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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1995.
REGISTRATION NO. 33-64565
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRST FINANCIAL BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 6712 75-0944023
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
400 PINE STREET
ABILENE, TEXAS 79601
(915) 675-7155
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CURTIS R. HARVEY
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
FIRST FINANCIAL BANKSHARES, INC.
400 PINE STREET
ABILENE, TEXAS 79601
(915) 675-7155
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
Copies to:
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N. KATHLEEN FRIDAY, P.C. DAVID L. BUHRMANN WALTER E. ZELLERS
AKIN, GUMP, STRAUSS, MCMAHON, SUROVIK, SUTTLE, ZELLERS & ZELLERS
HAUER & FELD, L.L.P. BUHRMANN, HICKS & Gill, P.C. 127 NORTH WACO
1700 PACIFIC AVENUE, SUITE 4100 P.O. BOX 3679 WEATHERFORD, TX 76086
DALLAS, TEXAS 75201-4618 ABILENE, TX 79604
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(1)
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Common Stock.................... 323,982 $15.85 $5,135,115 $1,771
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(1) The registration fee has been computed pursuant to Rule 457(f)(2) under the
Securities Act of 1933, as amended (the "Securities Act"), based on the
book value of the shares of Common Stock of Weatherford National
Bancshares, Inc. at September 30, 1995 that may be exchanged for the
securities being registered.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act, or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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FIRST FINANCIAL BANKSHARES, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
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FORM S-4 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
- -------------------------------- ------------------
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1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front Cover Page; Available Information;
Incorporation by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information................................ Prospectus Summary; Summary Financial Data;
First Financial and Subsidiaries and Weatherford
Holdings and Subsidiaries Pro Forma Combined
Selected Financial Data; Comparative Per Share
Data
4. Terms of the Transaction............................. The Exchange Offer; Description of First Financial
Capital Stock; Comparison of Shareholder Rights
5. Pro Forma Financial Information...................... Pro Forma Combined Selected Financial Data
6. Material Contacts With the Company Being
Acquired............................................. Prospectus Summary; Background of the Exchange
Offer; Operation After the Exchange Offer and
Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ *
8. Interests of Named Experts and Counsel............... *
9. Disclosure of Commission Position on
Indemnification of Securities Act Liabilities........ *
10. Information with Respect to S-3 Registrants.......... Available Information; Incorporation by Reference;
Prospectus Summary; Summary Financial Data;
Certain Regulatory Considerations; Information
About First Financial
11. Incorporation of Certain Information by Reference.... Incorporation by Reference
12. Information with Respect to S-2 or S-3 Registrants... *
13. Incorporation of Certain Information by Reference.... *
14. Information with Respect to Registrants Other than
S-3 or S-2 Registrants............................... *
15. Information With Respect to S-3 Companies............ *
16. Information With Respect to S-2 or S-3 Companies..... *
17. Information With Respect to Companies Other than
S-2 or S-3 Companies................................. Prospectus Summary; Summary Financial Data;
Information About Weatherford Holdings;
Consolidated Financial Statements
18. Information if Proxies, Consents or Authorizations
are to be Solicited.................................. *
19. Information if Proxies, Consents, or Authorizations
are not to be Solicited, or in an Exchange Offer..... The Exchange Offer; Incorporation by Reference;
Information About Weatherford Holdings
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* Not applicable.
<PAGE>
OFFERING CIRCULAR/
PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING
SHARES OF COMMON STOCK OF
WEATHERFORD NATIONAL BANCSHARES, INC.
FOR
SHARES OF COMMON STOCK OF
FIRST FINANCIAL
BANKSHARES, INC.
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., ABILENE, TEXAS TIME,
ON JANUARY 17, 1996
First Financial Bankshares, Inc., a Texas corporation ("First Financial" or
the "Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange shares of its voting common stock, par value $10.00 per share ("First
Financial Common Stock"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined herein) of which this Prospectus is a part, for all of the issued
and outstanding shares of stock of Weatherford National Bancshares, Inc., a
Texas corporation ("Weatherford Holdings"), par value $5.00 per share
("Weatherford Holdings Common Stock"). Upon consummation of the Exchange Offer,
each outstanding share of Weatherford Holdings Common Stock tendered in the
Exchange Offer will, subject to certain provisions with respect to fractional
shares, be exchanged (the "Exchange") for 1.5 shares of First Financial Common
Stock, subject to certain adjustments.
Subject to the terms and conditions of the Exchange Offer, First Financial
will accept for exchange all shares of Weatherford Holdings Common Stock that
are validly tendered on or prior to 5:00 p.m., Abilene, Texas time, on the date
the Exchange Offer expires, which will be January 17, 1996 (the "Expiration
Date"), unless the Exchange Offer is extended. Once shares of Weatherford
Holdings Common Stock are tendered in the Exchange Offer, they may not be
withdrawn. The Exchange Offer is subject to certain conditions, including a
condition that at least 90% of the outstanding Weatherford Holdings Common Stock
be tendered in the Exchange Offer. See "The Exchange Offer--Conditions to
Consummation of the Exchange Offer; Termination."
Upon consummation of the Exchange Offer, it is anticipated that Weatherford
Holdings will be merged (the "Merger") with and into a wholly-owned subsidiary
of First Financial and that any remaining Weatherford Shareholders (as defined
below) will receive in the Merger the same consideration they would have
received had they participated in the Exchange Offer, subject to their rights to
dissent to the Merger. This Prospectus also relates to the shares of First
Financial Common Stock that may be issued in the Merger.
Prior to the Exchange Offer, there has been no public market for the
Weatherford Holdings Common Stock. The First Financial Common Stock is traded
on the NASDAQ National Market under the trading symbol "FFIN." On December 14,
1995, the closing sales price of the First Financial Common Stock, as reported
by NASDAQ, was $32.00.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December 15, 1995
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL FIRST FINANCIAL ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF WEATHERFORD HOLDINGS COMMON STOCK IN
ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT
BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
First Financial Bankshares, Inc. (which until October 26, 1993 was named
"First Abilene Bankshares, Inc.") is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). The reports and other information filed
by the Company with the Commission can be inspected and copied at the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: 7 World Trade Center,
New York, New York 10048; and Northwestern Atrium Center, 500 West Madison
Street, Room 1400, Chicago, Illinois 60661-2511. Copies of such information can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto, and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS
TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE THEREIN,
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY SHAREHOLDER OF
WEATHERFORD HOLDINGS TO WHOM THIS PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN
REQUEST TO CURTIS R. HARVEY, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, FIRST FINANCIAL BANKSHARES, INC., P.O. BOX 701, ABILENE, TEXAS 79604,
TELEPHONE NUMBER (915) 675-7155. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JANUARY 10, 1996.
First Financial's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, First Financial's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995 and September 30, 1995 and First
Financial's Current Reports on Form 8-K dated September 7, 1995 and October 2,
1995, in each case filed with the Commission pursuant to Section 13 of the
Exchange Act, and the description of First Financial Common Stock which is
contained in First Financial's Registration Statement on Form 8-A dated March
29, 1974, filed under Section 12 of the Exchange Act, as amended by Amendment
No. 1 to Form 8-A on Form 8-A/A No. 1 dated January 7, 1994 and Amendment No. 2
to Form 8-A on Form 8-A/A No. 2 dated November 20, 1995, are incorporated into
this Prospectus by reference.
All documents filed by First Financial pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document
2
<PAGE>
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that
such statement is modified or superseded by a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
No person is authorized to give any information or to make any representations
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by First Financial or Weatherford Holdings. This Prospectus does not constitute
an offering within any jurisdiction to any person to whom it is unlawful to make
such offer within such jurisdiction.
The information herein concerning First Financial has been obtained from
various filings by First Financial under the Exchange Act and from management.
The information herein concerning Weatherford Holdings has been obtained from
the management of Weatherford Holdings.
TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUMMARY..................................................... 5
The Parties.......................................................... 5
Summary of the Transaction........................................... 6
SUMMARY FINANCIAL DATA................................................. 9
FIRST FINANCIAL AND SUBSIDIARIES SELECTED FINANCIAL DATA............... 10
WEATHERFORD HOLDINGS AND SUBSIDIARIES SELECTED FINANCIAL DATA.......... 11
FIRST FINANCIAL AND SUBSIDIARIES AND WEATHERFORD HOLDINGS AND
SUBSIDIARIES PRO FORMA COMBINED SELECTED FINANCIAL DATA.............. 12
FIRST FINANCIAL AND SUBSIDIARIES, WEATHERFORD HOLDINGS AND
SUBSIDIARIES AND CITIZENS AND SUBSIDIARIES PRO FORMA COMBINED
SELECTED FINANCIAL DATA.............................................. 13
COMPARATIVE PER SHARE DATA............................................. 14
THE EXCHANGE OFFER..................................................... 15
General.............................................................. 15
Background of the Exchange Offer..................................... 15
First Financial's Reasons for the Exchange Offer..................... 15
Weatherford Holdings' Reasons for the Exchange Offer................. 15
Operation After the Exchange Offer and Merger........................ 17
The Exchange Rate.................................................... 17
The Expiration Date.................................................. 18
Conditions to Consummation of the Exchange Offer; Termination........ 18
Exchange of Shares and Certificates.................................. 19
Guaranteed Delivery Procedures....................................... 21
Fractional Shares.................................................... 21
No Withdrawal Rights................................................. 21
Regulatory Approvals Required........................................ 21
Federal Income Tax Consequences...................................... 22
Exchange Agent....................................................... 23
Resale by Weatherford Holdings' Affiliates........................... 23
Anticipated Merger and Dissenting Shareholders' Rights............... 24
Accounting Treatment................................................. 24
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3
<PAGE>
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PAGE
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CERTAIN REGULATORY CONSIDERATIONS...................................... 25
General.............................................................. 25
Payment of Dividends................................................. 25
Certain Transactions by First Financial with its Affiliates.......... 26
Capital.............................................................. 26
First Financial Support of the First Financial Banks................. 28
FDIC Insurance Assessments........................................... 28
FDICIA............................................................... 28
Interstate Banking and Branching Act................................. 29
Pending and Proposed Legislation..................................... 29
DESCRIPTION OF FIRST FINANCIAL CAPITAL STOCK........................... 30
COMPARISON OF SHAREHOLDER RIGHTS....................................... 30
Board of Directors................................................... 30
Indemnification of Directors and Officers............................ 31
Special Meetings of Shareholders..................................... 31
INFORMATION ABOUT FIRST FINANCIAL...................................... 31
General.............................................................. 31
Recent Developments.................................................. 32
Market Prices of and Dividends Paid on First Financial Common Stock.. 33
INFORMATION ABOUT WEATHERFORD HOLDINGS................................. 34
General.............................................................. 34
Market Area.......................................................... 34
Services............................................................. 34
Competition.......................................................... 35
Employees............................................................ 35
Properties........................................................... 35
Market for and Dividends Paid on Weatherford Holdings Common Stock... 35
Security Ownership of Certain Beneficial Owners...................... 35
Security Ownership of Management..................................... 36
SELECTED CONSOLIDATED FINANCIAL DATA OF WEATHERFORD HOLDINGS........... 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION OF WEATHERFORD HOLDINGS......................... 39
LEGAL MATTERS.......................................................... 55
EXPERTS................................................................ 55
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WEATHERFORD HOLDINGS..... F-1
ANNEX A - OPINION OF GEORGE, MORGAN & SNEED, P.C.
ANNEX B - ARTICLES 5.12, 5.13, AND 5.16 OF THE TEXAS BUSINESS CORPORATION ACT
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus. As this summary is necessarily incomplete, reference is made to,
and this summary is qualified in its entirety by, the more detailed information
contained or incorporated by reference in this Prospectus and the Annexes
hereto. Shareholders of Weatherford Holdings are urged to read the Prospectus
and the Annexes hereto in their entirety.
THE PARTIES
The Company is a Texas corporation and a multi-bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "BHCA"). On October
28, 1993, the Company changed its name from "First Abilene Bankshares, Inc." to
"First Financial Bankshares, Inc." First Financial owns, through its wholly-
owned Delaware subsidiary, First Financial Bankshares of Delaware, Inc., all of
the capital stock of seven banks organized and located in Texas: First National
Bank of Abilene, Abilene, Texas; Hereford State Bank, Hereford, Texas; First
National Bank, Sweetwater, Texas; Eastland National Bank, Eastland, Texas; The
First National Bank in Cleburne, Cleburne, Texas; Stephenville Bank and Trust
Co., Stephenville, Texas; and Southwest Bank of San Angelo, San Angelo, Texas
(collectively, the "First Financial Banks"). First Financial operates
principally in order to give the First Financial Banks access to additional
management and technical resources which enable them to provide expanded banking
services while continuing their local activity. The First Financial Banks are
engaged in the general commercial banking business consisting of the acceptance
of checking, savings and time deposits, the making of loans, including bank
credit card services, transmitting funds and performing such other banking
services as are usual and customary for commercial banks. All First Financial
Banks, with the exception of Eastland National Bank, have trust powers, and
First National Bank of Abilene, First National Bank, Sweetwater, Hereford State
Bank and Stephenville Bank and Trust Co have active trust departments. As of
September 30, 1995, First Financial and its consolidated subsidiaries had total
assets of approximately $1.03 billion, total deposits of approximately $905.7
million, total loans (net of allowance for loan losses) of approximately $446.2
million and total shareholders' equity of approximately $112.4 million. First
Financial's principal executive offices are located at 400 Pine Street, Abilene,
Texas 79601, and its telephone number is (915) 675-7155. See "Information About
First Financial."
Weatherford National Bancshares, Inc. ("Weatherford Holdings") is a one bank
holding company formed in 1984 and incorporated in the State of Texas.
Weatherford Holdings owns 100% of Parker Bancshares, Inc. ("Parker Bancshares"),
a Delaware corporation and bank holding company that owns 100% of Weatherford
National Bank ("Weatherford National"), a national bank having its principal
office in the City of Weatherford, Parker County, Texas. Weatherford National,
which began operations in 1984, is federally chartered and insured by the
Federal Deposit Insurance Corporation. The market area of Weatherford National
is Parker County and surrounding counties. With two locations in Weatherford,
Weatherford National provides a full range of both commercial and consumer
banking services, including loans, checking accounts, savings programs, safe
deposit facilities, access to automated teller machines, and credit card
programs. The bank does not offer trust services. As of September 30, 1995,
Weatherford Holdings and its consolidated subsidiaries had total assets of
approximately $62.1 million, total deposits of approximately $56.5 million,
total loans (net of allowance for loan losses) of approximately $25.0 million
and total shareholders' equity of approximately $5.1 million. Weatherford's
principal executive offices are located at 101 College Park Drive, Weatherford,
Texas 76086 and its telephone number is (817) 599-7351. See "Information about
Weatherford Holdings".
5
<PAGE>
SUMMARY OF THE TRANSACTION
THE EXCHANGE OFFER
Pursuant to a Stock Exchange Agreement and Plan of Reorganization dated as of
October 20, 1995, between First Financial and Weatherford Holdings, Parker
Bancshares and Weatherford National (the "Exchange Agreement"), First Financial
is offering to acquire from the shareholders of Weatherford Holdings (the
"Weatherford Shareholders") all outstanding shares of Weatherford Holdings
Common Stock in exchange for shares of First Financial Common Stock at the
exchange rate specified below. THE WEATHERFORD HOLDINGS BOARD OF DIRECTORS HAS
UNANIMOUSLY DETERMINED THAT THE EXCHANGE OFFER IS FAIR TO THE WEATHERFORD
SHAREHOLDERS. See "The Exchange Offer."
THE EXCHANGE RATE
First Financial will issue and exchange 1.5 shares of First Financial Common
Stock for each share of Weatherford Holdings Common Stock tendered by the
Weatherford Shareholders who accept the Exchange Offer during the time period
the Exchange Offer is in effect; provided, however, that if First Financial,
prior to consummation of the Exchange Offer, shall issue any additional shares
of its Common Stock pursuant to any stock dividend or stock split, the rate of
exchange (the "Exchange Rate") shall be adjusted so as to prevent dilution of
the exchanging Weatherford Shareholders. First Financial will not issue any
fractional shares of First Financial Common Stock. Weatherford Shareholders who
would otherwise be entitled to receive fractional shares of First Financial
Common Stock will be paid in cash for such fractional shares based upon a value
of $33.34 per share of First Financial Common Stock.
THE EXPIRATION DATE
Unless otherwise extended by First Financial, the offer by First Financial to
exchange First Financial Common Stock for Weatherford Holdings Common Stock
shall terminate at 5:00 p.m., Abilene, Texas time on January 17, 1996 (the
"Expiration Date").
CONDITIONS TO CONSUMMATION OF THE EXCHANGE OFFER; TERMINATION
Consummation of the Exchange Offer is subject to certain conditions, including
without limitation, the valid tender by Weatherford Shareholders of at least
ninety percent (90%) of Weatherford Holdings Common Stock; the receipt of all
required regulatory approvals and the lapse of certain waiting periods with
respect to such approvals; the receipt by First Financial of an opinion from its
independent accountants that the transaction will be accounted for as a "pooling
of interests"; the receipt by Weatherford Holdings of an opinion from its
independent public accountants and/or tax counsel that the Exchange will not be
considered a taxable event for federal income tax purposes; the receipt by First
Financial of an opinion of counsel for Weatherford Holdings as to certain
corporate matters regarding Weatherford Holdings, Parker Bancshares and
Weatherford National; the receipt by Weatherford Holdings of an opinion of
counsel for First Financial as to certain corporate matters regarding First
Financial; the absence of any material adverse change in the financial condition
of either First Financial, Weatherford Holdings, Parker Bancshares, or
Weatherford National; the absence of legal or governmental action with respect
to the Exchange Offer; the receipt by First Financial of a satisfactory Phase I
Environmental Assessment Report covering all properties owned by Weatherford
Holdings and its subsidiaries; and appropriate action shall have been taken to
freeze, merge or terminate the Weatherford National 401(k) Profit Sharing Plan
and First Financial shall be satisfied with respect to certain other matters
concerning such Plan.
6
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The Exchange Offer may be terminated at any time (a) by mutual consent of
First Financial, Weatherford Holdings, Parker Bancshares and Weatherford
National, (b) by First Financial if any of the other parties shall have breached
a representation or warranty or covenant which constitutes a material adverse
change from that represented in the Exchange Agreement or if any of the
conditions to consummating the Exchange Offer are not satisfied or waived, (c)
by Weatherford Holdings if First Financial shall have breached a representation
or warranty or covenant which constitutes a material adverse change from that
represented in the Exchange Agreement or if any of the conditions to
consummating the Exchange Offer are not satisfied or waived, (d) by First
Financial or Weatherford Holdings if the Exchange Offer is not consummated by
March 31, 1996, or (e) by First Financial or Weatherford Holdings if a court or
governmental body shall have taken any action restraining, enjoining or
otherwise prohibiting the Exchange or the Merger (as defined herein) and such
action shall be final and nonappealable. If the Exchange Offer is terminated
without the acceptance by First Financial of any shares of Weatherford Holdings
Common Stock tendered, all shares so tendered will be promptly returned to the
tendering Weatherford Shareholders. See "The Exchange Offer - Conditions to
Consummation of the Exchange; Termination."
EXCHANGE OF SHARES AND CERTIFICATES
The Weatherford Shareholders are receiving with this Prospectus a letter of
transmittal for acceptance of the Exchange Offer (the "Letter of Transmittal").
Each Weatherford Shareholder wishing to accept the Exchange Offer must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and mail or otherwise
deliver the Letter of Transmittal, or such facsimile, together with the
certificates reflecting ownership of Weatherford Common Stock (the "Weatherford
Common Stock Certificates") to be exchanged and any other required documentation
to the Exchange Agent at the address set forth herein and therein. The delivery
of the Letter of Transmittal with the Weatherford Common Stock Certificates
shall be deemed to constitute an acceptance of the Exchange Offer to the extent
of the number of shares of Weatherford Holdings Common Stock reflected on the
Weatherford Common Stock Certificates accompanying the Letter of Transmittal.
Upon expiration of the Exchange Offer and satisfaction of certain conditions
to the consummation of the Exchange Offer, if First Financial receives written
notice from the Exchange Agent that at least ninety percent (90%) of the
outstanding shares of Weatherford Holdings Common Stock have been validly
tendered to First Financial, then First Financial will promptly cause to be
issued and mailed to Weatherford Shareholders who have tendered shares of
Weatherford Holdings Common Stock, by registered mail, certificates of First
Financial Common Stock ("First Financial Common Stock Certificates")
representing 1.5 shares of First Financial Common Stock for each share of
Weatherford Holdings Common Stock received by the Exchange Agent. Any cash
payment to which a Weatherford Shareholder may be entitled in place of
fractional shares of First Financial Common Stock will be included with the
First Financial Common Stock Certificates mailed to the Weatherford
Shareholders.
Any beneficial holder whose shares of Weatherford Holdings Common Stock are
registered in the name of such holder's broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender in the Exchange Offer should
contact the registered holder promptly and instruct such registered holder to
tender on his or her behalf. If such beneficial holder wishes to tender on his
or her own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering the Weatherford Common Stock
Certificates, either make appropriate arrangements to register ownership of the
shares of Weatherford Holdings Common Stock in such holder's name or obtain a
properly completed stock power from the registered holder. The transfer of
record ownership may take considerable time. See "The Exchange Offer - Exchange
of Shares and Certificates."
7
<PAGE>
GUARANTEED DELIVERY PROCEDURES
Weatherford Shareholders who wish to tender their shares of Weatherford
Holdings Common Stock and whose Weatherford Common Stock Certificates are not
immediately available or who cannot deliver their Weatherford Common Stock
Certificates and a properly completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date may tender their shares of Weatherford Holdings Common Stock
according to the guaranteed delivery procedures set forth in "The Exchange Offer
- -- Guaranteed Delivery Procedures."
NO WITHDRAWAL RIGHTS
Shares tendered pursuant to the Exchange Offer may not be withdrawn.
THE EXCHANGE AGENT
The Exchange Agent for purposes of the Exchange Offer discussed herein shall
be the Trust Department of First National Bank of Abilene, Third Floor, 400 Pine
Street, Abilene, Texas 79601.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Exchange Offer is conditioned on receipt by Weatherford
Holdings of a written opinion from its independent accountants and/or tax
counsel that the exchange of shares of Weatherford Holdings Common Stock will
not be considered a taxable event for federal income tax purposes. Weatherford
Holdings has received an opinion to such effect from its independent
accountants, George, Morgan & Sneed, P.C. A copy of their opinion, which is
subject to certain qualifications and assumptions, is attached hereto as Annex
A. See "The Exchange Offer -- Federal Income Tax Consequences."
ANTICIPATED MERGER AND DISSENTING SHAREHOLDERS' RIGHTS
First Financial anticipates that, upon consummation of the Exchange Offer,
Weatherford Holdings and Parker Bancshares will be merged (the "Merger") with
and into First Financial Bancshares of Delaware, Inc., a wholly-owned Delaware
subsidiary of the Company, with any remaining Weatherford Shareholders receiving
in the Merger the same consideration they would have received had they
participated in the Exchange Offer, subject to their rights to dissent from the
Merger. See "The Exchange Offer -- Anticipated Merger and Dissenting
Shareholders' Rights."
REGULATORY APPROVALS
The Exchange Offer and Merger are subject to prior approval by the Federal
Reserve Board. Regulatory approval has been obtained. See "The Exchange Offer--
Regulatory Approvals Required."
INTERESTS OF CERTAIN PERSONS IN THE EXCHANGE
As of October 1, 1995, the directors and executive officers of Weatherford
Holdings beneficially owned 141,602 shares of Weatherford Holdings Common Stock,
representing approximately 65.6% of Weatherford Holdings Common Stock
outstanding. See "Information about Weatherford Holdings--Security Ownership of
Management."
8
<PAGE>
SUMMARY FINANCIAL DATA
On March 10, 1994, First Financial acquired Concho Bancshares, Inc. and its
subsidiaries (collectively, "Concho"). The transaction was accounted for as a
pooling of interests for accounting purposes; therefore the financial statements
of First Financial for the year ended December 31, 1994 reflect the results of
Concho for the entire year, and prior periods have been restated to include the
combined balance sheets and income statements.
On July 28, 1995, First Financial acquired Citizens State Bank in Roby, Texas
("Roby"). On September 7, 1995, First Financial entered into an agreement to
acquire Citizens Equity Corporation and its subsidiary, Citizens National Bank
of Weatherford (together, "Citizens"). The acquisitions of Citizens and Roby
will be accounted for as purchase transactions for accounting purposes. For
further discussion of these acquisitions, see "Information About First
Financial." The proposed acquisition of Weatherford Holdings will be accounted
for as a pooling of interests.
The following pro forma data are prepared on the assumption that First
Financial acquired Citizens and Weatherford Holdings as of the date of the
balance sheet and as of the beginning of the period presented for the year ended
December 31, 1994 and for the nine months ended September 30, 1995, and 1994.
The pro forma balance sheet and income statement data for earlier periods also
assume that First Financial acquired Weatherford Holdings as of the beginning
of each such period. Years prior to 1994 exclude Citizens. For purposes of the
pro forma data, Roby is insignificant and has not been included.
The following tables present selected consolidated financial data for (i)
First Financial, (ii) Weatherford Holdings, (iii) combined pro forma data for
First Financial and Weatherford Holdings and (iii) combined pro forma data for
First Financial, Weatherford Holdings and Citizens. The historical financial
data for First Financial and Weatherford Holdings for each year in the five-year
period ended December 31, 1994 are derived from the audited consolidated
financial statements of First Financial and Weatherford Holdings, respectively,
incorporated herein by reference or contained elsewhere in this Prospectus. The
historical financial data for First Financial and Weatherford Holdings as of
September 30, 1994 and 1995 and for the nine months ended September 30, 1994 and
1995 are derived from the unaudited financial statements of First Financial and
Weatherford Holdings, respectively, and in the respective opinions of First
Financial and Weatherford Holdings, include all normal recurring adjustments
necessary for a fair presentation of such information. Operating results for
the nine months ended September 30, 1995 are not necessarily indicative of the
results that may be achieved for the year ending December 31, 1995. The
financial data should be read in conjunction with the applicable consolidated
financial statements of First Financial and Weatherford incorporated herein by
reference or included elsewhere in this document. The pro forma data give
effect to the Exchange and the Merger, in each case accounted for as a pooling
of interests and based upon a conversion of each share of Weatherford Holdings
Common Stock into 1.5 shares of First Financial Common Stock. All per share
data of First Financial have been adjusted to reflect stock splits and stock
dividends.
The unaudited pro forma financial information presented is for informational
purposes only and is not necessarily indicative of results of operations or
financial position that would have been reported had the Exchange or the Merger,
as the case may be, been completed at the beginning of the period or as of the
date for which such unaudited pro forma information is presented, nor is such
information indicative of future results of operations or financial position.
9
<PAGE>
FIRST FINANCIAL AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ -----------------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME STATEMENT DATA:
Interest income..................... $ 64,241 $ 68,127 $ 61,441 $ 59,850 $ 61,416 $ 45,363 $ 52,188
Interest expense.................... 35,471 35,912 24,202 20,333 21,264 15,421 20,275
-------- -------- -------- ---------- ---------- -------- ----------
Net interest income................. 28,770 32,215 37,239 39,517 40,152 29,942 31,913
Provision (credit) for loan losses.. 2,890 1,240 1,145 508 (885) (40) 30
Noninterest income.................. 8,667 9,232 9,768 11,696 11,593 8,831 11,128
Noninterest expense................. 23,889 27,307 28,935 31,875 33,092 24,547 24,258
-------- -------- -------- ---------- ---------- -------- ----------
Income before income taxes.......... 10,658 12,900 16,927 18,830 19,538 14,266 18,753
Provision (for income taxes......... 2,756 3,824 5,189 6,105 6,426 4,660 6,349
-------- -------- -------- ---------- ---------- -------- ----------
Net income before
cumulative effect of
accounting change.................. 7,902 9,076 11,738 12,725 13,112 9,606 12,404
Cumulative effect of
accounting change(1)............... -- -- -- 1,024 -- -- --
-------- -------- -------- ---------- ---------- -------- ----------
Net income.......................... $ 7,902 $ 9,076 $ 11,738 $ 13,749 $ 13,112 9,606 12,404
======== ======== ======== ========== ========== ======== ==========
Net income per First Financial Common
Share before cumulative effect
of accounting change................ $ 1.62 $ 1.85 $ 2.37 $ 2.56 $ 2.62 1.92 2.47
======== ======== ======== ========== ========== ======== ==========
Net income per First
Financial Common Share............. $ 1.62 $ 1.85 $ 2.37 $ 2.77 $ 2.62 1.92 2.47
======== ======== ======== ========== ========== ======== ==========
CONSOLIDATED PER SHARE DATA
APPLICABLE TO FIRST FINANCIAL
COMMON STOCK:
Net income.......................... $ 1.62 $ 1.85 $ 2.37 $ 2.77 $ 2.62 1.92 2.47
Cash dividends declared............. 0.56 0.66 0.76 0.96 1.10 0.82 0.90
Book value at period end............ 14.74 15.96 17.60 19.45 20.79 20.34 22.43
CONSOLIDATED BALANCE SHEET
DATA AT PERIOD END:
Investment securities............... $309,346 $384,919 $404,440 $ 456,180 $ 463,244 463,430 452,484
Loans, net of allowance
for loan losses.................... 346,687 342,619 366,188 411,230 416,536 403,583 446,227
Total assets........................ 866,952 915,308 928,338 1,017,983 1,012,613 988,565 1,027,024
Deposits............................ 774,542 824,837 831,542 913,273 900,930 878,403 905,757
Total liabilities................... 794,543 836,693 841,199 921,273 908,705 886,975 914,601
Total shareholders' equity.......... 72,409 78,615 87,139 96,710 103,908 101,590 112,423
</TABLE>
- --------------
(1) As of January 1, 1993, First Financial recorded the cumulative effect of the
change in accounting for income taxes to comply with Statement of Financial
Accounting Standards No. 109.
10
<PAGE>
WEATHERFORD HOLDINGS AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -----------------------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME STATEMENT DATA:
Interest income..................... $ 2,906 $ 3,088 $ 3,277 $ 3,105 $ 3,205 $ 2,353 $ 3,019
Interest expense.................... 1,720 1,730 1,490 1,180 1,152 825 1,319
------- ------- ------- ------- ------- ------- -------
Net interest income................. 1,186 1,358 1,787 1,925 2,053 1,528 1,700
Provision for loan losses........... 42 63 71 3 3 3 34
Noninterest income.................. 430 482 544 1,244 720 530 517
Noninterest expense................. 1,139 1,204 1,304 1,553 1,544 1,124 1,329
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes....................... 435 573 956 1,618 1,226 931 864
Provision (benefit) for
income taxes....................... 126 175 289 510 378 287 275
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect
of accounting change............... 309 398 667 1,103 848 644 589
Cumulative effect of
accounting change(1)............... -- -- -- (19) -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................... 309 398 667 1,084 848 644 589
======= ======= ======= ======= ======= ======= =======
Net income (loss) per Weatherford
Holdings Common Share before
cumulative effect
of accounting change............... 1.40 1.82 3.06 5.11 3.92 2.98 2.73
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
Weatherford Holdings
Common Share....................... 1.40 1.82 3.06 5.02 3.92 2.98 2.73
======= ======= ======= ======= ======= ======= =======
CONSOLIDATED PER SHARE DATA
APPLICABLE TO WEATHERFORD HOLDINGS
COMMON STOCK:
Net income (loss)................... 1.40 1.82 3.06 5.02 3.92 2.98 2.73
Cash dividends declared............. -- -- -- -- 1.00 0.50 0.50
Book value at period end............ 8.69 10.49 13.59 18.61 21.34 21.02 23.77
CONSOLIDATED BALANCE SHEET
DATA AT PERIOD END:
Investment securities............... $14,829 $22,906 $25,787 $26,705 $27,706 $25,790 $29,411
Loans, net of allowance
for loan losses.................... 11,821 12,606 13,822 16,397 21,151 20,067 25,005
Total assets........................ 33,698 41,617 47,808 51,406 54,369 50,159 62,142
Deposits............................ 30,467 38,182 43,856 47,039 49,321 45,286 56,542
Total liabilities................... 31,786 39,325 44,873 47,387 49,760 45,619 57,009
Total shareholders' equity.......... 1,912 2,292 2,935 4,019 4,609 4,540 5,133
</TABLE>
- --------------
(1) As of January 1, 1993, Weatherford Holdings recorded the cumulative effect
of the change in accounting for income taxes to comply with Statement of
Financial Accounting Standards No. 109.
