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, 2000
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 7, 2000.
Class Number of Shares Outstanding
---------------------------------------- ---------------------------------
Common Stock, Par Value $10.00 Per Share 9,873,053
<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 12
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 September
30, 2000 and 1999, and December 31, 1999, and the consolidated statements of
earnings and comprehensive earnings for the three and nine months ended
September 30, 2000 and 1999, and the changes in shareholders' equity for the
year ended December 31, 1999 and nine months ended September 30, 2000, and the
cash flows for the nine months ended September 30, 2000 and 1999, follow on
pages 4 through 8.
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
----------------------------------------
2000 December 31,
(Unaudited) 1999 1999
------------------ ------------------- -------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 75,752,498 $ 82,204,955 $ 119,228,650
Federal funds sold 28,988,293 70,311,142 68,741,408
------------------ ------------------- -------------------
Cash and cash equivalents 104,740,791 152,516,097 187,970,058
Interest-bearing deposits in banks 104,268 104,034 4,080
Investment securities:
Securities held-to-maturity (market value of
$411,316,933 and $425,846,817 at September 30, 2000
and 1999, and $414,407,070 at December 31, 1999) 415,406,190 446,222,676 422,362,918
Securities available-for-sale, at market value 256,358,817 211,588,088 233,854,837
------------------ ------------------- -------------------
Total investment securities 671,765,007 657,810,764 656,217,755
Loans 841,836,075 796,606,220 797,275,325
Less: Allowance for loan losses 9,516,300 8,875,789 8,937,542
------------------ ------------------- -------------------
Net loans 832,319,775 787,730,431 788,337,783
Bank premises and equipment, net 40,383,912 41,227,336 41,536,094
Goodwill, net 18,925,646 20,567,013 20,156,671
Other assets 28,731,925 27,519,366 29,146,756
------------------ ------------------- -------------------
TOTAL ASSETS $ 1,696,971,324 $ 1,687,475,041 $ 1,723,369,197
================== =================== ===================
LIABILITIES
Noninterest-bearing deposits $ 326,949,272 $ 311,522,602 $ 340,513,737
Interest-bearing deposits 1,142,383,096 1,172,110,668 1,184,190,709
------------------ ------------------- -------------------
Total deposits 1,469,332,368 1,483,633,270 1,524,704,446
Dividends payable 3,267,050 2,740,791 2,992,292
Securities sold under agreements to repurchase 25,831,099 11,149,531 9,637,734
Other liabilities 9,054,014 13,351,063 7,371,782
------------------ ------------------- -------------------
Total liabilities 1,507,484,531 1,510,874,655 1,544,706,254
------------------ ------------------- -------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock - $10 par value; authorized 20,000,000
shares; 9,977,153 issued and 9,877,653 outstanding
at September 30, 2000. 9,966,501 and 9,974,306
shares issued and outstanding at September 30, 1999
and December 31, 1999, respectively 99,771,530 99,665,010 99,743,060
Capital surplus 60,541,892 60,450,072 60,517,351
Retained earnings 34,030,917 18,929,102 22,495,259
Unrealized loss on investment securities
available-for-sale, net (1,764,327) (2,443,798) (4,092,727)
Treasury stock, at cost (99,500 shares) (3,093,219) - -
------------------ ------------------- -------------------
Total shareholders' equity 189,486,793 176,600,386 178,662,943
------------------ ------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,696,971,324 $ 1,687,475,041 $ 1,723,369,197
================== =================== ===================
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 19,440,985 $ 17,284,513 $ 55,449,284 $ 50,955,770
Interest on investment securities:
Taxable 8,457,372 8,090,321 25,188,990 23,969,656
Exempt from federal income tax 1,451,133 1,199,480 4,282,321 3,442,079
Interest on federal funds sold and
