FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-7674
------
FIRST FINANCIAL BANKSHARES, INC.
--------------------------------
(Exact name of registrant as Specified in its charter)
Texas 75-0944023
----- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
400 Pine Street, Abilene, Texas 79601
-------------------------------------
(Address of principal executive offices)
(Zip Code)
(915)627-7155
-------------
(Registrant's telephone number, including area code)
NO CHANGE
---------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 8, 1999.
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, Par Value $10.00 Per Share 9,967,188
<PAGE>
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item Page
---- ----
1. Consolidated Financial Statements and Notes to Consolidated
Financial Statements 3
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
3. Quantitative and Qualitative Disclosures About Market Risk 13
Signatures 14
-2-
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
The consolidated balance sheets of First Financial Bankshares, Inc. at September
30, 1999 and 1998, and December 31, 1998, and the consolidated statements of
earnings and comprehensive earnings for the three and nine months ended
September 30, 1999 and 1998, and the changes in shareholders' equity for the
year ended December 31, 1998 and nine months ended September 30, 1999, and the
cash flows for the nine months ended September 30, 1999 and 1998, follow on
pages 4 through 8.
-3-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
--------------------------------
1999 1998 December 31,
(Unaudited) (Unaudited) 1998
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ........................................... $ 82,204,955 $ 73,524,268 $ 84,237,577
Interest-bearing deposits in banks ................................ 104,034 203,837 203,911
Federal funds sold ................................................ 70,311,142 68,191,882 116,091,417
Investment securities:
Securities held to maturity (approximate market value
of $425,846,817 and $390,864,554 at September 30, 1999
and 1998, and $419,252,100 at December 31, 1998) ............... 429,931,069 404,646,164 414,302,781
Securities available for sale, at approximate market value ..... 227,879,695 191,263,332 211,588,088
------------- ------------- -------------
Total investment securities 657,810,764 595,909,496 625,890,869
Loans ............................................................. 796,606,220 790,052,176 779,544,287
Less: Allowance for loan losses ............................... 8,875,789 9,454,696 8,988,320
------------- ------------- -------------
Net loans ......................................................... 787,730,431 780,597,480 770,555,967
Bank premises and equipment - net ................................. 41,227,336 43,967,082 42,927,162
Goodwill, net ..................................................... 20,567,013 22,201,438 21,798,277
Other assets ...................................................... 27,519,366 24,557,166 24,941,695
------------- ------------- -------------
TOTAL ASSETS .......................................................... $ 1,687,475,041 $ 1,609,152,649 $ 1,686,646,875
============= ============= =============
LIABILITIES
Noninterest-bearing deposits ...................................... $ 311,522,602 $ 300,697,462 $ 334,719,132
Interest-bearing demand deposits .................................. 425,657,538 410,618,635 451,811,746
Interest-bearing time deposits .................................... 746,453,130 717,030,651 718,324,962
------------- ------------- -------------
Total deposits ................................................. 1,483,633,270 1,428,346,748 1,504,855,840
Dividends payable ................................................. 2,740,791 2,382,828 2,736,689
Securities sold under agreements to repurchase .................... 11,149,531 -- --
Other short-term borrowings ....................................... 3,150,000 150,000 516,958
Other liabilities ................................................. 10,201,063 11,310,378 9,088,130
------------- ------------- -------------
Total liabilities .............................................. 1,510,874,655 1,442,189,954 1,517,197,617
------------- ------------- -------------
SHAREHOLDERS' EQUITY
Capital stock - $10 par value;
20,000,000 shares authorized ...................................... 99,665,010 90,390,700 99,526,830
Capital surplus ................................................... 60,450,072 36,362,237 60,375,373
Retained earnings ................................................. 18,929,102 37,949,874 8,015,303
Unrealized gain (loss) on investment securities available for sale (2,443,798) 2,259,884 1,531,752
------------- ------------- -------------
Total shareholders' equity ..................................... 176,600,386 166,962,695 169,449,258
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $ 1,687,475,041 $ 1,609,152,649 $ 1,686,646,875
============= ============= =============
See notes to consolidated financial statements.
