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 Quarter Ended Commission File Number
March 31, 1994 0-7674
FIRST FINANCIAL BANKSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Texas 75-0944023
(State of Incorporation) (I.R.S. Employer
Identification No.)
400 Pine Street, Abilene, Texas 79601
(Address of Executive Offices) (Zip Code)
Registrant's Telephone Number (915) 675-7155
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $10.00 Per Share
(Title of Class)
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 X . No .
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
3,972,313 shares
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TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item Page
1. Financial Statements 3
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Signatures 11
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated balance sheets of First Financial Bankshares, Inc. at March 31,
1994, December 31, 1993, and March 31, 1993, and the consolidated statements of
income, the consolidated statements of changes in stockholders'equity, and the
consolidated statements of cash flows for the three months ended March 31, 1994
and 1993, follow on pages 4 through 7.
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<TABLE> FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<CAPTION>
March 31, December 31,
1994 1993 1993 1
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 50,375,800 $ 44,655,903$ 55,214,848
Interest-bearing deposits
in banks 885,264 981,000 787,000
Federal funds sold 27,078,000 42,340,000 45,506,000
Investment securities:
U.S Treasury and government
agencies 448,424,590 417,004,928435,839,601
State and political
subdivisions 18,872,249 13,125,21117,484,964
Other 7,961,246 10,404,195 2,854,971
Total investment
securities 475,258,085 440,534,334 456,179,536
Loans 414,057,089 410,874,468427,099,587
Less: Allowance for loan
losses 9,327,781 9,319,288 9,013,387
Unearned discount 6,868,228 6,924,813 6,856,584
Net loans 397,861,080 394,630,367 411,229,616
Bank premises and equipment-net 30,568,924 27,219,63030,052,817
Goodwill 1,238,783 1,080,543 1,257,743
Other assets 20,140,311 21,997,830 17,755,085
TOTAL ASSETS $1,003,406,247 $ 973,439,607$1,017,982,645
LIABILITIES
Non-interest-bearing deposits $ 180,137,736 $ 162,647,891 $ 193,934,140
Interest-bearing deposits-demand 302,150,976 293,460,391306,975,494
Interest-bearing deposits-time 413,034,325 417,037,332 412,439,927
Total deposits 895,323,037 873,145,614913,349,561
Short-term borrowings 150,000 105,000 90,000
Mortgage notes payable 1,127,845 1,218,133 1,150,988
Dividends payable 1,270,837 914,480 1,198,940
Other liabilities 7,252,018 7,636,021 5,735,459
Total liabilities 905,123,737 883,019,248 921,524,948
SHAREHOLDERS' EQUITY
Capital stock-$10 par value;
5,000,000 shares authorized 39,723,130 36,111,23039,708,470
Capital surplus 15,866,153 6,508,40515,841,318
Retained earnings 42,740,465 47,800,72440,907,909
Unrealized (loss) on investment
securities available for sale (47,238) - -
Total Shareholders'equity 98,282,510 90,420,359 96,457,697
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,003,406,247 $ 973,439,607$1,017,982,645
1 Restated to reflect pooling of interests.
/TABLE
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<TABLE> FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
