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
June 30, 1998 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) 627-7155
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 8,663,243 shares of common stock outstanding as of August 3,
1998.
<PAGE>
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item Page
1. Consolidated Financial Statements and Notes to
Consolidated Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Signatures 13
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
The consolidated balance sheets of First Financial Bankshares, Inc. at June 30,
1998 and 1997, and December 31, 1997, and the consolidated statements of
earnings and comprehensive earnings for the three and six months ended June 30,
1998 and 1997, and the changes in shareholders' equity for the year ended
December 31, 1997 and six months ended June 30, 1998, and the cash flows for the
six months ended June 30, 1998 and 1997, follow on pages 4 through 8.
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
---------------------------------
1998 1997 December 31,
(Unaudited) (Unaudited) 1997
--------------- --------------- ---------------
ASSETS
<S> <C> <C> <C>
Cash and due from banks ............................................ $ 75,617,522 $ 73,704,757 $ 88,795,827
Interest-bearing deposits in banks ................................. 203,784 498,570 398,671
Federal funds sold ................................................. 91,116,729 41,806,275 114,485,839
Investment securities:
Securities held to maturity (approximate market value
of $389,840,873 and $473,314,208 at June 30, 1998
and 1997, and $414,160,027 at December 31, 1997) .............. 387,331,051 483,038,330 411,857,644
Securities available for sale, at approximate market value ..... 176,900,304 60,798,833 170,697,516
--------------- -------------- ---------------
Total investment securities 564,231,355 543,837,163 582,555,160
Loans .............................................................. 734,817,728 615,716,780 716,792,426
Less: Allowance for loan losses .............................. 9,487,698 9,535,716 10,288,200
Unearned discount 6,610,286 8,290,767 7,853,724
--------------- -------------- ---------------
Net loans ...................................................... 718,719,744 597,890,297 698,650,502
Bank premises and equipment - net .................................. 41,125,202 37,789,005 41,501,074
Goodwill ........................................................... 22,250,847 5,557,708 23,054,329
Other assets ....................................................... 23,852,128 21,961,655 24,067,522
--------------- -------------- ---------------
TOTAL ASSETS .......................................................... $ 1,537,117,311 $ 1,323,045,430 $ 1,573,508,924
=============== ============== ===============
LIABILITIES
Noninterest-bearing deposits ....................................... $ 307,054,570 $ 244,437,303 $ 311,318,296
Interest-bearing demand deposits ................................... 391,758,810 324,217,003 399,745,364
Interest-bearing time deposits ..................................... 670,981,744 602,476,386 701,660,161
--------------- -------------- ---------------
Total deposits ................................................. 1,369,795,124 1,171,130,692 1,412,723,821
Dividends payable .................................................. 2,382,342 2,103,784 2,162,899
Other short-term borrowings ........................................ 1,120,000 100,000 4,700,000
Other liabilities .................................................. 8,893,544 7,979,496 5,695,741
--------------- -------------- ---------------
Total liabilities .............................................. 1,382,191,010 1,181,313,972 1,425,282,461
--------------- -------------- ---------------
SHAREHOLDERS' EQUITY
Capital stock - $10 par value;
20,000,000 shares authorized ..................................... 86,630,480 86,315,780 86,515,950
Capital surplus .................................................... 36,355,759 36,330,534 36,350,673
Retained earnings .................................................. 31,440,452 19,137,660 24,996,973
Unrealized gain (loss) on investment securities available for sale . 499,610 (52,516) 362,867
--------------- -------------- ---------------
Total shareholders' equity ..................................... 154,926,301 141,731,458 148,226,463
--------------- -------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $ 1,537,117,311 $ 1,323,045,430 $ 1,573,508,924
=============== =============== ===============
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans, including fees ................................. $16,884,847 $14,350,970 $33,285,403 $28,256,126
Investment income - taxable ........................... 8,030,444 7,802,425 16,325,132 15,286,485
Investment income - tax exempt ........................ 691,119 407,033 1,243,100 792,390
Interest on interest bearing deposits ................. 2,913 11,989 7,919 26,278
Interest on federal funds sold and other .............. 990,827 559,908 2,130,600 1,278,975