</TABLE>
-4-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees ................................................. $17,284,512 $18,140,148 $50,955,770 $53,048,308
Investment income - taxable ............................... ........... 8,090,321 8,132,156 23,969,656 25,573,291
Investment income - tax exempt ........................................ 1,199,480 825,637 3,442,079 2,068,735
Interest on interest bearing deposits ................................. 2,627 2,964 8,295 10,882
Interest on federal funds sold and other .............................. 1,115,080 1,094,311 3,484,446 3,418,248
----------- ----------- ----------- -----------
Total interest income ............................................... 27,692,021 28,195,216 81,860,246 84,119,464
INTEREST EXPENSE
Interest-bearing deposits ............................................. 10,749,505 11,603,022 32,092,964 34,853,487
Short-term borrowings ................................................. 83,393 23,591 121,614 150,287
----------- ----------- ----------- -----------
Total interest expense .............................................. 10,832,898 11,626,613 32,214,578 35,003,774
----------- ----------- ----------- -----------
NET INTEREST INCOME ....................................................... 16,859,123 16,568,603 49,645,668 49,115,690
Provision for loan losses ............................................. 485,833 260,000 1,263,833 694,500
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ............................................. 16,373,290 16,308,603 48,381,835 48,421,190
NONINTEREST INCOME
Trust fees ............................................................ 1,284,141 1,207,661 3,784,549 3,681,404
Service fees on deposit accounts ...................................... 3,431,179 3,046,372 9,841,763 8,664,964
Real estate mortgage fees ............................................. 306,516 357,072 1,018,238 977,476
Net gain on securities transactions ................................... -- 36,388 -- 41,440
Other ................................................................. 1,083,969 1,036,582 3,622,415 3,159,819
----------- ----------- ----------- -----------
Total noninterest income..................................... 6,105,805 5,684,075 18,266,965 16,525,103
NONINTEREST EXPENSE
Salaries and employee benefits ........................................ 6,743,269 6,773,421 20,259,176 20,060,207
Net occupancy and equipment expenses .................. ............... 959,242 1,078,800 2,909,192 3,131,384
Equipment expense ..................................................... 1,040,141 1,035,559 3,075,185 3,030,188
Goodwill amortization ................................................. 410,343 413,672 1,231,265 1,240,081
Other ................................................................. 3,860,527 3,949,355 11,388,463 11,604,251
----------- ----------- ----------- -----------
Total noninterest expense ................................... 13,013,522 13,250,807 38,863,281 39,066,111
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES .............................................. 9,465,573 8,741,871 27,785,519 25,880,182
Provision for income taxes ............................................ 2,932,389 2,811,034 8,653,427 8,449,501
----------- ----------- ----------- -----------
NET EARNINGS .............................................................. $ 6,533,184 $ 5,930,837 $19,132,093 $17,430,681
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE .................................................. $ 0.66 $ 0.60 $ 1.92 $ 1.75
EARNINGS PER SHARE, ASSUMING DILUTION ..................................... $ 0.66 $ 0.60 $ 1.91 $ 1.74
DIVIDENDS PER SHARE ....................................................... $ 0.275 $ 0.275 $ 0.825 $ 0.727
See notes to consolidated financial statements.
</TABLE>
-5-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET EARNINGS ....................................................... $ 6,533,184 $ 5,930,837 $ 19,132,093 $ 17,430,681
OTHER ITEMS OF COMPREHENSIVE EARNINGS
Change in unrealized gain (loss) on investment
securities available for sale, before tax ............... (571,464) 1,717,925 (6,116,231) 2,838,794
Reclassification adjustment for realized gains
on investment securities included in net earnings ....... -- (36,388) -- (41,440)
------------ ------------ ------------ ------------
Total other items of comprehensive earnings ......... (571,464) 1,681,537 (6,116,231) 2,797,354
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE EARNINGS, BEFORE TAX ........................... 5,961,720 7,612,374 13,015,862 20,228,035
Income tax (benefit) expense related to
other items of comprehensive earnings ................... (200,012) 588,538 (2,140,681) 979,074
------------ ------------ ------------ ------------
COMPREHENSIVE EARNINGS ............................................. $ 6,161,733 $ 7,023,836 $ 15,156,543 $ 19,248,961
============ ============ ============ ============
See notes to consolidated financial statements.