11
<PAGE>
FIRST FINANCIAL AND SUBSIDIARIES AND
WEATHERFORD HOLDINGS AND SUBSIDIARIES
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------------
1992 1993 1994 1994 1995
-------- ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME STATEMENT DATA:
Interest income..................... $ 64,718 $ 62,955 $ 64,621 $ 47,716 $ 55,207
Interest expense.................... 25,692 21,513 22,416 16,246 21,594
-------- ---------- ---------- ---------- ----------
Net interest income................. 39,026 41,442 42,205 31,470 33,613
Provision (credit) for loan losses.. 1,216 511 (882) (37) 64
Noninterest income.................. 10,312 12,940 12,313 9,361 11,655
Noninterest expense................. 30,239 33,428 34,636 25,671 25,587
-------- ---------- ---------- ---------- ----------
Income before income taxes.......... 17,883 20,443 20,764 15,197 19,617
Provision for income taxes.......... 5,478 6,615 6,804 4,947 6,624
-------- ---------- ---------- ---------- ----------
Net income before cumulative
effect of accounting change........ 12,405 13,828 13,960 10,250 12,993
Cumulative effect of
accounting change(1)............... -- 1,005 -- -- --
-------- ---------- ---------- ---------- ----------
Net income.......................... 12,405 14,833 13,960 10,250 12,993
======== ========== ========== ========== ==========
Net income per First Financial
Common Share before cumulative
effect of accounting change....... 2.35 2.61 2.62 1.93 2.44
======== ========== ========== ========== ==========
Net income per First
Financial Common Share............. 2.35 2.80 2.62 1.93 2.44
======== ========== ========== ========== ==========
CONSOLIDATED PER SHARE DATA
APPLICABLE TO FIRST FINANCIAL
COMMON SHARES:
Net income.......................... 2.35 2.80 2.62 1.93 2.44
Cash dividends declared............. 0.76 0.96 1.10 0.82 0.90
Book value at period end............ 17.08 19.01 20.39 19.96 22.03
CONSOLIDATED BALANCE SHEET
DATA AT PERIOD END:
Investment securities............... 430,227 482,885 490,950 489,220 481,895
Loans, net of allowance for
loan losses........................ 380,010 427,627 437,687 423,650 471,232
Total assets........................ 976,146 1,069,389 1,066,982 1,038,724 1,089,166
Deposits............................ 875,398 960,389 950,251 923,689 962,299
Short-term borrowings............... 283 90 90 160 65
Long-term debt...................... 1,776 1,174 1,167 1,079 113
Total shareholders' equity.......... 90,074 100,729 108,517 106,130 117,556
</TABLE>
- --------------
(1) As of January 1, 1993, First Financial and Weatherford Holdings recorded
the cumulative effect of the change in accounting for income taxes to
comply with Statement of Financial Accounting Standards No. 109.
12
<PAGE>
FIRST FINANCIAL AND SUBSIDIARIES,
WEATHERFORD HOLDINGS AND SUBSIDIARIES,
AND CITIZENS AND SUBSIDIARIES
PRO FORMA COMBINED SELECTED FINANCIAL DATA/(1)/
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
YEAR ENDED DECEMBER 31, 1994 1994 1995
----------------------------- ----------- ---------------
<S> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME STATEMENT DATA:
Interest income..................... $ 69,919 $ 51,748 $ 59,685
Interest expense.................... 24,714 17,941 23,791
---------- ---------- ----------
Net interest income................. 45,205 33,807 35,894
Provision (credit) for loan losses.. (932) (118) (11)
Noninterest income.................. 13,178 10,133 11,493
Noninterest expense................. 37,853 28,168 27,862
---------- ---------- ----------
Income before income taxes.......... 21,462 17,435 19,536
Provision for income taxes.......... 7,117 5,208 6,570
---------- ---------- ----------
Net income.......................... 14,345 10,682 12,966
========== ========== ==========
Net income per First Financial
Common Share....................... 2.70 2.01 2.43
========== ========== ==========
CONSOLIDATED PER SHARE DATA
APPLICABLE TO FIRST FINANCIAL
COMMON SHARES:
Net income.......................... 2.70 2.01 2.43
Cash dividends declared............. 1.10 0.82 0.90
Book value at period end............ 20.47 20.11 22.18
CONSOLIDATED BALANCE SHEET
DATA AT PERIOD END:
Investment securities............... 522,849 521,895 513,724
Loans, net of allowance
for loan losses.................... 437,687 454,990 506,960
Total assets........................ 1,161,773 1,132,523 1,180,444
Deposits............................ 1,029,022 1,007,752 1,043,175
Short-term borrowings............... 90 160 65
Long-term debt...................... 1,167 1,079 113
Total shareholders' equity.......... 108,902 106,947 118,346
</TABLE>
- ---------
(1) The accompanying pro forma combined data include adjustments for (1)
reductions to interest income for securities sold to facilitate the
acquisition of Citizens (2) reductions to interest expense for Citizens debt
to be repaid at the acquisition date (3) goodwill amortization and (4) the
related income tax effects.
13
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table sets forth for the First Financial Common Stock and the
Weatherford Holdings Common Stock certain historical, pro forma and pro forma
equivalent per share financial information. The pro forma data give effect to
the Exchange and the Merger, in each case accounted for as a pooling of
interests and based upon a conversion of each share of Weatherford Holdings
Common Stock into 1.5 shares of First Financial Common Stock. The pro forma
financial data have been included as required by the rules of the Commission and
are provided for comparative purposes only. The information presented below
should be read in conjunction with the separate financial statements of First
Financial and Weatherford Holdings, including the applicable notes, included or
incorporated by reference elsewhere herein. All per share data of First
Financial have been adjusted to reflect stock splits and stock dividends.
The unaudited pro forma financial information presented is for informational
purposes only and is not necessarily indicative of results of operations or
financial position that would have been reported had the Exchange or the Merger,
as the case may be, been completed at the beginning of the period or as of the
date for which such unaudited pro forma information is presented, nor is such
information indicative of future results of operations or financial position.
<TABLE>
<CAPTION>
FIRST FINANCIAL WEATHERFORD HOLDINGS
------------------------------------ -----------------------------------
PRO FORMA PRO FORMA EQUIVALENT PRO FORMA
HISTORICAL COMBINED TOTAL(2) HISTORICAL PRO FORMA(3) TOTAL(4)
--------- ------------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Common Shareholders' Equity:
December 31, 1994................. $20.79 $20.39 $20.47 $21.34 $30.59 $30.70
September 30, 1995................ 22.43 22.03 22.18 23.77 33.05 33.27
Cash Dividends Declared:(1)
Year ended December 31:
1992.............................. $ 0.76 $ 0.76 $ 0.76 $ -- $ 1.14 $ 1.14
1993.............................. 0.96 0.96 0.96 -- 1.44 1.44
1994.............................. 1.10 1.10 1.10 1.00 1.65 1.65
Nine Months ended
September 30, 1995............... 0.90 0.90 0.90 0.50 1.35 1.35
Net Income:
Year ended December 31, 1992:
Primary......................... $ 2.37 $ 2.35 $ 2.35 $ 3.06 $ 3.53 $ 3.53
Fully diluted................... 2.37 2.35 2.35 3.06 3.53 3.53
Year ended December 31, 1993:(5)
Primary......................... 2.56 2.61 2.61 5.02 3.92 3.92
Fully diluted................... 2.56 2.61 2.61 5.02 3.92 3.92
Year ended December 31, 1994:
Primary......................... 2.62 2.62 2.70 3.92 3.93 4.05
Fully diluted................... 2.62 2.62 2.70 3.92 3.93 4.05
Nine Months ended
September 30, 1995:
Primary......................... 2.47 2.44 2.43 2.73 3.66 3.65
Fully diluted................... 2.47 2.44 2.43 2.73 3.66 3.65
</TABLE>
- --------------
(1) The First Financial pro forma combined dividends per share amounts represent
historical dividends declared per share only on First Financial Common
Stock.
(2) The First Financial pro forma total per share amounts include First
Financial, Weatherford Holdings and Citizens combined for the year ended
December 31, 1994 and for the nine months ended September 30, 1995 and 1994.
Years prior to 1994 include First Financial and Weatherford Holdings and
exclude Citizens. Roby is insignificant and has not been included.
(3) The Weatherford Holdings pro forma equivalent per share amounts are
calculated by multiplying the First Financial pro forma per share amounts by
the Exchange Rate of 1.5. See "The Exchange Offer."
(4) The Weatherford Holdings total pro forma per share amounts include First
Financial, Weatherford Holdings and Citizens for the year ended December
31, 1994 and for the nine months ended September 30, 1995 and 1994. Years
prior to 1994 include First Financial and Weatherford Holdings and exclude
Citizens. Such amounts are calculated by multiplying the First Financial
pro forma total per share amounts by the Exchange Rate of 1.5.
(5) For the year ended December 31, 1993, per share data is based on continuing
operations before cumulative effect of the change in accounting for income
taxes.
14
<PAGE>
THE EXCHANGE OFFER
The information in this Prospectus concerning the terms of the Exchange Offer
is a summary only and is qualified in its entirety by reference to the Exchange
Agreement which is incorporated herein by reference.
GENERAL
Pursuant to the Exchange Agreement, First Financial is offering to acquire
from the Weatherford Shareholders all of the issued and outstanding Weatherford
Holdings Common Stock. In exchange for each share of Weatherford Holdings
Common Stock, the Weatherford Shareholders shall receive 1.5 shares of First
Financial Common Stock, unless certain conditions require adjustments to the
Exchange Rate. See "-- The Exchange Rate."
At least ninety percent (90%) of the Weatherford Holdings Common Stock must be
tendered by the Weatherford Shareholders in order for the Exchange to occur.
The Exchange Offer is also subject to certain other conditions. See "--
Conditions to Consummation of the Exchange Offer."
BACKGROUND OF THE EXCHANGE OFFER
In May 1995, Mr. Kenneth Murphy, the Chairman, President and Chief Executive
Officer of First Financial, contacted Mr. Walter Worthington, the Chairman of
the Board and President of Weatherford Holdings, to inquire as to whether
Weatherford Holdings would have any interest in discussing the possibility of
becoming associated with First Financial. Mr. Worthington indicated to Mr.
Murphy that Weatherford Holdings had no current plans to seek an acquisition but
that he would take the matter under consideration. During the ensuing weeks,
Messrs. Murphy and Worthington discussed further the possibility of an
acquisition by First Financial and various alternatives for structuring an
acquisition.
At a meeting of the Board of Directors of Weatherford Holdings held on July
20, 1995, Mr. Worthington informed the Board of Directors of his discussions
with Mr. Murphy. The Board decided to continue to pursue discussions with First
Financial and to explore in particular a stock-for-stock exchange that would be
tax-free to Weatherford Shareholders.
During August 1995, Messrs. Murphy and Worthington continued to discuss the
terms and price of a business combination.
In early September 1995, First Financial representatives conducted a
preliminary due diligence review of Weatherford Holdings. On September 20, 1995,
First Financial submitted to Weatherford Holdings a proposal to acquire
Weatherford Holdings pursuant to an exchange offer in which each share of
Weatherford Holdings Common Stock would be exchanged for 1.5 shares of First
Financial Common Stock.
On September 21, 1995, the Board of Directors of Weatherford Holdings met to
discuss the possible transaction and concluded that the proposed exchange rate
was fair to the Weatherford Holdings shareholders.
On September 21, 1995, First Financial and Weatherford Holdings executed a
Letter of Intent. During the period September 21, 1995 through October 19, 1995,
First Financial performed due diligence review at Weatherford National and the
parties began negotiating a definitive agreement. On October 19, 1995, the Board
of Directors of Weatherford Holdings met and approved the Exchange Agreement,
and on October 20, 1995, Weatherford Holdings and First Financial executed the
Exchange Agreement.
15
<PAGE>
FIRST FINANCIAL'S REASONS FOR THE EXCHANGE OFFER
It is part of First Financial's current business strategy to expand its
activities to areas in Texas where management believes there are long-term
opportunities that will benefit First Financial and its shareholders. The
acquisitions of Weatherford Holdings and Citizens will allow First Financial to
continue its expansion and enter the Weatherford market, which, management
believes, has substantial growth potential, thereby providing even greater asset
and earnings growth opportunities.
First Financial also views favorably the perceived compatibility of the
Weatherford Holdings management team with management of First Financial and its
demonstrated success in providing quality banking services.
In addition, First Financial believes that in light of the acceleration in the
number and size of combinations currently occurring within the financial and
banking industries and the likelihood that future changes in banking laws will
provide further impetus to consolidation of banking entities, it is desirable
for First Financial to continue to grow through acquisition of quality community
banks in favorable markets.
WEATHERFORD HOLDINGS' REASONS FOR THE EXCHANGE OFFER
The terms of the Exchange Offer, including the Exchange Rate, were the result
of arms' length negotiations between First Financial and Weatherford Holdings
and their respective representatives. Weatherford Holdings consulted with its
own legal counsel during the course of negotiations. The Weatherford Holdings
Board of Directors believes that the Exchange Offer is fair to the shareholders
of Weatherford Holdings. In reaching a conclusion to approve the Exchange
Offer, Weatherford Holdings' Board of Directors considered a number of factors.
Weatherford Holdings' Board of Directors did not assign any relative or specific
weights to the factors considered. Among other things, the Weatherford Holdings
Board of Directors considered:
1. The financial terms of the Exchange Offer. In this regard, Weatherford
Holdings Board of Directors took into account the premium represented by the
consideration offered to Weatherford Shareholders in relation to the book
value per share of Weatherford Holdings' Common Stock. Weatherford Holdings'
Board of Directors was of the view that the Exchange Rate represented a fair
multiple of Weatherford Holdings' per share book value and historical and
projected earnings. Weatherford Holdings' Board of Directors also considered
the financial terms of other recent business combinations in the banking
industry and determined that the financial terms of the Exchange Offer
compared favorably to such other transactions;
2. Certain financial and other information concerning First Financial. Such
information included, but was not limited to, the financial condition, asset
quality, historical earnings and historical operations of First Financial
Common Stock and the dividend yield of First Financial Common Stock;
3. The terms, other than the financial terms, and structure of the Exchange
Offer. In particular, the Weatherford Holdings Board of Directors considered
the anticipated tax-free nature of the Exchange Offer to Weatherford
Shareholders receiving First Financial Common Stock in exchange for the
shares of Weatherford Holdings Common Stock.
In addition to the above factors, the proposed Exchange Offer and Merger
reflect the judgment of the Board of Directors of Weatherford Holdings that
Weatherford Holdings' business can be benefitted by the resources and experience
of First Financial, that the Exchange Offer and Merger may produce an entity
better able to meet competitive challenges inherent in the banking industry, and
that the affiliation of First Financial and Weatherford Holdings could provide
operational benefits and efficiencies. The Weatherford Holdings Board of
Directors believes that the Exchange Offer would allow shareholders of
Weatherford Holdings to exchange their shares for a security in a company which
has a broader market appeal and thus a more liquid investment. First Financial
common stock is traded on the NASDAQ National Market, thus Weatherford
16
<PAGE>
Shareholders would have greater liquidity by holding First Financial stock
rather than shares of Weatherford Holdings, for which there is no established
public trading market. In addition, while Weatherford Holdings has paid cash
dividends to Weatherford Shareholders during 1994 and 1995 at the rate of $1.00
per annum, First Financial has declared cash dividends per share of $1.10, $.98
and $.76 during the years ended December 31, 1994, 1993 and 1992, respectively.
Furthermore, if the Exchange and Merger is consummated, shareholders of
Weatherford Holdings would hold shares in a larger banking organization which
would tend to lessen the risk that local market factors in Weatherford would
affect the value of their investment. The resources of a larger banking
organization would tend to benefit Weatherford Shareholders as a result of its
ability to compete in the larger marketplace. The Weatherford Holdings Board of
Directors also believes that, if the Exchange and Merger are consummated, its
subsidiary, Weatherford National, will continue to retain its community bank
character even though it will be a subsidiary of a substantially larger bank
holding company.
OPERATION AFTER THE EXCHANGE OFFER AND MERGER
If the Exchange Offer is consummated, First Financial will own at least 90% of
the outstanding Weatherford Holdings Common Stock. If the Merger is consummated
as presently anticipated, Weatherford Holdings will be merged with and into a
wholly-owned subsidiary of First Financial. See "The Exchange Offer --
Anticipated Merger and Dissenting Shareholders' Rights." Following the Merger
and the acquisition of Citizens, First Financial intends to merge Citizens
National Bank of Weatherford ("Citizens National"), a wholly-owned subsidiary of
Citizens, into Weatherford National. The surviving bank will retain the
Weatherford National name and charter, have its principal banking facility in
Weatherford, Texas, and have branches in both Weatherford and Aledo, Texas.
First Financial operates principally in order to give its affiliated banks
access to additional management and technical resources which help them to
improve or expand their banking services while continuing their local activity.
Each of the affiliated banks operates under the day-to-day management of its
board of directors and officers, with substantial authority in making decisions
concerning their own investments, loan policies, interest rates and service
charges. First Financial provides assistance to the affiliated banks, especially
with respect to decisions concerning major capital expenditures, employee fringe
benefits, including pension plans, group insurance, dividend policies,
appointment of officers and directors of affiliated banks and their
compensation. The internal audit and loan review functions are centralized at
First Financial.
THE EXCHANGE RATE
First Financial will issue and exchange 1.5 shares of First Financial Common
Stock for each share of Weatherford Holdings Common Stock tendered by the
Weatherford Shareholders who accept the Exchange Offer during the time period
the Exchange Offer is in effect; provided, however, that if First Financial,
prior to the consummation of the proposed Exchange Offer, shall issue any
additional shares of First Financial Common Stock pursuant to any stock dividend
or stock split, the Exchange Rate shall be appropriately adjusted to reflect
such stock dividend or split.
First Financial will not issue any fractional shares of First Financial Common
Stock. Weatherford Shareholders who would otherwise be entitled to receive
fractional shares of First Financial Common Stock will be paid in cash for such
fractional shares based upon a value of $33.34 per share of First Financial
Common Stock.
17
<PAGE>
THE EXPIRATION DATE
Unless otherwise extended by First Financial, the Exchange Offer shall
terminate at 5:00 p.m., Abilene, Texas time on January 17, 1996 (the
"Expiration Date").
CONDITIONS TO CONSUMMATION OF THE EXCHANGE OFFER; TERMINATION
Consummation of the Exchange Offer is subject to the satisfaction of a number
of conditions, including the following:
(1) the expiration of all mandatory waiting periods and the existence in full
force and effect of all regulatory approvals, filings, registrations and
notifications, including the approval by the Board of Governors of the Federal
Reserve System of the acquisition by First Financial of all of the issued and
outstanding capital stock of Weatherford Holdings;
(2) the receipt by First Financial of an opinion from its independent
accountants that the transaction contemplated by the Exchange Agreement may be
properly accounted for as a pooling-of-interests, and the receipt by Weatherford
Holdings from its independent accountants and/or tax counsel that the Exchange
by the Weatherford Shareholders will not be considered a taxable event for
federal income tax purposes;
(3) the accuracy of all the respective representations and warranties of
Weatherford Holdings, Parker Bancshares, Weatherford National and First
Financial in the Exchange Agreement as of the date of consummation of the
Exchange Offer (the "Consummation Date");
(4) the performance of all of the respective obligations and agreements and
compliance with all covenants and conditions by Weatherford Holdings, Parker
Bancshares, Weatherford National and First Financial contemplated by the
Exchange Agreement prior to or on the Consummation Date;
(5) the absence of any proceeding or litigation by any court, governmental
body or regulatory authority pertaining to the Exchange Offer;
(6) the declaration by the Commission that the Registration Statement filed by
First Financial pursuant to the Securities Act covering the shares of First
Financial Common Stock to be issued in the Exchange is effective and that no
stop orders have been issued or threatened and that First Financial, Weatherford
Holdings, Parker Bancshares, Weatherford National shall have complied with all
applicable state and federal securities laws relating to the Exchange Offer;
(7) the absence of any material adverse change in the financial conditions of
First Financial, Weatherford Holdings, Parker Bancshares or Weatherford National
between August 31, 1995 and the Consummation Date;
(8) receipt by First Financial and Weatherford Holdings of certain legal
opinions in form and substance satisfactory to the respective parties;
(9) the valid tender of ninety percent (90%) of the issued and outstanding
shares of Weatherford Holdings Common Stock to First Financial;
(10) the receipt by First Financial of a satisfactory Phase I Environmental
Assessment report covering all real property owned or held by Weatherford
Holdings, Parker Bancshares or Weatherford National; and
(11) Weatherford Holdings, Parker Bancshares and Weatherford National shall
have taken such action as is necessary to freeze or terminate the Weatherford
National 401(k) Profit Sharing Plan or merge such Plan with an Employee Benefit
Plan of First Financial and First Financial shall be satisfied that such 401(k)
Profit
18
<PAGE>
Sharing Plan is a qualified plan under, and in full compliance with, the
Employee Retirement Income Security Act of 1974, the Internal Revenue Code of
1986, and all other applicable laws, rules and regulations and that such
freezing, termination or merger of the 401(k) Plan will not result in liability
to First Financial, Weatherford Holdings, Parker Bancshares or Weatherford
National or any of their directors, officers or employees.
The Exchange Agreement and the Exchange Offer may be terminated at any time
prior to the Consummation Date:
(a) by mutual written consent of First Financial, Weatherford Holdings, Parker
Bancshares, and Weatherford National;
(b) by First Financial if there is a breach of a representation or warranty
made by Weatherford Holdings, Parker Bancshares or Weatherford National
which constitutes a material adverse change from that represented in the
Exchange Agreement or if any of the conditions to closing are not
satisfied or waived by First Financial;
(c) by Weatherford Holdings if there is a breach of a representation or
warranty made by First Financial which constitutes a material adverse
change from that represented in the Exchange Agreement or if any of the
conditions to closing are not satisfied or waived by Weatherford Holdings;
(d) by First Financial or Weatherford Holdings, if the Consummation Date shall
not have occurred by March 31, 1996 or such later date agreed to in
writing by First Financial, Weatherford Holdings, Parker Bancshares and
Weatherford National; or
(e) by First Financial or Weatherford Holdings if any court of competent
jurisdiction or other governmental body shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Exchange or the Merger, and such order, decree, ruling or
other action shall have been final and nonappealable.
Whether or not the transactions contemplated by the Exchange Agreement are
consummated, each of the parties to the Exchange Agreement shall be responsible
for their respective fees and expenses incident to the negotiation, preparation,
execution and consummation of the transactions contemplated by the Exchange
Agreement, including attorneys' and accountants' fees and expenses.
EXCHANGE OF SHARES AND CERTIFICATES
A Weatherford Shareholder's delivery of a properly completed and executed
Letter of Transmittal and Weatherford Common Stock Certificates, prior to the
Expiration Date, to the Exchange Agent at the address provided herein shall be
deemed to constitute an acceptance of the Exchange Offer described in the
Prospectus as to the number of shares registered on the Weatherford Common Stock
Certificates surrendered.
Except as otherwise provided below, all signatures on a Letter of Transmittal
must be guaranteed by a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Security Transfer Agent's Medallion Program, the Stock Exchange Medallion
Program or the New York Stock Exchange, Inc. Medallion Signature Program (each,
an "Eligible Institution"). Signatures on a Letter of Transmittal need not be
guaranteed (a) if the Letter of Transmittal is signed by the registered holder
of the shares of Weatherford Holdings Common Stock tendered therewith and such
holder has not completed the box entitled "Special Exchange Instructions" on the
Letter of Transmittal or (b) if such shares of Weatherford Holdings Common Stock
are tendered for the account of an Eligible Institution. See Instructions 1 and
3 of the Letter of Transmittal.
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<PAGE>
THE METHOD OF DELIVERY OF WEATHERFORD COMMON STOCK CERTIFICATES AND THE LETTER
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE WEATHERFORD SHAREHOLDERS. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT WEATHERFORD SHAREHOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. WEATHERFORD COMMON STOCK CERTIFICATES AND LETTERS OF
TRANSMITTAL SHOULD BE SENT TO THE EXCHANGE AGENT, WHICH IS THE TRUST DEPARTMENT
OF FIRST NATIONAL BANK OF ABILENE.
If any First Financial Common Stock Certificate is to be issued in a name
other than that in which the Weatherford Common Stock Certificate surrendered
for exchange is registered, the certificate so surrendered must be properly
endorsed or otherwise be in proper form for transfer, and the person requesting
such exchange must pay to First Financial or the Exchange Agent any applicable
transfer or other taxes required by reason of the issuance of the certificate.
Any beneficial holder whose shares of Weatherford Holdings Common Stock are
registered in the name of his or her broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on his or her own
behalf. If such beneficial holder wishes to tender on his or her own behalf,
such beneficial holder must, prior to completing and executing the Letter of
Transmittal and delivering the Weatherford Common Stock Certificates, either
make appropriate arrangements to register ownership of the Weatherford Holdings
Common Stock to be tendered in such holder's name or obtain a properly completed
stock power from the registered holder.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Weatherford Holdings Common Stock listed therein, the Weatherford
Common Stock Certificates reflecting ownership of Weatherford Holdings Common
Stock must be endorsed or accompanied by appropriate stock powers which
authorize such person to tender the Weatherford Holdings Common Stock on behalf
of the registered holder, in either case signed as the name of the registered
holder or holders appears on the Weatherford Common Stock Certificates.
If the Letter of Transmittal or any Weatherford Common Stock Certificates or
stock powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of a corporation or others acting in a fiduciary or
representative capacity, such persons should indicate when signing and, unless
waived by First Financial, evidence satisfactory to First Financial of their
authority to so act must be submitted with the Letter of Transmittal.
Upon expiration of the Exchange Offer and satisfaction of certain conditions
set forth in the Exchange Agreement, promptly after First Financial receives
written notice from the Exchange Agent indicating that at least ninety percent
(90%) of the outstanding shares of Weatherford Holdings Common Stock have been
validly tendered, each outstanding share of Weatherford Holdings Common Stock
tendered to First Financial will be exchanged for shares of First Financial
Common Stock at the Exchange Rate calculated as described under the caption "--
The Exchange Rate," and First Financial Common Stock Certificates reflecting the
Exchange shall be delivered to the Weatherford Shareholders by registered mail.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered shares of Weatherford
Holdings Common Stock will be determined by First Financial in its sole
discretion, which determination will be final and binding. First Financial
reserves the absolute right to reject any and all shares of Weatherford Holdings
Common Stock not properly tendered or any shares of Weatherford Holdings Common
Stock First Financial's acceptance of which would, in the opinion of counsel for
First Financial, be unlawful. First Financial reserves the absolute right to
waive any irregularities or conditions of tenders as to particular shares of
Weatherford Holdings Common Stock. Unless waived, any defects or irregularities
in connection with tenders of shares of Weatherford Holdings Common Stock must
be cured within such time as First Financial shall determine. Neither First
Financial nor the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of shares
of Weatherford Holdings Common Stock nor shall any of them incur any liability
for failure
20
<PAGE>
to give such notification. Tenders of shares of Weatherford Holdings Common
Stock will not be deemed to have been made until such irregularities have been
cured or waived. Any Weatherford Common Stock Certificates received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Weatherford Common Stock
Certificates unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Weatherford Shareholders who wish to tender their shares of Weatherford
Holdings Common Stock and (i) whose Weatherford Common Stock Certificates are
not immediately available, or (ii) who cannot deliver their Weatherford Common
Stock Certificates, the Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date, may effect a tender if:
(1) the tender is made through an Eligible Institution;
(2) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of Weatherford Holdings Common Stock, the
certificate number or numbers of such Weatherford Holdings Common Stock and the
amount of Weatherford Holdings Common Stock tendered, stating that the tender is
being made thereby, and guaranteeing that, within five (5) business days after
the Expiration Date, the Letter of Transmittal, together with the Weatherford
Common Stock Certificates registering the Weatherford Holdings Common Stock to
be tendered in proper form for transfer and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(3) such properly completed and executed Letter of Transmittal, together with
the certificates representing all tendered Weatherford Holdings Common Stock in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five (5) business days
after the Expiration Date.
FRACTIONAL SHARES
No fractional shares of First Financial Common Stock will be exchanged for
shares of Weatherford Holdings Common Stock. In lieu thereof, each Weatherford
Shareholder having a fractional interest resulting from the exchange of
Weatherford Holdings Common Stock for First Financial Common Stock will be paid
by First Financial an amount in cash for such fractional share based upon a
value of $33.34 per Share of First Financial Common Stock.
NO WITHDRAWAL RIGHTS
Tenders of shares of Weatherford Holdings Common Stock pursuant to the
Exchange Offer are irrevocable, and once such shares are tendered, they may not
be withdrawn.
REGULATORY APPROVALS REQUIRED
The Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") must approve First Financial's acquisition of Weatherford Holdings,
Parker Bancshares and Weatherford National under Section 3 of the Bank Holding
Company Act of 1956, as amended. Regulatory approval has been obtained.
21
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material U.S. Federal income tax
consequences of the Exchange, including certain consequences to holders of
Weatherford Holdings Common Stock who are citizens or residents of the United
States and who hold their shares as capital assets. It does not discuss all tax
consequences that may be relevant to the Weatherford Shareholders subject to
special Federal income tax treatment (such as insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations or foreign persons), or to Weatherford Shareholders who acquired
their shares of Weatherford Holdings Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation. The summary does not
address the state, local or foreign tax consequences of the Exchange Offer, if
any.
Weatherford Holdings has received an opinion from its independent public
accountants, with respect to certain Federal income tax consequences of the
Exchange Offer. A copy of their opinion, which is subject to certain
qualifications and assumptions, is attached hereto as Annex A, and the following
summary of their opinion is qualified in its entirety by reference thereto.
Subject to the qualifications and assumptions set forth in their opinion,
George, Morgan & Sneed, P.C. are of the opinion that, for Federal income tax
purposes:
1. The Exchange and Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code (the "Code"), and
First Financial, Weatherford Holdings and First Financial Bankshares of
Delaware, Inc. each will be a party to the reorganization within the
meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Weatherford Shareholders upon
receipt of First Financial Common Stock in exchange for their Weatherford
Holdings Common Stock, except for any gain or loss recognized with respect
to Weatherford Shareholders who receive cash in lieu of fractional share
interests in First Financial Common Stock or pursuant to the exercise of
statutory dissenter rights.
3. The aggregate Federal income tax basis of the shares of First Financial
Common Stock received by the Weatherford Shareholders in exchange for their
shares of Weatherford Holdings Common Stock will be the same as the
aggregate adjusted tax basis of their Weatherford Holdings Common Stock
exchanged therefor, less the tax basis, if any, allocated to fractional
share interests.
4. The holding period of the First Financial Common Stock received by the
Weatherford Shareholders in exchange for their shares of Weatherford
Holdings Common Stock in the hands of the Weatherford Shareholders will
include the holding period of their Weatherford Holdings Common Stock
exchanged therefor.
A Weatherford Holdings Shareholder who receives cash in lieu of a fractional
share interest in First Financial Common Stock will be treated as having
received the cash in redemption of the fractional share interest. The receipt
of cash in lieu of a fractional share interest should generally result in
capital gain or loss to the holder equal to the difference between the amount of
cash received and the portion of the holder's Federal income tax basis in the
Weatherford Holdings Common Stock allocable to the fractional share interest.
