SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
March 31, 1996 0-7674
FIRST FINANCIAL BANKSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Texas 75-0944023
(State of Incorporation) (I.R.S. Employer
Identification No.)
400 Pine Street, Abilene, Texas 79601
(Address of Executive Offices) (Zip Code)
Registrant's Telephone Number (915) 675-7155
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $10.00 Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
There were 5,348,697 shares of common stock outstanding as of May 1,
1996.
<PAGE>
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item Page
1. Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Signatures 12
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated balance sheets of First Financial Bankshares, Inc. at March 31,
1996, December 31, 1995, and March 31, 1995, and the consolidated statements of
earnings, the consolidated statements of changes in stockholders'equity, and the
consolidated statements of cash flows for the three months ended March 31, 1996
and 1995, follow on pages 4 through 9.
3
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------------
1996 1995 (1) 1995 (1)
---------------- -------------- ----------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 60,427,063 $ 61,743,144 $ 60,858,959
Interest-bearing deposits in banks 1,380,383 198,508 1,477,025
Federal funds sold 27,021,551 15,165,000 31,685,000
Investment securities:
Securities held to maturity (approximate
market value of $483,505,037 and
$445,788,184 at March 31, 1996 and 1995,
and $454,033,240 at December 31, 1995) 484,770,202 456,619,598 451,553,429
Securities available for sale, at
approximate market value 30,108,591 15,483,432 29,563,133
---------------- -------------- ----------------
Total investment securities 514,878,793 472,103,030 481,116,562
Loans 543,192,148 459,337,057 514,695,730
Less: Allowance for loan losses 10,222,116 9,169,184 9,598,024
Unearned discount 9,201,624 7,585,923 7,362,115
---------------- -------------- ----------------
Net loans 523,768,408 442,581,950 497,735,591
Bank premises and equipment-net 34,431,908 30,882,346 31,776,992
Goodwill 5,702,786 1,162,937 1,106,052
Other assets 21,131,701 19,800,756 20,130,839
---------------- -------------- ----------------
TOTAL ASSETS $ 1,188,742,593 $1,043,637,671 $ 1,125,887,020
================ ============== ================
LIABILITIES
Noninterest-bearing deposits $ 209,821,076 $ 190,694,443 $ 218,784,465
Interest-bearing demand deposits 303,888,769 288,366,036 312,163,265
Interest-bearing time deposits 540,827,560 443,569,639 466,630,618
---------------- -------------- ----------------
Total deposits 1,054,537,405 922,630,118 997,578,348
Short-term borrowings 120,000 65,000 85,000
Dividends payable 1,656,968 1,401,702 1,554,717
Other liabilities 9,756,756 8,297,188 6,641,308
---------------- -------------- ----------------
Total liabilities 1,066,071,129 932,394,008 1,005,859,373
SHAREHOLDERS' EQUITY
Capital stock-$10 par value;
10,000,000 shares authorized 53,462,970 53,300,540 53,391,930
Capital surplus 36,879,772 36,865,955 36,870,604
Retained earnings 32,704,620 21,568,675 29,917,274
Unrealized (loss) on investment
securities available for sale (375,898) (491,507) (152,161)
---------------- -------------- ----------------
Total shareholders'equity 122,671,464 111,243,663 120,027,647
---------------- -------------- ----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,188,742,593 $1,043,637,671 $ 1,125,887,020
================ ============== ================
(1) Restated to reflect pooling-of-interests.