</TABLE>
-6-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS 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, 1997 9,025,852 $ 90,258,520 $ 36,595,698 $ 27,203,391 $ 403,597 $ 154,461,206
Net earnings - - - 23,253,939 - 23,253,939
Stock issuances 23,257 232,570 60,857 - - 293,427
Cash dividends declared - - - (9,687,469) - (9,687,469)
Stock dividend, 10% 903,574 9,035,740 23,718,818 (32,754,558) - -
Change in unrealized gain (loss) - - - - 1,128,155 1,128,155
--------- ------------ ------------ ------------ ------------ -------------
Balances at December 31, 1998 9,952,683 99,526,830 60,375,373 8,015,303 1,531,752 169,449,258
Net earnings - - - 19,132,093 - 19,132,093
Stock issuances 13,818 138,180 74,699 - - 212,879
Cash dividends declared - - - (8,218,294) - (8,218,294)
Change in unrealized gain (loss) - - - - (3,975,550) (3,975,550)
--------- ------------ ------------ ------------ ------------ -------------
Balances at September 30,1999(unaudited) 9,966,501 $ 99,665,010 $ 60,450,072 $ 18,929,102 $ (2,443,798) $ 176,600,386
========= ============ ============ ============ ============ =============
See notes to consolidated financial statements.
</TABLE>
-7-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ............................................................................ $ 19,132,093 $ 17,430,700
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization ....................................................... 4,474,536 4,554,779
Provision for loan losses ........................................................... 1,263,833 664,500
Premium amortization, net of discount accretion ..................................... 2,247,844 1,702,734
Gain on sale of assets ............................................................. (259,005) (1,279)
Deferred federal income tax benefit ................................................. (201,700) (233,020)
Decrease (increase) in other assets ................................................. 220,541 (1,004,917)
Increase in other liabilities ....................................................... 1,112,933 4,347,350
------------- -------------
Total adjustments .................................... 8,858,982 10,030,147
------------- -------------
Net cash provided by operating activities ........................................... 27,991,074 27,460,847
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in banks ...................................... 99,877 194,834
Proceeds from sale of securities available for sale ..................................... -- 4,064,365
Proceeds from maturity of securities available for sale ................................. 31,409,193 100,416,498
Proceeds from maturity of securities held to maturity ................................... 88,072,762 168,919,691
Purchase of securities available for sale ............................................... (54,738,022) (127,104,153)
Purchase of securities held to maturity ................................................. (105,027,902) (125,031,313)
Net increase in loans ................................................................... (18,678,881) (48,460,248)
Capital expenditures .................................................................... (2,908,108) (3,471,712)
Proceeds from sale of assets ............................................................ 1,408,421 507,915
------------- -------------
Net cash used in investing activities ............................................... (60,362,661) (29,964,123)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits ............................................ (23,196,530) (23,462,668)
Net increase (decrease) in interest-bearing deposits .................................... 1,973,960 (36,899,312)
Net increase (decrease) in other short-term borrowings .................................. 13,782,573 (4,620,000)
Proceeds from stock issuances ........................................................... 212,879 143,914
Dividends paid .......................................................................... (8,214,192) (6,709,483)
------------- -------------
Net cash used in financing activities ............................................... (15,441,310) (71,547,549)
------------- -------------
Net decrease in cash and cash equivalents ............................................... (47,812,897) (74,050,825)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................................... 200,328,994 215,766,975
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................................... $ 152,516,097 $ 141,716,150
============= =============
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
Interest paid ........................................................................... $ 32,700,315 $ 34,215,488
Federal income tax paid ................................................................. 9,125,971 8,514,043
Assets acquired through foreclosure ..................................................... 370,791 21,000
See notes to consolidated financial statements.
</TABLE>
-8-
<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Presentation
In the opinion of management, the consolidated financial statements reflect
all adjustments necessary for a fair presentation of the Company's
financial position and results of operation. All adjustments were of a
normal recurring nature. However, the results of operations for the nine
months ended September 30, 1999 are not necessarily indicative of the
results to be expected for the year ended December 31, 1999.
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 nine-month periods ended September 30, 1999 and
1998, 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 September 30, 1999 and 1998, were
9,963,747 and 9,941,357 shares, respectively. The weighted average common
shares outstanding used in computing basic earnings per share for the
nine-month periods ended September 30, 1999 and 1998, were 9,958,714 and
9,937,834 shares, respectively. The weighted average common shares
outstanding used in computing diluted earnings per common share for the
quarters ended September 30, 1999 and 1998, were 10,000,578 and 9,990,908
shares, respectively. The weighted average common shares outstanding used
in computing diluted earnings per common share for the nine-month periods
ended September 30, 1999 and 1998, were 10,002,115 and 9,991,753 shares,
respectively.