interest-bearing deposits in banks 498,866 1,117,707 2,354,856 3,492,741
--------------- --------------- --------------- ---------------
Total interest income 29,848,356 27,692,021 87,275,451 81,860,246
INTEREST EXPENSE
Interest-bearing deposits 12,187,427 10,749,505 34,839,534 32,092,964
Other 306,330 83,393 677,165 121,614
--------------- --------------- --------------- ---------------
Total interest expense 12,493,757 10,832,898 35,516,699 32,214,578
--------------- --------------- --------------- ---------------
NET INTEREST INCOME 17,354,599 16,859,123 51,758,752 49,645,668
Provision for loan losses 426,000 485,833 1,586,250 1,263,833
--------------- --------------- --------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 16,928,599 16,373,290 50,172,502 48,381,835
NONINTEREST INCOME
Trust department income 1,376,699 1,284,141 4,120,221 3,784,549
Service fees on deposit accounts 3,561,381 3,431,179 10,492,613 9,841,763
ATM fees 407,815 326,314 1,122,289 903,384
Real estate mortgage fees 298,642 306,516 794,452 1,018,238
Other 805,302 757,655 2,649,167 2,719,031
--------------- --------------- --------------- ---------------
Total noninterest income 6,449,839 6,105,805 19,178,742 18,266,965
NONINTEREST EXPENSE
Salaries and employee benefits 6,718,219 6,743,269 20,343,732 20,259,176
Net occupancy expense 903,012 959,242 2,673,285 2,909,192
Equipment expense 1,045,528 1,040,141 3,119,065 3,075,185
Goodwill amortization 410,341 410,343 1,231,026 1,231,265
Other expenses 3,852,420 3,860,527 11,425,759 11,388,463
--------------- --------------- --------------- ---------------
Total noninterest expense 12,929,520 13,013,522 38,792,867 38,863,281
--------------- --------------- --------------- ---------------
EARNINGS BEFORE INCOME TAXES 10,448,918 9,465,573 30,558,377 27,785,519
Income tax expense 3,236,767 2,932,389 9,471,147 8,653,427
--------------- --------------- --------------- ---------------
NET EARNINGS $ 7,212,151 $ 6,533,184 $ 21,087,230 $ 19,132,092
=============== =============== =============== ===============
EARNINGS PER SHARE, BASIC $ 0.73 $ 0.66 $ 2.12 $ 1.92
EARNINGS PER SHARE, ASSUMING DILUTION $ 0.72 $ 0.65 $ 2.11 $ 1.91
DIVIDENDS PER SHARE $ 0.33 $ 0.275 $ 0.96 $ 0.825
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 Nine Months Ended
September 30, September 30,
----------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
NET EARNINGS $ 7,212,151 $ 6,533,184 $ 21,087,230 $ 19,132,092
OTHER ITEMS OF COMPREHENSIVE EARNINGS
Change in unrealized gain (loss) on investment
securities available-for-sale, before income taxes 3,413,992 (571,464) 3,582,154 (6,116,231)
--------------- --------------- --------------- -----------------
Total other items of comprehensive earnings 3,413,992 (571,464) 3,582,154 (6,116,231)
--------------- --------------- --------------- -----------------
OTHER COMPREHENSIVE EARNINGS, BEFORE INCOME TAXES 10,626,143 5,961,720 24,669,384 13,015,861
Income tax expense (benefit) related to other
items of comprehensive earnings 1,194,897 (200,012) 1,253,754 (2,140,681)
--------------- --------------- --------------- -----------------
COMPREHENSIVE EARNINGS $ 9,431,246 $ 6,161,732 $ 23,415,630 $ 15,156,542
=============== =============== =============== =================
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Investment
Common Stock Securities Total
---------------------- Capital Retained Available Treasury Shareholders'
Shares Amount Surplus Earnings For Sale, Net Stock, at cost Equity
--------- ---------- ---------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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 - - - 25,690,541 - - 25,690,541
Stock issuances 21,623 216,230 141,978 - - - 358,208
Cash dividends declared,
$1.125 per share - - - (11,210,585) - - (11,210,585)
Change in unrealized gain (loss)
on investment securities
available-for-sale, net - - - - (5,624,479) - (5,624,479)
--------- ---------- ---------- ---------- --------- ----------- -----------