<CAPTION>
Three Months Ended
March 31,
1994 1993 1
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 8,348,879$ 7,976,805
Investment income-taxable 5,994,169 6,322,392
Investment income-tax exempt 217,709 179,746
Interest on interest bearing deposits 10,810 10,188
Interest on federal funds sold and other 281,924 361,550
Total interest income 14,853,491 14,850,681
INTEREST EXPENSE
Interest-bearing deposits 4,892,737 5,014,913
Short-term borrowings 724 618
Interest on mortgage notes payable 26,534 28,643
Total interest expense 4,919,995 5,044,174
NET INTEREST INCOME 9,933,496 9,806,507
Provision for loan losses 40,000 79,510
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,893,496 9,726,997
NON-INTEREST INCOME
Trust fees 774,813 655,500
Service fees on deposit accounts 1,300,161 1,217,286
Other 859,846 606,427
Total non-interest income 2,934,820 2,479,213
NON-INTEREST EXPENSE
Salaries and employee benefits 4,155,870 3,710,093
Net occupancy and equipment expenses 660,493 536,692
Equipment expense 500,674 450,613
FDIC assessments 500,185 678,940
Correspondent bank service charges 218,276 205,933
Other 2,244,953 1,706,394
Total non-interest expense 8,280,451 7,288,665
EARNINGS BEFORE INCOME TAXES 4,547,865 4,917,545
Provision for income tax 1,444,472 1,595,382
EARNINGS BEFORE CUMULATIVE ADJUSTMENT 3,103,393 3,322,163
Cumulative adjustment-change in
accounting principle - 1,023,595
NET EARNINGS AFTER CUMULATIVE ADJUSTMENT
DUE TO CHANGE IN ACCOUNTING PRINCIPLE$ 3,103,393$ 4,345,758
EARNINGS PER SHARE
BEFORE CUMULATIVE ADJUSTMENT $ 0.78$ 0.84
NET EARNINGS PER SHARE
AFTER CUMULATIVE ADJUSTMENT 2 $ 0.78$ 1.09
DIVIDENDS PER SHARE 3 $ 0.32$ 0.25
1 Restated to reflect pooling of interests.
2 Earnings per share are calculated using weighted average shares outstanding for each period
presented, giving retroactive effect to shares issued through a 10% stock dividend in the
second quarter of 1993.
3 Dividends per share are calculated using actual number of shares outstanding at the end of
each period presented, giving retroactive effect to shares issued through a 10% stock
dividend in the second quarter of 1993.
/TABLE
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<TABLE> FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - UNAUDITED
<CAPTION>
Unrealized
Loss On
Investment Total
Securities Stock-
Capital Stock Capital Retained Available holders'
Shares Amount Surplus Earnings for Sale Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1993 3,384,785$33,847,850$ 4,299,902 $43,285,206 $ - $81,432,958
Net earnings 13,746,463 13,746,463
Cash dividends (4,505,022) (4,505,022)
Stock issued in
acquisition 224,160 2,241,600 2,168,909 1,090,541 5,501,050
Stock issued 361,902 3,619,020 9,372,507 (12,709,279) 282,248
Balances at De-
cember 31, 1993 3,970,847 39,708,470 15,841,318 40,907,909 - 96,457,697
Net earnings-
year to date 3,103,393 3,103,393
Cash dividends (1,270,837) (1,270,837)
Stock issued 1,466 14,660 24,835 39,495
Unrealized
gain (loss) (47,238) (47,238)
Balances at
March 31, 1994 3,972,313$39,723,130$15,866,153 $42,740,465 $ (47,238) $98,282,510
/TABLE
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<TABLE> FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,103,393 $ 4,345,758
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 640,446 511,162
Provision for loan losses 40,000 79,510
Premium amortization, net of discount accretion 1,106,149 1,207,748
(Gain) loss on sale of investment securities ( 73,396) 684
Deferred federal income tax benefit - ( 32,430)
(Increase) decrease in other assets ( 2,508,141) ( 1,945,858)
Increase (decrease) in other liabilities 1,660,353 ( 924,764)
Total adjustments 865,411 ( 1,103,848)
Net cash provided by operating activities 3,968,804 3,241,810
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing
deposits in banks (98,264) -
Cash and cash equivalents received through
acquisition, net of payment for stock 5,511,888
Proceeds from sale of investment securities 2,024,688 312,764
Proceeds from maturity of investment securities 30,067,505 52,163,718
Purchase of investment securities (52,250,734) ( 41,793,686)
Net (increase)in loans 13,451,402 ( 3,574,575)
Capital expenditures ( 1,137,544) ( 247,198)
Proceeds from sale of other assets - 90,556
Net cash provided by (used in)
investing activities ( 7,942,947) 12,463,467
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits (18,620,921)( 51,602,908)
Net increase (decrease) in time deposits 594,398 10,303,237
Net decrease in other short-term borrowings 60,000 15,000
Repayment of long-term debt ( 23,143) 67,145
Proceeds from stock issuances 39,495 31,802
Purchase of treasury stock - ( 344,924)
Dividends paid ( 1,342,734) ( 913,892)
Net cash provided by (used in)
financing activities (19,292,905) ( 42,444,540)
Net (decrease) in cash and cash equivalents (23,267,048)( 26,739,263)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 100,720,848 113,735,166
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77,453,800 $ 86,995,903
<PAGE>
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Assets acquired through foreclosure $ - $ 246,095
Loans to finance sales of other real estate 122,865 -
Unrealized (loss) on investment securities
available for sale 47,238 -
The Company purchased all of the capital
stock of Stephenville Bank and Trust for
$7,750,000. In conjunction with the
acquisition, liabilities were assumed,
as follows:
Fair value of assets acquired - 87,419,036
Cash paid for the capital stock - ( 7,750,000)
Liabilities assumed $ - $ 79,669,036
OTHER DISCLOSURES:
Interest paid $ 4,961,462 $ 5,786,120
Federal income tax paid 120,000 385,470
/TABLE
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net income for the first quarter amounted to $3.1 million, or $ .78 per
share. In the first quarter of 1993 earnings before cumulative accounting
adjustment totaled $3.3 million, or $ .84 per share. Including the
accounting adjustment resulting from the adoption of the new accounting
principle for income taxes, net income was $4.3 million, or $1.09 per share,
in the first quarter of 1993. The decrease in 1994 earnings is attributed
primarily to narrower interest margins and increased operating expenses,
some of which relate to the installation of new data processing systems, and
the merger transaction mentioned above. Nonrecurring merger related
expenses amounted to $98 thousand or $ .015 per share. Compared to the
fourth quarter of 1993, the current quarterly earnings are up $74 thousand.