The Company's per share financial information has been adjusted to reflect
the 10 percent stock dividend declared on October 27, 1998, payable on
December 1, 1998 to shareholders of record on November 16, 1998.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Operating Results
- -----------------
For the nine months ended September 30, 1999, the Company's net income
amounted to $19.1 million, or $1.92 per basic share. For the same period
last year, net income amounted to $17.4 million, or $1.75 per basic share.
Net income for the third quarter 1999 totaled $6.5 million, or $0.66 per
basic share, as compared to $5.9 million, or $0.60 per basic share, earned
in the third quarter of 1998. Return on average assets and return on
average equity for the nine months ended September 30, 1999, amounted to
1.45 percent and 14.39 percent, respectively. The Company's return on
average assets and return on average equity for the same period last year
amounted to 1.44 percent and 14.65 percent, respectively.
On a tax-equivalent basis, net interest income totaled $51.3 million for
the nine months ended September 30, 1999, and $17.4 million for the third
quarter in 1999. These amounts represented increases of $1.5 million and
$518 thousand, respectively, over the same periods last year. The
improvement resulted from higher average earning assets, primarily
investment securities. The net interest margin of 4.54 percent through
September 30, 1999, was unchanged from the same period last year. For the
nine months ended September 30, 1999, the provision for loan losses
amounted to $1.3 million as compared to $695 thousand for the same period
in 1998. For the third quarter, the provision for loan losses was $486
thousand, as compared to $260 thousand in the third quarter of 1998. The
higher provisions in 1999 resulted from the down grading of certain credits
and the Company's practice of maintaining the allowance for loan losses at
a level considered adequate to provide for estimated probable incurred
losses.
Total noninterest income for the nine months ended September 30, 1999,
amounted to $18.3 million as compared to $16.5 million for the same period
last year. Deposit service fees, sale of bank premises, and Pulse fees were
up $1.2 million, $246 thousand, and $152 thousand, respectively, and were
the primary factors contributing to the increase over the prior year.
Noninterest income for the third quarter of 1999 totaled $6.1 million as
compared to $5.7 million for the same period last year. Deposit service
fees were up $400 thousand which was the primary factor contributing to the
increase.
Noninterest expense for the first nine months ended September 30, 1999,
amounted to $38.9 million as compared to $39.0 million for the same period
last year. Noninterest expense for the third quarter of 1999 amounted to
$13.0 million, down $237 thousand from the 1998 third quarter amount. The
Company's efficiency ratio for the nine months ended September 30, 1999,
showed good improvement by dropping to 55.86 percent from 58.92 percent for
the same period last year.
Balance Sheet Review
- --------------------
Total assets at September 30, 1999, totaled $1.687 billion and were
virtually unchanged from December 31, 1998. Compared to this time last
year, total assets have increased $78.3 million, or 4.9 percent. The
balance sheets presented reflect normal recurring adjustments and accruals.
Loans at September 30, 1999, totaled $797 million as compared to $780
million at December 31, 1998, and $790 million at September 30, 1998. Since
year-end 1998, commercial loans, real estate loans, and student loans have
increased $15 million, $14 million, and $5 million, respectively. These
increases were offset by a $14 million decrease in consumer loans.
Investment securities at September 30, 1999, totaled $658 million as
compared to $626 million at year-end 1998 and $596 million at September 30,
1998. The net unrealized loss in the investment portfolio at September 30,
1999, amounted to $7.8 million. At September 30, 1999, the investment
portfolio reflected an overall yield of 6.07 percent. Approximately $324
million, or 49 percent, of the portfolio matures within three years which
protects the Company from significant interest rate risk should interest
rates move up. At September 30, 1999, the Company did not hold any CMOs
that entail higher risks than standard mortgage-backed securities. Total
investment securities at September 30, 1999, included structured notes with
an amortized cost of $7.0 million and an approximate market value of $6.9
million. Total deposits at September 30, 1999, amounted to $1.484 billion
as compared to $1.505 billion at year-end 1998 and $1.428 billion at
September 30, 1998. The decrease from December 31, 1998, is considered
temporary and not indicative of a long-term downward trend in total
deposits.