Such capital gain or loss will be long-term capital gain or loss if the holder's
holding period for the First Financial Common Stock received, determined as set
forth above, is longer than one year.
A Weatherford Shareholder who dissents from the Merger and receives cash in
exchange for shares of Weatherford Holdings Common Stock will recognize capital
gain or loss equal to the difference between the amount of cash received and the
holder's Federal income tax basis in the shares. Such capital gain or loss will
be long-term capital gain or loss if the holder has held the shares for more
than one year as of the effective time of the Merger.
22
<PAGE>
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND IS BASED ON THE INTERNAL REVENUE CODE (AND AUTHORITIES THEREUNDER) AS
IN EFFECT ON THE DATE OF THIS PROSPECTUS, WITHOUT CONSIDERATION OF THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. WEATHERFORD SHAREHOLDERS
ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE EXCHANGE IN THEIR PARTICULAR SITUATIONS, AS WELL
AS CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE AGENT
The Trust Department of First National Bank of Abilene has been appointed as
the Exchange Agent for the Exchange. Questions and requests for additional
copies of this Prospectus should be directed to the Exchange Agent addressed as
follows:
By mail, overnight, courier or hand delivery: Trust Department
First National Bank of Abilene
Third Floor
400 Pine Street
Abilene, Texas 79601
By facsimile transmission: (915) 675-7342
For confirmation by telephone: (915) 675-7003
RESALE BY WEATHERFORD HOLDINGS AFFILIATES
The shares of First Financial Common Stock issuable to Weatherford
Shareholders upon consummation of the Exchange Offer have been registered under
the Securities Act, but such registration does not cover the resales by
affiliates of Weatherford Holdings ("Weatherford Holdings Affiliates"). First
Financial Common Stock received and beneficially owned by those Weatherford
Shareholders who are deemed to be Weatherford Holdings Affiliates may be resold
without registration as provided for by Rule 145 under the Securities Act, or as
otherwise permitted. The term Weatherford Holdings Affiliate is defined to
include any person who, directly or indirectly, controls, or is controlled by,
or is under common control with Weatherford Holdings at or during the time
period covered by the Exchange Agreement. Each Weatherford Holdings Affiliate
who desires to resell the First Financial Common Stock must sell such First
Financial Common Stock either (i) pursuant to an effective registration
statement under the Securities Act; (ii) in accordance with the applicable
provisions of Rule 145 under the Securities Act; or (iii) in a transaction
which, in the opinion of counsel for the Weatherford Holdings Affiliate or as
described in a "no-action" or interpretive letter from the Commission, in each
case reasonably satisfactory in form and substance to First Financial, is exempt
from the registration requirements of the Securities Act. Rule 145(d) requires
that persons deemed to be Weatherford Holdings Affiliates resell their First
Financial Common Stock pursuant to certain of the requirements of Rule 144 under
the Securities Act if such First Financial Common Stock is sold within the first
two years after the receipt thereof. After two years if such person is not an
affiliate of First Financial and First Financial is current in the filing of its
periodic securities law reports, a former Weatherford Holdings Affiliate may
freely resell the First Financial Common Stock received in the Exchange Offer
without limitation. After three years from the issuance of the First Financial
Common Stock, if such person is not an affiliate of First Financial at the time
of sale and has not been so for at least three months prior to such sale, such
person may freely resell such First Financial Common Stock, without limitation,
regardless of the status of First Financial's periodic securities law reports.
23
<PAGE>
Each Weatherford Holdings Affiliate will deliver to First Financial a written
agreement to the effect that no sale will be made of any shares of First
Financial Common Stock received in the Exchange Offer by a Weatherford Holdings
Affiliate except (i) in accordance with the Securities Act; and (ii) if, as it
expects to do, First Financial utilizes pooling-of-interests accounting in
accounting for the Exchange Offer, until such time as First Financial shall
publish the financial results of at least thirty (30) days of post-Exchange
operations of First Financial. The First Financial Common Stock Certificates
issued to Weatherford Holdings Affiliates in the Exchange Offer may contain an
appropriate restrictive legend, and appropriate stop transfer orders may be
given to the Exchange Agent for such certificates.
ANTICIPATED MERGER AND DISSENTING SHAREHOLDERS' RIGHTS
First Financial anticipates that upon consummation of the Exchange Offer,
First Financial will contribute the shares of Weatherford Holdings Common Stock
acquired in the Exchange Offer to First Financial Bankshares of Delaware, Inc.,
a wholly-owned subsidiary of First Financial ("FFB Delaware"), and Weatherford
Holdings will then be merged (the "Merger") with and into FFB Delaware pursuant
to Article 5.16 of the Texas Business Corporation Act (the "TBCA"). In the
event that not all of the outstanding Weatherford Holdings Common Stock is
tendered for exchange in the Exchange Offer, within ten (10) days after the
effective date of the Merger, FFB Delaware shall provide notice of the Merger to
the Weatherford Shareholders who did not elect to participate in the Exchange
Offer. The consideration to be issued in the Merger shall be the same as that
in the Exchange Offer. A Weatherford Shareholder who elects to dissent from the
Merger (a "Dissenting Shareholder") must follow specific procedures in order to
perfect its dissenter's rights.
Within twenty (20) days of mailing of the notice of the Merger, the Dissenting
Shareholders must make a written demand on FFB Delaware for the fair value of
their shares of Weatherford Holdings Common Stock. The fair value of such
shares shall be the value thereof as of the day before the effective date of the
Merger, excluding any appreciation or depreciation in anticipation of the
Merger. The Dissenting Shareholders must include in their demands information
as to the number and estimated fair value of shares owned by such shareholders.
Any Dissenting Shareholder who fails to make a demand within the twenty (20) day
period shall be bound by the terms and the consideration provided in the Merger.
Within ten (10) days of receipt of a Dissenting Shareholder's written demand,
FFB Delaware shall either accept such demand or reject it and make a counter-
offer as to the fair value of the Weatherford Holdings Common Stock. Upon
agreement between FFB Delaware and the Dissenting Shareholder as to the fair
value of the Weatherford Holdings Common Stock, FFB Delaware shall pay the
agreed fair value of the shares of Weatherford Holdings Common Stock owned by
such Dissenting Shareholder in exchange for endorsed Weatherford Holdings Common
Stock Certificates representing such shares. The Dissenting Shareholder shall,
at that time, cease to have any interest in such shares. If a Dissenting
Shareholder is unable to reach an agreement with FFB Delaware as to the fair
value of the Weatherford Holdings Common Stock, the specific remedies provided
in Articles 5.12, 5.13 and 5.16 of the TBCA for determination of fair value by a
court of law shall be available to such shareholder. Articles 5.12, 5.13 and
5.16 of the TBCA are attached to this Prospectus as Annex B.
ACCOUNTING TREATMENT
First Financial expects to account for the Exchange as a pooling-of-interests
and expects to receive the written opinion of Arthur Andersen LLP that it is
appropriate to do so.
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<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. A change in
applicable law or regulation may have a material effect on the business of First
Financial.
As a bank holding company, First Financial is subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not (subject to certain limited exceptions) directly or
indirectly acquire the ownership or control of more than five percent (5%) of
any class of voting shares or substantially all of the assets of any company,
including a bank, without the prior written approval of the Federal Reserve
Board. In addition, bank holding companies are generally prohibited under the
BHCA from engaging in nonbanking activities, subject to certain exceptions.
PAYMENT OF DIVIDENDS
First Financial is a legal entity separate and distinct from its banking
and other subsidiaries. Most of First Financial's revenues result from
dividends paid to it by its Delaware holding company subsidiary, which receives
dividends from its bank subsidiaries. There are statutory and regulatory
requirements applicable to the payment of dividends by subsidiary banks as well
as by First Financial to its shareholders.
Each state bank subsidiary that is a member of the Federal Reserve System
and each national banking association is required by federal law to obtain the
prior approval of the Federal Reserve Board or the Office of the Comptroller of
the Currency (the "OCC"), as the case may be, for the declaration and payment of
dividends if the total of all dividends declared by the board of directors of
such bank in any year will exceed the total of (i) such bank's net profits (as
defined and interpreted by regulation) for that year plus (ii) the retained net
profits (as defined and interpreted by regulation) for the preceding two (2)
years, less any required transfers to surplus. In addition, these banks may
only pay dividends to the extent that retained net profits (including the
portion transferred to surplus) exceed bad debts (as defined by regulation).
Effective September 1, 1995, the newly adopted Texas Banking Act eliminated the
requirement under the predecessor code that, prior to paying a dividend, a state
bank must transfer to "certified surplus" an amount which is not less than ten
percent (10%) of the net profits of such bank earned since the last dividend was
declared; provided, however, that a transfer was not required to certified
surplus of a sum which would increase the certified surplus to more than the
capital of the bank.
Under the foregoing dividend restrictions, in 1995 the First Financial
Banks, without obtaining governmental approvals, could have declared aggregate
dividends of approximately $16.1 million from retained net profits. During the
nine months ended September 30, 1995, the First Financial Banks paid an
aggregate of $8.7 million in dividends.
The payment of dividends by First Financial and its subsidiaries is also
affected by various regulatory requirements and policies, such as the
requirement to maintain adequate capital above regulatory guidelines. In
addition, if, in the opinion of the applicable regulatory authority, a bank
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the bank, could
include the payment of dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice. The Federal
Reserve Board and the OCC have each indicated that paying dividends that deplete
a bank's capital base to an inadequate level would be an unsafe and unsound
banking practice. The Federal Reserve Board, the OCC and the Federal Deposit
Insurance Corporation (the "FDIC") have issued policy statements which provide
that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
25
<PAGE>
CERTAIN TRANSACTIONS BY FIRST FINANCIAL WITH ITS AFFILIATES
There are also various legal restrictions on the extent to which First
Financial can borrow or otherwise obtain credit from, or engage in certain other
transactions with, its depository subsidiaries. The "covered transactions" that
an insured depository institution and its subsidiaries are permitted to engage
in with their nondepository affiliates are limited to the following amounts:
(i) in the case of any one such affiliate, the aggregate amount of "covered
transactions" of the insured depository institution and its subsidiaries cannot
exceed ten percent (10%) of the capital stock and the surplus of the insured
depository institution; and (ii) in the case of all affiliates, the aggregate
amount of "covered transactions" of the insured depository institution and its
subsidiaries cannot exceed twenty percent (20%) of the capital stock and surplus
of the insured depository institution. In addition, extensions of credit that
constitute "covered transactions" must be collateralized in prescribed amounts.
"Covered transactions" are defined by statute to include a loan or extension of
credit to the affiliate, a purchase of securities issued by an affiliate, a
purchase of assets from the affiliate (unless otherwise exempted by the Federal
Reserve Board), the acceptance of securities issued by the affiliate as
collateral for a loan and the issuance of a guarantee, acceptance, or letter of
credit for the benefit of an affiliate. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
CAPITAL
The Federal Reserve Board has adopted risk based capital guidelines for
bank holding companies. The minimum guidelines for the ratio of total capital
("Total Capital") to risk weighted assets (including certain off-balance-sheet
activities, such as standby letters of credit) is eight percent (8%). At least
half of the Total Capital is to be composed of common shareholders' equity,
minority interests in the equity accounts of consolidated subsidiaries and a
limited amount of perpetual preferred stock, less goodwill ("Tier 1 Capital").
The remainder may consist of subordinated debt, other preferred stock and a
limited amount of loan loss reserves.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum Tier 1 Capital leverage ratio (Tier 1 Capital to total assets, less
goodwill) of three percent (3%) for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies will generally be required to maintain a minimum Tier 1
Capital leverage ratio of three percent (3%) plus an additional cushion of 100
to 200 basis points. The Federal Reserve Board has not advised First Financial
of any specific minimum Tier 1 Capital leverage ratio applicable to it. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets (e.g., goodwill, core deposit intangibles and purchased
mortgage servicing rights).
The following tables set forth the Tier 1 Capital to risk-weighted assets
ratios, the total capital to risk-weighted assets ratios and the Tier 1 leverage
ratios for First Financial and Weatherford Holdings individually and on a pro
forma combined basis as of certain dates and periods. Such pro forma combined
data is derived from the financial information of First Financial and
Weatherford Holdings at September 30 or December 31 for each of the periods
presented below and gives effect to the Exchange and the Merger.
26
<PAGE>
Tier 1 Capital to Risk-Weighted Assets Ratio
(in each case calculated pursuant to the
risk-based capital guidelines)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
As of: First Financial First Financial(1) Weatherford Holdings Combined
- -------------------- ---------------- ------------------ --------------------- ----------
<S> <C> <C> <C> <C>
September 30, 1995.. 20.38% 18.07% 17.96% 18.06%
December 31, 1994... 20.08% 18.99% 20.03%
December 31, 1993... 16.76% 21.97% 16.93%
December 31, 1992... 16.90% 23.81% 17.10%
</TABLE>
Total Capital To Risk-Weighted Assets Ratio
(in each case calculated pursuant to the
risk-based capital guidelines)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
As of: First Financial First Financial(1) Weatherford Holdings Combined
- -------------------- ---------------- ------------------ --------------------- ----------
<S> <C> <C> <C> <C>
September 30, 1995.. 21.64% 19.18% 18.56% 19.15%
December 31, 1994... 21.34% 19.73% 21.27%
December 31, 1993... 18.01% 22.97% 18.17%
December 31, 1992... 18.39% 24.96% 18.58%
</TABLE>
Tier 1 Leverage Ratio
<TABLE>
<CAPTION>
Pro Forma Pro Forma
As of: First Financial First Financial(1) Weatherford Holdings Combined
- -------------------- ---------------- ------------------ --------------------- ----------
<S> <C> <C> <C> <C>
September 30, 1995.. 10.91% 10.05% 8.26% 9.95%
December 31, 1994... 10.26% 8.89% 10.19%
December 31, 1993... 9.51% 8.09% 9.44%
December 31, 1992... 9.28% 7.83% 9.21%
</TABLE>
(1) September 30, 1995 ratios include Citizens
In addition to the Federal Reserve Board capital standards, Texas-chartered
banks must also comply with the capital requirements imposed by the Texas
Banking Department. Although neither the Texas Banking Act nor the regulations
promulgated thereunder specify any minimum capital-to-assets ratio that must be
maintained by a Texas-chartered bank, the Texas Banking Department has a policy
that generally requires Texas-chartered banks to maintain a minimum 6% ratio of
stockholders equity (stated capital, surplus capital, surplus and undivided
profits or retained earnings) to total assets. As of September 30, 1995, all
Texas-chartered banks owned by First Financial exceeded the minimum ratio.
Failure to meet capital guidelines could subject an insured bank to a variety
of enforcement remedies, including the termination of deposit insurance by the
FDIC and a prohibition on the taking of brokered deposits. See "FDICIA" below.
Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However, the management of First Financial is unable to predict
27
<PAGE>
whether and when higher capital requirements might be imposed and, if they are
imposed, at what levels and on what schedule.
FIRST FINANCIAL SUPPORT OF THE FIRST FINANCIAL BANKS
Under Federal Reserve Board policy, First Financial is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support each of such subsidiaries. This support may be required at
times when, absent such Federal Reserve Board policy, First Financial would not
otherwise be required to provide it.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"), a depository institution insured by the FDIC can be held liable for
any loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989 in connection with (i) the default of a commonly controlled FDIC-
insured depository institution, or (ii) any assistance provided by the FDIC to
any commonly controlled FDIC-insured depository institution "in danger of
default." "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment upon the bank's shareholders, pro rata, and to the
extent necessary, if any such assessment is not paid by any shareholder after
three (3) months' notice, to sell the stock of such shareholder to make good the
deficiency.
FDIC INSURANCE ASSESSMENTS
The First Financial Banks must pay assessments to the FDIC for federal deposit
insurance protection under a risk based assessment system. FDIC-insured
depository institutions that are members of the Bank Insurance Fund pay
insurance premiums at rates based on their risk classification. Institutions
assigned to higher-risk classifications (that is, institutions that pose a
greater risk of loss to their respective deposit insurance finds) pay
assessments at higher rates than institutions that pose a lower risk. An
institution's risk classification is assigned based on its capital levels and
the level of supervisory concern the institution poses to the regulators. In
addition, the FDIC can impose special assessments to cover the cost of
borrowings from the U.S. Treasury, the Federal Financing Bank, and Bank
Insurance Fund member banks. As of the date hereof, the assessment rate for
each of the First Financial Banks is at the lowest level risk-based premium
available.
FDICIA
Among other things, the Federal Deposit Insurance Corporation Improvement Act
of 1992 ("FDICIA") requires the federal banking agencies to take "prompt
corrective action" in respect of depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." A depository institution's
capital tier will depend upon where its capital levels are in relation to
various relevant capital measures, which will include a risk-based capital
measure, a leverage ratio capital measure and certain other factors.
Regulations establishing the specific capital tiers have been recently
enacted. Under these regulations, for an institution to be well capitalized it
must have a total risk-based capital ratio of at least ten percent (10%), a Tier
1 risk-based capital ratio of at least six percent (6%), and a Tier 1 leverage
ratio of at least five percent (5%), and not be subject to any specific capital
order or directive. For an institution to be adequately capitalized it must
have a total risk-based capital ratio of at least eight percent (8%), a Tier 1
risk-based capital ratio of at least four percent (4%), and a leverage ratio of
at least four percent (4%) (in some cases three percent (3%)). Under these new
regulations, the First Financial Banks would be considered to be well
capitalized as of December 31, 1994.
28
<PAGE>
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. An "undercapitalized institution" must develop a capital
restoration plan and its parent holding company must guarantee that bank's
compliance with the plan. The liability of the parent holding company under any
such guarantee is limited to the lesser of 5% of the bank's assets at the time
it became "undercapitalized" or the amount needed to comply with the plan.
Furthermore, in the event of the bankruptcy of the parent holding company, such
guarantee would take priority over the parent's general unsecured creditors. In
addition, FDICIA requires the various regulatory agencies to prescribe certain
non-capital standards for safety and soundness relating generally to operations
and management, asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such standards.
Banking agencies have recently adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. This
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have recently adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. Concurrently, banking agencies have
proposed a methodology for evaluating interest rate risk. After gaining
experience with the proposed measurement process, these banking agencies intend
to propose further regulations to establish an explicit risk-based capital
charge for interest rate risk.
INTERSTATE BANKING AND BRANCHING ACT
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branching Act"), a bank holding company is
able to acquire banks in states other than its home state. Prior to September
29, 1995, interstate acquisitions by bank holding companies were subject to
Federal law, which provided that no application to acquire shares of a bank
located outside of the state in which the operations of the acquiring bank
holding company were principally conducted would be approved by the Federal
Reserve Board unless such acquisition was specifically authorized by the laws of
the state in which the bank whose shares are to be acquired was located.
The Interstate Banking and Branching Act also authorizes banks to merge across
state lines, therefore creating interstate branches, beginning June 1, 1997.
Under such legislation, each state has the opportunity to "opt out" of this
provision, thereby prohibiting interstate branching in such states, or to "opt
in" at an earlier time, thereby allowing interstate branching within that state
prior to June 1, 1997. Furthermore, pursuant to such act, a bank is now able to
open new branches in a state in which it does not already have banking
operations, if the laws of such state permit such DE NOVO branching. Texas has
adopted legislation to "opt out" of the interstate branching provisions (which
Texas law currently expires on September 2, 1999).
PENDING AND PROPOSED LEGISLATION
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. In 1995, several bills have been introduced
in Congress that would have the effect of broadening the securities underwriting
powers of bank holding companies and possibly permitting bank holding companies
to engage in nonfinancial
29
<PAGE>
activities. The likelihood and timing of any such proposals or bills being
enacted and the impact they might have on First Financial and its subsidiaries
cannot be determined at this time.
DESCRIPTION OF FIRST FINANCIAL CAPITAL STOCK
The following description contains a summary of all of the material features
of the capital stock of First Financial but does not purport to be complete and
is subject to and qualified in its entirety by reference to the First Financial
Articles of Incorporation, which are filed as exhibits to documents incorporated
by reference herein and by reference to the applicable provisions of the Texas
Business Corporation Act. See also "COMPARISON OF SHAREHOLDER RIGHTS" below.
The following description should be read carefully by the Weatherford
Shareholders.
First Financial's total authorized capital stock consists of 10,000,000 shares
of First Financial Common Stock with a par value of $10.00 per share. There is
no authorized preferred stock. As of November 1, 1995, there were issued and
outstanding 5,012,133 shares of First Financial Common Stock.
The holders of First Financial Common Stock ("First Financial Shareholders")
are entitled to receive such dividends as may from time to time be declared by
the First Financial Board of Directors. Shareholders are entitled to one vote
per share of First Financial Common Stock on every issue submitted to them as
First Financial Shareholders at a meeting of shareholders or otherwise. In the
event of liquidation, First Financial Shareholders are entitled to share
ratably, after satisfaction in full of the prior rights of creditors, in all
assets of First Financial available for distribution to First Financial
Shareholders. First Financial Shareholders do not have preemptive or cumulative
voting rights. All shares of First Financial Common Stock now issued and
outstanding are fully paid and nonassessable.
COMPARISON OF SHAREHOLDER RIGHTS
In the event that the Exchange is consummated, Weatherford Shareholders whose
shares of Weatherford Holdings Common Stock are tendered in the Exchange Offer
will become First Financial Shareholders. Their rights will be governed by
Texas law, the First Financial Articles of Incorporation (the "First Financial
Charter") and the Bylaws of First Financial (the "First Financial Bylaws").
Certain differences between the rights of Weatherford Shareholders and First
Financial Shareholders are set forth below. As both Weatherford Holdings and
First Financial are organized under the laws of Texas, these differences
primarily arise from various provisions of the First Financial Charter, the
First Financial Bylaws, the Weatherford Holdings Articles of Incorporation (the
"Weatherford Holdings Charter") and the Bylaws of Weatherford Holdings (the
"Weatherford Holdings Bylaws"). This summary contains a description of the
material differences in shareholder rights, but is not meant to be relied upon
as an exhaustive list or detailed description of the provisions discussed herein
and is qualified in its entirety by reference to the TBCA, the First Financial
Charter, the First Financial Bylaws, the Weatherford Holdings Charter and the
Weatherford Holdings Bylaws.
BOARD OF DIRECTORS
The First Financial Bylaws provide that the number of directors constituting
the First Financial Board of Directors shall be not less than three and not more
than thirty. Persons eligible for election to the First Financial Board of
Directors are First Financial Shareholders who, at the date of the annual
meeting of shareholders at which the Board is elected, (i) have not attained the
age of 72 years, or (ii) have not attained the age of 75 years and own one
percent (1%) or more of the outstanding shares of First Financial Common
30
<PAGE>
Stock. Any director of First Financial may be removed, with or without cause, by
the holders of a majority of the shares outstanding.
The Weatherford Holdings Bylaws provide that the number of directors
constituting the Weatherford Holdings Board of Directors shall be not less than
one nor more than fifteen, the exact number to be determined from time to time
by the shareholders at their annual meeting or at any special meeting called for
that purpose. At any meeting of Weatherford Shareholders called expressly for
the purpose of removing a director, any director or the entire Weatherford
Holdings Board of Directors may be removed, with or without cause, by a vote of
the holders of a majority of the shares then entitled to vote at any election of
directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The First Financial Charter provides that each director, officer, employee and
agent of First Financial shall be indemnified for all expenses incurred in
connection with any action, suit, proceeding or claim to which he or she is
named a party or otherwise by virtue of holding such position; provided,
however, that no indemnification of employees or agents (other than directors or
officers) will be made without express authorization of the Board of Directors.
The First Financial Charter provides that such indemnification shall be provided
to the fullest extent permitted by applicable law.
The Weatherford Holdings Bylaws provide that Weatherford Holdings shall
indemnify its directors and officers against expenses actually and necessarily
incurred by such person in connection with the defense of any action, suit, or
proceeding, whether civil or criminal, in which he or she is made a party by
reason of being or having been such director or officer, except in relation to
matters as to which he or she shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in performance of duty.
SPECIAL MEETINGS OF SHAREHOLDERS
The First Financial Bylaws provide that a special meeting of shareholders may
be called by (i) a majority of the Board of Directors, or (ii) by the Chief
Executive Officer joined by at least three members of the Board of Directors, or
(iii) by shareholders holding voting rights of not less than 20% of the stock of
the corporation.
The Weatherford Holdings Bylaws provide that a special meeting of the
shareholders may be called by the President, the Board of Directors or
shareholders owning not less than 10% of all the shares entitled to vote at the
meeting.
INFORMATION ABOUT FIRST FINANCIAL
GENERAL
First Financial is a Texas corporation and a multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA").
First Financial owns, through its wholly-owned Delaware subsidiary, First
Financial Bankshares of Delaware, Inc., all of the capital stock of seven banks
located in Texas: First National Bank of Abilene, Abilene, Texas; Hereford
State Bank, Hereford, Texas; First National Bank, Sweetwater, Texas; Eastland
National Bank, Eastland, Texas; The First National Bank in Cleburne, Cleburne,
Texas; Stephenville Bank and Trust Co., Stephenville, Texas; and Southwest Bank
of San Angelo, San Angelo, Texas (collectively, the "First Financial Banks").
As of September 30, 1995, First Financial and its consolidated subsidiaries had
total assets of approximately $1.03 billion, total deposits of approximately
$905.7 million, total loans (net of allowance for loan losses) of approximately
$446.2 million and total shareholders' equity of approximately $112.4 million.
31
<PAGE>
First Financial operates principally in order to give the First Financial
Banks access to additional management and technical resources which help them to
improve or expand their banking and other services while continuing their local
activity. Each of the First Financial Banks operates under the day-to-day
management of its board of directors and officers, with substantial authority in
making decisions concerning its own investments, loan policies, interest rates
and service charges. First Financial provides assistance to the First Financial
Banks, especially with respect to decisions concerning major capital
expenditures, employee fringe benefits, including pension plans and group
insurance, dividend policies, appointment of officers and directors of First
Financial Banks and their compensation. The internal audit and loan review
functions are centralized at First Financial.
Each First Financial Bank is engaged in the general commercial banking
business consisting of the acceptance of checking, savings and time deposits,
the making of loans, transmitting funds and performing such other banking
services as are usual and customary for commercial banks.
In addition to First National Bank of Abilene, Hereford State Bank, First
National Bank, Sweetwater and Stephenville Bank and Trust Co. have active trust
departments. The trust departments offer a complete range of services to
individuals, associations and corporations, including the administration of
estates, testamentary trusts and various types of living trusts and agency
accounts. Other sources of revenue are services for businesses, including
administering pension, profit sharing, and other employee benefit plans, acting
as stock transfer agent or stock registrar, and providing paying agent services.
Commercial banking in Texas is very competitive and First Financial, holding
less than 1% of deposits, represents only a minor segment of the industry.
Success is dependent upon being able to compete in the areas of interest rates
paid or charged and scope of services offered and prices charged therefor.
Subsidiary banks of First Financial compete in their respective service areas
with highly competitive banks, savings and loan associations, small loan
companies, credit unions and brokerage firms, all of which are engaged in
providing financial products and services.
In addition to competition from other banks, the First Financial Banks will
also continue to be subject to substantial competition from other financial
institutions, such as savings and loan associations, small loan companies,
credit unions and brokerage firms, all of which are engaged in providing
financial products and services.
First Financial's principal executive offices are located at 400 Pine Street,
Abilene, Texas 79601, and its telephone number is (915) 675-7155. For further
information concerning First Financial which is incorporated herein by reference
from certain publicly-filed documents, see "Incorporation by Reference."
RECENT DEVELOPMENTS
On September 7, 1995, First Financial entered into an acquisition agreement
with Citizens Equity Corp. ("Citizens Equity"), The Citizens National Bank of
Weatherford ("Citizens National") and various persons (the "Principal
Shareholders") owning, in the aggregate, more than two-thirds (2/3) of the
issued and outstanding shares of the common stock of Citizens Equity ("Citizens
Equity Stock"). Pursuant to the acquisition agreement, the Principal
Shareholders have agreed to sell, and First Financial has agreed to purchase,
all of the Principal Shareholders' shares of Citizens Equity Stock for $60.00
per share, subject to certain price adjustments stated in the acquisition
agreement. First Financial shall also make a cash tender offer to the remaining
shareholders of Citizens Equity to acquire their Citizens Equity Stock at the
same price per share at which the Principal Shareholders have agreed to sell
their shares. Consummation of the transaction is conditioned upon tender of
100% of the issued and outstanding shares of Citizen Equity Stock. It is also a
condition precedent to consummation of the transaction that Citizens Equity
acquire all, or substantially all, of the remaining shares of Citizens National
common stock not presently owned by Citizens Equity and that Citizens Equity
also redeem all 311 shares of its presently issued and outstanding Preferred
32
<PAGE>
Stock. Closing of the purchase of Citizens Equity Stock is expected to occur
during the first quarter of 1996. If the transaction is consummated, Citizens
Equity will be merged with and into FFB Delaware and Citizens National shall
become a subsidiary of FFB Delaware. It is also anticipated that Citizens
National will be merged with and into Weatherford National and that Weatherford
National, as the surviving bank, will have its principal banking facility in
Weatherford, Texas and branches in both Weatherford and Aledo, Texas.
In addition to certain conditions precedent stated in the acquisition
agreement, consummation and closing of the stock purchase transaction is subject
to approval by the Federal Reserve Board and other federal and state regulatory
authorities. The Federal Reserve Board has approved the acquisition. Funding of
the stock purchase will be provided from available cash reserves of First
Financial.
Citizens Equity is a Texas corporation and registered bank holding company
which owns approximately 91% of the issued and outstanding stock of Citizens
National. Both Citizens Equity and Citizens National are located in the City of
Weatherford, Parker County, Texas. At September 30, 1995, Citizens Equity had
total assets of approximately $11,000,000, substantially all of which is its
stock in Citizens National, which is its only operating subsidiary. Citizens
National was originally chartered in 1868 and at July 31, 1995, had total assets
of approximately $94,000,000 and shareholders' equity of approximately
$8,400,000.
On July 28, 1995, First Financial acquired Citizens State Bank in Roby, Texas
("Roby"). The Roby bank was purchased for cash by First National Bank,
Sweetwater and then converted to a branch of First National Bank, Sweetwater.
MARKET PRICES OF AND DIVIDENDS PAID ON FIRST FINANCIAL COMMON STOCK
Since November 1, 1993, the First Financial Common Stock has been traded on
the NASDAQ National Market under the trading symbol "FFIN." The following table
sets forth, for the periods indicated, the high and low bid prices and cash
dividends declared per share of First Financial Common Stock. The information
with respect to price quotations was obtained from The Principal/Financial
Securities, Inc. of Abilene, Texas, a securities brokerage firm, and have been
adjusted to reflect stock splits and stock dividends.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
1993:
First Quarter............ $29.45 $28.36 $0.20
Second Quarter........... 31.20 29.45 0.26
Third Quarter............ 32.00 31.20 0.26
Fourth Quarter........... 33.20 32.00 0.26
1994:
First Quarter............ $35.60 $31.60 $0.26
Second Quarter........... 32.40 28.80 0.28
Third Quarter............ 30.00 28.00 0.28
Fourth Quarter........... 28.50 24.00 0.28
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C> <C>
1995:
First Quarter............ $26.00 $24.75 $0.28
Second Quarter........... 30.50 26.00 0.31
Third Quarter............ 31.75 29.50 0.31
Fourth Quarter (through
December 14, 1995)...... 30.50 30.00 0.31
</TABLE>
On October 19, 1995 (the last trading day preceding the execution of the
Exchange Agreement), the last sales price of First Financial Common Stock, as
reported by NASDAQ, was $32.00 per share. On December 14, 1995 (the last
practicable date prior to the mailing of this Prospectus), the last sales price
of First Financial Common Stock, as reported by NASDAQ, was $32.00 per share.