In March 1994, the Company acquired through a stock exchange, Concho
Bancshares, Inc. and its subsidiary, Southwest Bank of San Angelo. The
transaction was accounted for as a pooling of interests; therefore, prior
period financial statements have been restated to include Concho Bancshares,
Inc. The following table shows the effect of Concho Bancshares, Inc.'s
operations for the periods prior to combination (Note- The 1993 amounts are
before cumulative adjustment due to change in accounting principle):
<TABLE>
<CAPTION>
First
$(thousands) Financial Concho Combined
<S> <C> <C> <C>
Three Months Ended March 31, 1994:
Net Interest Income $ 9,048 $ 885 $ 9,933
Net Income 2,908 195 3,103
Three Months Ended March 31, 1993:
Net Interest Income 8,927 880 9,807
Net Income 3,131 191 3,322
</TABLE>
Balance Sheet Review
Total assets of $1.003 billion at March 31, 1994, represent a $30.0 million
increase from March 31, 1993, and a $14.5 million decrease from December 31,
1993. As previously stated, the 1993 financial statements have been
restated to reflect the acquisition of Concho Bancshares which was accounted
for as a pooling. Compared to last year, the Company's balance sheet mix
is relatively unchanged with asset growth funded with increased deposits and
internally generated capital. Compared to year-end 1993, investment
securities are up almost $20 million with the growth funded by reduced
Federal funds sold and cash. Loans and deposits at March 31, 1994, show
decreases of $13 million and $18 million, respectively, and, for the most
part, reflect normal seasonal fluctuations.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". At March 31, 1994, the Company classified
investment securities totaling $47.4 million as available-for-sale and
$427.8 million as held-to-maturity. The securities classified as available-
for-sale are recorded at fair value, with the resulting $47 thousand net of
tax unrealized loss reported in a separate component of shareholders'
equity. Investment securities classified as held-to-maturity are recorded
at amortized cost. At March 31, 1994, the Company had no investment
securities classified as trading.
Nonperforming assets totaled $4.6 million at March 31, 1994, down from $7.2
million at March 31, 1993, and $5.0 million at December 31, 1993. The
improvement from the first quarter 1993 resulted from a reduction in
foreclosed assets, while lower nonaccrual loans accounted for the decrease
from December 31, 1993. Management is not aware of any material classified
credit not properly disclosed as nonperforming and considers the allowance
for possible loan losses to be adequate.
<PAGE>
Liquidity and Capital
The Company's consolidated statements of cash flows are presented on pages
7-8 in this report. At March 31, 1994, the balance sheet continues to
reflect adequate liquidity, and the parent company had no funded debt under
its $5 million line of credit from an unaffiliated financial institution.
The ratio of equity capital to assets at March 31, 1994, was 9.8% as
compared to 9.3% at March 31, 1993, and 9.5% at December 31, 1993. With
respect to the acquisition of Concho Bancshares, Inc., equity capital
increased approximately $6.1 million, and 224 thousand shares of common
stock were issued to Concho shareholders. The 1994 first quarter cash
dividend was $ .32 per share, or 41% of earnings. On April 26, 1994, a 25%
stock dividend and $. 28 per share second quarter cash dividend were
approved. The stock dividend will be issued June 1, 1994 and the cash
dividend is payable July 1, 1994.
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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.
FIRST FINANCIAL BANKSHARES,
INC.
Date May 12, 1994 By:
Curtis R. Harvey
Executive Vice-President
and Chief Financial Officer
Date May 12, 1994 By:
Sandy Lester
Secretary-Treasurer