Balances at December 31, 1999 9,974,306 99,743,060 60,517,351 22,495,259 (4,092,727) - 178,662,943
Net earnings - - - 21,087,230 - - 21,087,230
Stock issuances 2,847 28,470 24,541 - - - 53,011
Cash dividends declared,
$.93 per share - - - (9,551,572) - - (9,551,572)
Acquisition of treasury stock - - - - - (3,093,219) (3,093,219)
Change in unrealized gain (loss)
on investment securities
available-for-sale, net - - - - 2,328,400 - 2,328,400
--------- ---------- ---------- ---------- --------- ----------- -----------
Balances at September 30,2000
(unaudited) 9,977,153 $ 99,771,530 $ 60,541,892 $ 34,030,917 $ (1,764,327) $ (3,093,219) $ 189,486,793
========= ========== ========== ========== ========= =========== ===========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 21,087,230 $ 19,132,093
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 4,306,211 4,474,536
Provision for loan losses 1,586,250 1,263,833
Premium amortization, net of discount accretion 1,344,389 2,247,843
Gain on sale of assets (5,694) (259,005)
Deferred federal income tax benefit (374,435) (201,700)
(Increase) decrease in other assets (484,229) 220,541
Increase in other liabilities 1,682,232 1,112,933
----------------- -----------------
Total adjustments 8,054,724 8,858,981
----------------- -----------------
Net cash provided by operating activities 29,141,954 27,991,074
CASH FLOWS FROM INVESTING ACTIVITIES
Net (decrease) increase in interest-bearing deposits in banks (100,188) 99,877
Activity in available-for-sale securities:
Maturities 9,602,976 31,409,193
Purchases (28,869,707) (54,738,022)
Activity in held-to-maturity securities:
Maturities 63,600,687 88,072,762
Purchases (57,643,443) (105,027,903)
Net increase in loans (45,838,881) (18,678,881)
Capital expenditures (2,009,332) (2,908,108)
Proceeds from sale of assets 382,402 1,408,421
----------------- -----------------
Net cash used in investing activities (60,875,486) (60,362,661)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits (13,564,465) (23,196,530)
Net (decrease) increase in interest-bearing deposits (41,807,613) 1,973,960
Net increase in securities sold under agreements to repurchase 16,193,365 13,782,573
Common stock transactions:
Acquisition of treasury stock (3,093,219) -
Proceeds from stock issuances 53,011 212,879
Dividends paid (9,276,814) (8,214,192)
----------------- -----------------
Net cash used in financing activities (51,495,735) (15,441,310)
----------------- -----------------
Net decrease in cash and cash equivalents (83,229,267) (47,812,897)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 187,970,058 200,328,994
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 104,740,791 $ 152,516,097
================= =================
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
Interest paid $ 35,193,198 $ 32,700,315
Federal income tax paid 9,884,787 9,125,971
Assets acquired through foreclosure 270,639 370,791
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 operations. All adjustments were of a normal
recurring nature. However, the results of operations for the nine months
ended September 30, 2000 are not necessarily indicative of the results to be
expected for the year ended December 31, 2000.
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 ended September 30, 2000 and 1999, 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, 2000 and 1999, were 9,946,303 and 9,963,747 shares, respectively. The
weighted average common shares outstanding used in computing basic earnings
per share for the nine-month periods ended September 30, 2000 and 1999, were
9,965,029 and 9,958,714 shares, respectively. The weighted average common
shares outstanding used in computing diluted earnings per common share for
the quarters ended September 30, 2000 and 1999, were 9,971,610 and
10,000,578 shares, respectively. The weighted average common shares
outstanding used in computing diluted earnings per common share for the
nine-month periods ended September 30, 2000 and 1999, were 9,994,068 and
10,002,115 shares, respectively.