WEATHERFORD SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
FIRST FINANCIAL COMMON STOCK. NO ASSURANCE CAN BE GIVEN CONCERNING THE MARKET
PRICE OF FIRST FINANCIAL COMMON STOCK BEFORE OR AFTER THE DATE ON WHICH THE
EXCHANGE IS CONSUMMATED. THE MARKET PRICE OF FIRST FINANCIAL COMMON STOCK WILL
FLUCTUATE BETWEEN THE DATE OF THIS PROSPECTUS AND THE DATE ON WHICH THE EXCHANGE
IS CONSUMMATED AND THEREAFTER.
The timing and amount of future dividends on First Financial Common Stock will
depend upon earnings, cash requirements, the financial condition of First
Financial and its subsidiaries, applicable government regulations and other
factors deemed relevant by the Board of Directors of First Financial. As
described under "Certain Regulatory Considerations," various state and federal
laws limit the ability of the First Financial Banks to pay dividends to First
Financial.
On October 10, 1995, there were 1,394 holders of record of First Financial
Common Stock.
INFORMATION ABOUT WEATHERFORD HOLDINGS
GENERAL
Weatherford Holdings is a one bank holding company formed in 1984 and
incorporated in the State of Texas. Weatherford Holdings owns all of the
capital stock of Parker Bancshares, Inc. ("Parker Bancshares"), a Delaware
corporation and bank holding company that owns all of the capital stock of
Weatherford National Bank ("Weatherford National"), a national bank having is
principal office in the City of Weatherford, Parker County, Texas. Weatherford
National, which began operations in 1984, is federally chartered and insured by
the Federal Deposit Insurance Corporation.
MARKET AREA
Weatherford Holdings conducts business principally in Parker County and
surrounding areas through its two locations in Weatherford, Texas.
SERVICES
Weatherford National provides a full range of both commercial and consumer
banking services including loans, checking accounts, savings programs, safe
deposit facilities, access to automated teller machines, and credit card
programs. The bank does not offer trust services.
34
<PAGE>
COMPETITION
The business of banking in Weatherford National's market area is highly
competitive. In Weatherford, six other banks operate with nine locations.
Weatherford National also competes with credit unions, saving and loan
associations, investment brokers, insurance companies, and mortgage companies.
EMPLOYEES
As of September 30, 1995, Weatherford Holdings and its subsidiaries employed
28 full time and 5 part time employees.
PROPERTIES
Weatherford National has two locations in Weatherford. Its principal office
is located at 101 College Drive and a full service branch office is located at
1214 N. Main.
MARKET FOR AND DIVIDENDS PAID ON WEATHERFORD HOLDINGS COMMON STOCK
There is no established public trading market for Weatherford Holdings Common
Stock. Weatherford Holdings Common Stock is not listed on a national securities
exchange and is not authorized for quotation on an interdealer quotation system.
As of October 1, 1995, there were 147 holders of record of Weatherford Holdings
Common Stock. Weatherford Holdings has paid dividends on Weatherford Holdings
Common Stock in 1994 and 1995, but payment of future dividends is not assured.
The Exchange Agreement permits Weatherford to pay in January 1996 a dividend of
$.50 per share to shareholders of record as of a date in December 1995.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of October 1, 1995, the management of Weatherford Holdings knew of no
person, other than those listed below, owning beneficially more than 5% of the
Weatherford Holdings Common Stock.
<TABLE>
<CAPTION>
Shares of Weatherford Holdings
Common Stock Percentage of Weatherford Holdings
Name and Address of Beneficial Owner Beneficially Owned(1) Common Stock Outstanding
------------------------------------- ------------------------------ ----------------------------------
<S> <C> <C>
Walter F. Worthington 67,565/(2)/ 31.3%
803 East Park
Weatherford, Texas 76086
Mac A. Coalson 40,142/(3)/ 18.6%
7801 New Authon Road
Weatherford, Texas 76086
Melvin L. Worthington 27,360/(4)/ 12.7%
403 West Oak
Weatherford, Texas 76086
Gerald E. Davis 12,500 5.8%
P.O. Box 640
Weatherford, Texas 76086
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C>
Bill G. Wester 11,316 5.2%
107 Edge Hill Terrace
Weatherford, Texas 76086
</TABLE>
- --------------
(1) As determined in accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(2) Walter F. Worthington may be deemed to beneficially own 67,565 shares, 746
shares of which are owned directly by Frances Fant Worthington Special
Trust, of which Mr. Worthington is a trustee, and 20,402 shares of which are
owned directly by Worthington Properties Ltd., of which Frances Fant
Worthington Special Trust is a general partner, of which Mr. Worthington is
a trustee.
(3) Mac A. Coalson may be deemed to beneficially own 40,142 shares, 20,000
shares of which are owned directly by The McAllen F. and Greg T. Coalson
Trust, of which Mr. Coalson is a trustee.
(4) Melvin L. Worthington may be deemed to beneficially own 27,360 shares, 746
shares of which are owned directly by Frances Fant Worthington Special
Trust, of which Mr. Worthington is a trustee and 20,402 shares of which are
owned directly by Worthington Properties Ltd., of which Frances Fant
Worthington Special Trust is a general partner, of which Mr. Worthington is
a trustee.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the shares of Weatherford
Holdings Common Stock beneficially owned by each director and executive officer
and for all directors and executive officers as a group as of October 1, 1995.
<TABLE>
<CAPTION>
Shares of Weatherford Holdings
Common Stock Percentage of Weatherford Holdings
Name Beneficially Owned(1) Common Stock Outstanding
------ --------------------- -----------------------------------
<S> <C> <C>
Helen G. Brogdon 452 *
Mac A. Coalson 40,142/(3)/ 18.6%
Gerald E. Davis 12,500 5.8%
Larry V. Mangrem 2,100 1.0%
Bill G. Wester 11,316 5.2%
Brookes B. Worthington 1,315 *
Melvin L. Worthington 27,360/(4)/ 12.7%
Walter F. Worthington 67,565/(2)/ 31.3%
All directors and executive
officers as a group: 141,602 65.6%
</TABLE>
- --------------
* Indicates beneficial ownership is less than one percent.
(1) Each director and executive officer of Weatherford Holdings has sole voting
and investment powers with respect to all shares of Weatherford Holdings
Common Stock shown as beneficially owned by such director or executive
officer except as otherwise indicated in the following footnotes. Beneficial
ownership is determined in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(2) Walter F. Worthington may be deemed to beneficially own 67,565 shares, 746
shares of which are owned directly by Frances Fant Worthington Special
Trust, of which Mr. Worthington is a trustee, and 20,402
36
<PAGE>
shares of which are owned directly by Worthington Properties Ltd., of which
Frances Fant Worthington Special Trust is a general partner, of which Mr.
Worthington is a trustee.
(3) Mac A. Coalson may be deemed to beneficially own 40,142 shares, 20,000
shares of which are owned directly by The McAllen F. and Greg T. Coalson
Trust, of which Mr. Coalson is a trustee.
(4) Melvin L. Worthington may be deemed to beneficially own 27,360 shares, 746
shares of which are owned directly by Frances Fant Worthington Special
Trust, of which Mr. Worthington is a trustee and 20,402 shares of which are
owned directly by Worthington Properties Ltd., of which Frances Fant
Worthington Special Trust is a general partner, of which Mr. Worthington is
a trustee.
After giving effect to the First Financial Common Stock to be issued in the
Exchange and the Merger, and based on the number of shares of First Financial
Common Stock outstanding as of November 1, 1995, no director or executive
officer of Weatherford Holdings will beneficially own more than one percent (1%)
of the outstanding First Financial Common Stock immediately after the Exchange
and the Merger, other than Walter F. Worthington and Mac A. Coalson who will own
1.9% and 1.1%, respectively, of the outstanding First Financial Common Stock
immediately following the Exchange and the Merger.
There are no commitments at this time for the issuance of shares to any
officer, director or other major stockholders.
37
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF WEATHERFORD HOLDINGS
The following tables present selected historical consolidated financial data
of Weatherford Holdings as of the dates and for the periods indicated. Results
of operations for the nine months ended September 30, 1995 are not necessarily
indicative of results for a full fiscal year. The financial data should be read
in conjunction with the historical consolidated financial statements of
Weatherford Holdings and related notes included elsewhere herein.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------------------------------- SEPTEMBER 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net interest income.................. $ 1,186 $ 1,358 $ 1,787 $ 1,925 $ 2,053 $ 1,700
Provision for loan losses............ 42 63 71 3 3 34
Noninterest income................... 430 482 544 1,244 720 527
Noninterest expense.................. 1,139 1,204 1,304 1,553 1,544 1,329
------- ------- ------- ------- ------- -------
Income before income taxes........... 435 573 956 1,613 1,226 864
Provisions (benefit) for
income taxes........................ 126 175 289 511 378 275
------- ------- ------- ------- ------- -------
Net income before cumulative effect
of accounting change................ 309 398 667 1,103 848 589
Cumulative effect of accounting
change.............................. -- -- -- (19) -- --
------- ------- ------- ------- ------- -------
Net income........................... $ 309 $ 398 $ 667 $ 1,084 $ 848 $ 589
======= ======= ======= ======= ======= =======
Net income per Weatherford
Holdings Common Share
before cumulative effect
of accounting change................ $ 1.40 $ 1.82 $ 3.06 $ 5.11 $ 3.92 $ 2.73
Net income per Weatherford
Holdings Common Share............... $ 1.40 $ 1.82 $ 3.06 $ 5.02 $ 3.92 $ 2.73
FINANCIAL POSITION:
Assets............................... $33,698 $41,617 $47,808 $51,406 $54,369 $62,142
Loans................................ 11,821 12,606 13,822 16,397 21,151 25,005
Investment Securities................ 14,829 22,906 25,787 26,705 27,706 29,411
Deposits............................. 30,467 38,182 43,856 47,039 49,321 56,542
Stockholders' equity................. 1,912 2,292 2,935 4,019 4,609 5,133
SIGNIFICANT RATIOS:
Return on assets..................... 0.98% 1.10% 1.50% 2.26% 1.66% 1.03%
Return on equity..................... 10.94% 13.06% 19.90% 29.16% 19.50% 12.30%
Net interest margin.................. 3.49% 3.10% 3.95% 3.77% 3.38% 3.46%
Earning assets to assets............. 88.60% 01.05% 91.52% 90.74% 90.96% 91.33%
Book value per share(1).............. 8.69 10.49 13.59 18.61 21.34 23.77
</TABLE>
(Footnotes may appear on following page)
______________
(1) At period end
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF WEATHERFORD HOLDINGS
INTRODUCTION
Included in this review are the following sections:
I. Overview of Operations
II. Net Interest Income
III. Asset Quality
IV. Deposits
V. Return on Equity and Assets
VI. Noninterest Income and Expense and Income Taxes
VII. Liquidity and Interest Rate Sensitivity
VIII. Capital
IX. Discussion of First Nine Months of 1995 versus First Nine Months of
1994
This discussion should be read in conjunction with the financial statements,
notes and tables included elsewhere in this Prospectus. Definitions of terms
used in this discussion include:
Average Balances
All average balances are calculated on the basis of daily averages. Interim
period annualizations are based on actual days in the relevant period.
Fully Taxable Equivalent Basis (FTE):
Income on earning assets which is subject to either a reduced rate or zero
rate of income tax has been adjusted to give effect to the statutory federal
income tax rate of 34%. Where appropriate, yield calculations include these
adjustments.
Net Interest Income:
Interest and related fee income on earning assets (FTE basis where
appropriate) reduced by total interest expense on interest bearing liabilities.
Net Interest Margin:
Net interest income on an FTE basis expressed as a percent of average earning
assets.
39
<PAGE>
I. OVERVIEW OF OPERATIONS
General
Net income of Weatherford Holdings for 1994 was $848 thousand as compared to
$1.01 million for 1993 and $667 thousand for 1992. Earnings per share were
$3.92, $5.02, and $3.06 for 1994, 1993, and 1992, respectively. Return on
average assets was 1.66% for 1994 compared to 2.26% in 1993 and 1.50% in 1992.
Return on shareholders' equity in 1994 was 19.53% compared to 29.16% in 1993 and
19.90% in 1992. The 1993 amounts reflect a $19 thousand reduction in earnings
which represented the cumulative effect of the adoption of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The decreased income for 1994
is attributed to a reduction in securities gains which amounted to $438
thousand, after-tax in 1993. Securities gains in 1994 were not significant, and
there were no securities gains or losses in 1992.
As shown in Table 1, net interest income on a tax-equivalent basis for 1994
amounted to $2.12 million as compared to $1.99 million for 1993 and $1.85
million for 1992. Table 2 summarizes the changes in net interest income on a
fully tax-equivalent basis by major category of interest-earning assets and
interest-bearing liabilities, identifying changes related to volumes and rates.
The provision for loan losses in 1994 amounted to $3 thousand which was equal
to the 1993 amount and below the 1992 total of $71 thousand. Net charge-offs in
1994 totaled $7 thousand as compared to net recoveries of $5 thousand and $12
thousand in 1993 and 1992, respectively. Nonperforming assets at December 31,
1994, amounted to $89 thousand as compared to $51 thousand at December 31, 1993,
and $62 thousand at December 31, 1992. Table 7 provides the components of
nonperforming assets and Table 8 provides an analysis of the Allowance for Loan
Losses. Management is not aware of any classified loan not properly classified
as nonperforming and considers the allowance for loan losses to be adequate.
Noninterest income for 1994 totaled $720 thousand as compared to $1.2 million
in 1993 and $543 thousand in 1992. As shown in Table 11, the 1994 decrease was
due primarily to lower securities gains which totaled $664 thousand in 1993.
Service fees on deposit accounts and brokerage commissions in 1994 reflect
increases over the prior year and offset to some extent the decrease in
securities gains. Total noninterest expense for 1994 amounted to $1.5 million
and was $9 thousand below the 1993 total. Noninterest expense in 1992 amounted
to $1.3 million. Salaries and employee benefits, the largest component of
noninterest expense, increased $31 thousand, or 4.5%, to $708 thousand in 1994,
with essentially all of the increase being in salaries. Total salaries and
employee benefits totaled $677 thousand in 1993, which was up $105 thousand from
the 1992 total. Table 12 provides detail of noninterest expense and the changes
from the prior year.
Income tax expense for 1994 amounted to $378 thousand compared to $511
thousand in 1993 and $289 thousand in 1992. Weatherford Holdings' effective tax
rates on pre-tax income were 30.9%, 31.6%, and 30.2% for the years 1994, 1993,
and 1992, respectively
Balance Sheet Review
Total assets amounted to $54.3 million and $51.4 million at December 31, 1994
and 1993, respectively. During 1994 total assets averaged $51.0 million
compared to an average of $48.8 million in 1993.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 which modified the accounting for
investment securities. The statement requires management to classify debt and
equity securities as held-to-maturity, available-for-sale, or trading based on
their intent. Securities classified as held-to-maturity are recorded at cost,
adjusted for amortization of premiums and accretion of discounts. Securities
classified as available-for-sale are recorded at fair value, with unrealized
gains and losses, net of deferred taxes, excluded from earnings and reported in
a separate component of shareholders' equity. Securities classified as trading
are recorded at fair value, with unrealized
40
<PAGE>
gains and losses included in earnings. As permitted by the statement,
Weatherford Holdings adopted this statement effective January 1, 1994, and the
resulting cumulative adjustment increased investment securities $37.7 thousand,
deferred income taxes payable $12.8 thousand, and shareholders' equity $24.9
thousand. Holding investment securities until maturity continues to be
Weatherford Holdings' primary investment strategy. Investment securities
totaling $3.8 million, however, are classified as available-for-sale which
provides Weatherford Holdings flexibility in asset and liability management to
liquidate prior to maturity certain investments. Investment securities at
December 31, 1994, totaled $27.7 million as compared to $26.7 million at
December 31, 1993. Table 3 presents the composition of the investment
portfolio, and Table 4 provides maturities and yields of investment securities
at December 31, 1994. The net unrealized loss for held-to-maturity securities
amounted to $1.6 million at December 31, 1994. Total loans at December 31,
1994, amounted to $21.3 million which represents a 28.3% increase from the year-
end 1993 total of $16.6 million. Table 5 presents the composition of the loan
portfolio.
Total deposits at December 31, 1994, were $49.3 million as compared to $47.0
million at December 31, 1993. For the year, total deposits averaged $46.3
million which was up from the 1993 average of $45.1 million. Table 9 provides
the composition of total average deposits and average rates on interest-bearing
deposits. At December 31, 1994, total shareholders' equity was $4.6 million, an
increase of $600 thousand, or 14.9%, from December 31, 1993.
Interest-Sensitivity
Table 13 presents Weatherford Holdings' interest-sensitivity gap at December
31, 1994. As shown in the table, Weatherford Holdings has a negative cumulative
repricing gap in the one-year horizon. Consequently, a sudden and large
increase in rates or a dramatic narrowing in the spread between asset yields and
liability costs would result in an adverse impact on the net interest margin;
however, the adverse impact is more moderate if interest rates follow historical
trends and increase gradually. There are no off-balance sheet financial
instruments to manage interest rate risk.
41
<PAGE>
II. NET INTEREST INCOME
TABLE 1 - AVERAGE BALANCES AND AVERAGE YIELDS AND RATES (000'S OMITTED) --
WEATHERFORD HOLDINGS
The following table shows Weatherford Holdings' consolidated balances of
assets, liabilities and capital computed principally on an average daily basis
and the interest income and average yield on interest-earning assets and
interest expense and average rate on interest-bearing liabilities for the three
years ended December 31, 1994, (000's omitted). The calculations of average
yields and rates are based upon the average daily balances. Non-accrual loans
are included in the average daily balance of loans and any interest income
recognized on a cash basis is included in interest income on loans:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- ---------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
-------- -------- -------- -------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments................ $ 1,382 $ 62 4.49% $ 1,950 $ 56 2.87% $ 2,619 $ 100 3.82%
Taxable investment securities......... 24,098 1,202 4.99 25,382 1,428 5.63 23,001 1,601 6.96
Tax-exempt investment securities(1)... 2,149 198 9.21 2,072 189 9.12 1,962 182 9.28
Loans(1)(2)........................... 18,889 1,810 9.58 15,398 1,496 9.72 13,823 1,456 10.53
------- ------- ------- ------ ------- ------
Total earning assets.................. 46,518 3,272 7.03 44,802 3,169 7.07 41,405 3,339 8.06
Cash and due from banks............... 2,654 2,206 2,403
Bank premises and equipment........... 1,458 1,399 811
Other assets.......................... 572 585 652
Allowance for loan losses............. (183) (184) (153)
------- ------- -------
Total assets.......................... $51,019 $48,808 $45,118
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits............. $37,719 $ 1,151 3.05% $37,219 $1,155 3.10% $35,015 $1,445 4.13%
Short-term borrowings
Long-term debt........................ 13 1 8.00 449 24 680 45 6.62
------- ------- ------- ------ ------- ------
Total interest bearing liabilities.... 37,732 1,152 3.05 37,668 1,179 3.13 35,695 1,490 4.17
------- ------ ------
Noninterest-bearing deposits.......... 8,640 7,448 6,277
Other liabilities..................... 299 278 394
------- ------- -------
Total liabilities..................... 46,671 45,394 42,366
Shareholders' equity.................. 4,348 3,414 2,752
------- ------- -------
Total liabilities and shareholders'
equity................................ $51,019 $48,808 $45,118
======= ======= =======
Net interest income................... $ 2,120 $ 1,990 $ 1,849
======= ======= =======
Rate Analysis
Interest income/earning assets........ 7.03% 7.07% 8.06%
Interest expense/earning assets....... 2.48 2.63 3.60
---- ---- ----
Net yield on earning assets 4.56% 4.44% 4.47%
==== ==== ====
</TABLE>
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
(2) Nonaccrual loans are included in loans.
42
<PAGE>
TABLE 2 - ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE (000'S
OMITTED) -- WEATHERFORD HOLDINGS
<TABLE>
<CAPTION>
1994 Compared to 1993 1993 Compared to 1992
--------------------------------------------------------- ----------------------------------------
Change Attributable to Total Change Attributable to Total
Volume Rate Change Volume Rate Change
----------------------- ------- ----------------------- ------- ---------------------- -------
<S> <C> <C> <C> <C> <C> <C>
Short-term investments..... $ (16) $ 22 $ 6 $ (26) $ (18) $ (44)
Taxable investment
securities................. (72) (154) (226) 166 (339) (173)
Tax-exempt investment
securities (1)............. 7 2 9 10 (3) 7
Loans (1).................. 339 (25) 314 166 (126) 40
----- ----- ----- ----- ----- -----
Interest income............ 258 (155) 103 316 (486) (170)
----- ----- ----- ----- ----- -----
Interest bearing deposits.. 16 (20) (4) 91 (381) (290)
Short-term borrowings...... -- -- -- -- -- --
----- ----- ----- ----- ----- -----
Long-term debt............. (24) 1 (23) (16) (5) (21)
----- ----- ----- ----- ----- -----
Interest expense........... (9) (19) (27) 75 (386) (311)
----- ----- ----- ----- ----- -----
Net interest income........ $ 266 (136) $ 130 $ 242 (101) $ 141
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
43
<PAGE>
TABLE 3 - COMPOSITION OF INVESTMENT SECURITIES -- WEATHERFORD HOLDINGS
The table below sets forth the composition of investment securities at the dates
indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------
1994 1993 1992
--------- ----------- -----------
<S> <C> <C> <C>
Held-to-Maturity
- ----------------
U.S. Treasury obligations and obligations of
U.S. Government corporations and agencies........ $13,728 $17,385 $22,845
Obligations of states and political subdivisions.. 2,360 2,068 2,076
Mortgage-backed securities........................ 7,764 7,191 806
------- ------- -------
Total debt securities............................ 23,852 26,644 25,727
Other securities.................................. -- 60 60
------- ------- -------
$23,852 $26,704 $25,787
======= ======= =======
December 31,
1994
-------------
Available-for-Sale
- ------------------
U.S. Treasury obligations and obligations of
U.S. Government corporations and agencies........ $2,821
Obligations of states and political subdivisions.. --
Mortgage-backed securities........................ 973
------
Total debt securities............................ 3,794
Other securities.................................. 60
------
$3,854
======
</TABLE>
TABLE 4 - MATURITY AND YIELDS OF INVESTMENT SECURITIES HELD AT DECEMBER 31, 1994
-- WEATHERFORD HOLDINGS
The following table shows the maturities of investment securities at December
31, 1994 and the weighted average yields (for tax exempt obligations on a fully
taxable basis assuming a 34% tax rate adjusted for disallowed interest
deductions in accordance with Federal income tax regulation) of such securities
(000's omitted):
<TABLE>
<CAPTION>
MATURING
--------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
--------------- ----------------- ---------------- --------------- ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ------ ------- ------ ------ ------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
- ----------------
U.S. Treasury obligations
and obligations of U.S.
Government corporations
and agencies $1,601 4.03% $12,127 4.65% $ -- --% $ -- --% $13,728 4.58%
Obligations of states and
political subdivisions 301 9.25 1,339 8.65 720 8.41 -- -- 2,360 8.64
Mortgage-backed securities -- -- -- -- 2,773 5.54 4,991 5.48 7,764 5.50
------- ------- ------- ----- ------ ---- ------ ---- ------- ----
Total $1,902 4.86% $13,486 5.05% $3,493 6.13% $4,991 5.48% $23,852 5.28%
======= ======= ======= ===== ====== ==== ====== ==== ======= ====
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
MATURING
--------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
--------------- ----------------- ---------------- --------------- ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ------ ------- ------ ------ ------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-Sale:
- ---------------------------
U.S. Treasury obligations
and obligations of U.S.
Government corporations
and agencies $2,627 6.95% $194 6.20% $-- --% $ -- --% $2,821 6.91%
Mortgage-backed securities -- -- 612 6.24 -- -- 361 8.04 973 6.81
Other securities -- -- -- -- -- -- 60 6.00 60 6.90
------ ---- ---- ---- --- -- ---- ---- ------ -----
Total $2,627 6.95% $806 6.23% $-- --% $421 7.75% $3,854 6.90%
====== ==== ==== ==== === == ==== ==== ====== =====
</TABLE>
TABLE 5 - COMPOSITION OF LOANS -- WEATHERFORD HOLDINGS
The table below sets forth the amount of loans outstanding at the end of the
years indicated, according to type of loan (000's omitted):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural.. $ 4,176 $ 2,870 $ 2,872 $ 2,490 $ 2,400
Real estate - construction............... 1,656 876 515 600 491
Real estate-mortgage..................... 11,668 8,501 6,673 5,777 5,701
Consumer................................. 3,832 4,335 3,939 3,834 3,337
------- ------- ------- ------- -------
$21,332 $16,582 $13,999 $12,701 $11,929
======= ======= ======= ======= =======
</TABLE>
TABLE 6 - LOAN MATURITIES AND INTEREST SENSITIVITY AT DECEMBER 31, 1994 --
WEATHERFORD HOLDINGS
The amounts of total loans (excluding real estate mortgages and installment
consumer loans) outstanding as of December 31, 1994, which, based on remaining
scheduled repayments of principal, are due in (i) one year or less, (ii) more
than one year but less than five years, and (iii) more than five years, are
shown in the following table. The amounts due after one year are classified
according to the sensitivity to changes in interest rates. Aggregate maturities
of loan balances which are due:
<TABLE>
<CAPTION>
Over One Year
One Year Through Over
Or Less Five Years Five Years Total
-------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural......... $1,486 $1,834 $856 $4,176
Real estate - construction..................... 1,656 -- -- 1,656
------ ------ ---- ------
$3,142 $1,834 $856 $5,832
====== ====== ==== ======
Maturities
After
One Year
-----------
Loans with fixed interest rates................ $2,580
Loans with floating or adjustable interest
rates......................................... 110
------
$2,690
======
</TABLE>
45
<PAGE>
III. ASSET QUALITY
TABLE 7 - NONPERFORMING ASSETS (000'S OMITTED)-- WEATHERFORD HOLDINGS
<TABLE>
<CAPTION>
PAST DUE AND NON-ACCRUAL LOANS: 1994 1993 1992 1991 1990
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans............................... $ 27 $ -- $ -- $ 110 $ 129
Loans past due 90 days or more................. 16 5 10 45 3
Restructured loans............................. -- -- -- -- --
----- ----- ----- ----- -----
Nonperforming loans....................... 43 5 10 155 132
Foreclosed assets.............................. 46 46 52 55 115
----- ----- ----- ----- -----
Total nonperforming assets................ $ 89 $ 51 $ 62 $ 210 $ 247
===== ===== ===== ===== =====
As a % of loans and foreclosed properties...... 0.42% 0.31% 0.44% 1.65% 2.05%
</TABLE>
Loan Concentrations
At December 31, 1994, Weatherford Holdings had $1.07 million in loans
outstanding to the agricultural industry, which represented 5.02% of total
loans.
<TABLE>
<CAPTION>
Allocation of Allowance for Loan Losses
- ---------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Real estate - construction.............. $ 14 $ 9 $ 6 $ 4 $ 6
Real estate - mortgage.................. 96 92 82 40 50
Commercial, financial and agricultural.. 34 30 8 6 7
Consumer................................ 37 53 82 43 46
----- ----- ----- ----- -----
$ 181 $ 185 $ 177 $ 94 $ 108
===== ===== ===== ===== =====
Allocation as Percent of Total Loans
- ------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
Real estate - construction.............. 7.6% 5.1% 3.3% 4.6% 5.3%
Real estate - mortgage.................. 53.2 49.7 46.1 42.8 45.8
Commercial, financial and agricultural.. 19.1 16.4 4.3 6.6 6.4
Consumer................................ 20.2 28.7 46.4 46.1 42.6
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
TABLE 8 - LOAN LOSS EXPERIENCE AND ALLOWANCE FOR LOAN LOSSES -- WEATHERFORD
HOLDINGS
The following table summarizes the daily average amount of net loans
outstanding; changes in the allowance for loan losses arising from loans charged
off, and recoveries on loans previously charged off, by loan category; additions
to the allowance which have been charged to operating expense; and the ratio of
net loans charged off to average loans outstanding:
46
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1,.................... $ 185 $ 177 $ 94 $ 108 $ 104
Charge-offs:
Commercial, financial and agriculture... 2 1 10 45 32
Consumer................................ 8 3 6 36 32
All other............................... -- -- -- -- --
------- ------- ------- ------- -------
Total loans charged off.................. 10 4 16 81 64
Recoveries:
Commercial, financial and agriculture... -- 5 19 0 0
Consumer................................ 3 4 9 4 22
All other............................... -- -- -- -- --
Total recoveries......................... 3 9 28 4 26
------- ------- ------- ------- -------
Net (recoveries)/charge-offs............. 7 (5) (12) 77 38
Provision/(credit) for loan losses....... 3 3 71 63 42
------- ------- ------- ------- -------
Balance at December 31,.................. $ 181 $ 185 $ 177 $ 94 $ 108
======= ======= ======= ======= =======
Loans at year-end........................ $21,332 $16,582 $13,999 $12,701 $11,929
Average loans............................ 18,889 15,398 13,823 12,200 12,308
Net charge-offs/(recoveries)/average loans 0.04% (0.03)% (0.09)% 0.63% 0.31%
Allowance for loan losses/year-end loans. 0.85 1.12 1.26 0.74 0.91
</TABLE>
IV. DEPOSITS
TABLE 9 - COMPOSITION OF DEPOSITS -- WEATHERFORD HOLDINGS
The following table presents the average daily amount and the average
rate paid on deposits (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------------------- -------------------- --------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand deposits $ 8,640 --% $ 7,448 --% $ 6,277 --%
Interest-bearing demand deposits
Interest-bearing checking 11,815 2.19 11,700 2.23 9,588 2.98
Savings and money market accounts 11,314 2.89 11,132 3.02 9,993 3.72
Time deposits under $100,000 11,628 3.78 11,250 3.91 12,722 5.12
Time deposits of $100,000 or more 2,962 4.25 3,137 3.76 2,712 4.94
------- ------- -------
Total interest-bearing deposits 37,719 3.05 37,219 3.10 35,015 4.13
------- ------- -------
Total deposits $46,359 $44,667 $41,292
======= ======= =======
</TABLE>
47
<PAGE>
TABLE 10 - MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE --
WEATHERFORD HOLDINGS
Time deposits of $100,000 or more outstanding at December 31, 1994 will mature
as follows (000's omitted):
<TABLE>
<CAPTION>
December 31, 1994
-----------------
<S> <C>
(in thousands)
Under three months $3,604
Over three through twelve months 1,837
Over twelve months 623
------
$6,064
======
</TABLE>
V. RETURN ON EQUITY AND ASSETS
TABLE 11 - RETURN ON EQUITY AND ASSETS -- WEATHERFORD HOLDINGS
The ratio of net earnings to average shareholders' equity and daily average
total assets and certain other ratios are presented below:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1992 1993 1994
-------- ------- -------
<S> <C> <C> <C>
Percentage of net earnings to:
Average total assets 1.50% 2.26% 1.66%
Average shareholders' equity 19.90 29.16 19.53
Percentage of dividends declared per common
share to earnings per common share -- -- 25.51
Percentage of average shareholders' equity
to daily average total assets 7.61 7.91 8.52
</TABLE>
VI. NONINTEREST INCOME AND EXPENSE AND INCOME TAXES
TABLE 12 - NONINTEREST INCOME AND NONINTEREST EXPENSE -- WEATHERFORD HOLDINGS
Noninterest Income (000's omitted):
<TABLE>
<CAPTION>
INCREASE INCREASE
1994 (DECREASE) 1993 (DECREASE) 1992
-------- ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C>
Service fees on deposit accounts.. $ 566 $ 76 $ 490 $ 30 $ 460
Other:
Miscellaneous income............ 44 14 30 (6) 36
Mastercard fees................. 1 -- 1 (2) 3
Securities gains (losses)....... 12 (652) 664 664 --
Real estate mortgage fees....... 29 10 19 (2) 21
Brokerage commissions........... 46 31 15 15 --
Safe deposit rental fees........ 10 (2) 12 1 11
Exchange fees................... 12 (1) 13 1 12
----- ----- ------ ---- -----
154 (600) 754 671 83
----- ----- ------ ---- -----
$ 720 (524) $1,244 $701 $ 543
===== ===== ====== ==== =====
</TABLE>
48
<PAGE>
Noninterest Expense (000's omitted):
<TABLE>
<CAPTION>
INCREASE INCREASE
1994 (DECREASE) 1993 (DECREASE) 1992
--------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Salaries.................................................... $ 581 $ 39 $ 542 $ 76 $ 466
Payroll taxes............................................... 44 2 42 7 35
Profit sharing.............................................. 17 3 14 3 11
Medical and other benefits.................................. 66 (13) 79 19 60
------- ------ ------ ------- ------
708 31 677 105 572
Net occupancy............................................... 94 2 92 35 57
Equipment expense........................................... 162 58 104 36 68
FDIC insurance expense...................................... 102 5 97 11 86
Correspondent bank service charges.......................... 11 (3) 14 2 12
Other:
Printing and supplies..................................... 58 (3) 61 15 46
Postage and courier....................................... 60 1 59 7 52
Legal and accounting fees................................. 1 (2) 3 1 2
Outside data processing fees.............................. -- (92) 92 (35) 127
Other professional and service fees....................... 6 (9) 15 (1) 16
Advertising............................................... 43 (5) 48 16 32
Other miscellaneous....................................... 299 8 291 57 234
------- ------ ------ ------- ------
467 (102) 569 60 509
------- ------ ------ ------- ------
Total Noninterest Expense $ 1,544 $ (9) $1,553 $ 249 $1,304
======= ====== ====== ======= ======
As a % of Tax Equivalent Net Revenue 54.37% 48.02% 54.52%
</TABLE>
VII. LIQUIDITY AND INTEREST RATE SENSITIVITY
TABLE 13 - INTEREST SENSITIVITY ANALYSIS -- WEATHERFORD
HOLDINGS (000'S OMITTED)
<TABLE>
<CAPTION>
WITHIN 3 4 - 6 7 - 12 1 - 5 OVER 5
MONTHS MONTHS MONTHS YEARS YEARS TOTAL
-------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Total loans................................................ $ 4,343 $ 3,753 $5,420 $ 5,252 $ 2,564 $21,332
Investment securities...................................... 1,087 300 3,147 14,070 9,102 27,706
Short-term investments..................................... 3,854 3,854
------- ------- ------ ------- ------- -------
Total interest - earning
assets.................................................. 9,284 4,053 8,567 19,322 11,666 52,892
Interest - bearing liabilities:
Transaction deposit accounts............................... 22,129 -- -- -- -- 22,129
Time deposits.............................................. 11,221 3,305 2,280 1,886 -- 18,692
Borrowed funds.............................................
