SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
and Exchange Act of 1934
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
First Financial Bankshares, Inc.
(Name of Registrant as Specified in its Charter)
Curtis R. Harvey
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: /
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the
previousfiling by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 22, 1997
TO OUR SHAREHOLDERS:
The annual meeting of shareholders of First Financial Bankshares, Inc.
will be held in the Abilene Civic Center, 1100 North 6th Street, Abilene, Texas,
at 10:30 a.m. on Tuesday, April 22, 1997, for the following purposes:
(1) To elect 14 Directors of the Company.
(2) To approve the appointment by the Board of Directors
of Arthur Andersen LLP as the independent accountants
of the Company for the year 1997.
(3) To act on such other business as may properly come
before the meeting, or any adjournment thereof. The
Board of Directors ("management") is not aware of any
other business to come before the meeting.
The transfer books of the Company will not be closed, but only the
holders of common stock of record at the close of business on March 14, 1997,
will be entitled to notice of and to vote at the annual meeting.
The management sincerely desires your presence at the annual meeting
and luncheon to be held immediately thereafter, but, nevertheless, respectfully
urges you to sign and return the enclosed proxy in order to remove any question
of your vote being counted. If you sign and return the proxy, but later desire
to vote in person, you may revoke your proxy by a written request to either of
the named proxies. Revocation of your proxy can be done either before or at the
annual meeting, so long as your written request is received by one of the named
proxies before your proxy is voted.
By order of the Board of Directors.
KENNETH T. MURPHY, Chairman
March 28, 1997
<PAGE>
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 22, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of First Financial Bankshares, Inc., a Texas corporation (the
"Company"), for use at the annual meeting of shareholders to be held on Tuesday,
April 22, 1997, at the time and place and for the purposes set forth in the
accompanying notice and at any recess or adjournments thereof. The solicitation
will be by mail. The total expense of such solicitation will be borne by the
Company and will include reimbursement paid to brokerage firms and other
custodians, nominees and fiduciaries for their expenses in forwarding
solicitation material regarding the meeting to beneficial owners. It may be that
further solicitation of proxies will be made by telephone or oral communication
with some of the shareholders of the Company following the original
solicitation. All further solicitation will be made by the officers of the
Company who will not be additionally compensated therefor.
The accompanying proxy, even though executed and returned, may be
revoked at any time prior to voting of the proxy by written request to either of
the named proxies by the shareholder of record.
The proxy materials were mailed to shareholders on March 28, 1997. Only
shareholders of record at the close of business on March 14, 1997, will be
entitled to vote at such meeting. On such date there were 6,727,630 shares of
common stock outstanding and entitled to vote. In order for any business to be
conducted at the meeting, a quorum consisting of shareholders having voting
rights with respect to a majority of the Company's issued and outstanding stock
(exclusive of treasury stock) must be present in person or by proxy. Except as
otherwise required by law, all matters submitted to a vote of the shareholders
require approval of a majority of the shares present at the meeting. The holders
of common stock will be entitled to one vote per share and cumulative voting is
not permitted.
ELECTION OF DIRECTORS
A Board of Directors is to be elected at the annual meeting. Each
Director elected will hold office until the next annual meeting of the
shareholders and until his or her successor shall be elected and qualified.
Under the Bylaws of the Company, an individual may not stand for election or
reelection as Director upon attainment of 72 years of age unless such individual
owns at least 1% of the outstanding shares of the Company and is less than 75
years of age. While Bylaws of the Company fix the number of Directors at a
number not less than three nor more than thirty, fourteen nominees are named and
proposed by management. The reason that the number of Directors authorized
exceeds the number of nominees is to avoid the necessity of amending the Bylaws
of the Company each time that it would appear to be to the advantage of the
Company to increase the number of its Directors. The proxies accompanying this
proxy statement cannot be voted by the proxy committee for a greater number of
persons than the number of nominees named. Other Directors could be elected
after nominations from the floor of the meeting, if such nominees each receive a
majority vote of the shareholders. Although the management of the Company does
not contemplate that any of the nominees will be unable to serve, if such a
situation arises prior to the meeting, the proxy committee will vote in
accordance with its best judgment.