Note 3 - Stock Repurchase
On July 25, 2000, the Company approved a stock repurchase plan, authorizing
the repurchase of up to 500,000 shares of the Company's common stock. During
the three months ended September 30, 2000, the Company repurchased 99,500
shares of its common stock. The treasury shares were purchased for
$3,093,219 which represents an average purchase price of $31.09 per share.
-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, 2000, the Company's net income amounted
to $21.1 million, or $2.12 per basic share. For the same period last year, net
income amounted to $19.1 million, or $1.92 per basic share. The increase in net
income for 2000 resulted primarily from higher net interest income, higher
service fees and improved operating efficiency. Return on average assets and
return on average equity for the nine months ended September 30, 2000, amounted
to 1.67 percent and 15.46 percent, respectively. The Company's return on average
assets and return on average equity for the same period last year amounted to
1.53 percent and 14.88 percent, respectively. Net income for the third quarter
2000 totaled $7.2 million, or $0.73 per basic share, as compared to $6.5
million, or $0.66 per basic share, earned in the third quarter of 1999.
Net interest income on a tax-equivalent basis for the nine months ended
September 30, 2000, amounted to $53.8 million, up $2.5 million from the same
period last year. The improvement in net interest income resulted primarily from
growth in average loans. For the first nine months of 2000, the Company's net
interest margin was 4.69 percent as compared to 4.54 percent for the same period
in 1999. Net interest income on a tax-equivalent basis for the third quarter of
2000 amounted to $18.1 million, an increase of $612 thousand over the third
quarter of 1999.
For the nine months ended September 30, 2000, the provision for loan losses
amounted to $1.6 million as compared to $1.3 million for the same period last
year. Net charge offs for the nine months ended September 30, 2000, totaled $497
thousand, which on an annualized basis amounted to .17 percent of average loans
as compared to .27 percent for the full year of 1999. At September 30, 2000, the
allowance for loan losses was 1.13 percent of loans and was considered by
Management to be adequate. For the third quarter of 2000, the provision for loan
losses was $426 thousand as compared to $486 thousand for the third quarter in
1999. Nonperforming assets at September 30, 2000 amounted to $2.4 million, or
.29 percent of loans and foreclosed assets, as compared to $2.1 million at
December 31, 1999 and $2.7 million at September 30, 1999. During the current
quarter nonperforming assets increased $800 thousand which was primarily the
result of one agricultural related credit relationship being placed on
nonaccrual status. At September 30, 2000, the allowance for loan losses amounted
to 478 percent of nonperforming loans. Management considers total nonperforming
assets to be at a manageable level.
Total noninterest income for the nine months ended September 30, 2000, amounted
to $19.2 million as compared to $18.3 million for the same period last year. The
increase resulted primarily from a $336 thousand, or an 8.9 percent, increase in
trust fees and a $651 thousand, or a 6.6 percent, increase in service fees on
deposit accounts. The improvement in these areas resulted primarily from growth
in the number of accounts and volume of transactions. For the nine months ended
September 30, 2000, real estate mortgage fees amounted to $794 thousand as
compared to $1.0 million for the same period last year. The decrease represents
a decline in the volume of new mortgage and refinancing transactions during
2000. For the nine months ended September 30, 2000, ATM fees amounted to $1.1
million as compared to $903 thousand for the same period last year. The
improvement reflects an increase in the volume of automatic teller machine
transactions. On a combined basis, all other noninterest income for the nine
months ended September 30, 2000, amounted to $2.6 million, slightly below the
total reported for the same period last year. Noninterest income for the third
quarter 2000 amounted to $6.4 million as compared to $6.1 million reported for
the third quarter 1999. For the third quarter 2000, trust fees were up $93
thousand and service fees on deposit accounts were up $130 thousand over the
third quarter 1999 amounts. Real estate mortgage fees for the third quarter 2000
amounted to $298 thousand as compared to $307 thousand for the third quarter in
1999. ATM fees for the third quarter 2000 amounted to $408 thousand as compared
to $326 thousand for the third quarter 1999. Other noninterest income totaled
$805 thousand for the third quarter of 2000 as compared to $757 thousand for the
third quarter of 1999.