Mortgage notes payable..................................... -- -- 38 75 -- 113
------- ------- ------ ------- ------- -------
Total interest-bearing
liabilities............................................. $33,350 $ 3,305 $2,318 $ 1,961 $ -- $40,934
------- ------- ------ ------- ------- -------
Interest sensitivity gap.................................... (24,066) $ 748 $6,249 $17,361 $11,666 $11,958
Cumulative interest sensitivity
gap........................................................ (24,066) (23,318) (17,069) 292 11,958 11,958
Ratio of interest sensitive
assets to interest sensitive
liabilities................................................ 0.28 1.23 3.70 9.85 --
Cumulative ratio of interest
sensitive assets to interest
sensitive liabilities......................................
Cumulative interest sensitivity
gap as a percent of earning
assets..................................................... (45.50)% (44.09)% (32.27)% 0.55% 22.61%
</TABLE>
49
<PAGE>
VIII. CAPITAL
At year end 1994, total shareholders' equity was $4.6 million, an increase of
nearly $0.6 million over December 31, 1993. Weatherford Holdings' risk based
capital ratio has decreased from 22.97% in 1993 to 19.23% at year end 1994.
However, the ratio remains well above the minimum 8.00% required by federal
regulations. Book value of Weatherford Holdings' stock at year-end 1994 was
$21.34 per share, or a 15% increase over 1993's $18.61 per share. Weatherford
Holdings declared a cash dividend of $1 per share in 1994, has declared a cash
dividend of $.50 in the first nine months of 1995 and will declare a cash
dividend of $.50 per share in December 1995.
IX. DISCUSSION OF NINE MONTHS ENDED SEPTEMBER 30, 1995 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 1994
OVERVIEW OF OPERATIONS
For the nine months ended September 30, 1995, net income amounted to $589
thousand, or $2.73 per share, compared to $644 thousand, or $2.98 per share,
earned during the same period in 1994.
Return on average assets and return on average equity for the nine months
ended September 30, 1995, amounted to 1.35% and 16.06%, respectively. For the
same period in 1994, return on average assets was 1.70% and return on average
equity was 20.20%.
On a tax-equivalent basis, net interest income for the first nine months of
1995 was up $174 thousand from the same period last year. Table 14 provides an
analysis of average yields and rates and Table 15 summarizes the changes in net
interest income on a fully tax-equivalent basis by major category of interest-
earning assets and interest-bearing liabilities, identifying changes related to
volumes and rates.
September 1995 year-to-date noninterest income totaled $527 thousand, down
slightly from the prior year amount of $530 thousand. The decrease is
attributable primarily to lower real estate mortgage fees which decreased from
$28 thousand to $9 thousand. Total year-to-date noninterest expense at
September 30, 1995, amounted to $1.3 million as compared to $1.1 million the
prior year. The 1995 increase resulted primarily from the opening of a new
branch in July 1995. Table 15 provides the detail of noninterest income and
noninterest expense.
The provision for losses for the nine month period ended September 30, 1995,
amounted to $34 thousand as compared to $3 thousand the prior year. Net charge-
offs for the first nine months of 1995 totaled $43 thousand as compared to $6
thousand during the first nine months of 1994. Nonperforming assets at
September 30, 1995, totaled $125 thousand as compared to $89 thousand at
December 31, 1994. The increase resulted primarily from an increase in
nonaccrual loans. Management is not aware of any classified loans not properly
classified as nonperforming and considers the allowance for loan losses to be
adequate.
BALANCE SHEET REVIEW
Total assets at September 30, 1995, totaled $62.1 million as compared to $50.2
million the prior year and $54.4 million at December 31, 1994. The balance
sheets reflect normal recurring adjustments and accruals. Compared to September
30, 1994, Federal funds sold, loans, and investment securities have increased
$2.7 million, $4.9 million, and $3.6 million, respectively. Since year-end
1994, Federal funds sold are up $1.7 million, loans are up $3.8 million, and
investment securities are up $1.7 million. The net unrealized loss in
investment securities held to maturity at September 30, 1995, totaled $362
thousand as compared to $1.6 million at December 31, 1994. The improvement
resulted primarily from a reduction in market interest rates. At September 30,
1995, the investment securities portfolio included structured notes with an
amortized cost of $1 million and market value of $977 thousand. There were no
high risk mortgage securities in the investment portfolio at September 30, 1995.
50
<PAGE>
Total deposits at September 30, 1995, amounted to $56.5 million as compared to
$45.3 million at September 30, 1994, and $49.3 million at December 31, 1994.
Total equity capital amounted to $5.1 million at September 30, 1995, which was
up from $4.5 million at September 30, 1994, and $4.6 million at year-end 1994.
The risk-base capital and leverage ratios at September 30, 1995, were 18.56% and
8.26%, respectively.
51
<PAGE>
TABLE 14 - AVERAGE BALANCES AND AVERAGE YIELDS AND RATES - WEATHERFORD HOLDINGS
(000'S OMITTED):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1995 1994
-------------------------- --------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments................ $ 2,319 $ 104 6.00% $ 1,389 $ 43 4.14%
Taxable investment securities......... 25,796 1,009 5.23 24,255 905 4.99
Tax-exempt investment securities (1).. 2,185 145 8.87 2,077 145 9.33
Loans (1) (2)......................... 23,328 1,811 10.38 18,276 1,310 9.58
------- ------ ------- -------
Total earning assets................ 53,628 3,069 7.65 45,997 2,403 6.98
Cash and due from banks............... 2,572 2,769
Bank premises and equipment........... 1,703 1,465
Other assets.......................... 670 572
Allowance for loan losses............. (178) (184)
------- -------
Total assets........................ $58,395 $50,619
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits............. $44,188 $1,312 3.97% $37,517 $ 825 2.94%
Short-term borrowings.................
Long-term debt........................ 113 7 8.00
------- ------ ------- ------
Total interest bearing liabilities.. 44,301 1,319 3.98 37,517 825 2.94
------ ------
Noninterest-bearing deposits.......... 8,824 8,542
Other liabilities..................... 366 297
------- -------
Total liabilities................... 53,491 46,356
Shareholders' equity.................. 4,904 4,263
------- -------
Total liabilities and shareholders'
equity............................. $58,395 $50,619
======= =======
Net interest income................... $1,750 $1,578
Rate Analysis
Interest income/earning assets....... 7.65% 6.98%
Interest expense/earning assets...... 3.29 2.18
----- ----
Net yield on earning assets......... 4.36% 4.81%
===== ====
</TABLE>
52
<PAGE>
TABLE 15 - CHANGES IN INTEREST INCOME AND INTEREST EXPENSE - WEATHERFORD
HOLDINGS (000'S OMITTED):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1994 COMPARED TO 1993
----------------------------------
CHANGE ATTRIBUTABLE TO
----------------------- TOTAL
VOLUME RATE CHANGE
---------- ----------- ---------
<S> <C> <C> <C>
Short-term investments................ $ 53 $ 8 $ 61
Taxable investment securities......... 382 (278) 104
Tax-exempt investment securities (1).. -- -- --
Loans(1).............................. 926 (425) 501
------ ----- ----
Interest income...................... 1,361 (695) 666
Interest bearing deposits............. 474 13 487
Short-term borrowings................. -- -- --
Long-term debt........................ 7 -- 7
------ ----- ----
Interest expense..................... 481 13 494
------ ----- ----
Net interest income.................. $ 880 (708) $172
====== ===== ====
</TABLE>
- ---------------
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
53
<PAGE>
TABLE 16 - NONINTEREST INCOME AND EXPENSE
Noninterest Income (000's omitted):
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, Change
--------------------------- ----------------
1994 1995 $ %
------------ ------------- ------ --------
<S> <C> <C> <C> <C>
Trust department income
Service fees on deposit accounts..... $ 419 $ 415 $ (4) (0.95)%
Other:
Miscellaneous income................ 33 53 20 60.61
Mastercard fees..................... -- 1 1 --
Securities gains (losses)........... 2 -- (2) --
Real estate mortgage fees........... 28 9 (19) (67.86)
Brokerage commissions............... 31 32 1 3.23
Safe deposit rental fees............ 8 8 -- --
Exchange fees....................... 9 9 -- --
------ ----- ---- ------
111 112 -- 0.90
------ ----- ---- ------
Total noninterest income.......... $ 530 $ 527 $ (3) (0.57)%
====== ===== ==== ======
</TABLE>
NONINTEREST EXPENSE (000'S OMITTED):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Salaries............................ $ 419 $ 498 $ 79 18.85%
Payroll taxes....................... 31 36 5 16.13
Profit sharing...................... 13 14 1 7.69
Medical and other benefits.......... 39 41 2 5.13
------ ------ ---- ------
502 589 87 17.33
Net occupancy....................... 54 61 7 12.96
Equipment expense................... 121 128 7 5.79
FDIC insurance expense.............. 76 50 (26) (34.21)
Correspondence bank service charges. 8 13 5 62.50
Other:
Printing and supplies............. 44 46 2 4.55
Postage and courier............... 44 52 8 18.18
Legal and accounting fees......... 1 5 4 --
Other professional and service
fees............................. 4 5 1 25.00
Advertising....................... 28 75 47 --
Other miscellaneous............... 242 305 63 26.03
------ ------ ---- ------
363 488 125 34.44
------ ------ ---- ------
Total noninterest expense......... $1,124 $1,329 $205 18.24%
====== ====== ==== ======
as a % of tax-equivalent
net revenue...................... 53.32% 58.36%
</TABLE>
54
<PAGE>
LEGAL MATTERS
The legality of the First Financial Common Stock to be issued in connection
with the Exchange Offer and Merger will be passed upon by McMahon, Surovik,
Suttle, Buhrmann, Hicks & Gill, P.C.
EXPERTS
The consolidated financial statements of First Financial as of December 31,
1994 and 1993 and for each of the years in the three-year period ended December
31, 1994, incorporated by reference in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report dated January 11, 1995, with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The consolidated financial statements of Weatherford Holdings as of December
31, 1994 and 1993 and for each of the years in the three-year period ended
December 31, 1994, included in this prospectus and elsewhere in the registration
statement have been audited by George, Morgan & Sneed, P.C., independent public
accountants, as indicated in their report dated January 7, 1995, with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
55
<PAGE>
INDEX TO WEATHERFORD NATIONAL BANCSHARES, INC.'S FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED
DECEMBER 31, 1992, 1993 AND 1994
Report of Independent Public Accountants................................................ F-2
Consolidated Balance Sheets as of December 31, 1993 and 1994............................ F-3
Consolidated Statements of Earnings for three years ended December 31, 1992,
1993 and 1994.......................................................................... F-4
Consolidated Statement of Changes in Stockholders' Equity for the three years ended
December 31, 1992, 1993 and 1994....................................................... F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 1992,
1993 and 1994.......................................................................... F-6
Notes to Consolidated Financial Statements.............................................. F-7
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1995
Compilation Report...................................................................... F-20
Consolidated Balance Sheets as of September 30, 1994 and 1995........................... F-21
Consolidated Statements of Earnings for the three months and the nine months
ended September 30, 1994 and 1995...................................................... F-22
Consolidated Statement of Changes in Stockholders' Equity for the nine months ended
September 30, 1994 and 1995............................................................ F-23
Consolidated Statements of Cash Flows for the nine months ended September 30, 1994 and
1995................................................................................... F-24
Notes to Consolidated Financial Statements.............................................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Weatherford National Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of Weatherford
National Bancshares, Inc. (a Texas corporation) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of earnings, changes
in stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Weatherford
National Bancshares, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the results of their consolidated operations and their consolidated cash flows
for each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
/s/ GEORGE, MORGAN & SNEED, P.C.
Weatherford, Texas
January 7, 1995
F-2
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,335,321 $ 2,467,996
Federal funds sold 1,000,000 3,800,000
Securities available-for-sale (notes A and B) 3,853,812
Securities held-to-maturity (notes A and B) 23,852,058 26,704,548
Loans, less allowance for credit losses of $181,259 and
$184,810 at December 31, 994 and 1993
(notes A, C, D, K, L and M) 21,151,227 16,396,842
Bank premises and equipment (notes A and E) 1,555,245 1,503,393
Accrued interest receivable 506,088 443,972
Foreclosed real estate (note A) 45,785 45,785
Other assets (note F) 69,326 43,097
----------- -----------
$54,368,862 $51,405,633
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 8,499,298 $ 8,557,409
Interest bearing (note G) 40,821,258 38,481,590
----------- -----------
Total deposits 49,320,556 47,038,999
Accrued expenses and liabilities 208,543 253,752
Deferred income taxes (notes A and J) 118,794 94,105
Note payable (note H) 112,500
----------- -----------
Total liabilities 49,760,393 47,386,856
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock, $5.00 par value, 1,000,000
shares authorized, 220,771 shares issued 1,103,855 1,103,855
Paid-in capital 11,245 11,245
Net unrealized depreciation on available-for-sale
securities, net of tax benefit (41,877)
Retained earnings 3,577,314 2,945,745
----------- -----------
4,650,537 4,060,845
Less treasury stock, at cost, 4,783 shares (42,068) (42,068)
----------- -----------
Total stockholders' equity 4,608,469 4,018,777
----------- -----------
$54,368,862 $51,405,633
=========== ===========
</TABLE>
The accompanying notes are an integal part of this statement.
F-3
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans (note A) $1,810,531 $1,495,782 $1,456,334
Interest on investment securities
Taxable 1,202,423 1,427,616 1,601,049
Exempt from federal income taxes 130,501 125,466 119,774
Interest on federal funds sold 56,755 51,226 84,804
Other interest 4,990 5,066 15,076
---------- ---------- ----------
Total interest income 3,205,200 3,105,156 3,277,037
---------- ---------- ----------
Interest Expense
Interest on deposits 1,151,076 1,155,226 1,444,198
Interest on notes and debentures payable 1,134 24,342 45,504
---------- ---------- ----------
Total interest expense 1,152,210 1,179,568 1,489,702
---------- ---------- ----------
Net interest income 2,052,990 1,925,588 1,787,335
Provision for credit losses (note A and D) 3,000 3,000 70,559
---------- ---------- ----------
Net interest income after provision for credit losses 2,049,990 1,922,588 1,716,776
---------- ---------- ----------
Noninterest income
Service charges and fees 706,935 578,553 528,515
Gain on sale of foreclosed real estate 4,350 3,000
Gain on sale of securities (note B) 12,069 663,769
Gain on sale of other assets 700 (2,330) 12,275
---------- ---------- ----------
Total other income 719,704 1,244,342 543,790
---------- ---------- ----------
Noninterest Expenses
Employee compensation and benefits 707,777 676,507 572,449
Net occupancy and equipment expense 256,493 195,681 124,777
Net cost of operations of foreclosed real estate 12,960 1,314 24,969
Other operating expenses 566,564 679,907 581,744
---------- ---------- ----------
Total other expenses 1,543,794 1,553,409 1,303,939
---------- ---------- ----------
Earnings before income taxes 1,225,900 1,613,521 956,627
Federal tax provision (note J) 378,343 510,683 289,059
---------- ---------- ----------
Earnings before cumulative effect adjustment 847,557 1,102,838 667,568
Cumulative effect adjustment for change in accounting for
income taxes (note J) (19,113)
---------- ---------- ----------
NET EARNINGS $ 847,557 $1,083,725 $ 667,568
========== ========== ==========
Earnings per share before cumulative adjustment for change
in accounting for income taxes $ 3.92 $ 5.11 $ 3.06
========== ========== ==========
Earnings per share $ 3.92 $ 5.02 $ 3.06
========== ========== ==========
</TABLE>
The accompanying notes are an integal part of this statement.
F-4
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Unrealized
Depreciation on
Common Paid-in Available-for- Retained Treasury
Stock Capital Sale Securities Earnings Stock
------------ ---------- --------------- -------- ----------
Balances January 1, 1991 $ 1,103,855 $ 11,245 $ $ 1,194,452 $ (17,693)
Net earnings in 1992 667,568
Purchase of treasury stock (24,375)
----------- --------- --------- ----------- --------
Balance at December 31, 1992 1,103,855 11,245 1,862,020 (42,068)
Net earnings year in 1993 1,083,725
----------- --------- --------- ----------- --------
Balance at December 31, 1993 1,103,855 11,245 2,945,745 (42,068)
Initial unrealized gain recorded on
investment in securities
available-for-sale (net of deferred
tax benefit) 24,908
Net earnings year in 1994 847,557
Dividends declared ($1.00 per share) (215,988)
Change in unrealized depreciation on
available-for-sale securities
(net of deferred tax benefit) (66,785)
----------- --------- --------- ----------- --------
Balances at December 31, 1994 $ 1,103,855 $ 11,245 $ (41,877) $ 3,577,314 $(42,068)
=========== ========= ========== =========== ========
</TABLE>
The accompanying notes are an integal part of this statement.
F-5
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ -------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net earnings $ 847,557 $ 1,083,725 $ 667,568
----------- ------------ ------------
Adjustments to reconcile net earnings to cash provided
by operating activities
Depreciation and amortization 135,993 89,079 52,486
Cumulative effect of change in account for income
taxes 19,113
Provision for credit losses 3,000 3,000 70,559
Premium amortization, net of discount accretion 86,971 7,166 51,848
Net gain on sale of available-for-sale securities (12,069)
Net gain on sale of investment securities (663,769)
Gain on sale of foreclosed real estate (4,350) (3,000)
Gain on sale of other assets (700) 2,330 (12,275)
Change in other assets (67,613) 69,380 82,179
Change in other liabilities (20,520) (63,392) 29,539
----------- ------------ ------------
Total adjustments 125,062 (541,443) 271,336
----------- ------------ ------------
Net cash provided by operating activities 972,619 542,282 938,904
----------- ------------ ------------
Cash flows from investing activities
Changes in federal funds sold 2,800,000 (250,000) (800,000)
Proceeds from maturities of held-to-maturity securities 1,959,150 4,901,220 9,012,457
Proceeds from maturities of available-for-sale securities 410,141
Proceeds from sales of available-for-sale securities 1,212,692
Proceeds from sales of investment securities 15,748,001
Net increase in loans (4,757,385) (2,578,164) (1,284,579)
Proceeds from sale of other assets 700 13,775
Proceeds from sale of foreclosed real estate 10,595 4,000
Purchase of bank premises and equipment (187,004) (677,753) (193,838)
Purchase of held-to-maturity securities (2,094,618) (20,909,935) (11,945,652)
Purchase of available-for-sale securities (2,627,039)
------------ ------------ ------------
Net cash used by investing activities (3,283,363) (3,756,036) (5,193,837)
----------- ------------ ------------
Cash flows from financing activities
Change in non-interest bearing activities (58,111) 1,839,027 1,644,918
Change in interest bearing activities 2,339,668 1,343,967 4,028,890
Proceeds from long-term debt 112,500
Payments on long-term debt (625,000) (155,000)
Purchase of treasury stock (24,375)
Dividends declared (215,988)
----------- ------------ ------------
Net cash provided by financing activities 2,178,069 2,557,994 5,494,433
----------- ------------ ------------
Net change in cash and cash equivalents (132,675) (655,760) 1,239,500
Cash and cash equivalents at beginning of year 2,467,996 3,123,756 $ 1,884,256
----------- ------------ ------------
Cash and cash equivalents at end of year $ 2,335,321 $ 2,467,996 $ 3,123,756
=========== ============ ============
Supplemental schedule of non-cash investing and financing
activities
Unrealized depreciation on available-for-sale securities $ 63,450 $ $
Other real estate acquired through foreclosure $ $ $ 52,030
Other real estate disposed through loans $ $ $ 54,000
Cash paid during the year for
Interest $ 1,109,250 $ 1,225,493 $ 1,524,230
Income taxes $ 554,253 $ 512,203 $ 137,602
</TABLE>
The accompanying notes are an integal part of this statement.
F-6
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of Weatherford
National Bancshares, Inc. (Weatherford) its wholly owned subsidiary, Parker
Bancshares, Inc. (Parker) (a Delaware corporation), and its wholly owned
subsidiary, the Weatherford National Bank (the Bank). All material intercompany
transactions and accounts have been eliminated upon consolidation.
Weatherford was incorporated on February 21, 1984. Parker was incorporated on
December 13, 1988, and commenced to do business on December 28, 1988. The Bank
was incorporated on November 5, 1983, and received approval from the Board of
Governors of the Federal Reserve System to open for business on July 16, 1984.
On December 28, 1988, Weatherford exchanged all of the shares it owned in the
Bank for all of the stock in Parker.
2. Basis of Accounting
-------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and conform with practices within the
banking industry.
3. Trading Securities
------------------
Bonds, notes, and debentures held principally for resale in the near term are
classified as trading account securities and are recorded at their fair values.
Unrealized gains and losses on trading account securities are included
immediately in other income. The Bank does not have an investment department
and does not actively engage in securities trading, hence no securities are
classified as trading securities.
4. Securities Held-to-Maturity
---------------------------
Bonds, notes, and debentures for which the Bank has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest method over
the period to maturity.
5. Securities Available-for-Sale
-----------------------------
Available-for-sale securities consist of bonds, notes, debentures, and certain
equity securities not classified as trading securities nor as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on available-for-
sale securities are reported as a net amount in a separate component of
shareholders' equity until realized. Realized gains and losses on the sale of
available-for-sale securities are determined using the specific-identification
method. Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary
have resulted in write-downs of the individual securities to their fair value.
The related write-downs have been included in earnings as realized losses.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.
6. Loans
-----
Loans are reported at the principal amount outstanding, net of unearned income
and the allowance for credit losses. Unearned discount on installment loans is
recognized as income over the terms of the loans by using principal amounts
outstanding. Interest on other loans is calculated by using the simple interest
method on the daily balance of the principal amount outstanding.
Loans on which the accrual of interest has been discontinued are designated as
non-accrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full, timely collection of interest or
principal or
F-7
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
when a loan becomes contractually past due by ninety days or more with respect
to interest or principal. When a loan is placed on non-accrual status, all
interest previously accrued, but not collected, is reversed against current
period income. Income on such loans is then recognized only to the extent that
cash is received and where the future collection of principal is probable.
Interest accruals are resumed on such loans only when they are brought fully
current with respect to interest and principal and when, in the judgement of
management, the loans are estimated to be fully collectible as to both principal
and interest.
Renegotiated loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty. Interest is generally
accrued on such loans in accordance with the new terms.
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.
7. Premises and Equipment
----------------------
Bank premises and equipment are carried at original cost less accumulated
depreciation. Depreciation is computed using the straight-line method based
upon the estimated useful lives of the assets. Costs incurred for maintenance
and repairs are expensed currently. For income tax purposes, the accelerated
cost recovery system of depreciation is used.
8. Allowance for Credit Losses
---------------------------
The allowance for credit losses is maintained at a level considered adequate to
provide for potential credit losses. The allowance is increased by provisions
charged to operating expense and reduced by net charge-offs. The level of the
allowance is based on management's evaluation of potential losses, the risk
characteristics of various categories of loans, review of individual credits,
recent loss experience, as well as prevailing and anticipated economic
conditions and other pertinent factors.
9. Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan foreclosure are
carried at the lower of the recorded investment in the property or its fair
value less estimated selling costs. Prior to foreclosure, the value of the
underlying loan is written down to the fair market value of the real estate to
be acquired by a charge to the allowance for credit losses, if necessary. Any
subsequent write-downs are charged against earnings. Operating expenses of such
properties, net of related income are included in net cost of operations of
foreclosed real estate.
10. Income Taxes
------------
The Bank, Parker and Weatherford file a consolidated federal income tax return.
The Bank receives a charge or credit from Bancshares equivalent to its federal
income tax computed on a separate return basis and allocating all of the surtax
exemption to the Bank.
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of the items listed in Note I
for financial and income tax reporting. The deferred tax assets and liabilities
F-8
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes.
11. Per Share Data
--------------
Earnings per share are based on the weighted average number of common
shares and common share equivalents outstanding in 1994, 1993, and 1992 of
215,988; 215,998; and 218,413, respectively.
12. Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, the Bank considers only cash and
due from banks to be cash equivalents.
13. Accounting Standards Not Yet Adopted
------------------------------------
In May 1993, Statement of Financial Accounting Standards No. 114 (SFAS 114),
"Accounting by Creditors for Impairment of a Loan," was issued. In October
1994, SFAS 114 was amended by Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures." These statements require that impaired loans, within the scope of
the statements, be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or market price or the
fair value of the collateral if the loan is collateral dependent. These
statements apply to fiscal years beginning after December 15, 1994, and are not
expected to have a material effect on the accompanying financial statements.
14. Reclassification of Amounts
---------------------------
To effectively provide comparative information, certain amounts in the prior
year were reclassified for financial statement presentation.
NOTE B - INVESTMENT SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 (FASB Statement 115), "Accounting for Certain Investments in
Debt and Equity Securities" FASB Statement 115 requires the Bank to account for
their investment securities as either trading securities, securities held-to-
maturity, or securities available-for-sale. The adoption of this statement
effective January 1, 1994 resulted in an after-tax adjustment to equity of $
24,908 and increasing investments by $ 37,739 . FASB Statement 115 does not
permit retroactive application of the statement.
Prior to January 1, 1994 the Company accounted for its investment in securities
at amortized cost.
F-9
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE B - INVESTMENT SECURITIES (continued)
Debt and equity securities have been classified in the statements of financial
condition according to management's intent. The carrying value, approximate fair
value and unrealized gains (losses) of the securities at December 31, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Securities held-to-maturity
U.S. Treasury securities $ 6,691,871 $ $ (432,429) $ 6,259,442
U.S. Government agencies
and corporations 7,036,026 (531,102) 6,504,924
Obligations of state and
political subdivisions 2,360,299 26,504 (16,066) 2,370,737
Mortgage-backed securities 7,763,862 (712,502) 7,051,360
----------- --------- ----------- -----------
Total Investment in securities
held-to-maturity $23,852,058 $ 26,504 $(1,692,099) $22,186,463
=========== ========= =========== ===========
Securities available-for-sale
U.S. Government agencies
and corporations $ 2,835,117 $ $ (14,685) $ 2,820,432
Mortgage-backed securities 1,022,145 (48,765) 973,380
----------- --------- ----------- -----------
Total investment in debt
securities available for sale 3,857,262 (63,450) 3,793,812
Other securities 60,000 60,000
----------- --------- ----------- -----------
Total investment in securities
available-for-sale $ 3,917,262 $ $ (63,450) $ 3,853,812
=========== ========= =========== ===========
</TABLE>
F-10
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE B - INVESTMENT SECURITIES (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 8,235,303 $ 15,075 $ (48,834) $ 8,201,544
U.S. Government agencies
and corporations 14,905,138 10,764 (96,059) 14,819,843
Obligations of state and
political subdivisions 2,067,702 135,940 2,203,642
Mortgage-backed securities 1,436,405 54,197 (750) 1,489,852
----------- -------- ---------- -----------
Total investment in debt
securities 26,644,548 215,976 (145,643) 26,714,881
Other securities 60,000 60,000
----------- -------- ---------- -----------
Total investment in securities $26,704,548 $215,976 $ (145,643) $26,774,881
=========== ======== ========== ===========
</TABLE>
Other securities include Federal Reserve Bank stock for which there is no
readily determinable fair value and on which there is contractual restrictions
on the sale and transfer of the stock. These stocks are carried at amortized
cost and evaluated for declines in value.
The amortized cost and approximate market value of the investment portfolio at
December 31, 1994 and 1993, by contractual maturity are shown above. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated market value of debt securities held to
maturity at December 31, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due within one year $ 1,901,544 $ 1,865,674
Due after one year through five years 13,466,338 12,546,165
Due after five years through ten years 720,314 723,264
Mortgage-backed securities 7,763,862 7,051,360
----------- -----------
$23,852,058 $22,186,463
=========== ===========
</TABLE>
The amortized cost and estimated market value of debt securities available for
sale at December 31, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Due within one year $2,635,107 $2,627,039
Due after one year through five years 200,010 193,393
Mortgage-backed securities 1,022,145 973,380
---------- ----------
$3,857,262 $3,793,812
========== ==========
</TABLE>
F-11
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE B - INVESTMENT SECURITIES (continued)
Gross realized gains and gross realized losses on sales of available for sale
securities for the year ended December 31, 1994 were as follows.
<TABLE>
<CAPTION>
GROSS REALIZED
-------------------------
GAINS LOSSES
-------- ---------------
<S> <C> <C>
U.S. Treasury securities $ 308 $(313)
U.S. Government agencies and corporations 2,024 (187)
Mortgage-backed securities 10,237
------- -----
$12,569 $(500)
======= =====
</TABLE>
Gross realized gains and gross realized losses on sales of investment securities
for the year ended December 31, 1993 were as follows.
<TABLE>
<CAPTION>
GROSS REALIZED
-------------------------
GAINS LOSSES
-------- ---------------
<S> <C> <C>
U.S. Treasury securities $158,580 $
U.S. Government agencies and corporations 505,189
-------- -----
$663,769 $
======== =====
</TABLE>
Securities carried at approximately $5,044,032 and $2,827,264 with market values
of approximately $4,899,766 and $2,845,081 at December 31, 1994 and 1993,
respectively, were pledged to secure public and trust funds.