----------- ----------- ----------- -----------
Total interest income .............................. 26,600,150 23,132,325 52,992,154 45,640,254
INTEREST EXPENSE
Interest-bearing deposits ............................. 10,965,866 9,335,469 22,040,846 18,373,574
Short-term borrowings ................................. 45,281 3,817 126,698 4,905
----------- ----------- ----------- -----------
Total interest expense ............................. 11,011,147 9,339,286 22,167,544 18,378,479
----------- ----------- ----------- -----------
NET INTEREST INCOME ...................................... 15,589,003 13,793,039 30,824,610 27,261,775
Provision for loan losses ............................. 268,000 190,500 419,500 433,500
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ............................. 15,321,003 13,602,539 30,405,110 26,828,275
NONINTEREST INCOME
Trust fees ............................................ 1,199,306 986,803 2,402,129 1,952,873
Service fees on deposit accounts ...................... 2,739,346 2,528,924 5,293,843 4,802,059
Other ................................................. 1,249,029 1,065,001 2,659,760 2,248,033
----------- ----------- ----------- -----------
Total noninterest income ........................... 5,187,681 4,580,728 10,355,732 9,002,965
NONINTEREST EXPENSE
Salaries and employee benefits ........................ 6,306,839 5,494,844 12,575,363 10,834,826
Net occupancy and equipment expenses .................. 992,704 874,849 1,930,502 1,744,111
Equipment expense ..................................... 969,867 845,520 1,914,466 1,626,284
Goodwill amortization ................................. 401,741 101,689 803,482 200,626
Other ................................................. 3,520,568 3,277,746 7,171,455 6,488,266
----------- ----------- ----------- -----------
Total noninterest expense .......................... 12,191,719 10,594,648 24,395,268 20,894,113
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES ............................. 8,316,965 7,588,619 16,365,574 14,937,127
Provision for income taxes ............................ 2,707,661 2,540,043 5,375,509 5,001,491
----------- ----------- ----------- -----------
NET EARNINGS ............................................. $ 5,609,304 $ 5,048,576 $10,990,065 $ 9,935,636
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE ................................. $ 0.65 $ 0.59 $ 1.27 $ 1.16
EARNINGS PER SHARE, ASSUMING DILUTION .................... $ 0.64 $ 0.58 $ 1.26 $ 1.15
DIVIDENDS PER SHARE ...................................... $ 0.275 $ 0.25 $ 0.525 $ 0.47
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET EARNINGS .................................................... $ 5,609,304 $ 5,048,576 $10,990,065 $ 9,935,636
Change in unrealized gain (loss) on investment
securities available for sale, before tax 208,782 635,248 211,954 335,985
Less: reclassification adjustment for gains on
investment securities included in net earnings 1,834 -- 1,580 --
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE
EARNINGS, BEFORE TAX ......................................... 5,816,252 5,683,824 11,200,439 10,271,621
Income tax expense related to items
included in other comprehensive earnings 72,432 222,337 73,631 117,595
----------- ----------- ----------- -----------
COMPREHENSIVE EARNINGS .......................................... $ 5,743,820 $ 5,461,487 $11,126,808 $10,154,026
=========== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
-6-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
On Investment
Capital Stock Securities Total
--------------------------- Capital Retained Available Shareholders'
Shares Amount Surplus Earnings For Sale Equity
------------ ------------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 6,718,886 $ 67,188,860 $ 36,874,707 $ 27,363,902 $ (266,623) $ 131,160,846
Adjustments for pooling of interests 216,442 2,164,420 (521,224) 2,658,712 (4,283) 4,297,625
------------ ------------ ------------ -------------- ------------- -------------
Balances at January 1, 1997 6,935,328 69,353,280 36,353,483 30,022,614 (270,906) 135,458,471
Net earnings - - - 20,063,105 - 20,063,105
Stock issuances 34,873 348,730 (2,810) - - 345,920
Cash dividends declared - - - (8,274,806) - (8,274,806)
Stock split effected in
the form of a dividend 1,681,394 16,813,940 - (16,813,940) - -
Change in unrealized gain (loss) - - - - 633,773 633,773
------------ ------------ ------------ -------------- ------------- -------------
Balances at December 31, 1997 8,651,595 86,515,950 36,350,673 24,996,973 362,867 148,226,463
Net earnings - - - 10,990,065 - 10,990,065
Stock issuances 11,453 114,530 5,086 - - 119,616
Cash dividends declared - - - (4,546,586) - (4,546,586)
Change in unrealized gain (loss) - - - - 136,743 136,743
------------ ------------ ------------ -------------- ------------- -------------
Balances at June 30,1998 (unaudited) 8,663,048 $ 86,630,480 $ 36,355,759 $ 31,440,452 $ 499,610 $ 154,926,301
============ ============ ============ ============== ============= =============
See notes to consolidated financial statements.