<PAGE>
The names and principal occupations of the nominees, together with the
length of service as a Director and the number of shares of common stock of the
Company beneficially owned by each of them on February 11, 1997, are as follows:
<TABLE>
<CAPTION>
Shares of
The Company Percent
Years as Principal Occupation Beneficially of Shares
Name Age Office Director (1) During Last Five Years Owned Outstanding
<S> <C> <C> <C> <C> <C> <C>
Joseph E. Canon (4) 54 Director 1 Executive Director 4,305 -
Dodge Jones Foundation
Mac A. Coalson (5) 58 Director 1 Real Estate and Ranching 75,266 1.1
F. Scott Dueser (2) 43 Director 6 President and Chief 49,523 0.7
Executive
Officer, First
National Bank
of Abilene,
Abilene, Texas*
since May 18,
1993;
President,
First National
Bank of
Abilene,
Abilene,Texas*,
January 15,
1991, to May
18, 1993;
Executive Vice
President,
First National
Bank of
Abilene,
Abilene, Texas*
Patrick N. Gerald 57 Director 16 Chairman and President, 26,454 0.4
First National Bank,
Sweetwater, Sweetwater,
Texas*
Robert E. Hitt (2) (5) 72 Director 24 Investments 67,222 1.0
Raymond A. McDaniel, Jr. 63 Director 5 McDaniel Associates 25,892 0.4
(4) (5)
Bynum Miers (3) (5) 60 Director 5 Ranching and Investments 16,816 0.3
Kenneth T. Murphy (2) 59 Chairman, 25 See "Executive Officers" 78,263 1.2
President on Page 5
and Chief
Executive
Officer, and
Director
Dian Graves Owen (3) 57 Director 4 Chairman, Owen Healthcare, Inc. 17,343 0.3
James M. Parker (2) (4) 66 Director 24 President, Parker 253,941 3.8
Properties, Inc.
Jack D. Ramsey, M.D. 66 Director - Physician 50,465 0.8
Craig Smith 54 Director 7 Chairman and President, 36,034 0.5
Hereford State Bank,
Hereford, Texas*
H.T. Wilson (2) (3) 69 Director 14 Chairman, Eastland National 62,857 0.9
Bank, Eastland, Texas*
Walter F. Worthington 70 Director 1 Chairman, Weatherford 108,271 1.6
National Bank,
Weatherford, Texas*
Shares beneficially owned by all Executive Officers and Directors as a group 876,330 13.0
*The bank shown is a subsidiary of the Company.
(1) The years indicated are the approximate number of years each person has
continuously served as Director of the Company, or, prior thereto, of
First National Bank of Abilene, which became a wholly-owned subsidiary of
the Company in April 1973, when all the then Directors of First National
Bank of Abilene became Directors of the Company.
(2) This Director/Nominee is a member of the Executive Committee.
(3) This Director/Nominee is a member of the Stock Option Committee.
(4) This Director/Nominee is a member of the Administrative Committee of the
Company Profit Sharing and Pension Plan.
(5) This Director/Nominee is a member of the Directors' Audit Committee.
</TABLE>
<PAGE>
MEETINGS OF BOARD OF DIRECTORS
During the last full year, four regular quarterly meetings of the Board
of Directors were called and held. All Directors except Mrs. Owen were able to
attend at least 75% of the aggregate of the meetings of the Board of Directors
and the meetings held by all committees of the Board on which they served.
Directors who are not officers of the Company receive $1,000 for each Board
meeting attended.
COMMITTEES
First Financial Bankshares, Inc. does not have a standing nominating or
compensation committee of the Board of Directors. The Company has a standing
Executive Committee whose responsibilities include functioning as a compensation
committee and a nominating committee with appropriate recommendations to the
entire Board. The Executive Committee met nine times during 1996 and, among
other items, considered and took action on matters relating to its capacity as
compensation and/or nominating committee. In its capacity as nominating
committee, the Executive Committee will consider director nominations from
security holders. There are no prescribed procedures that the security holder
must follow. The Company has a Directors' Audit Committee that has the
responsibility of acting on behalf of the Board in receiving and reviewing both
internal and external audit reports. During 1996 the Audit Committee met three
times. The Company also has an Administrative Committee for the Profit Sharing,
Pension and Flexible Spending Account Benefit Plans. Pursuant to the 1992
Incentive Stock Option Plan for Key Employees of First Financial Bankshares,
Inc. and its Subsidiaries, the Board of Directors has also appointed a Stock
Option Committee composed of four members. The Directors serving on these
committees are indicated in the section titled "ELECTION OF DIRECTORS."