NOTE C - LOANS
At December 31, 1994 and 1993, the Bank's loan portfolio was categorized as
follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Commercial and industrial $ 3,101,385 $ 2,128,243
Real estate - construction 1,655,538 876,159
Real estate - mortgage 6,978,530 6,449,425
Real estate - other 4,355,267 2,051,539
Loans held for sale 334,400
Installment loans 3,921,847 4,326,850
Agricultural 1,074,564 742,042
Credit card loans 461,906 488,461
Overdrafts 40,167 27,296
----------- -----------
21,923,604 17,090,015
Less:
Unearned discount 591,118 508,363
Allowance for credit losses 181,259 184,810
----------- -----------
$21,151,227 $16,396,842
=========== ===========
Non-accrual loans are as follows:
1994 1993
----------- -----------
Principle balances on non-accrual status $ 26,924 $ 0
=========== ===========
Approximate interest foregone related to
non-accrual loans $ 369 $ 0
=========== ===========
</TABLE>
F-12
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE C - LOANS (continued)
Loans, excluding credit card loans, non-accrual loans and overdrafts, at fixed
interest rates and variable interest rates at December 31, are as follows:
<TABLE>
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
Fixed rates $15,115,646 $11,491,249
Variable rates 6,278,961 5,083,009
----------- -----------
$21,394,607 $16,574,258
============ ===========
The following table shows the maturity distribution of the fixed rate loans at December 31:
1994 1993
----------- ------------
Three months or less $ 2,635,622 $ 1,542,622
Three through twelve months 2,703,516 2,187,574
One year through five years 7,212,225 6,385,145
Over five years 2,564,283 1,375,908
----------- -----------
$15,115,646 $11,491,249
============ ===========
</TABLE>
NOTE D - ALLOWANCE FOR CREDIT LOSSES
An analysis of the allowance for credit losses is shown below:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ----------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 184,810 $ 177,217 $ 95,285
Provision charged to operating expense 3,000 3,000 70,559
Recoveries credited to allowance 3,224 8,203 27,322
Losses charged to allowance (9,775) (3,610) (15,949)
----------- ----------- --------
Balance at end of year $ 181,259 $ 184,810 $177,217
=========== =========== ========
</TABLE>
For income tax purposes, $108,994 has been accumulated in the allowance for
credit losses. This amount in based on Internal Revenue Code Regulations.
NOTE E - PREMISES AND EQUIPMENT
The composition of bank premises and equipment for the two periods is summarized
below:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Land $ 505,958 $ 353,439 $ 353,439
Land improvements 54,990 54,990 48,537
Building 765,528 765,528 335,000
Furniture and fixtures 582,255 555,419 154,596
Automobiles 25,755 25,755 176,508
Leasehold improvements 8,984 8,984 25,755
Construction in progress 7,000 26,122
---------- ---------- ----------
1,950,470 1,764,115 1,119,957
Less accumulated depreciation 395,225 260,722 206,370
---------- ---------- ----------
$1,555,245 $1,503,393 $ 913,587
========== ========== ==========
Depreciation expense $ 135,152 $ 85,617 $ 49,024
========== ========== ==========
</TABLE>
F-13
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE E - PREMISES AND EQUIPMENT (continued)
The Bank capitalized interest expense of $16,284 in 1984 as part of the cost of
construction of banking facilities in accordance with Financial Accounting
Standards Board Statement No. 34, "Capitalization of Interest".
NOTE F - OTHER ASSETS
Other assets are composed of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Prepaid expenses $ 24,959 $ 26,055 $ 23,343
Organization and start-up costs 84,838 84,838 84,838
Deferred income tax benefit 21,573
Federal income tax receivable 4,433
Other assets 18,361 16,200 15,130
----------- ----------- ----------
154,164 127,093 123,311
Less accumulated
amortization 84,838 83,996 80,534
----------- ----------- ----------
$ 69,326 $ 43,097 $ 42,777
=========== =========== ==========
Amortization expense $ 842 $ 3,462 $ 3,462
=========== =========== ==========
</TABLE>
NOTE G - INTEREST BEARING DEPOSITS
Interest bearing deposits at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
NOW accounts $ 9,235,638 $10,130,002
Money market accounts 5,455,104 5,752,122
Savings 5,290,080 5,814,633
Individual retirement accounts
Under $100,000 4,272,187 4,090,592
Over $100,000 450,295 437,209
Certificates of deposit
Under $100,000 8,355,566 7,422,723
Over $100,000 5,614,352 2,700,000
State and political subdivisions 2,148,036 2,134,309
----------- ----------
$40,821,258 $38,481,590
=========== ===========
</TABLE>
Certificates of deposit and individual retirement accounts issued in amounts of
$100,000 or more and their remaining maturities at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Three months or less $3,604,351 $1,400,222
Three through twelve months 1,837,007 1,215,041
Over twelve months 623,289 521,946
---------- ----------
$6,064,647 $3,137,209
========== ==========
</TABLE>
NOTE H - LONG TERM DEBT
On November 15, 1994, the Bank purchased land to be used as a branch location of
the Bank and issued a real estate lien note in the amount of $112,500 payable to
F-14
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE H - LONG TERM DEBT (continued)
an individual. The principal of the note is payable in annual installment
payments of $37,500 each, on the 15th day of November each year, beginning
November 15, 1995 and continuing regularly and annually until the principal has
been paid. Interest computed at 8% per annum on the unpaid principal balance is
payable annually as it accrues on the same dates as and in addition to the
installments of principal. The Bank agreed that it will not make any prepayment
on the note prior to January 1, 1997 without the written consent of the holder
of the note. The note is secured by a vendor's lien retained in deed of even
date from the Bank to the holder, and by a deed of trust of even date from the
Bank to a trustee which conveys the property described above.
NOTE I - EMPLOYEE BENEFITS
In 1990, the Bank established a defined contribution (401(k)) pension plan which
covers substantially all employees. The eligible employees are allowed to
contribute from three to fifteen percent of their salary to the plan. The Bank
contributes three percent of the participating employees' salaries to the plan.
The Bank makes its contribution semi-monthly. Those contributions totaled
$16,580, $14,321 and $10,966, in 1994, 1993, and 1992, respectively.
NOTE J - INCOME TAXES
Effective January 1, 1993, the Bank adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The cumulative effect of the
change in accounting principle is included in determining net income for 1993.
Financial statements for prior years have not been restated.
The total 1994 and 1993 Federal income tax provision (benefit) consists of the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current provision $353,654 $515,379 $259,428
Deferred 24,689 (4,696) 29,631
-------- -------- --------
$378,343 $510,683 $289,059
======== ======== ========
Deferred income taxes at the appropriate rates are detailed as follows:
1994 1993 1992
--------- -------- --------
Net unrealized depreciation on available-for-sale
securities $(21,573) $ $
Excess depreciation charges
for tax purposes 23,138 8,608 818
Excess provision for credit losses for financial
reporting purposes (24,570) (23,550) (18,259)
Excess expenses for tax purposes using the cash
method of accounting 120,226 109,047 101,521
Other, net (4,392)
-------- -------- --------
$ 97,221 $ 94,105 $ 79,688
======== ======== ========
</TABLE>
F-15
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE J - INCOME TAXES (continued)
Applicable income taxes for financial reporting purposes differ from the amount
computed by applying the statutory federal income tax rate for the reasons noted
in the table below:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1994 % 1993 % 1992 %
--------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory federal
income tax rate $416,803 34.00 $548,597 34.00 $325,253 34.00
Increase (decrease) in tax
resulting from:
Tax exempt income (41,109) (3.35) (39,373) (2.44) (40,723) (4.26)
Other, net 2,649 .21 1,459 .09 4,529 .48
-------- ----- -------- ----- -------- -----
$378,343 30.86 $510,683 31.65 $289,059 30.22
======== ===== ======== ===== ======== =====
</TABLE>
NOTE K - TRANSACTIONS WITH RELATED PARTIES
The Bank's officers, directors, and their associates, including corporations
and firms of which they and their families have an ownership interest, are also
customers of the Bank. These persons, corporations, and firms have had
transactions in the ordinary course of business with the Bank, all of which were
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than normal risk of collectibility or present
other unfavorable features. The Bank expects to have such transactions on
similar terms with its officers, directors, and their associates in the future.
The aggregate indebtedness transactions with such related parties for 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Balance at January 1 $ 510,285 $ 527,724
New loans or additions to lines of credit 300,017 319,742
Payment on loans (317,722) (337,181)
--------- ---------
Balance at December 31 $ 492,580 $ 510,285
========= =========
</TABLE>
NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
position. The contract or notional amount of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
F-16
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Commitments on interim
construction loans $ 958,039 $ 535,457
Commitments on lines of credit 717,845 367,386
Standby letters of credit 119,655 137,190
Unused credit card lines 1,542,000 1,438,879
---------- ----------
$3,337,539 $2,478,912
========== ==========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property, plant, and equipment, and income-
producing commercial properties.
Standby letters of credit are written conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The average collateral value held on
letters of credit is approximately 53.37%.
NOTE M - CONCENTRATION OF CREDIT RISK FOR CERTAIN ENTITIES
The Bank grants agribusiness, commercial, and residential loans to customers
throughout Parker County, Texas and surrounding counties. Although the Bank has
a diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent upon the economic conditions in Parker
County, Texas and the surrounding counties.
NOTE N - REGULATORY MATTERS
The Bank, as a National Bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined) plus the
retained earnings (as defined) from the prior two years. The dividends, as of
December 31, 1994, that the Bank could declare, without approval of the
Comptroller of the Currency, amounted to approximately $1,488,039. The Bank is
also required to maintain minimum amounts of capital to total "risk weighted"
assets, as defined by the Bank Regulators. At December 31, 1994, the Bank was
required to have minimum Tier 1 and total capital ratios of 4.00% and 8.00%,
respectively. The Bank's actual ratios at that date were 16.52% and 17.16%,
respectively. The Bank's leverage ratio at December 31, 1994 was 8.89%.
NOTE O - CASH AND INVESTMENT SECURITIES
The Bank was required to maintain reserve balances with the Federal Reserve
Bank. During 1994 and 1993, such average balances totaled approximately
$412,000 and $365,000, respectively.
F-17
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the Company to disclose the estimated
fair value of its financial instrument assets and liabilities. For the Company,
as for most financial institutions, over 90% of its assets and liabilities are
considered financial instruments as defined in Statement No. 107. Many of the
Company's financial instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in an exchange
transaction.
Estimated fair values have been determined by the Company using the best
available data, as generally provided in the Company's Regulatory Reports, and
an estimation methodology suitable for each category of financial instruments.
For those loans and deposits with floating interest rates, it is presumed that
estimated fair values generally approximate the recorded book balances. The
estimation methodologies used, the estimated fair values, and recorded book
balances at December 31, 1994 and 1993, were as follows:
Financial instruments actively traded in a secondary market have been valued
using quoted available market prices.
<TABLE>
<CAPTION>
ESTIMATED FAIR VALUE RECORDED BOOK BALANCE
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,335,321 $ 2,467,996 $ 2,335,321 $ 2,467,996
Federal funds sold 1,000,000 3,800,000 1,000,000 3,800,000
Investment in securities 26,040,275 26,774,881 27,705,870 26,704,548
</TABLE>
Financial instruments with stated maturities have been valued using a present
value discounted cash flow with a discount rate approximating current market for
similar assets and liabilities. Financial instrument assets with variable rates
and financial instrument liabilities with no stated maturities have an estimated
fair value equal to both the amount payable on demand and the recorded book
balance.
<TABLE>
<CAPTION>
ESTIMATED FAIR VALUE RECORDED BOOK BALANCE
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Deposits with stated maturities $18,586,459 $14,628,303 $18,785,866 $14,701,322
Deposits with no stated
maturities 30,630,515 32,388,476 30,630,515 32,388,476
Net loans 20,953,157 16,449,599 21,151,227 16,396,842
</TABLE>
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values.
The Company's remaining assets and liabilities which are not considered
financial instruments have not been valued differently than has been customary
with historical cost accounting. No disclosure of the relationship value of the
Company's deposits is required by Statement No. 107 nor has the Company
estimated its value. There is no material difference between the notional
amount and the estimated fair value of off-balance-sheet unfunded loan
commitments which total $3,217,884 and $2,341,722 at December 31, 1994 and 1993,
respectively, and are generally priced at market at the time of funding.
Letters of credit discussed in Note L have an estimated fair value based on fees
currently charged for similar agreements. At December 31, 1994 and 1993, fees
related to the unexpired term of the letters of credit are not significant.
F-18
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Management is concerned that reasonable comparability between financial
institutions may not be likely due to the wide range of permitted valuation
techniques and numerous estimates which must be given the absence of active
secondary markets for many of the financial instruments. This lack of uniform
valuation methodologies also introduces a greater degree of subjectivity to
these estimated fair values.
F-19
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
Board of Directors
Weatherford National Bancshares, Inc.
Weatherford, Texas
We have compiled the accompanying consolidated balance sheets of Weatherford
National Bancshares, Inc. (a Texas corporation) and subsidiaries as of September
30, 1995 and 1994, and the related consolidated statements of earnings, changes
in stockholders' equity and cash flows for the nine months then ended and the
consolidated statement of earnings for the three months ended September 30, 1995
and 1994, in accordance with Statement on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them. However, we did become aware
of a departure from generally accepted accounting principles that is described
in the following paragraph.
Statements of cash flows for the three month periods ended September 30, 1995
and 1994 have not been presented. Generally accepted accounting principles
require a statement of cash flows to be presented for each period for which
results of operations are provided when financial statements report both
financial position and results of operations.
The consolidated balance sheet as of December 31, 1994 was audited by us as part
of an audit of Weatherford National Bancshares, Inc.'s financial statements, and
we expressed an unqualified opinion on those financial statements in our report
dated January 7, 1995, but we have not performed any auditing procedures since
that date.
/s/ GEORGE, MORGAN & SNEED, P.C.
Weatherford, Texas
October 27, 1995
F-20
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
--------------------------- ------------
September 30, December 31,
--------------------------- ------------
1995 1994 1994
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 2,439,343 $ 2,330,276 $ 2,335,321
Federal funds sold 2,725,000 1,000,000
Securities available-for-sale 4,796,598 1,622,005 3,853,812
Securities held-to-maturity 24,614,459 24,168,140 23,852,058
Loans, less allowance for credit losses of
$171,652 and $181,373 at September 30, 1995
and 1994 and $181,259 at December 31, 1994
(notes A, C, D, K, L and M) 25,005,068 20,066,927 21,151,227
Bank premises and equipment (notes A and E) 1,879,498 1,418,142 1,555,245
Accrued interest receivable 566,664 421,511 506,088
Foreclosed real estate (note A) 46,698 45,785 45,785
Other assets (note F) 68,479 86,260 69,326
----------- ----------- -----------
$62,141,807 $50,159,046 $54,368,862
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 9,363,198 $ 9,030,244 $ 8,499,298
Interest bearing (note G) 47,178,305 36,256,001 40,821,258
----------- ----------- -----------
Total deposits 56,541,503 45,286,245 49,320,556
Accrued expenses and liabilities 242,397 225,623 208,543
Deferred income taxes (notes A and J) 112,219 106,878 118,794
Note payable (note H) 112,500 112,500
----------- ----------- -----------
Total liabilities 57,008,619 45,618,746 49,760,393
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Capital stock, $5.00 par value, 1,000,000
shares authorized, 220,771 shares issued 1,103,855 1,103,855 1,103,855
Paid-in capital 11,245 11,245 11,245
Net unrealized depreciation on available-for-sale
securities, net of tax benefit 1,687 (14,541) (41,877)
Retained earnings 4,058,469 3,481,809 3,577,314
----------- ----------- -----------
5,175,256 4,582,368 4,650,537
Less treasury stock, at cost, 4,783 shares (42,068) (42,068) (42,068)
----------- ----------- -----------
Total stockholders' equity 5,133,188 4,540,300 4,608,469
----------- ----------- -----------
$62,141,807 $50,159,046 $54,368,862
=========== =========== ===========
</TABLE>
See accountants' compilation report.
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------
1995 1994 1995 1994
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans (note A) $ 639,043 $469,993 $1,810,665 $1,310,369
Interest on investment securities
Taxable 353,477 301,606 1,008,510 904,567
Exempt from federal income taxes 29,772 31,086 95,508 95,998
Interest on federal funds sold 47,839 13,790 101,721 38,821
Other interest 900 1,163 2,700 3,798
---------- -------- ---------- ----------
Total interest income 1,071,031 817,638 3,019,104 2,353,553
---------- -------- ---------- ----------
Interest Expense
Interest on deposits 486,170 286,123 1,312,160 825,163
Interest on notes and debentures payable 2,269 6,732
---------- -------- ---------- ----------
Total interest expense 488,439 286,123 1,318,892 825,163
---------- -------- ---------- ----------
Net interest income 582,592 531,515 1,700,212 1,528,390
Provision for credit losses (note A and D) 34,000 3,000 34,000 3,000
---------- -------- ---------- ----------
Net interest income after provision for
credit losses 548,592 528,515 1,666,212 1,525,390
---------- -------- ---------- ----------
Noninterest Income
Service charges and fees 181,563 188,100 504,141 527,816
Gain on sale of foreclosed real estate 4,215 4,215
Gain on sale of securities (note B) 1,832 1,832
Gain on sale of other assets 19,000 700
---------- -------- ---------- ----------
Total other income 185,778 189,932 527,356 530,348
---------- -------- ---------- ----------
Noninterest Expenses
Employee compensation and benefits 206,554 169,821 588,570 502,246
Net occupancy and equipment expense 70,497 59,279 188,767 174,726
Net cost of operations of foreclosed
real estate 8,189 (1,500) 6,987 (3,207)
Other operating expenses 188,438 160,535 544,918 450,425
---------- -------- ---------- ----------
Total other expenses 473,678 388,135 1,329,242 1,124,190
---------- -------- ---------- ----------
Earnings before income taxes 260,692 330,312 864,326 931,548
Federal tax provision (note J) 119,151 172,721 275,177 287,490
---------- -------- ---------- ----------
NET EARNINGS $ 141,541 $157,591 $ 589,149 $ 644,058
========== ======== ========== ==========
Earnings per share $ 0.66 $ 0.73 $ 2.73 $ 2.98
========== ======== ========== ==========
</TABLE>
See accountants' compilation report.
The accompanying notes are an integral part of this statement.
F-22
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
Unaudited
--------------------------------------------------------------------
Net Unrealized
Depreciation on
Common Paid-in Available-for- Retained Treasury
Stock Capital Sale Securities Earnings Stock
---------- ------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1994 $1,103,855 $11,245 $ $2,945,745 $(42,068)
Initial unrealized gain recorded
on investment in securities
available-for-sale (net of
deferred tax benefit) 24,908
Net earnings year to date 644,058
Dividends declared ($.50 per share) (107,994)
Change in unrealized depreciation on
available-for-sale securities (net
of deferred tax benefit) (39,449)
---------- ------- -------- ---------- --------
Balance at September 30, 1994 $1,103,855 $11,245 $(14,541) $3,481,809 $(42,068)
========== ======= ======== ========== ========
Balances at January 1, 1995 $1,103,855 $11,245 $(41,877) $3,577,314 $(42,068)
Net earnings year to date 589,149
Dividends declared ($.50 per share) (107,994)
Change in unrealized depreciation on
available-for-sale securities
(net of deferred tax benefit) 43,564
---------- ------- -------- ---------- ---------
Balances at September 30, 1995 $1,103,855 $11,245 $ 1,687 $4,058,469 $ (42,068)
========== ======= ======== ========== =========
</TABLE>
See accountants' compilation report.
The accompanying notes are an integral part of this statement.
F-23
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
-------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net earnings $ 589,149 $ 644,058
----------- -----------
Adjustments to reconcile net earnings to cash provided by operating
activities
Depreciation and amortization 103,349 101,634
Provision for credit losses 34,000 3,000
Premium amortization, net of discount accretion (70,675) 59,582
Net gain on sale of available-for-sale securities (1,832)
Gain on sale of foreclosed real estate (4,215)
Gain on sale of other assets (19,000) (700)
Change in other assets (81,302) (13,213)
Change in other liabilities 26,410 (15,356)
----------- -----------
Total adjustments (11,433) 133,115
----------- -----------
Net cash provided by operating activities 577,716 777,173
----------- -----------
Cash flows from investing activities
Changes in federal funds sold (1,725,000) 3,800,000
Proceeds from maturities of held-to-maturity securities 400,000 1,527,730
Proceeds from maturities of available-for-sale securities 4,389,021 245,359
Proceeds from sales of available-for-sale securities 1,156,152
Net increase in loans (3,934,539) (3,673,085)
Proceeds from sale of other assets 19,000 700
Proceeds from sale of foreclosed real estate 50,000
Purchase of bank premises and equipment (427,602) (16,383)
Purchase of held-to-maturity securities (1,206,094) (2,094,618)
Purchase of available-for-sale securities (5,151,433)
----------- -----------
Net cash used by investing activities (7,586,647) 945,855
----------- -----------
Cash flows from financing activities
Change in non-interest bearing activities 863,900 472,835
Change in interest bearing activities 6,357,047 (2,225,589)
Proceeds from long-term debt
Dividends declared (107,994) (107,994)
----------- -----------
Net cash provided by financing activities 7,112,953 (1,860,748)
----------- -----------
Net change in cash and cash equivalents 104,022 (137,720)
Cash and cash equivalents at beginning of year 2,335,321 2,467,996
----------- -----------
Cash and cash equivalents at end of year $ 2,439,343 $ 2,330,276
=========== ===========
Supplemental schedule of non-cash investing and financing activities
Unrealized appreciation (depreciation) on available-for-sale securities $ 66,006 $ (22,030)
Assets acquired through foreclosure $ 46,698 $
Cash paid during the year for
Interest $ 1,225,361 $ 811,715
Income taxes $ 281,926 $ 352,048
</TABLE>
See accountants' compilation report.
F-24
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of Weatherford
National Bancshares, Inc. (Weatherford) its wholly owned subsidiary, Parker
Bancshares, Inc. (Parker) (a Delaware corporation), and its wholly owned
subsidiary, the Weatherford National Bank (the Bank). All material intercompany
transactions and accounts have been eliminated upon consolidation.
Weatherford was incorporated on February 21, 1984. Parker was incorporated on
December 13, 1988, and commenced to do business on December 28, 1988. The Bank
was incorporated on November 5, 1983, and received approval from the Board of
Governors of the Federal Reserve System to open for business on July 16, 1984.
On December 28, 1988, Weatherford exchanged all of the shares it owned in the
Bank for all of the stock in Parker.
2. Basis of Accounting
-------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and conform with practices within the
banking industry.
3. Trading Securities
------------------
Bonds, notes, and debentures held principally for resale in the near term are
classified as trading account securities and are recorded at their fair values.
Unrealized gains and losses on trading account securities are included
immediately in other income. The Bank does not have an investment department
and does not actively engage in securities trading, hence no securities are
classified as trading securities.
4. Securities Held-to-Maturity
---------------------------
Bonds, notes, and debentures for which the Bank has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest method over
the period to maturity.
5. Securities Available-for-Sale
-----------------------------
Available-for-sale securities consist of bonds, notes, debentures, and certain
equity securities not classified as trading securities nor as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on available-for-
sale securities are reported as a net amount in a separate component of
shareholders' equity until realized. Gains and losses on the sale of available-
for-sale securities are determined using the specific-identification method.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary have resulted in
write-downs of the individual securities to their fair value. The related
write-downs have been included in earnings as realized losses. Premiums and
discounts are recognized in interest income using the interest method over the
period to maturity.
6. Loans
-----
Loans are reported at the principal amount outstanding, net of unearned income
and the allowance for credit losses. Unearned discount on installment loans is
recognized as income over the terms of the loans by using principal amounts
outstanding. Interest on other loans is calculated by using the simple interest
method on the daily balance of the principal amount outstanding.
Loans on which the accrual of interest has been discontinued are designated as
non-accrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or more
See accountants' compilation report.
F-25
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
with respect to interest or principal. When a loan is placed on non-accrual
status, all interest previously accrued, but not collected, is reversed against
current period income. Income on such loans is then recognized only to the
extent that cash is received and where the future collection of principal is
probable. Interest accruals are resumed on such loans only when they are
brought fully current with respect to interest and principal and when, in the
judgement of management, the loans are estimated to be fully collectible as to
both principal and interest.
Renegotiated loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty. Interest is generally
accrued on such loans in accordance with the new terms.
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.
7. Premises and Equipment
----------------------
Bank premises and equipment are carried at original cost less accumulated
depreciation. Depreciation is computed using the straight-line method based
upon the estimated useful lives of the assets. Costs incurred for maintenance
and repairs are expensed currently. For income tax purposes, the accelerated
cost recovery system of depreciation is used.
8. Allowance for Credit Losses
---------------------------
The allowance for credit losses is maintained at a level considered adequate to
provide for potential credit losses. The allowance is increased by provisions
charged to operating expense and reduced by net charge-offs. The level of the
allowance is based on management's evaluation of potential losses, the risk
characteristics of various categories of loans, review of individual credits,
recent loss experience, as well as prevailing and anticipated economic
conditions and other pertinent factors.
9. Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan foreclosure are
carried at the lower of the recorded investment in the property or its fair
value less estimated selling costs. Prior to foreclosure, the value of the
underlying loan is written down to the fair market value of the real estate to
be acquired by a charge to the allowance for credit losses, if necessary. Any
subsequent write-downs are charged against earnings. Operating expenses of such
properties, net of related income are included in net cost of operations of
foreclosed real estate.
10. Income Taxes
------------
The Bank, Parker and Weatherford file a consolidated federal income tax return.
The Bank receives a charge or credit from Bancshares equivalent to its federal
income tax computed on a separate return basis and allocating all of the surtax
exemption to the Bank.
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of the items listed in Note J
for financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes.
11. Per Share Data
--------------
Earnings per share at December 31, 1994, September 30, 1995 and 1994 are based
on the weighted average number of common shares and common share equivalents
outstanding of 215,988.
See accountants' compilation report.
F-26
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
12. Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, the Bank considers only cash and
due from banks to be cash equivalents.
13. Reclassification of Amounts
---------------------------
To effectively provide comparative information, certain amounts in the
prior year were reclassified for financial statement presentation.
NOTE B - INVESTMENT SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 (FASB Statement 115), "Accounting for Certain Investments in
Debt and Equity Securities" FASB Statement 115 requires the Bank to account for
their investment securities as either trading securities, securities held-to-
maturity, or securities available-for-sale. The adoption of this statement
effective January 1, 1994 resulted in an after-tax adjustment to equity of
$24,908 and increasing investments by $37,739. FASB Statement 115 does not
permit retroactive application of the statement.
Debt and equity securities have been classified in the statements of financial
condition according to management's intent. The carrying value, approximate
fair value and unrealized gains (losses) of the securities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Securities held-to-maturity
U.S. Treasury securities $ 6,564,349 $ $ (111,474) $ 6,452,875
U.S. Government agencies and
corporations 7,028,286 (130,040) 6,898,246
Obligations of state and political
subdivisions 2,054,538 69,982 2,124,520
Mortgage-backed securities 8,967,286 97 (190,483) 8,776,900
----------- --------- ---------- -----------
Total investment in securities
held-to-maturity $24,614,459 $ 70,079 $ (431,997) $24,252,541
=========== ========= ========== ===========
Securities available-for-sale
U.S. Government agencies
and corporations $ 2,419,715 $ 2,976 $ (6,387) $ 2,416,304
Mortgage-backed securities 2,313,923 14,717 (8,346) 2,320,294
----------- --------- ---------- -----------
Total investment in debt
securities available-
for-sale 4,733,638 17,693 (14,733) 4,736,598
Other securities 60,000 60,000
----------- ----------
Total investment in securities
available-for-sale $ 4,793,638 $ 17,693 $ (14,733) $ 4,796,598
=========== ========= ========== ===========
</TABLE>
See accountants' compilation report.
F-27
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE B - INVESTMENT SECURITIES (continued)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Securities held-to-maturity
U.S. Treasury securities $ 7,001,969 $ 573 $ (331,813) $ 6,670,729
U.S. Government agencies
and corporations 7,038,553 (383,818) 6,654,735
Obligations of state and
political subdivisions 2,362,575 50,755 (4,389) 2,408,941
Mortgage-backed
securities 7,765,043 (541,534) 7,223,509
----------- ---------- ----------- -----------
Total investment in securities
held-to-maturity $24,168,140 $ 51,328 $(1,261,554) $22,957,914
=========== ========== =========== ===========
Securities available-for-sale
U.S. Government agencies
and corporations $ 500,176 $ 140 $ (3,502) $ 496,814
Mortgage-backed
securities 1,083,859 4,659 (23,327) 1,065,191
----------- ---------- ----------- -----------
Total investment in debt
securities available-for-sale 1,584,035 4,799 (26,829) 1,562,005
Other securities 60,000 60,000
----------- ---------- ----------- -----------
Total investment in securities
available-for-sale $ 1,644,035 $ 4,799 $ (26,829) $ 1,622,005
=========== ========== =========== ===========
DECEMBER 31, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
----------- ----------- ------------ -----------
Securities held-to-maturity
U.S. Treasury securities $ 6,691,871 $ $ (432,429) $ 6,259,442
U.S. Government agencies
and corporations 7,036,026 (531,102) 6,504,924
Obligations of state and
political subdivisions 2,360,299 26,504 (16,066) 2,370,737
Mortgage-backed securities 7,763,862 (712,502) 7,051,360
---------- ----------- ----------- ----------
Total investment in securities
held-to-maturity $23,852,058 $ 26,504 $(1,692,099) $22,186,463
=========== ========== =========== ===========
</TABLE>
See accountants' compilation report.
F-28
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE B - INVESTMENT SECURITIES (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
U.S. Government agencies
and corporations $2,835,117 $ $ (14,685) $2,820,432
Mortgage-backed securities 1,022,145 (48,765) 973,380
---------- ---------- ---------- ----------
Total investment in debt
securities available-
for-sale 3,857,262 (63,450) 3,793,812
Other securities 60,000 60,000
---------- ---------- ---------- ----------
Total investment in securities
available-for-sale $3,917,262 $ $ (63,450) $3,853,812
========== ========== ========== ==========
</TABLE>
Other securities include Federal Reserve Bank stock for which there is no
readily determinable fair value and on which there is contractual restrictions
on the sale and transfer of the stock. These stocks are carried at amortized
cost and evaluated for declines in value.
The amortized cost and approximate market value of the investment portfolio at
September 30, 1995 and 1994 and December 31, 1994, by contractual maturity are
shown above. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
The amortized cost and estimated market value of debt securities held-to-
maturity at September 30, 1995, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due within one year $ 3,999,702 $ 3,985,803
Due after one year through five years 10,695,793 10,489,088
Due after five years through ten years 951,678 1,000,750
Mortgage-backed securities 8,967,286 8,776,900
----------- -----------
$24,614,459 $24,252,541
=========== ===========
</TABLE>
The amortized cost and estimated market value of debt securities available-for-
sale at September 30, 1995, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Due within one year $1,820,965 $1,815,034
Due after one year through five years 100,000 100,296
Due after five years through ten years 498,750 500,975
Due after ten years 2,320,293
Mortgage-backed securities 2,313,923
---------- ----------
Total debt securities available-for-sale $4,733,638 $4,736,598
========== ==========
</TABLE>
See accountants' compilation report.
F-29
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE B - INVESTMENT SECURITIES (continued)
The amortized cost and estimated market value of debt securities held-to-
maturity at September 30, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due within one year $ 1,700,850 $ 1,685,770
Due after one year through five years 13,344,717 12,669,095
Due after five years through ten years 1,242,813 1,266,557
Due after ten years 114,717 112,983
Mortgage-backed securities 7,765,043 7,223,509
----------- -----------
Total debt securities held-to-maturity $24,168,140 $22,957,914
=========== ===========
</TABLE>
The amortized cost and estimated market value of debt securities available-for-
sale at September 30, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Due within one year $ 300,000 $ 299,927
Due after one year through five years 200,176 204,360
Mortgage-backed securities 1,083,859 1,057,718
---------- ----------
Total debt securities available-for-sale $1,584,035 $1,562,005
========== ==========
</TABLE>
The amortized cost and estimated market value of debt securities held-to-
maturity at December 31, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due within one year $ 1,901,544 $ 1,865,674
Due after one year through five years 13,466,338 12,546,165
Due after five years through ten years 720,314 723,264
Mortgage-backed securities 7,763,862 7,051,360
----------- -----------
$23,852,058 $22,186,463
=========== ===========
</TABLE>
The amortized cost and estimated market value of debt securities available-for-
sale at December 31, 1994, by contractual and expected maturity, are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Due within one year $2,635,107 $2,627,039
Due after one year through five years 200,010 193,393
Mortgage-backed securities 1,022,145 973,380
---------- ----------
Total debt securities available-for-sale $3,857,262 $3,793,812
========== ==========
</TABLE>
Gross realized gains and gross realized losses on sales of available for sale
securities for the period ended September 30, 1994 were as follows.
