$	8,013,179	$	8,094,527	$	5,120

As of December 31, 2024
Real estate:
Commercial real estate owner occupied	$	2,810	$	273	$	7,963	$	11,046	$	920,663	$	931,709	$	569
Commercial real estate non-owner occupied		603		16,871		610		18,084		1,560,399		1,578,483		41
Construction and development < 60 months		317		351		20,327		20,995		735,667		756,662		116
Construction residential real estate < 60 months		292		622		616		1,530		248,843		250,373		—
Residential real estate first lien		9,128		2,118		3,332		14,578		1,416,687		1,431,265		797
Residential real estate all other		1,498		559		828		2,885		272,576		275,461		370
Agriculture		1,569		1,357		5,691		8,617		440,573		449,190		4,754
Commercial non-real estate		4,325		1,019		5,983		11,327		1,352,135		1,363,462		356
Consumer non-real estate		3,748		907		1,173		5,828		472,819		478,647		504
Oil and gas		1,111		458		232		1,801		508,057		509,858		232
Total	$	25,401	$	24,535	$	46,755	$	96,691	$	7,928,419	$	8,025,110	$	7,739

Credit Quality Indicators

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. These indicators are reviewed and updated regularly throughout the year. 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 the Company’s gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2024, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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

The following table summarizes the Company’s gross loans held for investment by year of origination and internally assigned credit grades:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Amortized Cost Basis		Total
As of March 31, 2025
Commercial real estate owner occupied
Grade 1	$	21,686	$	77,228	$	105,688	$	136,337	$	93,581	$	209,640	$	17,585	$	661,745
Grade 2		16,711		33,382		32,599		47,572		46,421		56,775		5,996		239,456
Grade 3		387		14,041		9,920		3,080		2,441		2,010		138		32,017
Grade 4		332		1,506		377		153		387		2,273		122		5,150
Total commercial real estate owner occupied		39,116		126,157		148,584		187,142		142,830		270,698		23,841		938,368
Commercial real estate non-owner occupied
Grade 1	$	56,154	$	109,497	$	282,664	$	262,068	$	173,442	$	176,336	$	23,464	$	1,083,625
Grade 2		33,254		82,361		108,531		141,844		52,448		83,323		13,497		515,258
Grade 3		—		20,633		125		735		—		30		—		21,523
Grade 4		—		5,751		—		—		1,947		2,104		—		9,802
Total commercial real estate non-owner occupied		89,408		218,242		391,320		404,647		227,837		261,793		36,961		1,630,208
Construction and development < 60 months
Grade 1	$	40,297	$	107,456	$	97,643	$	151,160	$	8,330	$	14,092	$	31,049	$	450,027
Grade 2		50,697		88,588		50,994		55,526		658		15,465		11,422		273,350
Grade 3		2,588		483		123		—		352		128		—		3,674
Grade 4		—		—		18		816		308		136		19,342		20,620
Total construction and development < 60 months		93,582		196,527		148,778		207,502		9,648		29,821		61,813		747,671
Construction residential real estate < 60 months
Grade 1	$	32,101	$	93,178	$	11,462	$	4,470	$	89	$	1,758	$	4,271	$	147,329
Grade 2		25,058		54,685		1,218		553		—		—		15,912		97,426
Grade 3		237		619		—		—		—		—		—		856
Grade 4		—		1,791		117		206		—		—		—		2,114
Total construction residential real estate < 60 months		57,396		150,273		12,797		5,229		89		1,758		20,183		247,725
Residential real estate first lien
Grade 1	$	67,422	$	246,761	$	189,340	$	195,013	$	142,744	$	251,378	$	4,856	$	1,097,514
Grade 2		18,221		76,975		72,008		47,839		37,344		65,901		969		319,257
Grade 3		3,520		6,168		3,204		3,401		2,707		6,231		—		25,231
Grade 4		—		1,870		802		616		1,930		1,855		—		7,073
Total residential real estate first lien		89,163		331,774		265,354		246,869		184,725		325,365		5,825		1,449,075
Residential real estate all other
Grade 1	$	7,051	$	36,798	$	24,767	$	18,504	$	5,291	$	15,416	$	52,478	$	160,305
Grade 2		1,250		6,992		5,255		3,783		1,219		4,920		92,263		115,682
Grade 3		247		918		394		265		171		482		1,924		4,401
Grade 4		329		68		245		108		—		186		990		1,926
Total residential real estate all other		8,877		44,776		30,661		22,660		6,681		21,004		147,655		282,314
Agriculture
Grade 1	$	15,224	$	38,758	$	37,016	$	37,398	$	26,324	$	56,517	$	52,148	$	263,385
Grade 2		18,495		34,417		21,982		17,310		12,002		24,776		41,465		170,447
Grade 3		413		1,260		2,306		2,319		1,742		4,501		7,471		20,012
Grade 4		10		461		246		865		162		397		125		2,266
Total Agriculture		34,142		74,896		61,550		57,892		40,230		86,191		101,209		456,110
Commercial non-real estate
Grade 1	$	53,825	$	126,977	$	90,837	$	132,250	$	106,919	$	66,222	$	282,164	$	859,194
Grade 2		32,121		84,894		69,514		28,032		15,275		7,963		208,939		446,738
Grade 3		447		1,391		1,652		1,701		371		347		36,508		42,417
Grade 4		559		669		1,212		601		124		381		345		3,891
Grade 5		—		—		4		71		6		172		—		253
Total commercial non-real estate		86,952		213,931		163,219		162,655		122,695		75,085		527,956		1,352,493
Consumer non-real estate
Grade 1	$	48,308	$	165,238	$	94,651	$	46,454	$	20,379	$	8,293	$	21,697	$	405,020
Grade 2		5,231		17,991		14,393		8,298		3,716		1,625		12,744		63,998
Grade 3		248		1,409		2,135		1,119		742		401		13		6,067
Grade 4		1,815		533		594		514		223		146		2		3,827
Total consumer non-real estate		55,602		185,171		111,773		56,385		25,060		10,465		34,456		478,912
Oil and gas
Grade 1	$	73,126	$	15,712	$	10,877	$	4,130	$	20,084	$	8,089	$	223,596	$	355,614
Grade 2		33,690		9,395		6,677		4,168		1,538		2,413		96,888		154,769
Grade 3		28		22		81		—		165		56		450		802
Grade 4		—		—		—		—		58		408		—		466
Total oil and gas		106,844		25,129		17,635		8,298		21,845		10,966		320,934		511,651
Total loans held for investment	$	661,082	$	1,566,876	$	1,351,671	$	1,359,279	$	781,640	$	1,093,146	$	1,280,833	$	8,094,527