Directors who are not officers of the Company receive $600 for each committee
meeting attended.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP to serve as
independent certified public accountants to the Company and its subsidiaries for
the year 1997 and to serve until the next annual meeting in April 1998. Arthur
Andersen LLP has served as the Company's independent accountants since 1990. The
Company has been advised by Arthur Andersen LLP that neither its firm nor any of
its members has any financial interest, direct or indirect, in the Company or
any of its subsidiaries, nor has had any connection with the Company or any of
its subsidiaries in any capacity other than independent accountants.
The Board of Directors recommends that you vote for the approval of the
appointment of Arthur Andersen LLP. If the shareholders do not approve the
appointment of Arthur Andersen LLP, then the appointment of independent
accountants will be reconsidered by the Board of Directors.
Representatives of Arthur Andersen LLP are expected to be present at
the annual shareholders meeting, and they may have the opportunity to make a
statement, if they desire to do so, and to respond to appropriate questions.
EXECUTIVE OFFICERS
The executive officers of First Financial Bankshares, Inc. are:
<TABLE>
<CAPTION>
Term of Years Served Principal Occupation
Name Age Office Office In Such Office During Past 5 Years
<S> <C> <C> <C> <C> <C>
Kenneth T. Murphy 59 Chairman, 1 year 10 years Chairman, President and Chief
President and Executive Officer; Chairman,
Chief Executive First National Bank of Abilene,
Officer Abilene, Texas*
Curtis R. Harvey 51 Executive Vice 1 year 6 years Executive Vice President and
President and Chief Financial Officer
Chief Financial
Officer
Tommy J. Barrow 49 Executive Vice 1 year 2 years Executive Vice President since
President October 1, 1995; President, First
National Bank of Andrews
* The bank shown is a subsidiary of the Company.
</TABLE>
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides individual compensation information on the
Chief Executive Officer and the four most highly compensated officers of the
Company and its subsidiaries.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
Number of
Securities
Underlying All Other
Options Compensation
Name and Principal Position Year Salary($) (#) (1) ($) (2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth T. Murphy, Chairman, President & CEO 1996 $ 315,750 - $ 18,421
First Financial Bankshares, Inc. 1995 295,500 3,750 18,143
1994 277,000 - 17,605
F. Scott Dueser, President & CEO 1996 185,000 - 21,210
First National Bank of Abilene 1995 173,250 2,500 20,397
1994 168,000 - 18,380
Patrick N. Gerald, Chairman, President & CEO 1996 145,000 - 15,741
First National Bank, Sweetwater 1995 137,500 1,250 19,561
1994 137,500 - 8,186
Craig Smith, Chairman, President & CEO 1996 140,000 - 10,043
Hereford State Bank 1995 132,000 1,250 19,700
1994 130,000 - 15,986
Curtis R. Harvey, Executive Vice President & CFO 1996 130,000 - 15,686
First Financial Bankshares, Inc. 1995 124,000 1,250 14,829
1994 121,800 - 14,157
(1) Adjusted for stock splits and stock dividends.
(2) The Company's contribution to Profit Sharing Plan.
</TABLE>
COMPENSATION PURSUANT TO PLANS
General
The Company has both a Pension and a Profit Sharing Plan. An employee
is eligible to become a participant in the Company Pension and Profit Sharing
Plans on January 1, coincident with or immediately following date of employment.
The Company and all of its then subsidiary banks adopted a Flexible Spending
Account Benefit Plan for all employees that became effective in 1988. First
National Bank in Cleburne adopted all benefit plans effective in 1991.
Stephenville Bank & Trust Co. adopted all benefit plans effective in 1993.
Southwest Bank of San Angelo adopted the Pension and Flexible Spending Account
Benefit Plan effective in 1994 and Profit Sharing Plan effective in 1995.