</TABLE>
-7-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1998 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings ............................................................... $ 10,990,065 $ 9,935,277
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization .......................................... 2,941,189 2,010,018
Provision for loan losses .............................................. 419,500 433,500
Premium amortization, net of discount accretion ........................ 1,116,956 632,831
(Gain) loss on sale of assets .......................................... (1,643) 40,171
Deferred federal income tax benefit .................................... (365,207) (95,456)
Decrease (increase) in other assets .................................... 387,567 (510,729)
Increase in other liabilities .......................................... 3,197,803 666,327
------------- -------------
Total adjustments 7,696,165 3,176,662
------------- -------------
Net cash provided by operating activities .............................. 18,686,230 13,111,939
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in banks ......................... 194,887 489,924
Proceeds from sale of securities available for sale ........................ 3,141,319 3,821,309
Proceeds from maturity of securities available for sale .................... 89,731,569 1,228,691
Proceeds from maturity of securities held to maturity ...................... 121,032,394 91,862,415
Purchase of securities available for sale .................................. (97,362,339) (23,395,771)
Purchase of securities held to maturity .................................... (99,127,300) (95,624,056)
Net increase in loans ...................................................... (20,520,742) (8,927,571)
Capital expenditures ....................................................... (1,787,696) (2,801,006)
Proceeds from sale of assets ............................................... 180,487 103,424
------------- -------------
Net cash used in investing activities .................................. (4,517,421) (33,242,641)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits ............................... (4,263,726) (18,604,859)
Net (decrease) increase in interest-bearing deposits ....................... (38,664,971) 21,079,043
Net decrease in other short-term borrowings ................................ (3,580,000) --
Proceeds from stock issuances .............................................. 119,616 157,072
Dividends paid ............................................................. (4,327,143) (3,784,154)
------------- -------------
Net cash used in financing activities .................................. (50,716,224) (1,152,898)
------------- -------------
Net decrease in cash and cash equivalents .................................. (36,547,415) (21,283,600)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................................. 203,281,666 136,794,632
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................... $ 166,734,251 $ 115,511,032
============= =============
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
Interest paid .............................................................. $ 21,802,909 $ 18,178,129
Federal income tax paid .................................................... 5,341,163 5,251,483
Assets acquired through foreclosure ........................................ 32,000 40,585
See notes to consolidated financial statements.
</TABLE>
-8-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("FAS 130"). FAS 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. FAS 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
adopted FAS 130 on January 1, 1998.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
FAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that all derivatives be
recognized as either assets or liabilities in the statement of financial
position and that those instruments be measured at fair value. The statement is
effective for years beginning after December 15, 1999, with early application
encouraged. The adoption of the statement will not have a significant impact on
the Company. The Company plans to adopt FAS 133 on January 1, 2000 or earlier.
Note 2 - Earnings Per Share
Basic earnings per common share is computed by dividing net income available to
common shareholders by the weighted average number of shares outstanding during
the period. In computing diluted earnings per common share for the quarters and
six-month periods ended June 30, 1998 and 1997, the Company assumes that all
outstanding options to purchase common stock have been exercised at the
beginning of the year (or time of issuance, if later). The dilutive effect of
the outstanding options is reflected by application of the treasury stock
method, whereby the proceeds from the exercised options are assumed to be used
to purchase common stock at the average market price during the respective
period. The weighted average common shares outstanding used in computing basic
earnings per common share for the quarters ended June 30, 1998 and 1997, was
8,661,632 and 8,627,445 shares, respectively. The weighted average common shares
outstanding used in computing basic earnings per share for the six-month periods
ended June 30, 1998 and 1997, was 8,658,211 and 8,623,211 shares, respectively.
The weighted average common shares outstanding used in computing diluted
earnings per common share for the quarters ended June 30, 1998 and 1997, was
8,714,134 and 8,698,362 shares, respectively. The weighted average common shares
outstanding used in computing diluted earnings per common share for the
six-month periods ended June 30, 1998 and 1997, was 8,710,217 and 8,674,128
shares, respectively.
Note 3 - Proposed Acquisition
On July 27, 1998, First Financial Bankshares, Inc. (the "Company") executed a
Letter of Intent with Cleburne State Bank ("CSB") to acquire all of the issued
and outstanding shares of the common stock of CSB. The proposed acquisition is
subject to negotiation, preparation and approval of a definitive written Stock
Exchange Agreement between the Company and CSB. Acquisition of CSB by the
Company is additionally subject to the approval by the Board of Governors of the
Federal Reserve System and other federal and state regulatory authorities.