The following tables summarize the Company's gross charge-offs by year of origination for the periods indicated:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
	2025		2024		2023		2022		2021		Prior		Amortized Cost Basis		Total
	(Dollars in thousands)
Three months ended March 31, 2025
Commercial real estate owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	17	$	6	$	—	$	—	$	23
Commercial real estate non-owner occupied
Current-period gross charge-offs		—		—		—		—		—		—		—		—
Construction and development < 60 months
Current-period gross charge-offs		—		—		—		—		3		—		—		3
Construction residential real estate < 60 months
Current-period gross charge-offs		—		25		—		—		—		—		—		25
Residential real estate first lien
Current-period gross charge-offs		—		6		2		1		5		37		—		51
Residential real estate all other
Current-period gross charge-offs		—		—		—		—		—		—		6		6
Agriculture
Current-period gross charge-offs		—		9		—		—		1		—		17		27
Commercial non-real estate
Current-period gross charge-offs		19		10		21		33		33		72		13		201
Consumer non-real estate
Current-period gross charge-offs		—		157		224		54		6		6		—		447
Oil and gas
Current-period gross charge-offs		—		—		—		—		—		—		—		—
Total current-period gross charge-offs	$	19	$	207	$	247	$	105	$	54	$	115	$	36	$	783


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
	2024		2023		2022		2021		2020		Prior		Amortized Cost Basis		Total
	(Dollars in thousands)
Three months ended March 31, 2024
Commercial real estate owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	15	$	—	$	—	$	—	$	15
Commercial real estate non-owner occupied
Current-period gross charge-offs		—		12		—		—		1		—		—		13
Construction and development < 60 months
Current-period gross charge-offs		—		—		—		—		—		—		—		—
Construction residential real estate < 60 months
Current-period gross charge-offs		—		3		—		—		—		—		—		3
Residential real estate first lien
Current-period gross charge-offs		1		—		—		1		—		21		—		23
Residential real estate all other
Current-period gross charge-offs		—		—		—		—		—		2		27		29
Agriculture
Current-period gross charge-offs		—		—		31		—		—		—		—		31
Commercial non-real estate
Current-period gross charge-offs		—		1,001		275		132		12		126		1,508		3,054
Consumer non-real estate
Current-period gross charge-offs		—		244		97		51		13		15		11		431
Oil and gas
Current-period gross charge-offs		—		9		83		—		—		—		—		92
Total current-period gross charge-offs	$	1	$	1,269	$	486	$	199	$	26	$	164	$	1,546	$	3,691