Weatherford National Bank adopted the Pension Plan, Profit Sharing Plan and
Flexible Spending Account Benefit Plan effective in 1996.
<PAGE>
Profit Sharing Plan
Each participating employer (that is, the Company and each subsidiary
that has adopted the Plan) determines on an annual basis the contribution that
it will make to the Profit Sharing Plan from such employer's operating profits.
Contributions under the Profit Sharing Plan are administered by an
Administrative Committee appointed by the Board of Directors of First Financial
Bankshares, Inc. for the exclusive benefit of Plan participants under the
provisions of a Trust Agreement. Under the Profit Sharing Plan, eligible
employees may contribute between 1% and 5% of their eligible earnings, although
contributions by employees are not required as a condition of participation.
Each employer's annual contribution is allocated among the accounts of the
active Plan participants employed by such employer, in the ratio that each
participant's compensation bears to the total compensation of all participants
of such employer. Compensation means the total amount paid to an employee during
the year including bonuses, commissions, and overtime pay, but excluding
reimbursed expenses, director fees, group insurance benefits and pension and
profit sharing contributions. Notwithstanding the foregoing, the compensation
amount used to calculate a participant's benefit is limited by the IRS to a
maximum of $150,000. Additionally, the Annual Addition that may be allocated to
a participant is limited to $30,000. Effective January 1, 1988, compensation
also includes the amount elected by an employee as salary reduction under the
Flexible Spending Account Benefit Plan.
The Profit Sharing Plan provides for benefits to vest (become
nonforfeitable) in graduated percentages for the first six (6) years of
participation, with benefits being fully vested after seven (7) years of
credited service. Generally, an employee's benefit at normal retirement will be
the contributions allocated to his account while a participant, increased by
gains and decreased by losses from investments of the trust and increased by any
forfeitures allocated to his account. An employee is always fully vested with
respect to any voluntary contributions he makes, and death or disability of a
participant while employed by the Company or one of its subsidiaries results in
immediate full vesting with respect to employer contributions. If a participant
terminates employment for any other reason, the total amount of his employee
contribution account and the vested portion of his employer contribution account
are distributed to him.
Pension Plan
The Company's Pension Plan requires annual contributions sufficient
to provide the pension benefits accruing to employees under the Plan. The annual
benefit for a participant in the Pension Plan who retires on his normal
retirement date is the Accrued Benefit at December 31, 1988, plus 1.25% of
average compensation multiplied by years of service from January 1, 1989.
"Average Compensation" is the average compensation during the 10 years
immediately preceding the date of determination. Compensation means the total
amount paid to an employee during the year including bonuses, commissions, and
overtime pay, but excluding reimbursed expenses, director fees, group insurance
benefits and pension and profit sharing contributions. There are provisions in
the Plan for early retirement with reduced benefits. There is no vesting of Plan
benefits until a participant has 5 or more years of credited service with
participating employers. Full (100%) vesting occurs upon the completion of 5
years of credited service or upon reaching age 65 without regard to credited
service.
The Company Pension Plan is subject to the minimum funding
requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and
there is no present funding deficiency. Contributions to the Company Pension
Plan for the past five years (1992-1996) have been $98,097; $162,052; $272,346;
$533,411; and $491,681, respectively.
The following table illustrates estimated retirement benefits under
the Company Pension Plan for persons in specified remuneration and years of
service categories and which benefits are payable annually for life with 10
years certain. The benefits listed in the table are not subject to any deduction
for social security or other offset amounts. This illustration does not reflect
any benefit that a participant may have accrued at December 31, 1988.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Years of Service
Remuneration 15 20 25 30 35
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 9,375 $ 10,938
50,000 9,375 12,500 15,625 18,750 21,875
75,000 14,063 18,750 23,438 28,125 32,813
100,000 18,750 25,000 31,250 37,500 43,750
125,000 23,438 31,250 39,063 46,875 54,688
150,000 28,125 37,500 46,875 56,250 65,625
The maximum annual pension benefit payable allowable under current
law is $120,000.