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<PAGE>
Noninterest expense for the nine months ended September 30, 2000, totaled $38.8
million as compared to $38.9 million for the same period last year. Year-to-date
totals for most noninterest expense categories remain near the prior year
amounts. The Company's efficiency ratio for the nine months ended September 30,
2000, improved to 53.14 percent as compared to 55.86 percent for the same period
last year. For the third quarter 2000 noninterest expense totaled $12.9 million
as compared to $13.0 million for the third quarter last year.
Balance Sheet Review
--------------------
Total assets at September 30, 2000, amounted to $1.697 billion as compared to
$1.723 billion at December 31, 1999, and $1.687 billion at September 30, 1999.
The decrease in total assets since year-end 1999 is attributable primarily to a
reduction in total deposits. The balance sheets presented reflect normal
recurring adjustments and accruals.
Investment securities at September 30, 2000, totaled $672 million as compared to
$656 million at December 31, 1999. The increase was funded through a reduction
in cash and cash equivalents. The net unrealized loss in the portfolio at
September 30, 2000, amounted to $6.8 million. With an overall yield of 6.37
percent, the investment portfolio continues to provide a positive contribution
to the Company's earnings. At September 30, 2000, the Company did not hold any
CMOs that entail higher risks than standard mortgage-backed securities.
Loans at September 30, 2000, totaled $842 million as compared to $797 million at
year-end 1999. As compared to year-end 1999, loans at September 30, 2000,
reflect (i) a $9.4 million increase in commercial loans; (ii) a $2.7 million
increase in agricultural loans; (iii) a $35.1 million increase in real estate
loans; and (iv) a $2.2 million decrease in consumer loans.
Total deposits at September 30, 2000, totaled $1.469 billion and were $56
million below the year-end 1999 total of $1.525 billion. Approximately $15
million of the 2000 deposit reduction was retained through repurchase agreement
transactions. The ratio of noninterest-bearing deposits at September 30, 2000,
amounted to 22.3 percent and was unchanged from the year-end 1999 ratio. The
ratio of loans to deposits at September 30, 2000, amounted to 57.3 percent as
compared to 52.3 percent at year-end 1999. The Company's loan growth during 2000
has been funded primarily through reduction in cash and cash equivalents which
eliminated to some extent the need to increase rates during the current quarter
in order to retain interest-bearing deposits.
Liquidity and Capital
---------------------
The Company's consolidated statements of cash flows are presented on page 8 of
this report. At September 30, 2000, the parent company had no debt outstanding
under its $25 million line of credit with an unaffiliated financial institution.
Total equity capital amounted to $189.5 million at September 30, 2000, which was
up from $178.7 million at year-end 1999. The Company's risk-based capital and
leverage ratios at September 30, 2000, were 18.93 percent and 10.39 percent,
respectively. The third quarter 2000 cash dividend of $0.33 per share totaled
$3.3 million and represented 45.3 percent of third quarter earnings. On October
24, 2000, the Company declared a $0.33 per share cash dividend payable January
2, 2001. During the third quarter 2000, the Company implemented a stock buyback
plan and as of September 30, 2000, has acquired 99,500 shares at an average cost
of $31.09 per share. The program provides for the acquisition of 500,000 shares
and expires December 31, 2002.
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<PAGE>
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 1999, there has been no material change in
the Company's interest rate risk.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management considers interest rate risk to be a significant market risk for the
Company. 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, 1999.
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<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 10, 2000 By:/S/CURTIS R. HARVEY
----------------- -----------------------------------
Curtis R. Harvey
Executive Vice President and
Chief Financial Officer
Date: November 10, 2000 By:/S/SANDY LESTER
----------------- -----------------------------------
Sandy Lester
Secretary-Treasurer
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