Allowance for Credit Losses Methodology

The Company determines its provision for credit losses and allowance for credit losses using the current expected credit loss methodology that is referred to as the current expected credit loss ("CECL") model. The allowance for current expected credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The allowance for credit losses methodology is disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The following tables detail activity in the allowance for credit losses on loans for the periods 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		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 March 31, 2025
Real estate:
Commercial real estate owner occupied	$	6,869	$	(23	)	$	39	$	16		$	106		$	6,991
Commercial real estate non-owner occupied		33,097		—			—		—			656			33,753
Construction and development < 60 months		8,671		(3	)		—		(3	)		(55	)		8,613
Construction residential real estate < 60 months		2,336		(25	)		—		(25	)		(29	)		2,282
Residential real estate first lien		4,568		(51	)		3		(48	)		146			4,666
Residential real estate all other		1,741		(6	)		21		15			34			1,790
Agriculture		5,696		(27	)		11		(16	)		96			5,776
Commercial non-real estate		24,150		(201	)		125		(76	)		(197	)		23,877
Consumer non-real estate		4,833		(447	)		81		(366	)		353			4,820
Oil and gas		7,536		—			—		—			351			7,887
Total	$	99,497	$	(783	)	$	280	$	(503	)	$	1,461		$	100,455


	Allowance for Credit Losses
	Balance at beginning of period		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 March 31, 2024
Real estate:
Commercial real estate owner occupied	$	7,483	$	(15	)	$	20	$	5		$	(20	)	$	7,468
Commercial real estate non-owner occupied		33,080		(13	)		—		(13	)		113			33,180
Construction and development < 60 months		3,950		—			—		—			2,646			6,596
Construction residential real estate < 60 months		3,414		(3	)		—		(3	)		53			3,464
Residential real estate first lien		4,914		(23	)		4		(19	)		28			4,923
Residential real estate all other		1,646		(29	)		5		(24	)		30			1,652
Agriculture		6,137		(31	)		12		(19	)		19			6,137
Commercial non-real estate		22,745		(3,054	)		33		(3,021	)		758			20,482
Consumer non-real estate		4,401		(431	)		69		(362	)		296			4,335
Oil and gas		9,030		(92	)		—		(92	)		92			9,030
Total	$	96,800	$	(3,691	)	$	143	$	(3,548	)	$	4,015		$	97,267

Purchased Credit Deteriorated Loans

The Company has previously purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The Company did not purchase credit-deteriorated loans during the three month period ended March 31, 2025 or March 31, 2024.

Collateral Dependent Loans

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 three months ended March 31, 2025 and 2024, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following tables summarize collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:


	Collateral Type
	Real Estate		Business Assets		Other Assets		Total		Specific Allocation
	(Dollars in thousands)
As of March 31, 2025
Real estate:
Commercial real estate owner occupied	$	125	$	—	$	—	$	125	$	50
Commercial real estate non-owner occupied		7,822		—		—		7,822		880
Construction and development < 60 months		20,142		—		—		20,142		3,755
Construction residential real estate < 60 months		206		—		—		206		75
Residential real estate first lien		343		—		—		343		99
Residential real estate all other		98		—		—		98		33
Agriculture		1,584		110		13		1,707		688
Commercial non-real estate		—		9,510		66		9,576		2,052
Consumer non-real estate		—		—		562		562		316
Oil and gas		—		—		—		—		110
Total collateral-dependent loans held for investment	$	30,320	$	9,620	$	641	$	40,581	$	8,058

	Collateral Type
	Real Estate		Business Assets		Other Assets		Total		Specific Allocation
	(Dollars in thousands)
As of December 31, 2024
Real estate:
Commercial real estate owner occupied	$	—	$	—	$	—	$	—	$	—
Commercial real estate non-owner occupied		7,890		—		—		7,890		879
Construction and development < 60 months		20,142		—		—		20,142		3,755
Construction residential real estate < 60 months		206		—		—		206		75
Residential real estate first lien		300		—		—		300		93
Residential real estate all other		100		—		—		100		34
Agriculture		1,584		110		13		1,707		688
Commercial non-real estate		—		10,087		108		10,195		2,222
Consumer non-real estate		—		—		399		399		242
Oil and gas		—		—		—		—		—
Total collateral-dependent loans held for investment	$	30,222	$	10,197	$	520	$	40,939	$	7,988

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 consolidated 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:


	Three Months Ended March 31,
	2025		2024
	(Dollars in thousands)
Other real estate owned	$	909	$	1,582
Repossessed assets		824		455
Total	$	1,733	$	2,037