Following execution of a definitive Stock Exchange Agreement and approval by
appropriate regulatory authorities, it is anticipated that the Company would,
pursuant to a Prospectus and upon or following the effective date of a
Registration Statement to be filed with the Securities and Exchange Commission,
offer to exchange 1.75 shares of its common stock for each outstanding share of
CSB common stock. Completion of the anticipated transaction could reasonably be
expected prior to year end, and thereafter it is anticipated that CSB would
merge into the Company's affiliate, First National Bank in Cleburne.
-9-
<PAGE>
CSB is a state chartered banking association chartered in 1980. CSB has total
assets of $83,000,000 and deposits of $76,000,000, and operates two full service
locations, one in Cleburne, Texas and a branch in nearby Alvarado, Texas. The
Company's affiliated bank in Cleburne, Texas, First National Bank in Cleburne,
has total assets of $100,000,000 and operates locations in Cleburne, Texas and
Burleson, Texas.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating Results
For the six months ended June 30, 1998, the Company's net income amounted to
$10.99 million, or $1.27 per basic share, compared to $9.94 million, or $1.16
per basic share, earned in the first half of 1997. Net income for the second
quarter 1998 totaled $5.61 million, or $ .65 per basic share. In the second
quarter 1997, the Company reported net income of $5.05 million, or $ .59 per
basic share. Earnings for the second quarter and first six months of 1998
represent increases of 11.1% and 10.6%, respectively. Return on average assets
and return on average equity for the six months ended June 30, 1998, amounted to
1.45% and 14.75%, respectively. The Company's return on average assets and
return on average equity for the same period last year amounted to 1.54% and
14.74%, respectively.
Net interest income for the six months ended June 30, 1998, was $3.53 million
above 1997 and resulted primarily from loan growth. The net interest margin for
the first six months of 1998 was 4.55% as compared to 4.65% for the same period
last year. Higher average rates on interest bearing liabilities were the main
factor in the lower net interest margin.
Noninterest income for the six months ended June 30, 1998, amounted to $10.36
million as compared to $9.0 million for the same period last year. Trust fees
and deposit accounts acquired through a purchase acquisition completed in
September contributed to increases in Trust fees and deposit services of $449
thousand and $492 thousand, respectively. For the six months ended June 30,
1998, real estate mortgage fees and gain on sale of foreclosed assets increased
$243 thousand and $208 thousand, respectively, over the 1997 amounts and were
primary factors contributing to the improvement in other noninterest income.
Noninterest expense for the first six months of 1998 totaled $24.40 million, an
increase of $3.50 million over the same period last year. Higher employee costs
and goodwill amortization were primary factors contributing to the increase.
Communication expense, professional service fees, and correspondent bank service
charges were factors in the higher level of other noninterest expense which
increased $683 thousand from the 1997 first six months total. Excluding the
effect of the Company's purchase acquisition completed in September 1997, total
noninterest expense increased approximately $1.4 million, or 6.8%. The Company's
key indicator of operating efficiency, noninterest expense as a percent of net
interest income and noninterest income, for the first six months of 1998 was
58.79% as compared to 56.95% for the same period in 1997.
Balance Sheet Review
Total assets at June 30, 1998, amounted to $1.537 billion as compared to $1.574
billion at December 31, 1997, and $1.323 billion at June 30, 1997. Approximately
$155 million of growth in assets over June 30, 1997, resulted from an
acquisition finalized in September 1997. The June 30, 1998, decline in total
assets from the year-end 1997 balance reflects a seasonal decrease in total
deposits. The balance sheets presented reflect normal recurring adjustments and
accruals.
Loans at June 30, 1998, totaled $728 million as compared to $709 million at
year-end 1997 and $607 million at June 30, 1997. The previously mentioned 1997
acquisition accounted for approximately $60 million in growth over the June 30,
1997, balance.