</TABLE>
<PAGE>
As of December 31, 1996, Mr. Murphy was credited with 26 years of
service under the Company Pension Plan, Mr. Gerald was credited with 21 years of
service, Mr. Smith was credited with 27 years of service, Mr. Dueser was
credited with 20 years of service, and Mr. Harvey was credited with 6 years of
service. The covered compensation of each of these officers and directors during
1996 was $150,000; $145,243; $136,225; $150,000; and $131,476, respectively.
In 1992, the Board of Directors approved a deferred compensation
agreement between First Financial Bankshares, Inc. and Kenneth T. Murphy,
Chairman, President and Chief Executive Officer. The agreement was made in
recognition of his contribution to the success of the Company and as an
inducement to remain, subject to the discretion of the Board of Directors, in
the employ of the Company. The agreement provided that following retirement in
December 2002, or such later date as may be mutually agreed upon by the parties,
the Company would pay Mr. Murphy, or his beneficiary, the sum of $6,250 per
month for a period of 84 months. In 1995 the agreement was revised to provide
for the sum of $8,750 per month for a period of 84 months. The increase serves
to offset the reduction in Mr. Murphy's pension benefit resulting from a lower
covered compensation amount now allowable under Federal tax law. The monthly
amount is considered to be an appropriate level of supplemental income to
partially offset Mr. Murphy's reduction in personal income following retirement
and is based on an analysis of the difference in projected final year
compensation and retirement compensation. The agreement also provides for 70%
vesting at age 62, 80% vesting at age 63, and 90% vesting at age 64.
Flexible Spending Account Benefit Plan
Effective January 1, 1988, the Company and its subsidiaries adopted a
Flexible Spending Account Benefit Plan. An employee is eligible to become a
participant in this plan on the first day of the month following completion of
two months of service. The Flexible Spending Account Benefit Plan allows each
participant to redirect a portion of his/her salary, before taxes, to pay
certain medical and/or dependent care expenses.
STOCK OPTIONS
At the 1992 Annual Meeting, the "1992 Incentive Stock Option Plan"
was approved and adopted. The purposes of the Plan are to attract and retain key
employees and to encourage employee performance by providing them with a
proprietary interest in the Company through the granting of stock options. The
maximum aggregate number of shares of the Company's common stock that may be
issued under the Plan is 100,000, subject to adjustment for stock dividends and
similar events. The 1992 Plan includes substantially the same features as the
expired 1982 Plan and is administered by a Stock Option Committee appointed by
the Board of Directors. There were no options granted during 1996.
The following table contains information concerning each exercise of
stock options during the last fiscal year by each of the persons named below and
the fiscal year-end value of unexercised options.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY- Options at
End(#)(1) FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Kenneth T. Murphy 7,750 $ 182,970 1,688 $ 44,512
9,984 170,294
F. Scott Dueser 5,258 128,511 - -
6,656 113,529
Patrick N. Gerald 2,908 64,821 515 13,581
3,328 56,765
Craig Smith 3,171 74,273 774 20,410
3,585 61,148
Curtis R. Harvey 773 18,645 - -
3,585 61,148
(1) Adjusted for stock splits and other stock dividends.
</TABLE>
<PAGE>
EXECUTIVE RECOGNITION PLAN
In April, 1996, the outside directors of the Company, who constituted
a majority of the Board of Directors, unanimously approved an Executive
Recognition Plan (the "Plan"). The Plan enables the Compensation Committee of
the Board of Directors to offer key executive officers of the Company and its
subsidiary banks an Executive Recognition Agreement (the "ER Agreement"). ER
Agreements have since been offered to, and accepted by, each executive officer
of the Company having the title of Executive Vice President or higher, and each
executive officer of each subsidiary bank of the Company having the title of
President or higher. Each ER Agreement provides a severance payment to the key
executive officer if his employment with the Company or a subsidiary of the
Company is involuntarily terminated (whether actually or constructively) within
two (2) years following a Change in Control, if the Change in Control occurs
prior to May 31, 1998. For purposes of the Plan and each ER Agreement, a "Change
in Control" occurs if either (1) any entity or person ( or group of persons)
becomes the beneficial owner, or obtains voting control, of more than 50% of the
outstanding Common Stock of the Company; or (2) a reorganization, merger,
consolidation, recapitalization, exchange offer, purchase of assets or other
transaction is approved by the shareholders of the Company and, as a result,
those persons who were the beneficial owners of the Company immediately prior to
such transaction do not, immediately after consummation of such transaction, own
more than 50% of the outstanding stock or other securities entitled to vote
generally for the election of directors of the reorganized, merged,
recapitalized or resulting company; or (3) a sale or transfer is made, in one or
more related transactions, of assets aggregating 50% or more of the book value
of the assets of the Company and its subsidiaries taken as a whole; or (4) the
shareholders of the Company approve liquidation or dissolution of the Company.