-10-
<PAGE>
Nonperforming assets at September 30, 1999, totaled $2.9 million, or .34
percent of loans and foreclosed assets, and were down $500 thousand from
the December 31, 1998, amount. At September 30, 1999, the allowance for
loan losses amounted to 331.5 percent 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 8
of this report. At September 30, 1999, the parent company had no debt
outstanding under its $25 million line of credit with an unaffiliated
financial institution. Total equity capital amounted to $176.6 million at
September 30, 1999, which was up from $169.4 million at year-end 1998 and
$166.9 million at September 30, 1998. The Company's risk-based capital and
leverage ratios at September 30, 1999, were 17.84 percent and 9.60 percent,
respectively. The third quarter 1999 cash dividend of $0.275 per share
totaled $2.7 million and represented 42.0 percent of third quarter
earnings. On October 26, 1999, the Company declared a $0.30 per share cash
dividend payable January 3, 2000.
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
1998, there has been no material change in the Company's interest rate
risk.
Year 2000
- ---------
The Company completed compliance testing of its core IT systems during the
quarter ended December 31, 1998. The Company believes that the results of
its tests were successful and that these results showed that these core IT
systems are Year 2000 compliant. These results were reviewed and confirmed
by an independent third party that is competent in Year 2000 compliance
testing and hired by the Company. The Company believes that, based on these
results and the warranties and assurances provided by the third parties
that licensed these core IT systems to the Company, these core IT systems
are Year 2000 compliant. The Company has also completed its Year 2000
compliance assessment of its other IT systems, which includes automatic
teller machine software systems. These other IT systems are also licensed
from third parties and these third parties have assured the Company that
their systems are Year 2000 compliant.
-11-
<PAGE>
The Company has developed contingency plans for Year 2000 noncompliance.
However, there can be no assurance that the Company's contingency plans
will prevent the Company from suffering a material adverse effect on its
operations, financial condition or results of operations if any of its core
IT systems, other IT systems or embedded technology or any systems of a
governmental agency, a significant customer or significant vendor prove not
to be Year 2000 compliant.
-12-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management considers interest rate risk to be a significant market risk for
Bankshares. See "Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations" for disclosure regarding this market
risk. The Company has procedures to monitor market risk and has determined
that no material changes in market risk have occurred since December 31,
1998.
-13-
<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: November 9, 1999 By:/S/CURTIS R. HARVEY
----------------- ----------------------------
Curtis R. Harvey
Executive Vice President and
Chief Financial Officer
Date: November 9, 1999 By:/S/SANDY LESTER
----------------- ----------------------------
Sandy Lester
Secretary-Treasurer
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 82,205
<INT-BEARING-DEPOSITS> 104
<FED-FUNDS-SOLD> 70,311
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 231,639
<INVESTMENTS-CARRYING> 426,171
<INVESTMENTS-MARKET> 425,847
<LOANS> 796,606
<ALLOWANCE> 8,876
<TOTAL-ASSETS> 1,687,475
<DEPOSITS> 1,483,633
<SHORT-TERM> 14,300
<LIABILITIES-OTHER> 12,941
<LONG-TERM> 0
0
0
<COMMON> 99,665
<OTHER-SE> 76,936
<TOTAL-LIABILITIES-AND-EQUITY> 1,687,475
<INTEREST-LOAN> 50,956
<INTEREST-INVEST> 27,412
<INTEREST-OTHER> 3,492
<INTEREST-TOTAL> 81,860
<INTEREST-DEPOSIT> 32,093
<INTEREST-EXPENSE> 32,215
<INTEREST-INCOME-NET> 49,645
<LOAN-LOSSES> 1,264
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 38,863
<INCOME-PRETAX> 18,320
<INCOME-PRE-EXTRAORDINARY> 19,132
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,132
<EPS-BASIC> 1.92
<EPS-DILUTED> 1.91
<YIELD-ACTUAL> 4.54
<LOANS-NON> 2,032
<LOANS-PAST> 37
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 484
<ALLOWANCE-OPEN> 8,988
<CHARGE-OFFS> 2,613
<RECOVERIES> 1,237
<ALLOWANCE-CLOSE> 8,876
<ALLOWANCE-DOMESTIC> 8,876
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