<TABLE>
<CAPTION>
GROSS REALIZED
---------------------
GAINS LOSSES
-------- --------
<S> <C> <C>
U.S. Treasury securities $ 308 $(313)
U.S. Government agencies and corporations 2,024 (187)
------ -----
$2,332 $(500)
====== =====
</TABLE>
See accountants' compilation report.
F-30
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE B - INVESTMENT SECURITIES (continued)
Securities carried at approximately $4,508,155, $3,315,791 and $5,044,032 with
market values of approximately $4,468,643, $3,213,282 and $4,899,766 at
September 30, 1995 and 1994 and December 31, 1994, respectively, were pledged to
secure public and trust funds.
NOTE C - LOANS
At the end of each period, the Bank's loan portfolio was categorized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------- -----------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Commercial and industrial $ 3,814,019 $ 2,987,319 $ 3,101,385
Real estate - construction 1,500,220 1,243,242 1,655,538
Real estate - mortgage 8,891,321 7,065,583 6,978,530
Real estate - other 5,201,401 4,212,256 4,355,267
Loans held for sale 380,786 334,400
Installment loans 4,538,496 3,755,939 3,921,847
Agricultural 1,044,995 1,071,187 1,074,564
Credit card loans 433,726 445,659 461,906
Overdrafts 36,277 45,589 40,167
----------- ----------- -----------
25,841,241 20,826,774 21,923,604
Less:
Unearned discount 664,521 578,474 591,118
Allowance for credit losses 171,652 181,373 181,259
----------- ----------- -----------
$25,005,068 $20,066,927 $21,151,227
=========== =========== ===========
Non-accrual loans are as follows:
Principle balances on non-accrual status $ 69,204 $ 0 $ 26,924
=========== =========== ===========
Approximate interest foregone related to
non-accrual loans $ 3,779 $ 0 $ 369
=========== =========== ===========
</TABLE>
Loans, excluding credit card loans, non-accrual loans and overdrafts, at fixed
interest rates and variable interest rates are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------- -----------
1995 1994 1994
------------ ----------- -----------
<S> <C> <C> <C>
Fixed rates $18,025,951 $13,505,039 $15,115,646
Variable rates 7,276,082 6,830,487 6,278,961
----------- ----------- -----------
$25,302,033 $20,335,526 $21,394,607
=========== =========== ===========
The following table shows the maturity distribution of the fixed rate loans:
SEPTEMBER 30 DECEMBER 31
------------------------- -----------
1995 1994 1994
----------- ----------- -----------
Three months or less $ 2,525,601 $ 1,967,663 $ 2,635,622
Three through twelve months 3,768,947 2,415,341 2,703,516
One year through five years 8,137,222 7,212,137 7,212,225
Over five years 3,594,181 1,909,898 2,564,283
----------- ----------- -----------
$18,025,951 $13,505,039 $15,115,646
=========== =========== ===========
</TABLE>
See accountants' compilation report.
F-31
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE D - ALLOWANCE FOR CREDIT LOSSES
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114 (FASB Statement 114), "Accounting by Creditors for Impairment
of a Loan" as it was amended by Financial Accounting Standards No. 118
"Accounting by Creditors for Impairment of a Loan - Loan Recognition and
Disclosures." These statements require that impaired loans, with the scope of
the statements, be measured based on the expected future cash flows discounted
at the loan's effective interest rate or market price or the fair value of the
collateral if the loan is collateral dependent. The allowance for any impaired
loans as of the effective date was considered insignificant and was included in
the Company's normal allowance for credit losses.
An analysis of the allowance for credit losses is shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
--------------------------- ---------
1995 1994 1994
------------- ------------ ---------
<S> <C> <C> <C>
Balance at beginning of year $181,259 $184,810 $184,810
Provision charged to operating expense 34,000 3,000 3,000
Recoveries credited to allowance 13 2,166 3,224
Losses charged to allowance (43,620) (8,603) (9,775)
-------- -------- --------
Balance at end of period $171,652 $181,373 $181,259
======== ======== ========
</TABLE>
Impairment of loans having carrying values of $69,204 as of September 30, 1995
has been recognized in conformity with FASB Statement 114. The allowance for
credit losses related to these loans was considered insignificant and was
included in the Company's normal allowance for credit losses.
See accountants' compilation report.
F-32
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE E - PREMISES AND EQUIPMENT
The composition of bank premises and equipment for the periods is summarized
below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------ -----------
1995 1994 1994
---------- ------------ -----------
<S> <C> <C> <C>
Land $ 505,958 $ 353,439 $ 505,958
Land improvements 65,078 54,990 54,990
Building 1,004,053 765,528 765,528
Furniture and fixtures 739,370 570,802 582,255
Automobiles 28,874 25,755 25,755
Leasehold improvements 8,984 8,984 8,984
Construction in progress 1,000 7,000
---------- ---------- ----------
2,352,317 1,780,498 1,950,470
Less accumulated
depreciation 472,819 362,356 395,225
---------- ---------- ----------
$1,879,498 $1,418,142 $1,555,245
========== ========== ==========
Depreciation expense $ 103,349 $ 101,634 $ 135,152
========== ========== ==========
</TABLE>
The Bank capitalized interest expense of $16,284 in 1984 as part of the cost of
construction of banking facilities in accordance with Financial Accounting
Standards Board Statement No. 34, "Capitalization of Interest".
NOTE F - OTHER ASSETS
Other assets are composed of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------- ----------
1995 1994 1994
------------ ----------- ----------
<S> <C> <C> <C>
Prepaid expenses $ 53,905 $ 63,771 $ 24,959
Organization and start-up costs 84,838 84,838 84,838
Deferred income tax benefit 7,489 21,573
Federal income tax receivable 4,433
Other assets 14,574 15,000 18,361
----------- ----------- ----------
153,317 171,098 154,164
Less accumulated amortization 84,838 84,838 84,838
----------- ----------- ----------
$ 68,479 $ 86,260 $ 69,326
=========== =========== ==========
Amortization expense $ $ 842 $ 842
=========== =========== ==========
</TABLE>
See accountants' compilation report.
F-33
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE G - INTEREST BEARING DEPOSITS
Interest bearing deposits are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------ -----------
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
NOW accounts $ 9,414,687 $ 8,366,985 $ 9,235,638
Money market accounts 5,703,383 5,614,800 5,455,104
Savings 4,901,444 6,071,788 5,290,080
Individual retirement accounts
Under $100,000 4,538,810 4,264,625 4,272,187
Over $100,000 586,364 446,909 450,295
Certificates of deposit
Under $100,000 12,765,067 7,261,013 8,355,566
Over $100,000 7,227,781 2,719,916 5,614,352
State and political subdivisions 2,040,769 1,509,965 2,148,036
----------- ----------- -----------
$47,178,305 $36,256,001 $40,821,258
=========== =========== ===========
</TABLE>
Certificates of deposit and individual retirement accounts issued in amounts of
$100,000 or more and their remaining maturities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------ -----------
1995 1994 1994
---------- ----------- -----------
<S> <C> <C> <C>
Three months or less $3,769,941 $ 900,000 $3,604,351
Three through twelve months 2,400,834 1,725,890 1,837,007
Over twelve months 1,643,370 540,935 623,289
---------- ---------- ----------
$7,814,145 $3,166,825 $6,064,647
========== ========== ==========
</TABLE>
NOTE H - LONG TERM DEBT
On November 15, 1994, the Bank purchased land to be used as a branch location of
the Bank and issued a real estate lien note in the amount of $112,500 payable to
an individual. The principal of the note is payable in annual installment
payments of $37,500 each, on the 15th day of November each year, beginning
November 15, 1995 and continuing regularly and annually until the principal has
been paid. Interest computed at 8% per annum on the unpaid principal balance is
payable annually as it accrues on the same dates as and in addition to the
installments of principal. The Bank agreed that it will not make any prepayment
on the note prior to January 1, 1997 without the written consent of the holder
of the note. The note is secured by a vendor's lien retained in deed of even
date from the Bank to the holder, and by a deed of trust of even date from the
Bank to a trustee which conveys the property described above.
NOTE I - EMPLOYEE BENEFITS
In 1990, the Bank established a defined contribution (401(k)) pension plan which
covers substantially all employees. The eligible employees are allowed to
contribute from three to fifteen percent of their salary to the plan. The Bank
contributes three percent of the participating employees' salaries to the plan.
The Bank makes its contribution semi-monthly. Those contributions totaled
$14,455, $12,807 and $16,580, at September 30, 1995 and September 30, 1994 and
December 31, 1994, respectively.
See accountants' compilation report.
F-34
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE J - INCOME TAXES
The total Federal income tax provision consists of the following components:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------- -----------
1995 1994 1994
-------- -------- -----------
<S> <C> <C> <C>
Current provision $281,752 $274,717 $353,654
Deferred (6,575) 12,773 24,689
-------- -------- --------
$275,177 $287,490 $378,343
======== ======== ========
</TABLE>
Deferred income taxes at the appropriate rates are detailed as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------- -----------
1995 1994 1994
-------- -------- -----------
<S> <C> <C> <C>
Net unrealized depreciation on available-for-sale
securities $ 869 $ (7,489) $(21,573)
Excess depreciation charges for tax purposes 28,634 19,803 23,138
Excess provision for credit losses for financial
reporting purposes (34,530) (24,570) (24,570)
Excess expenses for tax purposes using the cash
method of accounting 118,115 111,645 120,226
-------- -------- --------
$113,088 $ 99,389 $ 97,221
======== ======== ========
</TABLE>
Applicable income taxes for financial reporting purposes differ from the amount
computed by applying the statutory federal income tax rate for the reasons noted
in the table below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------------------ -----------------
1995 % 1994 % 1994 %
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory federal
income tax rate $293,871 34.00 $316,726 34.00 $416,803 34.00
Increase (decrease) in tax
resulting from:
Tax exempt income (29,418) (3.40) (39,787) (4.27) (41,109) (3.35)
Other, net 10,724 1.24 10,551 1.13 2,649 .21
$275,177 31.84 $287,490 30.86 $378,343 30.86
======== ===== ======== ===== ======== =====
</TABLE>
NOTE K - TRANSACTIONS WITH RELATED PARTIES
The Bank's officers, directors, and their associates, including corporations and
firms of which they and their families have an ownership interest, are also
customers of the Bank. These persons, corporations, and firms have had
transactions in the ordinary course of business with the Bank, all of which were
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than normal risk of collectibility or present
other unfavorable features. The Bank expects to have such transactions on
similar terms with its officers, directors, and their associates in the future.
The aggregate indebtedness transactions with such related parties were as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
-------------------- -----------
1995 1994 1994
--------- --------- -----------
<S> <C> <C> <C>
Balance at January 1 $ 492,580 $ 510,285 $ 510,285
New loans or additions to lines of credit 141,350 243,396 300,017
Payment on loans (253,471) (293,946) (317,722)
--------- --------- ---------
Balance at end of period $ 380,459 $ 459,735 $ 492,580
========= ========= =========
</TABLE>
See accountants' compilation report.
F-35
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
position. The contract or notional amount of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------------------- -----------
1995 1994 1994
------------ ----------- -----------
<S> <C> <C> <C>
Commitments on interim
construction loans $1,339,976 $ 722,400 $ 958,039
Commitments on lines
of credit 1,490,063 853,636 717,845
Standby letters of credit 321,705 119,655 119,655
Unused credit card lines 1,590,077 1,567,247 1,542,000
---------- ---------- ----------
$4,741,821 $3,262,938 $3,337,539
========== ========== ==========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property, plant, and equipment, and income-
producing commercial properties.
Standby letters of credit are written conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The average collateral value held on
letters of credit is approximately 53.37%.
NOTE M - CONCENTRATION OF CREDIT RISK FOR CERTAIN ENTITIES
The Bank grants agribusiness, commercial, and residential loans to customers
throughout Parker County, Texas and surrounding counties. Although the Bank has
a diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent upon the economic conditions in Parker
County, Texas and the surrounding counties.
NOTE N - REGULATORY MATTERS
The Bank, as a National Bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined) plus the
retained earnings (as defined) from the prior two years. The dividends, as of
September 30, 1995, that the Bank could declare, without approval of the
Comptroller of the Currency, amounted to approximately $1,474,236 The Bank is
also required to maintain minimum amounts of capital to total "risk weighted"
assets, as defined by the Bank Regulators. At September 30, 1995, the Bank is
required to have minimum Tier 1 and total capital ratios of 4.00% and 8.00%,
respectively. The Bank's actual ratios at that date were 17.96% and 18.56%,
respectively. The Bank's leverage ratio at September 30, 1995 was 8.26%.
See accountants' compilation report.
F-36
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE O - CASH AND INVESTMENT SECURITIES
Certain subsidiary banks are required to maintain reserve balances with the
Federal Reserve Bank. For the period ending September 30, 1995 and September
30, 1994 and December 31, 1994, such average balances totaled approximately
$456,000, $410,000 and $412,000, respectively.
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the Company to disclose the estimated
fair value of its financial instrument assets and liabilities. For the Company,
as for most financial institutions, over 90% of its assets and liabilities are
considered financial instruments as defined in Statement No. 107. Many of the
Company's financial instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in an exchange
transaction.
Estimated fair values have been determined by the Company using the best
available data, as generally provided in the Company's Regulatory Reports, and
an estimation methodology suitable for each category of financial instruments.
For those loans and deposits with floating interest rates, it is presumed that
estimated fair values generally approximate the recorded book balances. The
estimation methodologies used, the estimated fair values, and recorded book
balances at September 30, 1995, September 30, 1994 and December 31, 1994, were
as follows:
See accountants' compilation report.
F-37
<PAGE>
WEATHERFORD NATIONAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
DECEMBER 31, 1994 (AUDITED)
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Financial instruments actively traded in a secondary market have been valued
using quoted available market prices.
<TABLE>
<CAPTION>
ESTIMATED FAIR VALUE RECORDED BOOK BALANCE
---------------------------------------- ---------------------------------------
SEPTEMBER 30 DECEMBER 31, SEPTEMBER 30 DECEMBER 31,
-------------------------- ------------ -------------------------- ------------
1995 1994 1994 1995 1994 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and due
from banks $ 2,435,947 $ 2,264,547 $ 2,335,321 $ 2,435,947 $ 2,264,547 $ 2,335,321
Federal funds
sold 2,725,000 1,000,000 2,725,000 1,000,000
Investment in
securities 29,049,139 24,579,919 26,040,275 29,411,057 25,790,145 27,705,870
</TABLE>
Financial instruments with stated maturities have been valued using a present
value discounted cash flow with a discount rate approximating current market for
similar assets and liabilities. Financial instrument assets with variable rates
and financial instrument liabilities with no stated maturities have an estimated
fair value equal to both the amount payable on demand and the recorded book
balance.
<TABLE>
<CAPTION>
ESTIMATED FAIR VALUE RECORDED BOOK BALANCE
---------------------------------------- ---------------------------------------
SEPTEMBER 30 DECEMBER 31, SEPTEMBER 30 DECEMBER 31,
-------------------------- ------------ -------------------------- ------------
1995 1994 1994 1995 1994 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Deposits with
stated
maturities $25,210,446 $14,632,325 $18,586,459 $25,118,022 $14,689,603 $18,785,866
Deposits with
no stated
maturities 31,423,481 30,596,642 30,630,515 31,423,481 30,596,642 30,630,515
Net loans 24,760,218 19,953,876 20,953,157 25,005,068 20,066,927 21,151,227
</TABLE>
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values.
The Company's remaining assets and liabilities which are not considered
financial instruments have not been valued differently than has been customary
with historical cost accounting. No disclosure of the relationship value of the
Company's deposits is required by Statement No. 107 nor has the Company
estimated its value. There is no material difference between the notional
amount and the estimated fair value of off-balance-sheet unfunded loan
commitments which total $4,420,116 and $3,143,283 at September 30, 1995 and
1994, respectively, and $3,217,884 at December 31, 1994, and are generally
priced at market at the time of funding. Letters of credit discussed in Note L
have an estimated fair value based on fees currently charged for similar
agreements. At September 30, 1995 and 1994, and December 31, 1994, fees related
to the unexpired term of the letters of credit are not significant.
Management is concerned that reasonable comparability between financial
institutions may not be likely due to the wide range of permitted valuation
techniques and numerous estimates which must be given the absence of active
secondary markets for many of the financial instruments. This lack of uniform
valuation methodologies also introduces a greater degree of subjectivity to
these estimated fair values.
See accountants' compilation report.
F-38
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ANNEX A
[Letterhead of George, Morgan & Sneed, P.C.]
October 30, 1995
The Board of Directors
Weatherford National Bancshares, Inc.
P.O. Box 1299
Weatherford, Texas 76086
Dear Sirs:
Pursuant to Section 2.2 of the Stock Exchange Agreement and Plan of
Reorganization, dated October 20, 1995 (the "Agreement") among First Financial
Bankshares, Inc. ("First Financial"), Weatherford National Bancshares, Inc.
("Weatherford Holdings"), Parker Bancshares, Inc. ("Parker"), and Weatherford
National Bank ("Weatherford National"), our opinion has been requested with
respect to certain Federal income tax consequences of the exchange by the
Weatherford Holdings shareholders of their Weatherford Holdings stock for First
Financial voting common stock (the "Stock Exchange") and the merger of
Weatherford Holdings with and into First Financial Bankshares of Delaware, Inc.
("FFB Delaware"), a wholly-owned subsidiary of First Financial (the "Merger").
This opinion letter supersedes our opinion letter dated September 27, 1995.
In rendering our opinion, we have reviewed the Agreement and such other
documents as we have deemed necessary or appropriate. We have relied upon the
accuracy and completeness of the facts, information, covenants, and
representations contained in the Agreement and such other documents.
Furthermore, we have assumed that the Stock Exchange and Merger will be
consummated in accordance with the Agreement and that the Merger will qualify as
a merger under applicable State law.
In rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that statutes, regulations, judicial decisions and
administrative interpretations are subject to change at any time and, in some
circumstances, with retroactive effect.
<PAGE>
The Board of Directors
Weatherford National Bancshares, Inc.
October 30, 1995
Page 2
A material change in the authorities upon which our opinion is based could
affect our conclusions. However, we assume no obligation to revise or supplement
this opinion if any subsequent change were to occur.
Requisite to a tax-free reorganization under the Code is a continuity of
interest in the business enterprises on the part of those persons who were the
owners of the enterprise prior to the reorganization. Accordingly, the
Weatherford Holdings shareholders, as a group, will be required to satisfy the
continuity of interest doctrine through a post-exchange continuing ownership of
the First Financial voting common stock received in the Stock Exchange. In this
regard, a disposition by the Weatherford Holdings shareholders of a substantial
portion (in the aggregate) of their post-exchange First Financial shares which
is pursuant to a plan, intention or arrangement existing at the time of the
Stock Exchange will result in a failure to satisfy the continuity of interest
doctrine. The Internal Revenue Service takes the position that 50 percent (in
the aggregate) constitutes a "substantial portion." A failure to satisfy the
continuity of interest doctrine will result in the Stock Exchange being a
taxable transaction to the Weatherford Holdings shareholders. In rendering our
opinion, we have assumed that the continuity of interest doctrine can and will
be satisfied.
Also requisite to a tax-free reorganization under the Code is a continuity of
the business enterprise under the modified corporate form. The continuity of
business enterprise doctrine requires that the acquiring corporation either
continue the acquired corporation's historic business or use a significant
portion of the acquired corporation's historic business assets in a business.
Accordingly, in order to satisfy the continuity of business enterprise doctrine,
First Financial and/or one or more of its controlled subsidiaries will be
required to either continue the historic business of Weatherford Holdings,
Parker and Weatherford National or use a significant portion of the historic
business assets of Weatherford Holdings, Parker, and Weatherford National in a
business. A failure to satisfy the continuity of business enterprise doctrine
will result in the Stock Exchange being a taxable transaction to the Weatherford
Holdings shareholders. In rendering our opinion, we have assumed that the
continuity of business enterprise doctrine will be satisfied.
In addition to the requirements noted in the foregoing for a tax-free
reorganization under the Code, there is the requirement that, immediately after
a stock-for-stock exchange, the acquiring corporation must have control of the
acquired corporation. For purposes of the reorganization provisions of the Code,
the term "control" means the ownership of stock possessing at least 80 percent
of the total combined voting power of all classes of stock entitled to vote and
at least 80 percent of the total number of shares
<PAGE>
The Board of Directors
Weatherford National Bancshares, Inc.
October 30, 1995
Page 3
of all other classes of stock of the corporation. Therefore, in order to satisfy
the control requirement, First Financial and/or one or more of its controlled
subsidiaries will have to own at least 80 percent of the outstanding stock of
Weatherford Holdings immediately after the Stock Exchange. If the Stock Exchange
is consummated with First Financial acquiring less than 80 percent of the
outstanding stock of Weatherford Holdings, the Stock Exchange will be a taxable
transaction to the Weatherford Holdings shareholders. In rendering our opinion,
we have assumed that the control requirement will be satisfied.
Based solely upon and subject to foregoing, we are of the opinion that under
current law:
1. The Stock Exchange and Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code, and First Financial,
Weatherford Holdings, and FFB Delaware each will be a party to the
reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Weatherford Holdings
shareholders upon receipt of First Financial voting common stock in
exchange for their Weatherford Holdings stock, except for any gain or
loss recognized with respect to the shareholders who receive cash in
lieu of fractional share interests in First Financial voting common
stock or pursuant to the exercise of statutory dissenter rights.
3. The aggregate Federal income tax basis of the shares of First
Financial voting common stock received by the Weatherford Holdings
shareholders in exchange for their shares of Weatherford Holdings
stock will be the same as the aggregate adjusted tax basis of their
Weatherford Holdings stock exchanged therefor, less the tax basis, if
any, allocated to fractional share interests.
4. The holding period of the First Financial voting common stock
received by the Weatherford Holdings shareholders in exchange for
their shares of Weatherford Holdings stock in the hands of the
Weatherford Holdings shareholders will include the holding period of
their Weatherford Holdings stock exchanged therefor.
Except as set forth above, we express no opinion as the tax consequences,
whether Federal, State or local, of the Stock Exchange and Merger, or of any
transactions related thereto. We are furnishing this opinion to you solely in
connection with Section 2.2 of the Agreement. This opinion is solely for your
benefit and is not to be
<PAGE>
The Board of Directors
Weatherford National Bancshares, Inc.
October 30, 1995
Page 4
used, circulated, quoted or otherwise referred to for any purposes without our
prior consent.
We hereby consent to the references made to us in the Summary and under the
heading "The Exchange Offer - Certain Federal Income Tax Consequences" in the
Offering Circular/Prospectus of First Financial relating to the Stock Exchange,
and to the inclusion of this opinion as an Annex to the Offering
Circular/Prospectus and the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 of which such Offering Circular/Prospectus is
a part.
Very truly yours,
/s/ GEORGE, MORGAN & SNEED, P.C.
Weatherford, Texas
<PAGE>
ANNEX B
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS
AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the shareholder
shall not have voted in favor of the action, the corporation, in the case of
action other than a merger, or the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the action
is effected, deliver or mail to the shareholder written notice that the action
has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
proceeding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and class
of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant
to Section A of Article 9.10 of this Act, the corporation, in the case of action
other than a merger, and the surviving or new corporation (foreign or domestic)
or other entity that is liable to discharge the shareholder's right of dissent,
in the case of a merger, shall, within ten (10) days after the date the action
is effected, mail to each shareholder of records as of the effective date of the
action notice of the fact and data of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice shall be
accompanied by a copy of this Article and any articles or documents filed by the
corporation with the Secretary of State to effect the action. If the shareholder
shall not have consented to the taking of the action, the shareholder may,
within twenty (20) days after the mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the shareholder's
shares. The fair value of the shares shall be the value thereof as of the date
the written consent authorizing the action was delivered to the corporation
pursuant to Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the number
and class of shares owned by the dissenting shareholder and the fair value of
the shares as estimated by the shareholder. Any shareholder failing to make
demand within the twenty (20) day period shall be bound by the action.
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(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action
was effected, the value of the shares is agreed upon between the shareholder and
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, payment for the shares shall be made within ninety
(90) days after the date on which the action was effected and, in the case of
shares represented by certificates, upon surrender of the certificates duly
endorsed. Upon payment of the agreed value, the shareholder shall cease to have
any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make
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a determination of the fair value of the shares upon such investigation as to
them may seem proper. The appraisers shall also afford a reasonable opportunity
to the parties interested to submit to them pertinent evidence as to the value
of the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action. If the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, complies with the requirements of this Article, any shareholder who
fails to comply with the requirements of this Article shall not be entitled to
bring suit for the recovery of the value of his shares or money damages to the
shareholder with respect to the action.
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ARTICLE 5.13. PROVISIONS AFFECTING REMEDIES
OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name or the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his share or before any petition has been filed pursuant
to Article 5.12 or 5.16 of this Act asking for a finding and determination of
the fair value of such shares, but no such demand may be withdrawn after such
payment has been made or, unless the corporation shall consent thereto, after
any such petition has been filed. If, however, such demand shall be withdrawn
as hereinbefore provided, or if pursuant to Section B of this Article the
corporation shall terminate the shareholder's rights under Article 5.12 or 5.16
of this Act, as the case may be, or if no petition asking for a finding and
determination of fair value of such shares by a court shall have been filed
within the time provided in Article 5.12 or 5.16 of this Act, as the case may
be, or if after the hearing of a petition filed pursuant to Article 5.12 or
5.16, the court shall determine that such shareholder is not entitled to the
relief provided by those articles, then, in any such case, such shareholder and
all persons claiming under him shall be conclusively presumed to have approved
and ratified the corporate action from which he dissented and shall be bound
thereby, the right of such shareholder to be paid the fair value of his shares
shall cease, and his status as a shareholder shall be restored without prejudice
to any corporate proceedings which may have been taken during the interim, and
such shareholder shall be entitled to receive any dividends or other
distributions made to shareholders in the interim.
4
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ARTICLE 5.16 OF TEXAS BUSINESS CORPORATION ACT
MERGER OF SUBSIDIARY OR SUBSIDIARIES
INTO PARENT CORPORATION
QUALIFICATIONS
A. In any case in which at least ninety (90%) percent of the outstanding
shares of each class and series of a domestic or foreign corporation or
corporations is owned by another domestic or foreign corporation, and at least
one of such corporations is a domestic corporation and the other or others are
domestic corporations or foreign corporations organized under the laws of a
jurisdiction that permit such a merger, the corporation having such share
ownership may (1) merge such other domestic or foreign corporation or
corporations into itself, (2) merge itself into such other corporation, or (3)
merge itself and one or more of such corporations into another of such domestic
or foreign corporations:
(a) in the event that the corporation having share ownership will be a
surviving corporation in the merger, by executing and filing articles of merger
in accordance with Section B of this Article; or
(b) in the event that the corporation having such share ownership will not
be a surviving corporation in the merger, by the corporation having such share
ownership adopting a plan of merger in the manner required by Article 5.03 of
this Act, except that no action under Section 5.03 shall be required to be taken
by the corporation or corporations whose shares are so owned, and executing and
filing articles of merger in accordance with Section B of this Article.
SIGNATURE OF ARTICLES; CONTENTS
B. The articles of merger shall be signed on behalf of the parent
corporation by an officer and shall set forth:
(1) The name of the parent corporation, and the name or names of the
subsidiary corporations and the respective jurisdiction under which each such
corporation is organized.
(2) The number of outstanding shares of each class of each subsidiary
corporation and the number of such shares of each class owned by the parent
corporation.
(3) A copy of the resolution adopted by the board of directors of the
parent corporation to so merge and the date of the adoption thereof. If the
parent corporation does not own all the outstanding shares of each class of each
subsidiary corporation that is a party to the merger, the resolution shall state
the terms and conditions of the merger, including the cash or other property,
including shares, obligations, evidences of ownership, rights to purchase
securities, or other securities of any person or entity or any combination of
the shares, obligations, evidences of ownership, rights, or other securities, to
be used, paid or delivery by
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the surviving corporation upon surrender of each share of the subsidiary
corporation or corporations not owned by the parent corporation.
(4) If the surviving corporation is a foreign corporation, the address,
including street number if any, of its registered or principal office in the
jurisdiction under whose laws it is governed. If the surviving corporation is a
foreign corporation, on the merger taking effect the surviving foreign
corporation is deemed to (a) appoint the Secretary of State of this state as its
agent for service of process to enforce an obligation or the rights of
dissenting shareholders of each domestic corporation that is a party to the
merger, and (b) agree that it will promptly pay to the dissenting shareholders
of each domestic corporation that is a party to the merger the amount, if any,
to which they are entitled under this Article.
(5) If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the information
required by Section A of Article 5.04 of this Act.
C. Delivery to Secretary of State; Duties. The original and a copy of the
articles of merger shall be delivered to the Secretary of State. If the
Secretary of State finds that such articles conform to law; he shall, when all
fees and franchise taxes have been paid as required by law:
(1) Endorse on the original and the copy the word "Filed," and the month,
day and year of the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of merger to which he shall affix the copy and
deliver them to the surviving corporation or its representative.
D. Effective Date and Effect. The effective date and the effect of such
merger shall be the same as provided in Articles 5.05 and 5.06 of this Act if
the surviving corporation is a domestic corporation. If the surviving
corporation is a foreign corporation, the effective date and the effect of such
merger shall be the same as in the case of the merger of domestic corporations
except in so far as the laws of such other jurisdiction provide otherwise.
REMEDY OF MINORITY SHAREHOLDERS
E. In the event all of the shares of a subsidiary domestic corporation that
is a party to a merger effected under this Article are not owned by the parent
corporation immediately prior to the merger, the surviving corporation (foreign
or domestic) shall, within ten (10) days after the effective date of the merger,
mail to each shareholder of record of each subsidiary domestic corporation a
copy of the articles of merger and notify the shareholder that the merger has
become effective. Any such shareholder who holds shares of a class or series
that would have been entitled to vote on the merger if it had been effected
pursuant to Article 5.03 of this Act shall have the right to dissent from the
merger and demand payment of the fair value for his shares in lieu of the cash
or other property to be used, paid or delivered to such shareholder
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upon the surrender of such shareholder's shares pursuant to the terms and
conditions of the merger, with the following procedure:
(1) Such shareholder shall within twenty (20) days after the mailing of the
notice and copy of the articles of merger make written demand on the surviving
corporation, domestic or foreign, for payment of the fair value of his shares.
The fair value of the shares shall be the value thereof as of the day before the
effective date of the merger, excluding any appreciation or depreciation in
anticipation of such act. The demand shall state the number and class of the
shares owned by the dissenting shareholder and the fair value of such shares as
estimated by him. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the corporate action.
(2) Within ten (10) days after receipt by the surviving corporation of a
demand for payment by the dissenting shareholder of the fair value of his shares
in accordance with Subsection (1) of this section, the corporation (foreign or
domestic) shall deliver or mail to the dissenting shareholder a written notice
which shall either set out that the corporation (foreign or domestic) accepts
the amount claimed in the demand and agrees to pay such amount within ninety
(90) days after the date on which the corporate action was effected and, in the
case of shares represented by certificates, upon the surrender of the shares
certificates duly endorsed, or shall contain an estimate by the corporation of
the fair value of such shares, together with an offer to pay the amount of that
estimate within ninety (90) days after the date on which such corporate action
was effected, upon receipt of notice within sixty (60) days after that date from
the shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the shares
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action
was effected, the value of the shares is agreed upon between the dissenting
shareholder and the surviving corporation (foreign or domestic), payment for the
shares shall be made within ninety (90) days after the date on which the
corporate action was effected and, in the case of shares represented by
certificates, upon surrender of his certificate or certificates representing
such shares. Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in such shares or in the corporation.