The severance payment to which a key executive officer shall be entitled under
his or her ER Agreement is determined on an individual basis by the Compensation
Committee of the Board, but may not exceed two (2) times such executive
officer's annual base salary immediately preceding termination of his or her
employment following a Change in Control.
The amount of severance compensation payable under the Plan and each
ER Agreement does not exceed the amount which would be deductible by the Company
under the applicable Internal Revenue Code "golden parachute" payment
limitations, after taking into consideration all other payments to each key
executive officer covered by the Plan, such as a payment to said executive
officer (actual or constructive) resulting from acceleration of vesting of stock
options, restrictive stock grants or other benefits upon termination of his
employment. Each current ER Agreement has a term of two (2) years, beginning
June 1, 1996. However, if a Change in Control shall occur during the original
term of the Agreement, then the ER Agreement shall continue in effect for an
additional period of two (2) years following such Change in Control. Similarly,
if a second Change in Control occurs within two (2) years from the date of the
first Change in Control, then the ER Agreement shall continue in effect for a
period of two (2) years from the date of the second Change in Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person who served as a member of the Executive Committee in its
capacity as compensation committee was, during the past fiscal year, an officer
or employee of the Company or any of its subsidiaries, or had any relationship
requiring disclosure in this Notice to Shareholders. However, committee member
James Parker did obtain loans from a subsidiary bank during the past year. In
each case, such loans were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features. No executive officer of the Company served as a member of
the compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire Board of
Directors) of another entity, one of whose executive officers served as a
Director of the Company.
EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the past fiscal year the Company's executive compensation
program was administered by the Executive Committee acting in the capacity of
compensation committee. The Company's executive compensation program consists of
base salary, profit sharing, and incentive stock options. With the exception of
the Chief Executive Officer, and Mr. Dueser whose salary is reviewed in February
and adjusted March 1, the base salaries for the executive officers named on page
6 of this Notice are reviewed in December of each year with adjustments made
effective January 1. Included among the factors that the committee considers
when approving annual base salaries are: attainment of planned goals and
objectives, scope of responsibility (asset size of subsidiary bank and/or degree
of influence on the Company's profitability and operations), tenure with the
Company, evaluation input from subsidiary bank directors, and relationship of
base salary to the base salaries of other members of the executive officer
group.
<PAGE>
The base salary for Mr. Murphy was reviewed in March 1996 with an
adjustment made effective April 1, 1996. The increase was based on the
following factors:
- The Company's financial performance for 1995.
- Performance of Chief Executive Officer's duties that relate
primarily to leading and managing the Company within the broad
guidelines set by the Board of Directors.
- Base salary compared to SNL Securities, Inc. compensation survey
data for chief executive officers of similar size
organizations within the industry.
- Successful negotiation and completion of two acquisition trans-
actions.
- Subjective evaluations of Mr. Murphy's contribution to the overall
success of the Company.
Stock options are granted under the Incentive Stock Option
Plan upon recommendation of the Stock Option Committee of the Board of
Directors. The Executive Committee believes that the Stock Option Plan is an
integral part of the executive compensation program that encourages key
employees to align their long-range interest with those of shareholders by
accomplishing longer-term corporate goals. There were no stock options granted
during 1996.
Robert E. Hitt H.T. Wilson
James Parker
The line graph below compares cumulative total shareholder
return with: a performance indication of the overall stock market, the S&P 500
Stock Index; a banking industry index, the Keefe, Bruyette and Woods, Inc. (KBW)
50 Total Return Index, which is comprised of fifty of the nation's top banking
companies; and the SNL Banks Index, which is a banking index prepared by SNL
Securities and comprised of banks with $1 billion to $5 billion in total assets.