Investment securities at June 30, 1998, totaled $564 million as compared to $583
million at year-end 1997 and $544 million at June 30, 1997. The net unrealized
gain in the investment portfolio at June 30, 1998, amounted to $3.3 million as
compared to a $2.9 million unrealized gain at December 31, 1997. With an overall
yield of 6.20%, the investment portfolio continues to provide a positive
contribution to the Company's earnings. Approximately $234 million, or 41%, of
the portfolio matures within two years which protects the Company from
signficant interest rate risk should interest rates move up. At June 30, 1998,
the Company did not hold any CMOs that entail higher risks than standard
mortgage-backed securities. Total investment securities at June 30, 1998,
included structured notes with an amortized cost of $7.02 million and an
approximate market value of $6.95 million. Total deposits at June 30, 1998,
amounted to $1.370 billion as compared to $1.413 billion at year-end 1997 and
$1.171 billion at June 30, 1997. The decrease from December 31, 1997, is
considered temporary and not indicative of a downward trend in total deposits.
The 1997 acquisition accounted for approximately $155 million in total deposit
growth from June 30, 1997.
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<PAGE>
Nonperforming assets at June 30, 1998, totaled $3.9 million, or .53% of loans
and foreclosed assets, and were down $900 thousand from the December 31, 1997,
amount. At June 30, 1998, the allowance for loan losses amounted to 244.2% 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. During 1998, the markets in which the subsidiary banks
operate have experienced a lack of rainfall. Management continues to assess the
impact this may have to its agricultural lending and, if required, will provide
adjustments to the allowance when the impact is known.
Liquidity and Capital
The Company's consolidated statements of cash flows are presented on page 7 of
this report. At June 30, 1998, the balance sheet reflects adequate liquidity,
and the parent company had $9 million available under its $10 million line of
credit. Total equity capital amounted to $154.9 million at June 30, 1998, which
was up from $148.2 million at year-end 1997 and $141.7 million at June 30, 1997.
The Company's risk-based capital and leverage ratios at June 30, 1998, were
16.21% and 8.76%, respectively. The second quarter cash dividend of $ .275 per
share totaled $2.4 million and represented 42.5% of earnings. On July 28, 1998,
the Company declared a $ .275 per share cash dividend which is payable October
1, 1998.
Interest Rate Risk
Interest rate risk results when the maturity or repricing intervals of
interest-earning assets and interest-bearing liabilities are different. The
Company's exposure to interest rate risk is managed primarily through the
Company's strategy of selecting the types and terms of interest-earning assets
and interest-bearing liabilities which generate favorable earnings, while
limiting the potential negative effects of changes in market interest rates. The
Company uses no off-balance-sheet financial instruments to manage interest rate
risk. Each subsidiary bank has an asset/liability committee which monitors
interest rate risk and compliance with investment policies. Interest-sensitivity
gap and simulation analysis are among the ways that the subsidiary banks track
interest rate risk. Since year-end 1997, there has been no material change in
interest rates or the Company's interest rate risk.
-12-
<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 August 12, 1998 By:/S/CURTIS R. HARVEY
- ------------------------ ----------------------------
Curtis R. Harvey
Executive Vice President and
Chief Financial Officer
Date August 12, 1998 By:/S/SANDY LESTER
- ------------------------ ----------------------------
Sandy Lester
Secretary-Treasurer
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 75,618
<INT-BEARING-DEPOSITS> 204
<FED-FUNDS-SOLD> 91,117
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 176,900
<INVESTMENTS-CARRYING> 387,331
<INVESTMENTS-MARKET> 389,841
<LOANS> 728,208
<ALLOWANCE> 9,488
<TOTAL-ASSETS> 1,537,117
<DEPOSITS> 1,369,795
<SHORT-TERM> 1,090
<LIABILITIES-OTHER> 11,306
<LONG-TERM> 0
0
0
<COMMON> 86,630
<OTHER-SE> 68,296
<TOTAL-LIABILITIES-AND-EQUITY> 1,537,117
<INTEREST-LOAN> 33,285
<INTEREST-INVEST> 17,568
<INTEREST-OTHER> 2,139
<INTEREST-TOTAL> 52,992
<INTEREST-DEPOSIT> 22,041
<INTEREST-EXPENSE> 22,168
<INTEREST-INCOME-NET> 30,824
<LOAN-LOSSES> 419
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 24,395
<INCOME-PRETAX> 16,366
<INCOME-PRE-EXTRAORDINARY> 10,990
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,990
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 4.55
<LOANS-NON> 3,093
<LOANS-PAST> 186
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 376
<ALLOWANCE-OPEN> 10,288
<CHARGE-OFFS> 1,796
<RECOVERIES> 577
<ALLOWANCE-CLOSE> 9,488
<ALLOWANCE-DOMESTIC> 9,488
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