(4) If, within sixty (60) days after the date on which such corporate
action was effected, the shareholder and the surviving corporation (foreign or
domestic) do not so agree, then the dissenting shareholder or the corporation
(foreign or domestic) may, within sixty (60) days after the expiration of the
sixty (60) day period, file a petition in any court of competent jurisdiction in
the county in which the principal office of the corporation is located, asking
for a finding and determination of the fair value of the shareholder's shares as
provided in Section B of Article 5.12 of this Act and thereupon the parties
shall have the rights and duties and follow the procedure set forth in Sections
B to D inclusive of Article 5.12.
(5) In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to the corporate action is the exclusive
remedy for the recovery of the value of his shares or money damages to the
shareholder with respect to the corporate action. If the surviving corporation
(foreign or domestic) complies with the requirements of this Article, any such
shareholder who fails to comply with the requirements of this Article shall not
be
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entitled to bring suit for the recovery of the value of his shares or money
damages to such shareholder with respect to such corporate action.
DISSENTING SHAREHOLDERS
F. If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the provisions of
Articles 5.11 and 5.12 of this Act shall apply to the rights of the shareholders
of the parent corporation to dissent from such merger. Except as otherwise
provided in this Article, the provisions of Articles 5.11 and 5.12 of this Act
shall not be applicable to a merger effected under the provisions of this
Article. The provisions of Article 5.13 of this Act shall be applicable to any
merger effected under the provisions of this Article to the extent provided in
Article 5.13 of this Act.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Article 2.02-1 of the Texas Business Corporation Act (the "TBCA") provides
that a Texas corporation, such as First Financial Bankshares, Inc. ("First
Financial"), may indemnify a director or officer of the corporation against
judgments, penalties, fines, settlements and reasonable expenses incurred in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative, any
appeal in such an action and any inquiry or investigation that could lead to
such an action, because the person is or was a director of officer of the
corporation. In order to be entitled to such indemnification, the director of
officer must have conducted himself in good faith and reasonably believed (i) in
the case of conduct in his official capacity with the corporation, that his
conduct was in the corporation's best interest, (ii) in all other cases, that
his conduct was at least not opposed to the corporation's best interest, and
(iii) in the case of any criminal proceeding, that his conduct was not unlawful.
Article 2.02-1 of the TBCA provides that a director or officer may not be
indemnified for proceedings in which the person is found liable on the basis
that a personal benefit was improperly received or in which the person is found
liable to the corporation.
The First Financial Articles of Incorporation provide that, to the fullest
extent permitted by applicable law, each director, officer, employee and agent
of First Financial shall be indemnified for all expenses incurred in connection
with any action, suit, proceeding or claim to which he or she is named a party
or otherwise by virtue of holding such position; provided, however, that no
indemnification of employees or agents (other than directors or officers) will
be made without express authorization of the Board of Directors.
The First Financial Articles of Incorporation also provide that, to the
fullest extent permitted by applicable law, no First Financial director shall be
liable to First Financial or the First Financial shareholders for monetary
damages for or with respect to any acts or omissions in his or her capacity as a
director, except in the case of liability for (i) a breach of a duty of loyalty
to First Financial or its shareholders, (ii) an act or omission not in good
faith or that involves intentional misconduct or a knowing violation of the law,
(iii) a transaction from which a director received an improper benefit, (iv) an
act or omission for which the liability of a director is expressly provided by
statute, or (v) an act related to an unlawful stock repurchase or payment of a
dividend.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.
II-1
<PAGE>
<TABLE>
Item 601
Regulation S-K
Exhibit Reference
Number Description
----------------- -----------
<C> <S>
*2.1 Stock Exchange Agreement and Plan of Reorganization
dated as of October 20, 1995 by and between First
Financial Bankshares, Inc., Weatherford National
Bancshares, Inc., Parker Bancshares, Inc. and
Weatherford National Bank.
**3.1 Articles of Incorporation, and all amendments thereto,
of the Registrant (incorporated by reference from
Exhibit 1 of the Registrant's Amendment No. 2 to Form
8-A filed on Form 8-A/A No. 2 on November 21, 1995).
**3.2 Amended and Restated Bylaws of the Registrant, and all
amendments thereto (incorporated by reference from
Exhibit 2 of the Registrant's Amendment No. 1 to Form
8-A filed on Form 8-A/A No. 1 on January 7, 1994).
**4 Specimen certificate for First Financial Common Stock
(incorporated by reference from Exhibit 3 of the
Registrant's Amendment No. 1 to Form 8-A filed on Form
8-A/A No. 1 on January 7, 1994).
***5.1 Opinion and Consent of McMahon, Surovik, Suttle,
Buhrmann, Hicks & Gill, P.C.
*8.1 Opinion and Consent of George, Morgan & Sneed, P.C.
***15.1 Letter from George, Morgan & Sneed, P.C. regarding
unaudited interim financial information.
***23.1 Consent of McMahon, Surovik, Suttle, Buhrmann, Hicks &
Gill, P.C. (included in Exhibit 5.1).
***23.2 Consent of George, Morgan & Sneed, P.C. (included in
Exhibit 8.1).
***23.3 Consent of Arthur Andersen LLP, independent public
accountants (auditors for First Financial Bankshares,
Inc.).
</TABLE>
II-2
<PAGE>
***23.4 Consent of George, Morgan & Sneed, P.C., independent
public accountants (auditors for Weatherford National
Bancshares, Inc.).
*24 Powers of Attorney (see the signature pages to this
Form S-4 Registration Statement).
***99 Form of Letter of Transmittal
- --------------
*Previously filed
**Incorporated by reference
***Filed herewith
(b) Financial Statement Schedules. Financial Statement Schedules are not
applicable.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to
II-3
<PAGE>
section 13(a) or section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that
is incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement related to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The undersigned registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
II-4
<PAGE>
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Abilene, State of Texas, on the 14th day of December, 1995.
FIRST FINANCIAL BANKSHARES, INC.
By: /s/ Curtis R. Harvey
----------------------
Curtis R. Harvey,
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed on the 14th day of
December, 1995, by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Curtis R. Harvey Executive Vice President, Chief Financial
- -------------------- Officer, Controller and Chief Accounting Officer
Curtis R. Harvey
* Director
- -------------------
F. Scott Dueser
* Director
- ---------------------
Patrick N. Gerald
* Director
- ------------------
Robert E. Hitt
Director
- --------------------------
Joe B. Matthews
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
* Director
- ----------------------------
Raymond A. McDaniel, Jr.
* Director
- ---------------
Bynum Miers
* Chairman of the Board, President,
- --------------------- Chief Executive Officer and Director
Kenneth T. Murphy
* Director
- --------------------
Dian Graves Owen
* Director
- -------------------
James M. Parker
* Director
- ---------------------------
W.V. Ramsey, Jr., M.D.
Director
- ---------------------------
O. L. Schuch
Director
- ---------------------------
Craig Smith
Director
- ---------------------------
H.T. Wilson
* By: /s/ Curtis R. Harvey
----------------------------------
Curtis R. Harvey, Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K SEQUENTIAL
EXHIBIT REFERENCE NUMBERING
NUMBER PAGE NO.
_________________ __________
<S> <C>
*2.1 Stock Exchange Agreement and Plan of Reorganization dated as of
October 20, 1995 by and between First Financial Bankshares, Inc.,
Weatherford National Bancshares, Inc., Parker Bancshares, Inc. and
Weatherford National Bank.
**3.1 Articles of Incorporation, and all amendments thereto, of the
Registrant (incorporated by reference from Exhibit 1 of the
Registrant's Amendment No. 2 to Form 8-A filed on Form 8-A/A No. 2
on November 21, 1995).
**3.2 Amended and Restated Bylaws of the Registrant, and all amendments
thereto (incorporated by reference from Exhibit 2 of the
Registrant's Amendment No. 1 to Form 8-A filed on Form 8-A/A No. 1
on January 7, 1994).
**4 Specimen certificate for First Financial Common Stock (incorporated
by reference from Exhibit 3 of the Registrant's Amendment No. 1 to
Form 8-A filed on Form 8-A/A No. 1 on January 7, 1994).
***5.1 Opinion and Consent of McMahon, Surovik, Suttle, Buhrmann, Hicks &
Gill, P.C.
*8.1 Opinion and Consent of George, Morgan & Sneed, P.C.
***15.1 Letter from George, Morgan & Sneed, P.C. regarding unaudited
interim financial information.
***23.1 Consent of McMahon, Surovik, Suttle, Buhrmann, Hicks & Gill,
P.C. (included in Exhibit 5.1).
</TABLE>
EXHIBIT INDEX -- PAGE 1
<PAGE>
***23.2 Consent of George, Morgan & Sneed, P.C. (included in Exhibit 8.1).
***23.3 Consent of Arthur Andersen LLP, independent public accountants
(auditors for First Financial Bankshares, Inc.).
***23.4 Consent of George, Morgan & Sneed, P.C., independent public
accountants (auditors for Weatherford National Bancshares, Inc.).
*24 Powers of Attorney (see the signature pages to this Form S-4
Registration Statement).
***99 Form of Letter of Transmittal
- --------------
*Previously filed
**Incorporated by reference
***Filed herewith
EXHIBIT INDEX -- PAGE 2
<PAGE>
Exhibit 5.1
[LETTERHEAD OF MCMAHON, SUROVIK, SUTTLE, BUHRMANN, COBB & HICKS APPEARS HERE]
December 14, 1995
First Financial Bankshares, Inc.
P.O. Box 701
Abilene, TX 79604
Dear Sirs:
We have acted as counsel to First Financial Bankshares, Inc. (the
"Company") in connection with certain matters concerning a Registration
Statement on Form S-4 (the "Registration Statement") relating to an aggregate of
323,982 shares (the "Shares") of the Company's Common Stock, par value $10.00
per share, to be issued in connection with the Exchange Offer by the Company to
the shareholders of Weatherford National Bankshares, Inc. Capitalized terms used
herein that are not otherwise defined have the meaning ascribed to them in the
Prospectus which constitutes a part of the Registration Statement.
We have examined such corporate records, documents, instruments and
certificates of the Company and have received such representations from the
officers and directors of the Company and have reviewed such questions of law
as we have deemed necessary, relevant or appropriate to enable us to render the
opinion expressed herein. During the course of our examination, we have assumed
the genuineness of all signatures and the authenticity of all documents,
instruments, records and certificates submitted to us as originals.
Based upon our examination and review and upon the representations made to
us by the officers and directors of the Company, we are of the opinion that the
Shares have been duly and validly authorized and will, upon issuance and
delivery against payment therefor in the manner contemplated by the Exchange
Offer and Merger, be validly issued, and upon such issuance, the Shares will be
fully paid and nonassessable.
This firm consents to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to the firm in the Prospectus
constituting a part thereof under the caption "Legal Matters."
Very truly yours,
McMAHON, SUROVIK, SUTTLE,
BUHRMANN, HICKS & GILL, P.C.
By: /s/ David L. Buhrmann
--------------------------
David L. Buhrmann
DLB/rw
[BW 120:74]
<PAGE>
EXHIBIT 15.1
[Letterhead of George, Morgan & Sneed, P.C.]
INDEPENDENT ACCOUNTANTS' ACKNOWLEDGMENT
We acknowledge and consent to the use in the Registration Statement on Form S-4
of which this Exhibit 15.1 is a part, of our Compilation Report dated October
27, 1995 relating to the consolidated balance sheets of Weatherford National
Bancshares, Inc. and Subsidiaries, as of September 30, 1995 and 1994, and the
related consolidated statements of earnings, changes in stockholders' equity and
cash flows for the nine months then ended and the consolidated statements of
earnings for the three months ended September 30, 1995 and 1994.
/s/ GEORGE, MORGAN & SNEED, P.C.
George, Morgan & Sneed, P.C.
December 14, 1995
<PAGE>
[ARTHUR ANDERSEN LLP LETTERHEAD APPEARS HERE]
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 11, 1995 (and to all references to our Firm) included in or made a
part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
December 15, 1995
<PAGE>
EXHIBIT 23.4
[Letterhead of George, Morgan & Sneed, P.C.]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
First Financial Bankshares, Inc.
Abilene, Texas
As independent public accountants, we hereby consent to the use of our report
dated January 7, 1995, on the audited consolidated financial statements of
Weatherford National Bancshares, Inc. as of December 31, 1994 and 1993, and to
all references to our firm included in or made part of this registration
statement.
/s/ George, Morgan & Sneed, P.C.
Weatherford, Texas
December 14, 1995
<PAGE>
EXHIBIT 99
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
WEATHERFORD NATIONAL BANCSHARES, INC.
PURSUANT TO THE OFFER FOR ALL OUTSTANDING SHARES OF
COMMON STOCK OF
WEATHERFORD NATIONAL BANCSHARES, INC. BY
FIRST FINANCIAL BANKSHARES, INC.
===============================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
ABILENE, TEXAS TIME, ON JANUARY 17, 1996
UNLESS EXTENDED (THE "EXPIRATION DATE").
===============================================================================
------------------------------
PURSUANT TO THE OFFERING CIRCULAR/PROSPECTUS DATED DECEMBER 15, 1995
TO: TRUST DEPARTMENT OF FIRST NATIONAL BANK OF ABILENE, The Exchange Agent
BY HAND, MAIL OR OVERNIGHT COURIER:
Trust Department
First National Bank of Abilene
Third Floor
400 Pine Street
Abilene, Texas 79601
FOR INFORMATION CALL: (915) 675-7003
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges that he or she has received the Offering
Circular/Prospectus dated December 15, 1995 (the "Prospectus") of First
Financial Bankshares, Inc. ("First Financial") and this letter of transmittal
(the "Letter of Transmittal"), which constitutes First Financial's offer (the
"Exchange Offer") to exchange shares of its voting common stock, par value
$10.00 per share ("First Financial Common Stock"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part, for all of the
issued and outstanding shares of Weatherford National Bancshares, Inc.
("Weatherford Holdings") par value $5.00 per share ("Weatherford Common Stock").
Other capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
This Letter of Transmittal is to be used by Weatherford Shareholders (as
defined below) if certificates representing Weatherford Common Stock are to be
physically delivered herewith or if the guaranteed delivery procedures
1
<PAGE>
described in the Prospectus are to be utilized pursuant to the procedures set
forth in "The Exchange Offer -- Exchange of Shares and Certificates" and
"-- Guaranteed Delivery Procedures" in the Prospectus.
The term "Weatherford Shareholder" with respect to the Exchange Offer means
any person in whose name shares of Weatherford Common Stock are registered on
the books of Weatherford Holdings or any other person who has obtained a
properly completed stock power from the registered Weatherford Shareholder. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action that the undersigned desires to take with respect to the
Exchange Offer. Weatherford Shareholders who wish to tender their Weatherford
Common Stock must complete this Letter of Transmittal in its entirety.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
===============================================================================
DESCRIPTION OF SHARES OF WEATHERFORD COMMON STOCK TENDERED
Total Number of Shares
Name(s) and Address(es) of of Weatherford Common
Registered Holder(s) Certificate Stock Represented by
(Please fill in, if blank) Number(s) Certificates
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
================================================================================
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Shareholder(s):
-------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
----------------------
Name of Institution which Guaranteed Delivery:
---------------------------
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer set forth in the
Prospectus (receipt of which is hereby acknowledged), the undersigned hereby
tenders to First Financial the shares of Weatherford Common Stock described
herein. Subject to and effective upon the acceptance for exchange of the shares
of Weatherford Common Stock tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, First Financial all right, title and interest in and to all the shares of
Weatherford Common Stock tendered hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent its true and lawful agent
2
<PAGE>
and attorney-in-fact with respect to the tendered shares of Weatherford Common
Stock with full power of substitution to (i) deliver certificates for such
shares of Weatherford Common Stock with all accompanying evidences of transfer
and authenticity to, or upon the order of, First Financial and (ii) present such
shares of Weatherford Common Stock for transfer on the books of Weatherford
Holdings and receive all benefits and otherwise exercise all rights of
beneficial ownership of such shares of Weatherford Common Stock all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
For purposes of the Exchange Offer, First Financial shall be deemed to have
accepted validly tendered shares of Weatherford Common Stock when, as and if
First Financial has given oral or written notice thereof to the Exchange Agent.
If any tendered shares of Weatherford Common Stock are not accepted for
exchange pursuant to the Exchange Offer for any reason, certificates for any
such unaccepted shares of Weatherford Common Stock will be returned, without
expense, to the undersigned at the address shown below or at a different address
as may be indicated herein under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the shares of
Weatherford Common Stock tendered hereby and that when the same are accepted for
exchange by First Financial, First Financial shall acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or First Financial to be necessary or desirable to complete the sale,
assignment and transfer of the shares of Weatherford Common Stock tendered
hereby.
The undersigned hereby irrevocably appoints Curtis R. Harvey the attorney
and proxy of the undersigned, with full power of substitution, to exercise all
voting and other rights of the undersigned in such manner as such attorney and
proxy or his substitute shall in his sole discretion deem proper, with respect
to all of the shares of Weatherford Common Stock tendered hereby which have been
acquired by First Financial pursuant to the Exchange Offer prior to the time of
any vote or other action, at any meeting of Weatherford Shareholders (whether
annual or special and whether or not an adjourned meeting), by written consent
or otherwise. This proxy is irrevocable and is granted in consideration of, and
is effective upon, the acquisition of such shares of Weatherford Common Stock by
First Financial in accordance with the terms of the Exchange Offer. Such
acquisition shall revoke any other proxy or written consent granted by the
undersigned at any time with respect to such shares of Weatherford Common Stock,
and no subsequent proxies will be given or written consents will be executed by
the undersigned (and if given or executed, will not be deemed to be effective).
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. Except as stated in the Exchange
Offer, this tender is irrevocable.
The undersigned understands that tenders of shares of Weatherford Common
Stock pursuant to the procedures described under the caption "The Exchange
Offer" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and First Financial upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Exchange Instructions," please
issue the certificates representing the shares of First Financial Common Stock
issued in exchange for the shares of
3
<PAGE>
Weatherford Common Stock accepted for exchange and any cash payment in lieu of
fractional shares, as discussed in the Prospectus, and return any shares of
Weatherford Common Stock not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the shares of First Financial Common
Stock issued in exchange for the shares of Weatherford Common Stock accepted for
exchange and any certificates for shares of Weatherford Common Stock not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signatures. In the event that both
"Special Exchange Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the shares of First
Financial Common Stock issued in exchange for the shares of Weatherford Common
Stock accepted for exchange and return any shares of Weatherford Common Stock
not exchanged in the name(s) of, and send said certificates to, the person(s) so
indicated. The undersigned recognizes that First Financial has no obligation
pursuant to the "Special Exchange Instructions" and "Special Delivery
Instructions" to transfer any shares of Weatherford Common Stock from the name
of the registered holder(s) thereof if First Financial does not accept for
exchange any of the shares of Weatherford Common Stock so tendered.
================================== ==================================
SPECIAL EXCHANGE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4 and 5) (See Instructions 3, 4 and 5)
To be completed ONLY if certificates To be completed ONLY if certificates
for shares of First Financial Common for shares of First Financial Common
Stock or the check for any cash Stock, the check for any cash
payment in lieu of fractional shares payment in lieu of fractional shares
of First Financial Common Stock are of First Financial Common Stock, or
to be issued in the name of someone certificates for shares of
other than the undersigned. Weatherford Common Stock not accepted
are to be sent to someone other than
Issue certificate(s) to: the undersigned, or to the undersigned
at an address other than that shown
Name above.
------------------------------
(Please Print) Mail to:
Address Name
--------------------------- ------------------------------
(Please Print)
- ----------------------------------
(Include Zip Code) Address
---------------------------
- ----------------------------------
(Tax Identification or ----------------------------------
Social Security No.) (Include Zip Code)
================================== ==================================
Weatherford Shareholders who wish to tender their shares of Weatherford
Common Stock and (i) whose shares of Weatherford Common Stock are not
immediately available, or (ii) who cannot deliver their shares of Weatherford
Common Stock, this Letter of Transmittal or any other documents required hereby
to the Exchange Agent prior to the Expiration Date, may tender their shares of
Weatherford Common Stock according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 1 regarding the completion of this Letter
of Transmittal.
4
<PAGE>
PLEASE SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
X
- ------------------------------------- ---------------------------
Date
X
- ------------------------------------- ---------------------------
Signature(s) of Registered Holder(s) Date
or Authorized Signatory
Area Code and Telephone Number:_________________________________
The above lines must be signed by the registered holder(s) of shares of
Weatherford Common Stock as their name(s) appear(s) on the certificates
reflecting shares of Weatherford Common Stock or by person(s) authorized to
become registered holder(s). If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. See Instruction 3 regarding the completion
of this Letter of Transmittal.
Name(s):
--------------------------------------------------------------------
--------------------------------------------------------------------
(Please Print)
Capacity:
--------------------------------------------------------------------
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
--------------------------------------------------------------------
(Include Zip Code)
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED BELOW):
(IF REQUIRED BY INSTRUCTION 3)
--------------------------------------------------------------------
(Authorized Signature)
--------------------------------------------------------------------
(Title)
--------------------------------------------------------------------
(Name of Firm)
--------------------------------------------------------------------
(Address, Including Zip Code)
--------------------------------------------------------------------
(Area Code and Telephone Number)
Dated:_______________________________________, 1996
5
<PAGE>
Under the federal income tax laws, the Exchange Agent may be required to
withhold 31% of the amount of any payments made to certain Weatherford
Shareholders pursuant to the Exchange Offer. In order to avoid such backup
withholding, each tendering Weatherford Shareholder must provide the Exchange
Agent with such Weatherford Shareholder's correct taxpayer identification number
by completing the Substitute Form W-9 set forth below. In general, if a
Weatherford Shareholder is an individual, the taxpayer identification number is
the Social Security number of such individual. If the Exchange Agent is not
provided with the correct taxpayer identification number, the Weatherford
Shareholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. CERTAIN WEATHERFORD SHAREHOLDERS (INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP
WITHHOLDING AND REPORTING REQUIREMENTS. In order to satisfy the Exchange Agent
that a foreign individual qualifies as an exempt recipient, such Weatherford
Shareholder must submit a statement, signed under penalties of perjury,
attesting to that individual's exempt status. A form for such statements can be
obtained from the Exchange Agent. For further information concerning backup
withholding and instructions for completing the Substitute Form W-9 (including
how to obtain a taxpayer identification number if you do not have one and how to
complete the Substitute Form W-9 if securities are held in more than one name),
consult the enclosed Guideline of the Internal Revenue Service for Certification
of Taxpayer Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
shares of Weatherford Common Stock to be deemed invalidly tendered, but may
require the Exchange Agent to withhold 31% of the amount of any payments made
pursuant to the Exchange Offer. Backup withholding is not an additional federal
income tax. Rather, the federal income tax liability of a person subject to
backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
PAYER'S NAME: TRUST DEPARTMENT OF FIRST NATIONAL BANK OF ABILENE
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SUBSTITUTE REQUEST FOR TAXPAYER IDENTIFICATION
Form W-9 NUMBER AND CERTIFICATION
Department of the Treasury
Internal Revenue Service Payer's
Request for Taxpayer
Identification No.
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PART I Taxpayer Identification Number (TIN) PART II For Payees Exempt from
Backup Withholding (see
enclosed Guidelines)
- -------------------------------------------------------------------------------
Enter your TIN on the Social security number: [ ]
appropriate line. For
individuals, this is your --------------------------
social security number OR
(SSN). For other Employer identification
entities, it is your number:
employer identification
number (EIN). --------------------------
- -------------------------------------------------------------------------------
CERTIFICATION.--Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS.--You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item 2.
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below.
---------------------------------------
Address (number and street)
----------------------------------------------------
City, state, and ZIP code
------------------------------------------------------
Signature Date
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<PAGE>
IF YOU CHECKED THE BOX IN PART II OF THE SUBSTITUTE FORM W-9, YOU MUST SIGN AND
DATE THE FOLLOWING CERTIFICATION:
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
===============================================================================
I certify, under penalties of perjury, that a Taxpayer Identification Number has
not been issued to me, and that I mailed or delivered an application to receive
a Taxpayer Identification Number to the appropriate IRS Center or Social
Security Administration Office (or I intend to mail or deliver an application in
the near future). I understand that if I do not provide a Taxpayer
Identification Number within sixty (60) days, 31% of all reportable payments
made to me thereafter will be withheld until I provide a number.
SIGNATURE DATE
--------------------------------------- ------------------------
===============================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SHARES OF WEATHERFORD
COMMON STOCK. The certificates for the tendered shares of Weatherford Common
Stock, as well as a properly completed and duly executed copy of this Letter of
Transmittal and any other documents required by this Letter of Transmittal must
be received by the Exchange Agent at its address set forth herein prior to 5:00
P.M., Abilene, Texas time, on the Expiration Date. Subject to certain
conditions to the consummation of the Exchange Offer, the exchange of shares of
First Financial Common Stock for shares of Weatherford Common Stock will be
promptly made with respect to all shares of Weatherford Common Stock properly
tendered on or prior to 5:00 p.m., Abilene, Texas time, on the Expiration Date,
if First Financial receives notice from the Exchange Agent that at least 90% of
the outstanding shares of Weatherford Common Stock have been tendered. The
method of delivery of the tendered shares of Weatherford Common Stock, this
Letter of Transmittal and all other required documents to the Exchange Agent is
at the election and risk of the Weatherford Shareholder and, except as otherwise
provided below, the delivery will be deemed made only when actually received by
the Exchange Agent. Instead of delivery by mail, it is recommended that the
Weatherford Shareholder use an overnight or hand delivery service. If
certificates for shares of Weatherford Common Stock are sent by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to assure timely delivery.
Weatherford Shareholders who wish to tender their shares of Weatherford Common
Stock and (i) whose shares of Weatherford Common Stock are not immediately
available, or (ii) who cannot deliver their shares of Weatherford Common Stock,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their shares of
Weatherford Common Stock pursuant to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through a firm that is a bank, broker,
dealer, credit union, savings association or other entity which is a member
in good standing of the Securities Transfer Agent's Medallion Program, the
Stock Exchange Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program (each, an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the Eligible Institution a properly completed and duly executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the shares of
Weatherford Common Stock, the certificate number for the certificates
representing such shares of Weatherford Common Stock and the amount of
shares of Weatherford Common Stock tendered, stating that the tender is
being made thereby and guaranteeing that, within 5 business days after the
Expiration Date, this Letter of Transmittal together with the
certificate(s) representing the shares of Weatherford Common Stock and any
other required documents will be deposited by the Eligible Institution with
the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal, as well
as all other documents required by this Letter of Transmittal and the
certificate(s) representing all tendered shares of Weatherford Common Stock
in proper form for transfer, must be received by the Exchange Agent within
5 business days after the Expiration Date, all as provided in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Any Weatherford Shareholder who wishes to tender his or her shares of
Weatherford Common Stock pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 P.M., Abilene, Texas time, on the Expiration
Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered shares of Weatherford Common
Stock will be determined by First Financial in
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<PAGE>
its sole discretion, which determination will be final and binding. First
Financial reserves the absolute right to reject any and all shares of
Weatherford Common Stock not properly tendered or any shares of Weatherford
Common Stock, First Financial's acceptance of which would, in the opinion of
counsel for First Financial, be unlawful. First Financial also reserves the
right to waive any irregularities or conditions of tender as to particular
shares of Weatherford Common Stock. Unless waived, any defects or irregularities
in connection with tenders of shares of Weatherford Common Stock must be cured
within such time as First Financial shall determine. Neither First Financial,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of shares of
Weatherford Common Stock, nor shall any of them incur any liability for failure
to give such notification. Tenders of shares of Weatherford Common Stock will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any shares of Weatherford Common Stock received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering Weatherford Shareholders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
2. NO PARTIAL TENDERS. All shares of Weatherford Common Stock represented
by certificates delivered to the Exchange Agent will be deemed to have been
tendered.
3. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the shares of Weatherford Common Stock tendered hereby,
the signature must correspond with the name(s) as written on the face of the
certificates representing the shares of Weatherford Common Stock without
alteration, enlargement or any change whatsoever.
If this Letter of Transmittal is signed by the registered holder(s) of
shares of Weatherford Common Stock tendered and the certificate(s) for shares of
First Financial Common Stock issued in exchange therefor is to be issued to the
registered holder, such holder need not and should not endorse any certificates
for tendered shares of Weatherford Common Stock, nor provide a separate stock
power. In any other case, such holder must either properly endorse the
certificates representing shares of Weatherford Common Stock tendered or
transmit a properly completed separate stock power with this Letter of
Transmittal, with the signatures on the endorsement or stock power guaranteed by
an Eligible Institution.
If any shares of Weatherford Common Stock tendered hereby are held of
record by two or more persons, all such persons must sign this Letter of
Transmittal.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificates for shares of Weatherford Common Stock
tendered hereby, such certificates for shares of Weatherford Common Stock must
be endorsed or accompanied by appropriate stock powers signed exactly as the
name of the registered holder(s) appears on the certificates representing such
shares of Weatherford Common Stock and must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any certificates for shares of Weatherford
Common Stock or stock powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by First Financial, evidence satisfactory to First
Financial of their authority so to act must be submitted with this Letter of
Transmittal.
Endorsements on certificates for shares of Weatherford Common Stock and
signatures on stock powers required by this Instruction 3 must be guaranteed by
an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the shares of Weatherford Common Stock tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
set forth herein entitled "Special Exchange Instructions" or the box entitled
"Special Delivery Instructions" or (ii) for the account of an Eligible
Institution.
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<PAGE>
4. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS. If the certificates for
shares of First Financial Common Stock or checks for any cash payment in lieu of
payment of fractional shares of First Financial Common Stock are to be issued,
or any shares of Weatherford Common Stock not accepted for exchange are to be
mailed to someone other than the person(s) signing this Letter of Transmittal or
to the person(s) signing this Letter of Transmittal at an address other than
that provided herein, the appropriate boxes on this Letter of Transmittal should
be completed. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
5. TRANSFER TAXES. First Financial will pay all transfer taxes, if any,
applicable to the exchange of shares of Weatherford Common Stock pursuant to the
Exchange Offer unless such payment would jeopardize the tax-free nature of the
Exchange Offer or the Merger (as defined in the Prospectus) for Federal income
tax purposes. If, however, certificates representing shares of First Financial
Common Stock or checks for any cash payment in lieu of fractional shares of
First Financial Common Stock are issued, or certificates for shares of
Weatherford Common Stock not accepted for exchange are to be returned, in the
name of any person other than the registered holder of the shares of Weatherford
Common Stock tendered hereby, or if tendered shares of Weatherford Common Stock
are registered in the name of any person other than the person signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of shares of Weatherford Common Stock pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be deducted from the consideration to be received by such holder (i.e., the
number of shares of First Financial Common Stock to be issued to such holder
will be reduced).
6. WAIVER OF CONDITIONS. First Financial reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any shares of Weatherford Common Stock tendered.
7. MUTILATED, LOST, STOLEN OR DESTROYED SHARES OF WEATHERFORD COMMON STOCK.
Any tendering holder whose shares of Weatherford Common Stock have been
mutilated, lost, stolen or destroyed should contact the Exchange Agent at the
address indicated herein for further instruction.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Weatherford Shareholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
10
<PAGE>
(DO NOT WRITE IN SPACE BELOW)
DATE RECEIVED __________ ACCEPTED BY __________ CHECKED BY __________
===============================================================================
SHARES SURRENDERED SHARES ACCEPTED SHARES RETURNED CERTIFICATE NO.
- --------------------------- --------------- --------------- -----------------
- -------------------------------------------------------------------------------
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DELIVERY PREPARED BY_________________________________ CHECKED BY____________
DATE_______________________________
================================================================================
11