Management believes a comparison of the Company's total shareholder return to
that of similar size organizations is more meaningful and intends to use the SNL
Index in future years.
<TABLE>
First Financial Bankshares, Inc.
Comparison of Five Year Cumulative Return
[LINE GRAPH OMITTED AND REPLACE WITH TABLE]
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Financial 100 203 245 191 259 391
SNL Banks 100 145 174 183 246 320
KBW 50 100 127 134 128 204 289
S&P 500 100 108 118 120 165 203
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Assumes $100 invested on December 31, 1991, in First Financial Bankshares,
Inc. Common Stock, the S&P 500 Index, the SNL Banks, and the KBW 50 Total
Return Index
</TABLE>
<PAGE>
PRINCIPAL SHAREHOLDERS OF FIRST FINANCIAL BANKSHARES, INC.
At December 31, 1996, management was not aware of any person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) who is the beneficial owner of more than five
percent (5%) of the Company's common stock. However, First National Bank of
Abilene, First National Bank, Sweetwater, and Stephenville Bank & Trust Co. held
of record in various fiduciary capacities an aggregate of 1,378,328 shares of
such stock. Of the total shares held, these subsidiaries of the Company had sole
power to vote 716,650 shares (10.7%), 104,455 shares (1.6%), and 1,406 shares (
- - %), respectively. In addition, First National Bank of Abilene and First
National Bank, Sweetwater, shared, with other persons, the power to vote the
remaining 549,440 shares and 6,377 shares, respectively. All the shares held by
each subsidiary bank, which are registered in its name as fiduciary or in the
name of its nominee, are owned by many different accounts, each of which is
governed by a separate instrument that sets forth the powers of the fiduciary
with regard to the securities held in such accounts.
INTEREST IN CERTAIN TRANSACTIONS
As has been true in the past, some of the Company's officers
and directors, members of their families, and other businesses with which they
are affiliated, are or have been customers of one or more of the subsidiary
banks of the Company (First National Bank of Abilene, Abilene, Texas; Hereford
State Bank, Hereford, Texas; First National Bank, Sweetwater, Sweetwater, Texas;
Eastland National Bank, Eastland, Texas; First National Bank in Cleburne,
Cleburne, Texas; Stephenville Bank & Trust Co., Stephenville, Texas; Southwest
Bank of San Angelo, San Angelo, Texas; Weatherford National Bank, Weatherford,
Texas). As customers, they have had transactions in the ordinary course of
business with such banks including borrowings, all of which were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than a normal risk of collectibility or present any other
unfavorable features to the subsidiary banks involved. None of the transactions
involving subsidiary banks of the Company and the Company's officers and
directors, or other businesses with which they may be affiliated, have been
classified or disclosed as nonaccrual, past due, restructured or potential
problems.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the next
annual meeting, to receive consideration, must be submitted in writing and
delivered to the Company no later than December 1, 1997.
UNDERTAKING TO FURNISH INFORMATION
The Company will furnish a copy of its Annual Report for the
year 1996 on Form 10-K, including the financial statements and schedules thereto
required to be filed with the Securities and Exchange Commission, without charge
to any person whose proxy is solicited herewith upon such person's written
request therefor, which request shall contain a good faith representation that,
as of the record date for the annual meeting of the Company's shareholders, the
person making the request was a beneficial owner of securities entitled to vote
at such meeting and such request shall be addressed to Curtis R. Harvey,
Executive Vice President and Chief Financial Officer, First Financial
Bankshares, Inc., P.O. Box 701, Abilene, Texas 79604. Exhibits to the 10-K
Annual Report shall also be furnished upon the payment of a specified reasonable
fee, which fee shall be limited to the Company's reasonable expenses in
furnishing such exhibits.
OTHER BUSINESS
Management does not know of any other matters that are likely
to be brought before the meeting for action. However, if any matters do properly
come before the meeting, it is intended that the enclosed proxy will be voted in
accordance with the judgment of the person voting the proxy.
By Order of the Board of Directors.
KENNETH T. MURPHY, Chairman
March 28, 1997