</TABLE>
4
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1996 1995 (1)
-------------- --------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 13,011,804 $ 10,653,248
Investment income-taxable 7,160,785 6,385,734
Investment income-tax exempt 228,439 214,244
Interest on interest bearing deposits 29,372 2,553
Interest on federal funds sold and other 549,614 358,721
-------------- --------------
Total interest income 20,980,014 17,614,500
INTEREST EXPENSE
Interest-bearing deposits 8,395,987 6,543,849
Short-term borrowings 29,458 13,050
-------------- --------------
Total interest expense 8,425,445 6,556,899
-------------- --------------
NET INTEREST INCOME 12,554,569 11,057,601
Provision for loan losses 518,000 20,000
-------------- --------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 12,036,569 11,037,601
NONINTEREST INCOME
Trust fees 859,602 769,437
Service fees on deposit accounts 1,811,467 1,518,370
Net gain on sale of foreclosed assets 95,691 6,266
Other 937,837 874,630
-------------- --------------
Total noninterest income 3,704,597 3,168,703
NONINTEREST EXPENSE
Salaries and employee benefits 4,853,335 4,261,608
Net occupancy and equipment expenses 737,595 616,494
Equipment expense 660,905 530,234
FDIC assessments 4,752 516,976
Correspondent bank service charges 224,730 217,268
Other 2,505,813 2,364,637
-------------- --------------
Total noninterest expense 8,987,130 8,507,217
-------------- --------------
EARNINGS BEFORE INCOME TAXES 6,754,036 5,699,087
Provision for income tax 2,309,722 1,908,924
--------------- --------------
NET EARNINGS $ 4,444,314 $ 3,790,163
============== ==============
EARNINGS PER SHARE (2) $ 0.83 $ 0.71
============== ==============
DIVIDENDS PER SHARE (3) $ 0.31 $ 0.28
============== ==============
(1) Restated to reflect pooling-of-interests.
(2) Earnings per share are calculated using weighted average shares
outstanding for each period presented with the prior period restated to
reflect acquisition of Weatherford National Bancshares, Inc. through a
pooling of interests on January 17, 1996.
(3) Dividends per share are calculated using actual number of shares
outstanding at the end of each period presented.
</TABLE>
5
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
On Investment Total
Securities Share-
Capital Stock Capital Retained Available holders'
Shares Amount Surplus Earnings for Sale Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 (1) 5,321,191 $ 53,211,910 $ 36,863,701 $ 18,964,236 $ (681,018) $ 108,358,829
Net earnings - year to date (1) 17,015,613 17,015,613
Cash dividends (6,062,575) (6,062,575)
Exercise of stock options 18,002 180,020 6,903 186,923
Change in unrealized
gain (loss) 528,857 528,857
--------- ------------ ------------ ------------ ------------- -------------
Balances at
December 31, 1995 5,339,193 53,391,930 36,870,604 29,917,274 (152,161) 120,027,647
Net earnings - year to date 4,444,314 4,444,314
Cash dividends (1,656,968) (1,656,968)
Exercise of stock options 7,104 71,040 9,168 80,208
Change in unrealized
gain (loss) (223,737) (223,737)
--------- ------------ ------------ ------------ ------------- -------------
Balances at
March 31, 1996 5,346,297 $ 53,462,970 $ 36,879,772 $ 32,704,620 $ (375,898) $ 122,671,464
========= =========== =========== =========== ============ ============
(1) Restated to reflect pooling-of-interests.
</TABLE>
6
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1996 1995 (1)
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 4,444,314 $ 3,790,163
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,018,854 693,438
Provision for loan losses 518,000 20,000
Premium amortization, net of discount accretion 695,175 830,055
Gain on sale of foreclosed assets (95,691) 6,266
Deferred federal income tax expense (benefit) (351,376) 2,934
(Increase) decrease in other assets 532,127 (678,530)
Increase in other liabilities 2,658,831 2,613,011
------------- -------------
Total adjustments 4,975,920 3,487,174
------------- -------------
Net cash provided by operating activities 9,420,234 7,277,337
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits in banks 691,642 (508)
Cash payment for stock, net of cash and
cash equivalents acquired through acquisition (4,554,417) -
Proceeds from sale of securities available for sale - 4,119,844
Proceeds from maturity of securities available for sale 667,328 1,020,086
Proceeds from maturity of securities held to maturity 56,288,372 40,677,049
Purchase of securities available for sale (2,966,531) (1,938,082)
Purchase of securities held to maturity (44,107,826) (25,602,552)
Net increase in loans 9,436,459 (5,087,706)
Capital expenditures (1,117,513) (593,790)
Proceeds from sale of assets 297,620 72,546
------------- -------------
Net cash used in investing activities 14,635,134 12,666,887
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits (23,121,209) (18,717,510)
Net decrease in interest-bearing deposits (4,114,557) (8,902,560)
Net decrease in short-term borrowings (440,438) (1,079,131)
Proceeds from stock issuances 80,208 90,884
Dividends paid (1,554,717) (1,399,220)
------------- -------------
Net cash used in financing activities (29,150,713) (30,007,537)
------------- -------------
Net decrease in cash and cash equivalents (5,095,345) (10,063,313)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 92,543,959 86,971,457
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,448,614 $ 76,908,144
============= =============
(1) Restated to reflect pooling-of-interests.
