Company: BANFP
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000950170-25-030159
Chunk: 41

Company: BANCFIRST CORP /OK/
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 41
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 initial balance. The loss experience of this original balance is tracked annually and summed over the life of the loan for each separate loan pool, leaving a cumulative life of credit loss rate based on historic averages weighted towards more recent loss experience. These key quantitative inputs change from period to period as new loans are originated, and charge-offs and recoveries are recognized. The recovery rate is revised on an annual basis, taking into consideration the most recent seven years. The weighting factor percentages remain static, however, the most recent year receives the highest weighting percentage. 

The Senior Loan Committee (“the SLC”) sets qualitative adjustments for each loan pool. In setting the qualitative adjustments, they consider several factors, including external economic information, peer bank comparisons and experience with the loan portfolio, among others. The SLC also considers other current conditions adjustments and reasonable and supportable forecasts derived from third party information, primarily Moody’s Analytics economic scenarios. To determine the appropriateness of the economic scenarios, the Company uses judgment and statistical analysis which correlates charge-off history to the economic scenarios. The Company then forecasts future loss expectations based on the selected economic scenarios over the next 12-24 months, which is driven by management’s judgment of a reasonable and supportable forecast period, to arrive at an estimated qualitative adjustment attributable to economic forecasts. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected credit losses, the Company reverts to historical loss information.  

 In some cases, management may determine a loan to be collateral dependent. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty based on the Company's assessment as of the reporting date and the repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, the standard allows institutions to use, as a practical expedient, the fair value of the collateral to measure current expected credit losses on collateral-dependent financial assets. This amount is included in the allowance for credit losses. 

Each quarter the SLC reviews the aggregate allowance and adjusts the appropriateness of the allowance. In addition, annually or more frequently as needed, the SLC evaluates the qualitative adjustments used in the allowance based on the information described above. To facilitate the SLC’s evaluation, the Asset Quality Department performs periodic reviews of business units and reports on the adequacy of management’s identification of collateral-dependent and adversely classified loans and their adherence to loan policies and procedures.

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The process of evaluating the appropriateness of the allowance for credit losses necessarily involves the exercise of judgment