</TABLE>
7
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1996 1995 (1)
----------- ------------
<S> <C> <C>
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Assets acquired through foreclosure $ 29,581 $ 200,632
Loans to finance sales of other real estate - 27,450
Change in unrealized (loss) on investment securities
available for sale (215,947) 192,331
The Company acquired all of the capital stock of
Weatherford National Bancshares, Inc. in exchange
for capital stock of the Company, as follows:
Capital stock 3,239,770 -
Retained earnings (including unrealized gain on
securities available for sale) 1,871,228 -
----------- ------------
5,110,998 -
The Company purchased all of the capital stock of
The Citizens Equity Corporation for $6,394,800.
In conjunction with the acquisition, liabilities
were assumed, as follows:
Fair value of assets acquired 98,061,501 -
Cash paid for the capital stock (6,394,800) -
----------- ------------
Liabilities assumed 91,666,701 -
OTHER DISCLOSURES
Interest paid 8,022,978 7,474,953
Federal income tax paid - 420,078
(1) Restated to reflect pooling-of-interests.
</TABLE>
8
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business Combinations
In January 1996, the Company acquired Citizens Equity Corporation and its
subsidiary bank, Citizens National Bank of Weatherford, in a cash transaction
accounted for as a purchase. The operations of Citizens National Bank are
included only in the first quarter of 1996. Also in January 1996, the Company
acquired Weatherford National Bancshares, Inc. and its subsidiary bank,
Weatherford National Bank, through an exchange of stock. The transaction was
accounted for as a pooling-of-interests; therefore, prior period financial
statements have been restated to include Weatherford National Bancshares, Inc.
The following table shows the effect of Weatherford National Bancshares, Inc.'s
operations for the period prior to combination:
<TABLE>
<CAPTION>
First Weatherford
($ thousands) Financial National Combined
- -------------------------------------------------- --------- ------------- --------
<S> <C> <C> <C>
Three Months Ended March 31, 1995:
Net Interest Income $ 10,510 $ 548 $ 11,058
Net Income 3,586 204 3,790
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating Results
Net income for the first quarter 1996 totaled $4.4 million, an increase of
approximately 17% over the $3.8 million earned in the first quarter last year.
The improved earnings resulted primarily from increased net interest income. On
a per share basis, earnings amounted to $ .83 per share as compared to $ .71 per
share in 1995. Return on average assets and return on average equity amounted to
1.49% and 14.77%, respectively. For the same period in 1995, the Company
reported return on average assets of 1.48% and return on average equity of
13.95%.
Net interest income for the first quarter 1996 was $1.5 million above the same
period last year and resulted primarily from loan growth. The net interest
margin for the first quarter was 4.68%, down slightly from 4.77% for the first
quarter 1995. The provision for loan losses in the first quarter amounted to
$518 thousand as compared to $20 thousand for the same period in 1995. The
increase is attributed to provisions at subsidiary banks located in markets
where lack of rainfall has adversely affected agriculture.
Total noninterest income for the first quarter amounted to $3.7 million, up from
the $3.2 million total for the first quarter 1995. The addition of Citizens
National Bank of Weatherford in 1996 accounted for approximately $200 thousand
of the increase in total noninterest income. Trust fees and service fees on
deposit accounts increased $90 thousand and $293 thousand, respectively. Net
gain from the sale of foreclosed assets in the first quarter 1996 was $89
thousand above the first quarter last year. Higher merchant credit card fees and
real estate mortgage fees contributed to the 1996 increase in other noninterest
income.
Noninterest expense for the first quarter 1996 amounted to $8.9 million, an
increase of $480 thousand, or 5.6% over the same period last year. Salaries and
employee benefits were $592 thousand, or 13.9% above the first quarter 1995
amount. Excluding employee related expense at Citizens National Bank of
Weatherford, total salaries and benefits were 5.1% above the first quarter 1995
which did not include the Citizens National Bank expense. Lower FDIC assessment
rates implemented in mid-year 1995 resulted in a $512 thousand decrease in FDIC
insurance expense. The Company's key indicator of operating efficiency,
noninterest expense as a percent of net interest income and noninterest income,
was 57.69% for the first quarter as compared to 59.30% for the first quarter in
1995.
Balance Sheet Review
Total assets of $1.19 billion at March 31, 1996, represent a $63 million
increase from December 31, 1995, and a $145 million increase from March 31,
1995. The balance sheets presented reflect normal recurring adjustments and
accruals; and as previously stated, prior periods have been restated to reflect
the acquisition of Weatherford National Bancshares, which was accounted for as a
pooling-of-interests. Compared to year end 1995, balance sheet growth in the
first quarter of 1996 is attributed to the addition of Citizens National Bank of
Weatherford, which at March 31, 1996, had total assets, loans and deposits of
$90 million, $34 million, and $80 million, respectively.
Loans at March 31, 1996, amounted to $534 million as compared to $507 million at
December 31, 1995, and $452 million at March 31, 1995. Investment securities at
March 31, 1996, amounted to $515 million as compared to $481 million at December
31, 1995, and $472 million at March 31, 1995. The net unrealized loss in the
investment portfolio at March 31, 1996, totaled $1.6 million as compared to $2.7
million at December 31, 1995. At March 31, 1995, the Company did not hold any
CMOs that entail higher risks than standard mortgage-backed securities. Total
investment securities at March 31, 1996, included structured notes with an
amortized cost of $17.1 million and an approximate market value of $16.5
million. Total deposits at March 31, 1996, amounted to $1.05 billion as compared
to $998 million at December 31, 1995, and $923 million at March 31, 1995.
10
<PAGE>
Balance Sheet Review - continued
Nonperforming assets at March 31, 1996, totaled $4.4 million, or .82% of loans
and foreclosed assets, and were up $2.3 million from the December 31, 1995,
amount. The increase resulted from the addition of certain agricultural-related
credits and the acquisition of Citizens National Bank of Weatherford, which had
nonperforming assets of $902 thousand at March 31, 1996. At March 31, 1996, the
allowance for loan losses amounted to 232.7% of nonperforming assets. Management
is not aware of any material classified credit not properly disclosed as
nonperforming and considers the allowance for loan losses to be adequate.
Liquidity and Capital
The Company's consolidated statements of cash flows are presented on page 7 of
this report. At March 31, 1996, the balance sheet reflects adequate liquidity,
and the parent company has no funded debt under its $10 million line of credit.
Total equity capital amounted to $122.7 million at March 31, 1996, which was up
from $120.0 million at year end 1995 and $111.2 million at March 31, 1995. The
Company's risk-based capital and leverage ratios at March 31, 1996, were 20.10%
and 9.75%, respectively. The first quarter cash dividend of $ .31 per share
totaled $1.6 million and represented 37.3% of earnings. On April 23, 1996, the
Company announced a 25% stock dividend and declared a $ .28 per share cash
dividend. The stock dividend will be issued June 3, 1996, and the cash dividend
is payable July 1, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL BANKSHARES, INC.
Date By:
Curtis R. Harvey
Executive Vice President and Chief
Financial Officer
Date By:
Sandy Lester
Secretary-Treasurer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 60,427
<INT-BEARING-DEPOSITS> 1,380
<FED-FUNDS-SOLD> 27,022
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,109
<INVESTMENTS-CARRYING> 484,770
<INVESTMENTS-MARKET> 513,614
<LOANS> 533,991
<ALLOWANCE> 10,222
<TOTAL-ASSETS> 1,188,743
<DEPOSITS> 1,054,537
<SHORT-TERM> 120
<LIABILITIES-OTHER> 11,414
<LONG-TERM> 0
0
0
<COMMON> 53,463
<OTHER-SE> 69,209
<TOTAL-LIABILITIES-AND-EQUITY> 1,188,743
<INTEREST-LOAN> 13,012
<INTEREST-INVEST> 7,389
<INTEREST-OTHER> 579
<INTEREST-TOTAL> 20,980
<INTEREST-DEPOSIT> 8,396
<INTEREST-EXPENSE> 29
<INTEREST-INCOME-NET> 12,555
<LOAN-LOSSES> 518
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,987
<INCOME-PRETAX> 6,754
<INCOME-PRE-EXTRAORDINARY> 6,754
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,444
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
<YIELD-ACTUAL> 4.68
<LOANS-NON> 3,180
<LOANS-PAST> 82
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 789
<ALLOWANCE-OPEN> 9,194
<CHARGE-OFFS> 459
<RECOVERIES> 169
<ALLOWANCE-CLOSE> 10,222
<ALLOWANCE-DOMESTIC> 10,222
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
